Financial Data and Key Metrics Changes - Silvergate reported a record quarterly pretax income of $29.4 million, the highest in its history, driven by growth in its platform and balance sheet [6] - Net income for the third quarter was $23.5 million or $0.88 per diluted share, up from $20.9 million or $0.80 per diluted share in the second quarter and $7.1 million or $0.37 per diluted share for the third quarter of 2020 [11] - Net interest income increased by 24% compared to the previous quarter and by 99% year-over-year [12] - Non-interest income for the third quarter was $14 million, up 16% from the prior quarter and up 254% from the third quarter of 2020 [15] Business Line Data and Key Metrics Changes - Average deposits from digital currency customers reached a record $11.2 billion, up from $9.9 billion in the second quarter [6] - Total approved lines of credit for SEN Leverage grew by 25% to $323 million compared to $259 million at the end of the second quarter [7] - SEN transfer volume was $162 billion, a decline of 32% sequentially but an increase of 342% compared to the third quarter of 2020 [8] Market Data and Key Metrics Changes - The number of customers on the SEN platform expanded to 1,305, an increase of over 300 customers since the beginning of the year [6] - Nonperforming assets totaled $5.8 million, representing 5 basis points relative to total assets, a decrease of 1 basis point from the previous quarter [19] Company Strategy and Development Direction - The company is focused on expanding its stablecoin infrastructure and believes stablecoins have the potential to become a meaningful payment rail for customers globally [9] - Silvergate aims to leverage its banking charter to navigate regulatory guidance on stablecoins, positioning itself as a leader in compliance and customer service [25] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the growth of SEN Leverage and the overall digital currency market, noting that customer deposits are expected to remain stable even during trading volume declines [41] - The company anticipates continued growth in its customer base and product offerings, particularly in the stablecoin and corporate treasury segments [62] Other Important Information - The company issued 8 million depository shares of fixed-rate noncumulative perpetual Series A preferred stock, raising gross proceeds of $200 million [21] - The securities portfolio totaled $7.2 billion with a yield of 1.22%, up from $6.2 billion at the end of the second quarter [17] Q&A Session Summary Question: What are the holdups regarding the stablecoin initiative? - Management indicated that they are awaiting guidance from federal regulators and believe their banking charter will be beneficial in addressing compliance issues [25] Question: How does the company view its competitive positioning in the market? - Management believes their product suite and network effects provide a strong competitive advantage despite competition from larger balance sheets [28] Question: What is the outlook for SEN Leverage and its expansion? - Management noted that SEN Leverage has seen growth even during a downturn in trading volumes, indicating strong demand and potential for future expansion [48] Question: How does the company plan to address deposit growth? - Management explained that they actively manage customer deposits to ensure liquidity while also providing options for customers to earn yield on excess deposits [38] Question: What is the potential loan demand from bitcoin miners? - Management sees significant opportunity in providing loans to bitcoin miners, indicating a shift towards corporate treasury use cases [68]
Silvergate Capital(SICP) - 2021 Q3 - Earnings Call Transcript