Silvergate Shares Drop as USD Transfers, Digital Deposits Slowed in Q3

Crypto-focused bank Silvergate Capital Corporation (SI) missed both earnings and revenue estimates for third-quarter earnings, sending shares down nearly 14% early Tuesday.

Silvergate's earnings per share missed expectations as U.S. dollar transfers on its Silvergate Exchange Network (SEN) slowed by more than expected on a sequential basis, said BTIG analyst Mark Palmer in a note Tuesday. Silvergate's average digital asset deposits during Q3 fell short of the consensus expectation as well, noted Palmer. He maintained his buy rating and $135 price target on the stock, or more than double the current level of $61.15.

The firm's quarterly net income attributable to shareholders was $40.6 million, or $1.28 per diluted common share, lower than FactSet's mean estimate of $1.40. The bank reported revenue of $89.3 million, well below FactSet's mean estimate of $100.3 million.

The bank grew its customer base to 1,677 as of Sept. 30, compared to 1,305 as of Sept. 30, 2021, the firm said on Tuesday. The Silvergate Exchange Network (SEN) handled transactions worth $112.6 billion during the third quarter, down 41% from Q2 and 30% from one year ago.

Earlier this month, Wells Fargo downgraded the stock from overweight to underweight, and cut its price target to $70 from $115. Silvergate is one of the most asset-sensitive banks, but deposit outflows due to weaker crypto prices more than offset the benefits from higher interest rates, according to Wells Fargo.

Read more: Silvergate's Q2 Net Income Jumps 85%, Shares Spike

UPDATE (Oct. 18, 2022 13:20 UTC): Updates headline and story with estimates and stock move.

UPDATE (Oct. 18, 14:05 UTC): Updates stock move and adds analyst commentary.