Silvergate Capital Corporation (NYSE:SI), once a high flying, an innovative bank serving the digital asset industry, filed a notice with the Securities and Exchange Commission (SEC) today indicating it was unable to file its annual report or 10K on time. Additionally, the bank stated that it would be unable to make the extension date of March 16, 2023. Following the news, Silvergate shares cratered by over 30% in after-hours trading.
Silvergate stated that it was “working diligently” to file the 10-K, but it required additional time to “perform analysis, record journal entries related to subsequent events and to complete management’s evaluation of internal controls over financial reporting.”
The bank stated that more time was also needed so its accountants could complete audit procedures, including a review of “adjustments” not yet recorded as well as a review of the effectiveness of internal controls.
“The Company is currently analyzing certain regulatory and other inquiries and investigations that are pending with respect to the Company. The Company’s independent registered public accounting firm is also requesting detailed information relating to such matters and the Company is responding to such requests. The Registrant is still preparing analyses and providing documentation requested by its independent auditors in connection with their review.”
Silvergate stated that it anticipates the results of Q4 operations and the full year ended December 31, 2022, will “reflect significant changes from the fourth quarter and full fiscal year ended December 31, 2021.”
Silvergate’s preliminary, unaudited financial results for Q4 and full year 2022 include a net loss attributable to common shareholders for the year ended December 31, 2022, of $948.7 million compared to net income available to common shareholders of $75.5 million for the year ended December 31, 2021.
Silvergate reported that it sold debt in both January and February of 2023 and expects further losses. There is also a risk that Silvergate will not be sufficiently capitalized. The impact of the challenges facing the bank raises questions as to its ability to continue as a going concern.
Silvergate said it was reevaluating its business and considering options.
In January, Moody’s downgraded Silvergate following the revelation that deposits rapidly declined during Q4 of 2022, and the bank had to shore up its balance sheet.
Silvergate has been hammered by the collapse of multiple crypto firms and related contagion. The bank has had to post multiple statements on its exposure to various firms, most recently in regard to its limited exposure to Genesis.
At one point, Silvergate was the bank of choice for crypto firms – many of which struggled to find a chartered bank willing to take on the business.
In January 2022, Silvergate touted its business, stating 2021 was “another year of significant growth and momentum”… “driven by strong demand for our digital currency solutions…” The bank said they were “excited about the opportunities and areas for growth that lie ahead as the digital currency industry continues to evolve.”
In November of 2021, shares in Silvergate traded at just under $220. Silvergate started the year at around $17. In after-hours trading, shares closed at $9.24 as investors ran for the exits following the statement regarding its ability to operate going forward.