Silvergate shares crash after company delays annual report reveals new losses

Shares of troubled lender Silvergate (SI) fell as much as 35% Thursday morning after the company said late Wednesday it will miss a March 16 deadline to file its already-delayed annual report.

The bank said its team needs “additional time to perform analysis, record journal entries related to subsequent events, and to complete management’s review of internal controls over financial reporting.”

“The Company is currently analyzing certain regulatory and other investigations and investigations pending regarding the Company,” the company added.

Silvergate shares have collapsed over the past year as the company’s entanglements with several crypto firms — including bankrupt exchange FTX, among others — led to deposits falling by more than two-thirds in the fourth quarter of last year. In January, the company laid off 40% of its staff. The company later suspended a dividend payment on preferred stock as it attempted to raise cash.

The bank’s shares have lost more than 90% in the past year.

A Silvergate spokesperson told Yahoo Finance, “Silvergate is working hard to file its 10-K as soon as possible and has no further comment at this time.”

In Wednesday’s notification, the bank said it sold more debt securities than previously expected in January and February and expects to post further losses than previously disclosed. In January, the company announced that it had incurred $887 million in noninterest losses in the fourth quarter.

The sales are primarily to repay “outstanding advances” it received from the Federal Home Loan Bank of San Francisco, Silvergate said. The bank also needs additional time to complete an “evaluation of the effectiveness of its internal controls over financial reporting” conducted by its third-party accounting firm.

Citing business and regulatory challenges, the company is weighing the extent to which the changes may affect its “ability to continue its business during the 12 months following the issuance of these financial statements,” according to the filing.

In late January, a bipartisan group of US senators urged the company to provide answers about whether it knew its customers were misusing FTX customer funds. A Reuters report in February said a Silvergate account controlled by Binance.US had transferred millions of dollars to a company controlled by Binance CEO Changpeng Zhao.

Alan Lane, CEO of Slivergate, second from right, is applauded as he rings the opening bell of the New York Stock Exchange ahead of his bank’s IPO, Thursday, Nov. 7, 2019. (AP Photo/Richard Drew)

Last week, in a joint statement with the Federal Deposit and Insurance Corporation (FDIC) and Office of the Comptroller of the Currency (OCC), the Federal Reserve made a point to highlight heightened liquidity risks for banks taking on crypto-related clients.

As for its own risks, Silvergate cited “tightened regulatory oversight of banking institutions that provide products and services to the digital asset industry,” private litigation, and investigations from congressional investigations, banking regulators, and the Justice Department.

Analysts at JPMorgan downgraded the stock’s rating from Neutral to Underweight and pulled out their price target in a note Thursday, calling the situation “highly unusual” and adding: “The ‘run’ Silvergate has been experiencing appears to have been caused by shaken by a combination of (1) confidence in the overall system given the collapse of previously trusted players (such as FTX) and (2) short-sellers expressing their concerns (primarily on Twitter).

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