Struggling Crypto Bank Silvergate Suspends Dividends To Preserve Capital
- The bank had halted the payment of dividends on its 5.375% Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series A
- Silveragte reported a net loss of $1 billion for Q4 compared with a net income of $40.6 million in Q3
Struggling crypto bank Silvergate had suspended dividend payments on its preferred stock as a measure to preserve its “highly liquid balance sheet.” Reasoning the decision, the bank, in its official statement, said
“This decision reflects the Company’s focus on maintaining a highly liquid balance sheet with a strong capital position as it navigates recent volatility in the digital asset industry.”
The California-based bank had halted “the payment of dividends on its 5.375% Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series A” to preserve capital. The bank further added that the firm’s Board of Directors would be re-evaluating the payment of quarterly dividends as market conditions evolve.
The latest development comes days after Silevrgate disclosed the losses it incurred in Q4. As per the report, in all of 2022, Silvergate posted a loss of $949 million, compared with a net income of $75.5 million in 2021.
Silvergate Capital also reported a net loss of $1 billion for Q4, compared with a net income of $40.6 million for the third quarter and a net income of $18 million for the same period in 2021. The banks’ poor performance can be hugely attributed to the demise of the crypto exchange FTX and the ripple effect it created across the crypto market.
The bank’s total deposits were made up primarily of deposits from FTX, a business owned by Sam Bankman-Fried, which contributed around $1 billion. Around 90% of all deposits made to the bank are made through accounts associated with cryptocurrencies. The bank had earlier revealed that investors, wary of wading far into the digital asset space after the collapse, pulled out over $8 billion in deposits held at the bank in the last three months of 2022
The liquidity issues that arose following the FTX implosion had forced Silvergate Capital to sell assets at a significant loss to repay withdrawals of almost $8.1 billion. Additionally, the bank also fired 200 employees, or 40% of its workforce, to cut costs. According to experts, it is expected that more crypto firms will find themselves with insufficient liquidity in the near future, leading to more bankruptcies and a collapse in investor confidence in crypto.