Silvergate took nearly $ 3B in Deposits from Digital Currency Customers in Q4 2020

Silvergate Bank received a total of $ 2.9 billion in new deposits from new and existing digital currency customers in the fourth quarter of 2020, according to an earnings report released Wednesday.

The majority of these new deposits came from crypto exchanges that deposited $ 1.7 billion more in cash into their quarter-on-quarter accounts. Institutional investor deposits grew $ 961 million and those from other customers $ 234 million. California-based bank La Jolla added 41 digital currency customers for a total of 969.

Crypto companies are often a rich source of low-cost deposits for the few banks that openly serve the sector. For 2020, the average cost of Silvergate deposits was 0.27%. For scale, average deposit costs of mid-cap commercial banks are typically around 0.75 to 1.25 percent.

Silvergate Exchange Network, a fiat ramp for bitcoin markets, processed 90,763 transactions transferring $ 59.2 billion over the network during the last quarter.

“Looking ahead to 2021, I am very excited about the multiple paths to continued growth and opportunities to monetize the AAA platform, such as digital asset lending and custodial services,” Silvergate CEO Alan Lane said in a press release. “In particular, SEN Leverage, a lending proposal piloted by a majority of last year, is now Silvergate’s core product enabling customers to get US dollar loans collateralized by bitcoin. We anticipate increasing demand for this proposal over the next year. ”

Fee income collected by digital currency customers was $ 3.8 million in Q4, a $ 500,000 increase from the third quarter. Through all of 2020, Silvergate accumulated $ 11.1 million in fees from digital currency clients, more than double the $ 4.9 million taken in 2019.

The bank’s tier 1 leverage ratio – which measures equity capital against risk-weighted assets – fell below 10% in the fourth quarter, but remained well above the 5% regulatory threshold at 8.29%.