- Silvergate Capital’s share price slumped more than 11% earlier today.
- Officials from the U.S. Federal Deposit Insurance Corp are currently in talks with the crypto bank.
- The federal regulator and the bank’s management are discussing ways to salvage the company.
- FDIC examiners were reportedly authorized by the U.S Federal Reserve to visit Silvergate’s offices.
Silvergate Capital Corp (SI) has seen its share price tank more than 11% since the New York Stock Exchange (NYSE) opened today. The bank’s share price opened at $5.21 and fell as low as $4.60. The double-digit slump in the crypto bank’s stock came amid talks with federal regulators in the United States.
Silvergate and FDIC are trying to resolve the bank’s crisis
According to a report by Bloomberg, officials from the U.S. Federal Deposit Insurance Corporation are currently holding discussions with Silvergate’s management to explore ways to salvage the company in a bid to keep it in business. The United States Federal Reserve reportedly authorized examiners from the FDIC to visit Silvergate. The examiners reached the crypto bank’s offices in La Jolla, California, last week.
People familiar with the matter revealed that the potential options to rescue the troubled bank involve lining up investors from the crypto industry to support its liquidity as it navigates its financial predicament. While Silvergate and the Federal Reserve declined to provide a comment to Bloomberg, the FDICs stated that it does not comment on “open and operating institutions.”
Silvergate’s share price has seen a month-over-month decline of more than 72%, going from $17.3 last month all the way down to $4.8 at the time of writing. Once the go-to financial institution for companies operating in the crypto space, the bank has lost several high-profile banking partners, including Coinbase and Mike Novogratz’s Galaxy Digital, over the past few days.
The crypto bank’s financial turmoil worsened last week after it revealed that it was evaluating its ability to continue its operations. Silvergate is currently facing a probe by the U.S. Department of Justice for its dealing with bankrupt crypto exchange FTX. The crypto bank was also grilled by U.S. Senators for its role in the mismanagement of client funds by FTX.
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Shares of Silvergate Bank (NASDAQ: SI) have tanked 11% on February 16, 2021, on news of talks with the U.S. Federal Deposit Insurance Corporation (FDIC). This was after the company’s share price rose nearly 50% since the beginning of the year. Silvergate is a California-based online lender and cryptocurrency exchange.
Silvergate has filed for an FDIC-insured industrial loan company (ILC) charter, one of the few remaining requirements for them to accept institutional deposits from other financial and banking institutions. Recently, the bank announced that it has entered into negotiations with the FDIC to obtain the necessary approvals.
Although the news of talks with the FDIC was likely the cause for the dip on February 16, recently SI has come under pressure, with selling pressure intensifying after it released its fourth-quarter results on February 10. The lender reported strong growth, with revenue almost tripling year-over-year. However, a 13.1% jump in noninterest expenses weighed on the bottom-line results, resulting in Net Income being 3% lower than expected.
Many investors are now waiting to see the outcome of the negotiations with the FDIC and are also closely watching the lender’s first-quarter results to be reported in May 2021. If the bank is able to obtain the ILC charter and report better-than-expected first-quarter results, the share price is likely to surge again. Being one of the few companies in the crypto banking space, any strengthening of its position is expected to attract the attention of investors.
