Shares of troubled lender Silvergate (SI) fell as much as 35% on Thursday morning after the company said late Wednesday that it will miss the 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 assessment of internal controls over financial reporting.”
“The company is currently analyzing certain ongoing regulatory and other inquiries and investigations relating to the company,” the company added.
Silvergate shares have slumped over the past year as the company’s entanglements with several crypto firms – including bankrupt exchange FTX, among others – saw deposits plummet 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 paid on the preferred stock as it sought to bolster its liquidity.
Over the past year, the bank’s shares have lost more than 90%.
A Silvergate spokesperson told Yahoo Finance: “Silvergate is working diligently to file its 10-K as soon as possible and has no further comment at this time.”
In Wednesday’s notice, the bank said it sold additional debt securities beyond what was previously expected in January and February and expects to incur additional losses from which had previously been disclosed. In January, the company disclosed that it suffered $887 million in noninterest losses in the fourth quarter.
The sales are primarily to pay off “unpaid advances” it received from the Federal Home Loan Bank of San Francisco, Silvergate said. The bank also needs more time to complete an “assessment 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 assessing how the changes could affect its “ability to continue as a going concern for the twelve months following the publication of these financial statements,” according to the filing.
In late January, a bipartisan group of U.S. senators pressed the company for answers about whether it knew its FTX clients had misused client funds. A Reuters report in February said a Silvergate account controlled by Binance.US transferred millions of dollars to a company controlled by Binance CEO Changpeng Zhao.
Last week, in a joint statement with the Federal Deposit and Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC), the Federal Reserve highlighted increased liquidity risks for banks accepting customers linked to cryptography.
As for its own risks, Silvergate cited “increased regulatory scrutiny of banking institutions that provide products and services to the digital asset industry,” private litigation, and investigative inquiries from Congress, banking regulators, and government. Ministry of Justice.
JPMorgan analysts downgraded the stock from neutral to underweight and withdrew their price target in a note released Thursday, calling the situation “highly unusual” and adding: “The ‘race’ experienced at Silvergate appears to have been driven by a combination of (1) confidence in the overall system is shaken given the collapse of trusted players (such as FTX) and (2) short sellers are voicing their concerns (primarily on Twitter).”
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