Shares of the crypto bank Silvergate Capital (SI) were nearly 10% higher as of 9:55 a.m. EST today after the company reported earnings results that beat consensus estimates for the first quarter of 2022.
Silvergate reported nearly $25 million of net income, or roughly $0.79 in earnings per share (EPS), on total revenue of about $60 million. Analysts on average had projected $0.44 EPS and total revenue of about $55.3 million, so it was a strong beat.
Silvergate's main offering is its Silvergate Exchange Network (SEN), which is a real-time payments system that allows multiple parties on the network to send and clear transactions instantly. It's appealing to institutional crypto traders and crypto exchanges because cryptocurrencies trade around the clock.
Due to weak crypto spot-trading volume in the quarter, volume across SEN came in lower than normal at $142 billion, down 15% year over year and 35% from the previous quarter. But despite the broader industry headwind, SEN added 122 digital customers, showing that demand for the platform is still strong. The bank also nicely grew SEN Leverage -- its Bitcoin-collateralized line of credit -- surpassing $1 billion of total volume in the first quarter of 2022, which is up 87% from the previous quarter.
Silvergate grew average deposits to $14.7 billion, up 11% from the prior quarter. Net interest income -- which is the money that banks make on loans, securities, and cash after covering the cost of funding those assets -- shot up to $50.5 million in the quarter, up 32% from the prior quarter. Silvergate is a tremendous beneficiary of rising interest rates.
I thought Silvergate performed well considering the weakness in broader crypto trading volume in the quarter. SEN customers and SEN Leverage grew nicely, and this is a bank that will benefit tremendously as the Federal Reserve hikes its benchmark overnight lending rate, the federal funds rate, multiple times this year.