Small Banks see fortune rise and fall with crypto

That’s according to a Monday (Aug. 15) report by The Wall Street Journal (WSJ), which explored the phenomenon from the perspective of three small banks: Silvergate Capital, Signature Bank, and Customers Bancorp.

Silvergate, for example, saw its deposits swing by $5 billion in the second quarter of the year, ending more or less flat at $13.5 billion. The bank reported its second quarterly drop in deposits in the past 10 years, while one of its larger crypto customers declared bankruptcy, the report stated.

The banks’ stocks have taken a wild ride as well, with Silvergate and Signature shares doubling during the market boom in 2021, and Customers’ stock increasing three-fold. Now, Silvergate has fallen almost 30% this year, while Signature and Customers have dropped close to 40%, according to the report.

Among Signature’s customers was the crypto lender Celsius Network, which filed for bankruptcy last month. Court records show that Celsius said it had $130 million in cash on hand and nearly all its bank accounts were with Signature, the report stated.

Chairman Scott Shay told WSJ that Signature has experience working with clients in bankruptcy and that Celsius accounts for a small portion of its deposits. A $2.4 billion drop in digital asset deposits in the second quarter dragged down total deposits.