Silvergate Wasn't Cut Off From Loans, Lender Says

The Federal Home Loan Bank of San Francisco, the bank that supplied $4.3 billion to Silvergate Bank late last year, didn't force Silvergate to repay advances, which had been rumored to be the reason why crypto-focused Silvergate decided to shut down, the FHLB said Wednesday.

“FHLBank San Francisco did not request or compel Silvergate Bank to prepay its outstanding advances,” a spokesperson for the bank told CoinDesk. “Silvergate made their determination to prepay their outstanding advances based on their own assessment of their position.”

Silvergate Capital (SI) disclosed in a securities filing on March 1 that it had to accelerate sales of securities to raise money to repay advances from the Federal Home Loan Bank of San Francisco. It fully repaid these loans by the start of this month.

Some in the crypto industry have speculated that the early repayment ultimately triggered the bank run on Silvergate. Silvergate’s stock price tanked a day after the company made the disclosure, and it announced it would suspend operations and voluntarily liquidate a few days later.

“We can't speculate as to what went into their final decision to prepay; however, the existing tenure of their remaining advances before the prepayment was short term,” the spokesperson said.

The spokesperson said that the FHLBank could require prepayment if the bank it’s loaning to experiences a “material adverse change,” but that didn't happen with Silvergate.

“Again, we did not request or compel Silvergate Bank to prepay its outstanding advances. We would assume that any prudent borrower in their position would assess their own position and upcoming disclosures and make their own decisions about what was in their best interest in terms of all of their assets and liabilities,” a statement from FHLBank said.

When asked about whether there was any determination or decision not to roll their advance, the FHLB spokesperson said that they can't comment about member-specific transactions.

Silvergate declined to comment.

UPDATE (March 15, 2023 18:30 UTC): Adds last paragraph.

UPDATE (March 15, 2023 20:38 UTC): Adds last comment from the FHLB spokesperson.

UPDATE (March 15, 2023 20:38 UTC): Adds that Silvergate declined to comment.