Palmer Luckey’s Erebor surges to more than $7bn in deposits since launch

Palmer Luckey’s bank for the technology industry has surged to more than $7bn in deposits since launching in February, as the start-up seeks to fill a void left by the collapse of Silicon Valley Bank in 2023.

Erebor is aiming to replace SVB as the lender of choice for early-stage technology businesses, as Luckey, who also co-founded drone maker Anduril Industries, capitalises on his network to build one of America’s fastest-growing lenders.

The eight-month-old bank has added more than 500 customers and more than $3bn in deposits over the past quarter, according to a source familiar with its finances.

Erebor in February became the first of more than a dozen new lenders to receive a national charter during President Donald Trump’s second term.

Luckey, its 34-year-old founder, was among the earliest tech leaders to voice support for Trump. The billionaire and major Republican donor has described Erebor as the technology sector’s equivalent of an agricultural bank: a specialised lender that understands its customers better than mainstream rivals.

Ultimately, Erebor aspires to service the entire tech sector, from venture capital-backed start-ups to Big Tech companies, according to Jacob Hirshman, the group’s co-founder and chair.

“Eventually we want to match our offering with those of global systemically important banks [and] have a broad set of credit products, [foreign exchange], loans etc,” Hirshman said.

It is also looking to expand overseas and is in discussion with a number of foreign lenders about becoming a correspondent bank, according to a person with knowledge of the matter. The group had been exploring ways to provide banking services to countries where financial sanctions have recently been eased, including Venezuela and Syria, they added.

Erebor has raised money from prominent venture capital firms including Lux Capital, Andreessen Horowitz and Peter Thiel’s Founders Fund.

It has also raked in deposits from tech start-ups, largely in defence and manufacturing. “Palmer Luckey is one of the most sophisticated founders in the world,” Hirshman said. “By virtue of being a venture-backed company in the tech world we are able to leverage that to our advantage.”

The rapid deposit growth has yet to translate into large-scale lending for Erebor. As of the end of the second quarter, the bank had made about $78mn in loans while keeping almost 90 per cent of its assets — more than $4bn — in cash and balances with other banks. This is a far higher share than most other lenders of its size, according to Federal Deposit Insurance Corporation data aggregated by BankRegData.

The bank reported a net loss of $10.3mn for the second quarter. Erebor is on track to be profitable by the end of 2026, according to the source familiar with its finances.

The bank — which takes its name from JRR Tolkien’s The Hobbit — holds much of its collateral in cryptocurrencies and semiconductors. Luckey has said he wants Erebor to use dollar-backed cryptocurrencies to provide round-the-clock payment settlements.

Executives have stressed that Erebor will maintain a conservative balance sheet as it grows, with a 50 per cent loan-to-deposit ratio.

SVB collapsed over the course of a few days in March 2023 after a run on the bank forced it to sell off its long-term bond portfolio at a heavy loss.

Prior to its collapse, SVB was one of the principal banks in California’s start-up ecosystem. North Carolina-based First Citizens Bank acquired SVB in a government-led auction.