Shoulder Innovations, Inc.

and welcome to the Silvergate Capital Corporation second quarter 2021 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touchtone phone. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Hunter Stenback with SilverGate Investor Relations. Please go ahead.

Thank you, operator, and good morning, everyone. We appreciate your participation in the SilverGate Capital Corporation second quarter 2021 earnings call. With me here today are Alan Lane, our chief executive officer, Tony Martino, our chief financial officer, and Ben Reynolds, our Chief Strategy Officer. As a reminder, a telephonic replay of this call will be available through 1159 p.m. Eastern Time on August 3rd, 2021. Access to the replay is also available on the Investor Relations section of our website. Additionally, a slide deck to complement today's discussion is available on the IR section of our website. Before we begin, let me remind everyone that this call may contain certain statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These include remarks about management's future expectations, beliefs, estimates, plans, and prospects. Such statements are subject to a variety of risks, uncertainties, and other factors, including the COVID-19 pandemic that could cause actual results to differ materially from those indicated or implied by such statements. Such risks and other factors are set forth in our periodic and current reports, followed with the Securities and Exchange Commission. We do not undertake any duty to update such forward-looking statements. Now, I would like to return the call over to Alan.

Thank you, Hunter, and good morning, everyone. I'm pleased to share that Silvergate had an outstanding second quarter. We nearly doubled pre-tax income compared to the first quarter of 2021. We announced our continued development of stablecoin infrastructure, including an agreement to be the exclusive issuer of DMUSD stablecoins. We continue to grow SendLeverage, our U.S. dollar-based Bitcoin collateralized lending product, and we completed the at-the-market equity offering that we launched in early March. Our success continues to be driven by strong demand for our digital currency solutions powered by the Silvergate Exchange Network, or SEND. In the second quarter, the number of customers on the SEND platform expanded to 1,224, and our pipeline of potential new digital currency customers remains robust as we continue to benefit from the powerful network effects created by the SEND. We generated more than $239 billion of volume on the SEND, a new record, and an increase of 44% compared to the first quarter. We also continued to see elevated demand for cash management and foreign currency exchange services, bolstered by our proprietary API, which allows our customers to seamlessly interact with us. As a result, transaction revenue from digital currency customers grew nearly 60% from last quarter to $11.3 million. Turning to SEND leverage, total approved lines of credit grew 32% to $259 million, compared to $197 million at the end of the first quarter. Importantly, SEND leverage continued to perform as designed. Despite the decline in the price of Bitcoin during the quarter, we have experienced zero losses to date and no forced liquidations. While I continue to be encouraged by the demand we are seeing from our customers, it's no surprise that the pace of new loan commitments slowed down given the pricing dynamics at play during the quarter. As with any new product, we continue to look for opportunities to improve the design and benefits of SEND Leverage to ensure we are meeting our customers' needs. Over the long term, I remain incredibly confident in the growth of SEND Leverage. As I discussed last quarter, we have seen an influx of deposits from our digital currency customers who require the ability to move U.S. dollars on the SEND in real time, 24 hours a day, seven days a week. In the second quarter, average deposits from digital currency customers grew by $3.5 billion to $9.9 billion, driven by the record volume we experienced on the SEND. We are prudently deploying these deposits into interest-earning assets including the purchase of $4.5 billion of both short and long-duration securities during the quarter, while ensuring we have ample liquidity to support our customers as they transact on the SEND. Going forward, we will continue to take a balanced approach and invest the deposits into securities that balance duration and returns. Before I turn it over to Tony, I am incredibly excited to share an update on the development of our stablecoin infrastructure initiatives. In May, we announced our partnership with Diem to become the exclusive issuer of U.S. dollar-backed stablecoins known as DiemUSD, designed to enable the conversion of fiat U.S. dollars to and from the stablecoin through a process known as minting and burning. The stablecoins can then be used by virtual asset service providers, or VASPs, for a variety of use cases, including commerce between consumers and merchants, as well as cross-border payments. Over time, we believe stablecoins have the potential to become a meaningful payment rail for customers around the world. That said, it's important to keep in mind that we are still in the very early innings and that novel products like this often require regulatory dialogue. As the use cases for U.S. dollar-backed stablecoins increase, Silvergate is well-positioned to benefit from multiple levers for monetization. First, we'll seek to earn transaction fees on minting and burning of the stablecoins. Second, we'll earn yield on reserve deposits while managing them in a capital-efficient manner. And third, we will add a new category of customer to the SEND for whom we will provide traditional banking services. We believe Silvergate's future remains incredibly bright. I will now turn it over to Tony to discuss our financial results in more detail before we take your questions. Tony?