Shoulder Innovations, Inc.

Good day and welcome to the SilverGate Capital Corporation third quarter 2021 earnings conference call. All participants will be in a 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 touch-tone 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 third 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 November 2, 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 filed with the Securities and Exchange Commission. We do not undertake any duty to update such forward-looking statements. Now, I would like to turn the call over to Alan.

Thank you, Hunter, and good morning, everyone. Silvergate had another great quarter. I'm pleased to share that our quarterly pre-tax income of $29.4 million was the highest in Silvergate's history, driven by growth in our platform and our balance sheet. Average deposits from digital currency customers continued to grow during the third quarter, reaching a record $11.2 billion, compared to an average of $9.9 billion during the second quarter, which was driven by our customers, who require the ability to move U.S. dollars in real time, 24 hours a day, seven days a week, using our API-enabled proprietary Silvergate Exchange Network, or SEND. To that end, the number of customers on the SEND platform expanded to 1,305 this quarter, an increase of more than 300 customers since the beginning of the year. Our pipeline of potential new digital currency customers remains robust as we continue to benefit from the powerful network effects created by the SEND. Turning to SEND leverage, our Bitcoin collateralized lending product, total approved lines of credit grew 25% to $323 million compared to $259 million at the end of the second quarter. Then leverage continued to perform as designed with zero losses to date and no forced liquidations. And we remain very confident in our ability to scale this product over the long term. Turning briefly to slide four, we have been working with Coinmetrics since early this year to better understand how SEND activity is correlated to the broader industry, a question we are often asked. According to their data, both Bitcoin and Ethereum dollar trading volumes were down significantly in the third quarter and were highly correlated with trends on the SEND. Consistent with this data, SEND transfer volume of $162 billion declined 32% on a sequential basis, but increased by $125 billion or 342% compared to the third quarter of 2020. Similarly, transaction revenue from digital currency customers of $8.1 million was the second highest in our history and increased nearly 150% compared to a year ago, reflecting continued strong demand for cash management and foreign currency exchange services. Finally, before I turn it over to Tony, I wanted to briefly discuss our stable coin infrastructure initiative. Last quarter, I detailed our new partnership with DM. While we are not able to provide an update on timing of the launch today, I remain incredibly enthusiastic about Silvergate's position and ability to contribute to the growing stable coin ecosystem. Over time, we believe stable coins have the potential to become a meaningful payment rail for customers around the world. And as I said last quarter, it's important to keep in mind that we are still in the early innings of this exciting opportunity. We continue to have an open dialogue with our regulators and look forward to keeping you updated on this initiative in the coming months. I will now turn it over to Tony to discuss our financial results in more detail before we take your questions. Tony?