Shoulder Innovations, Inc.

Good morning or good afternoon all and welcome to the Silvergate Capital Corporation first quarter 2022 earnings conference call. My name is Adam and I'll be your operator today. If you'd like to ask a question during the Q&A portion of today's call, you may do so by pressing star one on your telephone keypad. I will now hand you over to Hunter Stembeck to begin. So Hunter, please go ahead when you are ready.

Thank you, operator, and good morning, everyone. We appreciate your participation in the Silvergate Capital Corporation first quarter 2022 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 May 3rd, 2022. 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. We started off 2022 on a strong note with first quarter net income available to common shareholders of $24.7 million, an increase of 94% compared to the first quarter of 2021. This is a testament to the earnings power of our platform and continued progress on our strategic initiatives, which I will discuss further in a moment. I'm particularly pleased with our first quarter results when you consider that this was one of the most challenging periods for the broader crypto ecosystem since the beginning of the pandemic. As we have done over the past few quarters, we continue to work with Coinmetrics to better understand how activity on the Silvergate Exchange Network, or CEN, our real-time API-enabled platform, is correlated with the broader crypto industry. According to their data, in the first quarter, both Bitcoin and Ethereum dollar trading volumes were down significantly. Consistent with this data, first quarter SEND transfer volume of $142 billion declined 35% on a sequential basis and 15% compared to the first quarter of 2021. Transaction revenue from digital currency customers of $8.9 million increased year over year by 26%, but declined 4% sequentially. As I've said before, our growth trajectory won't always be linear. That said, while SEND volume was impacted by broader industry trends in the first quarter, I remain encouraged by the continued growth we achieved in customers, SEND leverage commitments, and average deposits. the number of digital currency customers increased to 1,503 in the first quarter, an increase of nearly 400 customers since the same quarter last 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 products Total approved commitments grew 88% to $1.1 billion compared to $571 million at the end of the fourth quarter. Last month, we announced the issuance of a $205 million SEND leverage loan to MacroStrategy, a subsidiary of MicroStrategy. demonstrating the use case for SendLeverage as a treasury management solution that will allow institutions to utilize their Bitcoin to support and grow their business. SendLeverage is still in the early stages of its evolution, and we remain confident in our ability to grow this product over the long term, including through new, innovative use cases like this one. Importantly, SendLeverage has continued to perform as designed with zero losses to date and no forced liquidations. Average deposits from digital currency customers also continued to grow during the first quarter, reaching a record $14.7 billion, driven by our customers that require the ability to move U.S. dollars in real time, 24 hours a day, seven days a week on the cent. This compared to an average of $13.3 billion during the fourth quarter, and $6.4 billion during the first quarter of 2021. Now, turning to our strategic initiatives. As I've noted in the past, many of our initiatives and product launches are born out of solving problems for our customers. We made two exciting announcements this quarter that helped advance our customer-first approach. First, I'll touch on our stablecoin infrastructure initiative. In January, we announced that we had acquired select blockchain-based payment technology assets from the DM Group, further enhancing our existing stablecoin infrastructure. These intellectual property assets include development, deployment, and operations infrastructure and tools for running a blockchain-based payment network designed to facilitate payments for both commerce and cross-border remittance. Importantly, The assets we purchased include proprietary software elements that are critical to running a regulatory-compliant stablecoin network. We see the potential for stablecoins to become a meaningful payment rail for consumers and businesses around the globe. As an insured depository institution, Silvergate is uniquely positioned to leverage this technology under the evolving framework from Washington, D.C. We know that our customers have a need for a U.S. dollar-backed stablecoin that is regulated and highly scalable to further enable them to move money without barriers. And as we announced on our fourth quarter earnings call, we are working to launch a stablecoin in 2022. We view this investment as an important milestone, and the acquired assets bring us one step closer to achieving this goal by enhancing our already existing stablecoin infrastructure. Turning to EuroSend. In February, we announced the expansion of the send to enable customers to transfer euros in near real time, 24 hours a day, seven days a week. EuroSend was built using the same technology as the existing US dollar send payment rails and enables customers to send euros to other Silvergate customers with immediate access to funds. We are excited to solve this need for our customers who can now move euros 24-7 on the SEND just as they do U.S. dollars. Finally, I wanted to briefly touch on the EJF Silvergate Ventures Fund, our joint investment vehicle with EJF Capital focused on early-stage startups that we announced during the fourth quarter of 2021. We're excited to announce the closing of our first capital call with total fund capital commitments of $114 million. subsequent to the quarter. By supporting entrepreneurs who are shaping the future of the digital currency ecosystem, we will stay on the cutting edge of the next generation of products coming to market, and in turn, continue to deliver more innovative and useful products to our customers. I'm proud of everything we accomplished in the first quarter, and I'm excited for what's to come in 2022. I'll now turn it over to Tony to review our financial results in more detail before we take your questions. Tony?