Shoulder Innovations, Inc.

Hello, everyone, and welcome to the SilverGate Capital Corporation second quarter 2022 earnings conference call. My name is Victoria, and I will be calling into your call today. If you'd like to ask a question, please press star 1 on your telephone keypad. To withdraw your question, please press star 2. When preparing to ask a question, please ensure that your line is unmuted locally. And I'll pass over to Hunter Stembeck to begin. Please go ahead.

Thank you, operator, and good morning, everyone. We appreciate your participation in the Silvergate Capital Corporation second 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 August 2nd, 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. I am pleased to share our strong second quarter results with you today. I am especially proud of our results this quarter in light of the challenging backdrop facing the broader digital asset ecosystem. Driven by our diverse revenue streams, SilverGate delivered record net income available to common shareholders of $35.9 million, an increase of 45% since last quarter, and EPS of $1.13 per share, an increase of 43% from last quarter. Net interest income of $70.5 million increased $20.1 million compared to the first quarter as we benefited from the rising interest rate environment, which Tony will touch on in more detail. In times like this, it's important to highlight what differentiates Silvergate. Our platform was built to support our clients in this relatively nascent industry during periods of high volumes market volatility and transformation, just like we're seeing today. The Silvergate Exchange Network, or CEN, our highly scalable technology platform that operates 24-7, 365, underpins our offering and serves as critical market infrastructure. We've experienced high volumes and significant volatility many times since we started banking this industry over eight years ago, and I'm sure this won't be the last. In fact, It was this experience of ever-increasing peak volumes and volatility which informed the creation of the SEND and influenced how we manage customer deposits and liquidity. Our balance sheet is optimized for client liquidity and risk management practices are at the forefront in all aspects of our business. As a regulated bank, we take compliance seriously and our robust risk management framework ensures we are well prepared for any market environment. Finally, we take a disciplined approach to innovation. As we have always done, our goal is to introduce new products that solve problems for our customers and increase the value of our franchise while also managing risk. Now, I'd like to provide a bit more detail on some of our key metrics. As we have done over the past few quarters, We continue to work with Coinmetrics to better understand how activity on the SEND is correlated with the broader digital asset industry. According to Coinmetrics data, in the second quarter, both Bitcoin and Ethereum dollar trading volumes were relatively flat. Despite these trends, the SEND saw some of its highest daily trading volumes ever during the second quarter, with transfer volume of $191 billion an increase of 34% on a sequential basis. Average deposits from digital currency customers declined to $13.8 billion in the second quarter compared to $14.7 billion last quarter. That said, average deposits throughout the quarter were higher than end of period deposits in Q1. We saw a significant range of deposits during the quarter from a high of $17.6 billion to a low of $12.6 billion, which we believe was caused by the significant dislocation that occurred within the broader ecosystem that was in part impacted by the collapse of various digital asset platforms. However, SilverGate did not experience any loss of customers, deposits, or capital as a result of these events, a testament to the power of our model and our robust risk management framework. The number of digital currency customers increased to 1,585 in the second quarter, an increase of over 300 customers since the same quarter last year. We added over 80 clients during the quarter, a decline when compared to Q1, but consistent with the average clients added per quarter in the second half of 2021, as we continue our focus on adding high-quality clients that bring the most value to our platform. Our pipeline of potential new digital currency customers remains robust with over 300 prospects. Turning to SendLeverage, our Bitcoin collateralized lending product, we saw continued strong demand for the product with total approved commitments growing 28% to $1.4 billion compared to $1.1 billion at the end of the first quarter. In addition, we experienced a range of outstanding SEND leverage balances during the quarter between $303 million and $732 million with an average outstanding balance of $560 million. Importantly, all of our SEND leverage loans performed as expected with no losses or forced liquidations. As a reminder, by design, these loans are over collateralized and our customers have the ability to draw, pay down, or pledge additional Bitcoin as collateral to comply with the terms of their loan agreement, 24 hours a day, seven days a week. Finally, I want to provide an update on our stablecoin infrastructure initiative. Following our announcement in January that we acquired select blockchain-based payment technology assets from the DM Group, we are still on track to launch our own U.S. dollar-backed stablecoin in 2022. We look forward to updating you on this initiative in the coming months. I'm extremely proud of our accomplishments this quarter amidst the challenging environment in the digital asset industry. I look forward to providing further updates on our progress in the second half of the year. I'll now turn it over to Tony to review our financial results in more detail before we take your questions. Tony?