Shoulder Innovations, Inc.

Hello and welcome to today's Silvergate Capital Corporation third quarter 2022 earnings conference call. My name is Jordan and I'll be coordinating your call today. If you'd like to register an audio question, you may do so by pressing star followed by one on your telephone keypad. We'd ask all participants to please limit themselves to one question and an additional follow-up. I'm now going to hand over to Hunter Stembeck to begin. Hunter, please go ahead.

Thank you, Operator, and good morning, everyone. We appreciate your participation in the Silvergate Capital Corporation third 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 November 1st, 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. Silvergate reported strong third quarter results, even as the broader digital asset ecosystem continued to experience challenges. Against this backdrop, Silvergate delivered record net income available to common shareholders of $40.6 million, an increase of 13% compared to the second quarter, driven by our diverse revenue streams and progress on our strategic initiatives. Before I dive into our results, I want to provide some color on the broader digital asset ecosystem. In the third quarter, Bitcoin hit its lowest price and market cap of the year. We have not seen these levels since the fourth quarter of 2020. At that point in time, Silvergate had fewer than 1,000 digital asset customers, $2.6 billion of average digital asset deposits, and only $59 billion of spend volumes. By contrast, this quarter we have more than 1,600 customers, average deposits of $12 billion, and send volumes of $113 billion, which is a testament to the strength of our platform over the last two years and the dedication of our team. As we've done in the past, we worked with Coinmetrics again this quarter to better understand how activity on the send correlated with the broader digital asset industry. According to their data, in the third quarter, both Bitcoin and Ethereum dollar trading volumes increased compared to the second quarter. The SEND saw lower daily trading volumes this quarter, with transfer volume of $113 billion, a decrease of 41% on a sequential basis. Volumes were mainly impacted by trends in the broader industry, specifically within stablecoins. as volumes from stablecoin issuers such as USDC saw a sizable drop in market cap during the quarter. It's important to note that the correlation between the SEND and the industry won't always be linear, given the different use cases of the SEND. We remain confident in the power of the platform and the opportunities for expansion within the network. Now, moving to our key metrics. Average deposits from digital asset customers declined to $12 billion in the third quarter compared to $13.8 billion last quarter. Importantly, we saw the range of deposits during the quarter narrow to a high of $14 billion and a low of $11.1 billion, signaling lower volatility in our deposit base. The number of digital asset customers continued to increase. reaching 1,677 in the third quarter, an increase of over 350 customers since the same quarter last year. We added over 90 clients on a sequential basis as we continue our focus on adding high-quality clients that bring the most value to our platform. Our pipeline of potential new digital asset 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 9% to $1.5 billion compared to $1.4 billion at the end of the second quarter. In addition, we experienced a range of outstanding SendLeverage balances during the quarter between $268 million and $322 million. with an average outstanding balance of $308 million. All of our SEND leveraged loans continue to perform 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 would like to provide an update on the progress we are making towards our strategic initiatives. We continue to balance our culture of innovation with our prudent risk-based approach to launching new products and are actively engaged with regulators and policymakers in anticipation of launching a regulatory compliant tokenized dollar on the blockchain. Unfortunately, we no longer expect that to happen this year. That said, we remain committed to bringing blockchain-based payments to our customers in a regulatory-compliant manner and will continue to provide additional updates on this initiative and the other exciting opportunities being explored by Silvergate in the coming quarters. While we are taking a balanced approach, as you can see on slide four, the opportunity ahead remains massive. We believe Silvergate is one of the best positioned in the industry to both power the current $1 trillion digital asset market and disrupt the $67 trillion global commerce market with a blockchain-based payment solution. As the digital asset ecosystem continues to grow and evolve, we will continue to take a customer-first approach to product innovation. In line with this approach, I'm pleased to share that in the fourth quarter, we will introduce updates to our customer support model to provide our customers with support 24 hours a day, seven days a week. We already offer real-time payments with 24-7 availability through SEND and EuroSEND, and we have maximized payment windows to give our customers increased opportunities to execute their banking activities when it's convenient for them. Enhancing our existing customer support model will be incredibly meaningful for our customers who work in digital assets, which is an industry that operates without time constraints or geographic barriers. Finally, earlier this year, we announced the launch of the EuroSend, which enables customers to transfer euros in near real time, 24 hours a day, seven days a week. This quarter, we gained momentum on this platform with the rise in ECB rates, and in turn, customers held more euro deposits. This technology is just one example of our ability to provide products that meet our customers' needs. I am proud of the progress we made this quarter against our strategy and look forward to what's to come as we close out 2022. I'll now turn it over to Tony to review our financial results in more detail before we take your questions. Tony?