Financial Performance - Total assets increased to $4.97 billion, a 15% year-over-year increase from $4.31 billion[9, 11] - Credit assets reached $4.35 billion[9, 11, 16] - Cash and securities significantly increased by 109% year-over-year, reaching $0.55 billion compared to $0.26 billion[11] - Net income was $8.1 million, a 36% decrease year-over-year[9, 14] - Earnings per share (EPS) was $0.28, a 42% decrease year-over-year[9, 14] - Total revenue was $27.8 million, a 4% decrease year-over-year[9, 14] Digital Banking Operations - Canadian Digital Banking Efficiency Ratio is 47%[9] - Digital Banking Canada revenue decreased by 11% year-over-year to $23.81 million[15] - Digital Banking USA revenue was $2.04 million[15] - Net Interest Margin (NIM) on credit assets was 2.36%[9, 19] Receivable Purchase Program (RPP) - Receivable Purchase Program portfolio comprised $928 million of the $4.35 billion total credit asset portfolio[17] - Multi-Family Residential Loans & Other comprised $3.4 billion of the $4.35 billion total credit asset portfolio[17] Capital and Ratios - CET1 Ratio was 14.61%, an increase of 322 bps year-over-year[11] - Leverage Ratio was 9.67%, an increase of 123 bps year-over-year[11] - Book value per common share increased by 11% year-over-year to $16.03[11]

Financial Data and Key Metrics Changes - Total assets at the end of Q1 2025 grew 15% year-over-year and 3% sequentially to just under $5 billion [18] - Total consolidated revenue was $27.8 million, compared to $28.9 million last year, reflecting a small year-over-year decrease driven by lower net interest margin and non-interest income [20] - Consolidated non-interest expense increased to $15.7 million from $12 million in Q1 last year, attributed to operating costs associated with U.S. operations [21] - Book value per share increased to a record $16.03 [18] - CET-1 ratio increased to 14.61% and leverage ratio was 9.67%, both above internal targets [18] Business Line Data and Key Metrics Changes - Revenue for Canadian banking operations was $23.8 million, up slightly from Q4 last year, with net income of $8.8 million [22] - U.S. banking operations generated revenue of $2 million, with income of $103,000 [22] - Cybersecurity component within DRTC generated revenue of $2 million, up from $1.9 million in Q1 last year, but net loss was $757,000 due to higher operating expenses [23] Market Data and Key Metrics Changes - The credit asset portfolio grew to a record $4.35 billion, with the receivable purchase program increasing 10% year-over-year and 3% sequentially to $3.4 billion [24] - The multifamily residential loans and other portfolio grew 5% year-over-year to $928 million [25] - Digital banking operations net interest margin on credit assets was 2.36%, down 10% year-over-year but up 1% sequentially [27] Company Strategy and Development Direction - The company aims for low double-digit growth in Canadian assets, with potential upside from increased consumer spending in a lower interest rate environment [30] - The company is targeting $1 billion in commitments for CMHC-insured multifamily residential loans by the end of fiscal 2025 [31] - The company is actively pursuing opportunities in digital deposit receipts (DDRs), which are expected to disrupt conventional banking deposit frameworks [36][37] Management's Comments on Operating Environment and Future Outlook - Management expects to see a more meaningful contribution from the CMHC-insured multifamily residential loan business and anticipates favorable trends supporting net interest margin [32] - The company is optimistic about the U.S. RPP business, with a robust pipeline of potential partners [34] - Management noted that the uncertainty in markets could make their RPP solution more attractive as alternative funding sources become more expensive [34] Other Important Information - The company completed a successful capital raise of $86 million to support U.S. RPP opportunities [8] - The company has transferred intellectual property related to DDRs to a wholly owned subsidiary for exclusive focus on DDR assets [37] Q&A Session Summary Question: How should we think about the digital deposit receipts in the near term? - Management plans to pilot the project in the U.S. and expects to start raising deposits towards the middle to end of the year [44][46] Question: Should we consider the current non-interest expenses as the run rate moving forward? - Management indicated that current expenses may increase slightly due to exchange rate impacts and higher costs associated with U.S. operations [49] Question: How quickly can the U.S. RPT volume ramp up? - Management believes that the initial target of $290 million in U.S. RPT volume is easily attainable with several partners lined up [53] Question: Can you provide an update on the trajectory of the U.S. point-of-sale business? - Management stated that the process involves paperwork and that partners are keen to start, with momentum expected to build [58] Question: What is the impact of the flattening yield curve on margins? - Management expects margins to widen back up to historical levels as higher-priced deposits mature [70][72] Question: Can you provide details on the provision taken in the quarter? - Management explained that provisions are based on forward-looking models and are higher due to an unstable credit environment, but still remain low compared to industry averages [74]

Core Viewpoint - VersaBank reported quarterly earnings of $0.20 per share, missing the Zacks Consensus Estimate of $0.29 per share, and down from $0.36 per share a year ago, indicating a significant earnings surprise of -31.03% [1][2] Financial Performance - The company posted revenues of $19.58 million for the quarter ended January 2025, missing the Zacks Consensus Estimate by 8.98%, and down from $21.35 million year-over-year [2] - Over the last four quarters, VersaBank has surpassed consensus EPS estimates only once [2] Stock Performance - VersaBank shares have declined approximately 13.9% since the beginning of the year, compared to a decline of -1.8% for the S&P 500 [3] - The current Zacks Rank for VersaBank is 3 (Hold), indicating expected performance in line with the market in the near future [6] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.33 on revenues of $22.64 million, and for the current fiscal year, it is $1.46 on revenues of $98.83 million [7] - The trend of estimate revisions for VersaBank is mixed, which could change following the recent earnings report [6] Industry Context - The Zacks Industry Rank for Banks - Foreign is currently in the top 32% of over 250 Zacks industries, suggesting that the industry outlook can significantly impact stock performance [8]

Financial Performance - Net income for the three months ended January 31, 2025, was CAD 8.1 million, a decrease of 35.5% compared to CAD 12.7 million for the same period in 2024[6] - Total revenue for the three months ended January 31, 2025, was CAD 27.8 million, down 3.6% from CAD 28.9 million in the prior year[6] - VersaBank's basic and diluted income per common share decreased to CAD 0.28 for the three months ended January 31, 2025, down from CAD 0.48 in the same period of 2024[6] - For the three months ended January 31, 2025, total revenue was $27,827,000, a decrease of 3.6% from $28,851,000 in the same period of 2024[75] - Net income for the three months ended January 31, 2025, was $8,143,000, down 35.5% from $12,699,000 in the prior year[75] Asset and Equity Growth - As of January 31, 2025, VersaBank's total assets increased to CAD 4,971.7 million, up from CAD 4,838.5 million as of October 31, 2024, representing a growth of 2.8%[4] - Shareholders' equity increased to CAD 521.3 million as of January 31, 2025, up from CAD 399.2 million as of October 31, 2024, indicating a growth of 30.6%[4] - Cash and cash equivalents increased to CAD 386.7 million as of January 31, 2025, from CAD 225.3 million at the end of October 2024, marking a significant increase of 71.5%[8] - The bank's credit assets, net of allowance for credit losses, rose to CAD 4,346.7 million as of January 31, 2025, compared to CAD 4,236.1 million as of October 31, 2024, reflecting a growth of 2.6%[4] - The Bank's total assets increased to CAD 30.623 million as of January 31, 2025, compared to CAD 29.574 million on October 31, 2024[34] Credit Losses and Risk Management - The provision for credit losses was CAD 1.0 million for the three months ended January 31, 2025, compared to a recovery of CAD 0.1 million in the same period of 2024[6] - The allowance for expected credit losses (ECL) was CAD 4,233 thousand as of January 31, 2025, up from CAD 3,303 thousand as of October 31, 2024, reflecting a 28.1% increase[29] - The Bank's maximum exposure to credit risk is the carrying value of its financial assets, with security held against the majority of credit assets[23] - Management's credit risk modeling incorporates macroeconomic indicators such as real GDP, unemployment rate, and long-term interest rates to assess credit risk parameters[25] - The Bank anticipates potential tightening of credit conditions due to high household debt-service obligations, although loan performance is expected to remain stable[27] Capital and Regulatory Metrics - The Bank's Common Equity Tier 1 (CET1) capital increased to CAD $500,158 thousand as of January 31, 2025, up from CAD $373,503 thousand on October 31, 2024, reflecting a growth of 33.8%[61] - The CET1 capital ratio improved to 14.61% as of January 31, 2025, compared to 11.24% on October 31, 2024, indicating a stronger capital position[61] - The Bank's leverage ratio increased to 9.67% as of January 31, 2025, up from 7.38% on October 31, 2024, demonstrating enhanced capital adequacy[63] - Total regulatory capital rose to CAD $613,021 thousand as of January 31, 2025, compared to CAD $481,176 thousand on October 31, 2024, marking an increase of 27.4%[61] - The Bank's total risk-weighted assets were CAD $3,422,768 thousand as of January 31, 2025, compared to CAD $3,323,595 thousand on October 31, 2024, reflecting a growth of 3.0%[61] Segment Performance - Digital Banking Canada segment generated net interest income of $23,685,000, a decrease from $26,568,000 year-over-year[75] - Non-interest income for the Digital Banking USA segment was $1,989,000, compared to $1,920,000 in the previous year, reflecting a growth of 3.6%[75] - Digital Banking Canada focuses on a business-to-business model to serve underserved segments in the Canadian banking market, utilizing proprietary financial technology[69] - Digital Banking USA aims to implement a similar business-to-business model to address underserved segments in the US banking market[70] - DRTC is dedicated to cybersecurity services and the development of banking and financial technology, targeting large-market opportunities in cybersecurity[71] Expenses and Tax Provisions - The income tax provision for the three months ended January 31, 2025, was CAD 3.0 million, a decrease from CAD 4.3 million in the same period of 2024[42] - Salaries and benefits expenses rose to $8,614,000 from $6,538,000, marking an increase of 31.7%[75] - General and administrative expenses increased to $5,489,000 from $4,333,000, reflecting a growth of 26.7%[75] - The company reported an income tax provision of $2,961,000, down from $4,255,000 in the previous year, a decrease of 30.5%[75] Securities and Investments - The bank's securities held decreased to CAD 158.5 million as of January 31, 2025, from CAD 299.3 million as of October 31, 2024, a decline of 47%[18] - The fair value of FVOCI securities decreased from $299,300 on October 31, 2024, to $158,546 on January 31, 2025, indicating a decline of 47%[68] - The fair value of FVTPL securities is $386,693, compared to $225,254 as of October 31, 2024, reflecting a significant increase of 71.5%[68] Other Financial Metrics - Loan commitments decreased to CAD $556,629 thousand as of January 31, 2025, down from CAD $635,433 thousand on October 31, 2024, representing a decline of approximately 12.2%[50] - The outstanding foreign exchange forward contract had a notional value of USD 63.0 million, hedging a portion of the USD 97.1 million net investment in VersaBank USA[45] - The Bank's total off-balance sheet exposure at gross notional amount was CAD $621,370 thousand as of January 31, 2025, down from CAD $701,104 thousand on October 31, 2024, indicating a decrease of approximately 11.4%[63]

Core Insights - VersaBank reported its first quarter results for fiscal 2025, highlighting a total revenue of CAD 27.8 million, a 4% decrease year-over-year but a 2% increase sequentially [2][10] - The bank's net income for the quarter was CAD 8.1 million, up 48% from CAD 5.5 million in the previous quarter but down from CAD 12.7 million in the same quarter last year [10] - Total assets reached a record CAD 5.0 billion, reflecting a 15% year-over-year increase and a 3% sequential increase, primarily driven by growth in the Receivable Purchase Program (RPP) portfolio [10] Financial Performance - Total revenue for the quarter was CAD 27,827,000, compared to CAD 27,285,000 in the previous quarter and CAD 28,851,000 in the same quarter last year [3][9] - Net interest income was CAD 25,724,000, showing a slight increase from CAD 24,901,000 in the previous quarter but a decrease from CAD 26,568,000 year-over-year [9] - Non-interest income was CAD 2,103,000, down from CAD 2,384,000 in the previous quarter and CAD 2,283,000 year-over-year [9] Key Ratios - The cost of funds decreased to 3.84% from 4.11% in the previous quarter and 3.99% year-over-year [3][9] - The net interest margin was 2.08%, down from 2.12% in the previous quarter and 2.48% year-over-year [3][9] - Return on average common equity improved to 7.02%, compared to 5.28% in the previous quarter and 13.41% year-over-year [3][9] Operational Highlights - The bank's Canadian Digital Banking operations reported a net income of CAD 8.8 million, up from CAD 5.0 million in the previous quarter but down from CAD 12.3 million year-over-year [10] - The U.S. Digital Banking operations reported a net income of CAD 103,000, down from CAD 465,000 in the previous quarter [10] - The bank successfully completed an equity offering for gross proceeds of approximately CAD 124.2 million, enhancing its balance sheet capacity [10] Strategic Initiatives - The bank is expanding its U.S. Receivable Purchase Program, having entered into a partnership with Watercress Financial Group LLC [10][4] - The transition of key executive team members to support U.S. operations is expected to drive growth in the RPP [10][4] - The bank is pursuing opportunities for its Digital Deposit Receipts (DDRs), which leverage blockchain technology for enhanced security and efficiency [4][10]

Company Overview - VersaBank is a North American bank with a branchless, digital, business-to-business model that utilizes proprietary technology to serve underserved segments of the banking industry in a risk-mitigated manner [5] - The bank primarily conducts its operations electronically through financial intermediary partners, which enhances its operational efficiency and return on common equity [5] - VersaBank launched its Receivable Purchase Program (RPP) in August 2024, targeting the underserved multi-trillion-dollar US market, building on its successful experience in Canada [5] - The bank also owns DRT Cyber Inc., a leader in providing cybersecurity services to combat increasing cyber threats faced by financial institutions and government entities [5] Upcoming Financial Results - VersaBank will report its first quarter fiscal 2025 financial results on March 5, 2025, at 7:00 a.m. ET [1] - A conference call/webcast will follow at 9:00 a.m. ET, featuring presentations by the President & CEO David Taylor and CFO John Asma, along with a Q&A session [1] - The financial results will be disseminated via a news release prior to the conference call [1]

Core Insights - VersaBank has entered into a partnership with Watercress Financial Group to enhance its presence in the US home improvement loan market through its Receivable Purchase Program (RPP) [1][2] - The partnership marks VersaBank's first collaboration with an American company following its acquisition of a US bank, aiming to leverage Watercress's established network and expertise in consumer loans [2][5] - VersaBank's RPP has shown significant growth, with a portfolio exceeding CAD$3.3 billion (US$2.4 billion) and a compounded annual growth rate of over 27% over the last five years [4] Company Overview - VersaBank is a fully digital financial institution with a cloud-based, branchless model, focusing on underserved segments of the banking industry [6][7] - The bank has successfully provided over CAD$10.5 billion (US$7.5 billion) in funding to North American finance companies since the launch of its RPP in 2010 [4] - VersaBank also operates in the cybersecurity sector through its subsidiary DRT Cyber Inc., addressing the growing cyber threats faced by financial institutions and corporations [7] Industry Context - The US represents the largest point-of-sale financing market globally, making it a strategic focus for VersaBank's expansion efforts [2] - Home improvement financing has been a significant growth driver for VersaBank's Canadian operations, indicating potential for similar success in the US market [2][4] - The RPP is designed to meet the demand for accessible and economically attractive capital in the consumer and small business financing market [3]

Corporate Realignment and Divestiture - VersaBank announced the internal transfer of assets related to its Digital Deposit Receipt technology to a subsidiary named Digital Meteor, Inc. This move is aimed at enhancing shareholder value and supports the planned divestiture of its Cyber Security businesses [1] - The transfer is not expected to have any material financial implications for the bank [1] Digital Asset Innovation - The company is encouraged by the favorable stance of the U.S. administration towards digital assets, particularly following President Trump's executive order aimed at promoting U.S. leadership in digital assets and financial technology [2] - VersaBank has successfully completed a pilot program with its blockchain-based DDR, which provides a secure representation of federally regulated bank deposits on multiple blockchains, and received SOC 2 Type I certification for its VersaVault® technology in 2022 [2] - DDRs can be converted to and from other digital currencies like Bitcoin, combining traditional banking safety with blockchain efficiency [2] Digital Deposit Receipts (DDRs) - DDRs are highly encrypted digital assets representing actual fiat currency on deposit with the bank, issued on secure blockchains such as Algorand, Ethereum, and Stellar [3] - They offer superior security, stability, and regulatory compliance compared to traditional stablecoins, making them a trusted alternative for mainstream financial applications [3] Business Model and Market Expansion - VersaBank operates as a fully digital financial institution with a cloud-based, branchless model, focusing on underserved segments of the banking industry [4] - The bank launched its Receivable Purchase Program (RPP) in August 2024, targeting the U.S. market, which has been successful in Canada for nearly 15 years [4] - The RPP provides funding for low-risk point-of-sale finance companies through automated electronic purchases of cash flow streams from finance partners' loans [4] Cyber Security Services - VersaBank owns DRT Cyber Inc., a leader in providing cyber security services to financial institutions, multinational corporations, and government entities [5]

Core Insights - The "holy grail" in banking is achieving a high Return on Equity (ROE) with a low-risk profile while also ensuring rapid growth and significant operating leverage [1] Group 1: Independent Banking Research - Independent banking research emphasizes financials, deep value, special situations, and financial arbitrage [2] - The approach is agnostic and apolitical, focusing on durable and uncorrelated cash flows that perform well in both inflationary and deflationary environments [2]

Group 1 - VersaBank announced the full exercise of the underwriters' option to purchase an additional 849,056 common shares at a price of US$13.25 per share, resulting in additional gross proceeds of US$11,249,992 [1] - The total number of common shares sold in the Offering increased to 6,509,434, with total gross proceeds reaching US$86,250,001 [1] - The net proceeds from the Offering are expected to be used for general banking purposes and will qualify as Common Equity Tier 1 capital for the Bank [2] Group 2 - Raymond James & Associates, Inc. acted as the sole bookrunning manager, while Keefe, Bruyette & Woods, A Stifel Company, and Roth Canada, Inc. served as co-managers for the Offering [2] - VersaBank operates a branchless, digital, business-to-business banking model, leveraging proprietary technology to serve underserved segments of the banking industry [5] - The Bank launched its Receivable Purchase Program (RPP) funding solution in March 2022, targeting the U.S. market, which has been successful in Canada for nearly 15 years [5]