VersaBank (NASDAQ:VBNK) Q3 2023 Earnings Call Transcript August 30, 2023 9:00 AM ET Company Participants David Taylor - President and CEO Shawn Clarke - CFO Conference Call Participants David Feaster - Raymond James Mike Rizvanovic - KBW Research Stephen Ranzini - University Bank Bradley Ness - Choral Capital Operator Good morning, ladies and gentlemen, and welcome to VersaBank's Third Quarter fiscal 2023 Financial Results Conference Call. This morning, VersaBank issued a news release reporting its financia ...

Q3 2023 Conference Call Presentation August 30, 2023 Follow us Post Conference Call Q&A 2 Toll-free: 1 (888) 664-6392 (Canada/US) Local: (416) 764-8659 For those wishing to ask questions during the Q&A, please access today's call through the telephone dial-in: Advisory 3 The Bank occasionally makes forward-looking statements about its objectives, operations and targeted financial results. These statements may be written or verbal and may be included in such things as press releases, corporate presentations, ...

Exhibit 99.1 Interim Consolidated Financial Statements July 31, 2023 (Unaudited) 1 VERSABANK Consolidated Balance Sheets (Unaudited) (thousands of Canadian dollars) | | | July 31 | | October 31 | | July 31 | | --- | --- | --- | --- | --- | --- | --- | | As at | | 2023 | | 2022 | | 2022 | | Assets | | | | | | | | Cash | $ | 87,726 | $ | 88,581 | $ | 84,214 | | Securities (note 4) | | 182,944 | | 141,564 | | 133,682 | | Loans, net of allowance for credit losses (note 5) | | 3,661,672 | | 2,992,678 | | 2,814,1 ...

VersaBank (NASDAQ:VBNK) Q2 2023 Earnings Conference Call June 7, 2023 9:00 AM ET Company Participants David Taylor - President, Chief Executive Officer Shawn Clarke - Chief Financial Officer Conference Call Participants David Feaster - Raymond James Stephen Lange Ranzini - University Bank Abhilash Shashidharan - KBW Research Operator Good morning ladies and gentlemen. Welcome to VersaBank’s second quarter fiscal 2023 financial results conference call. This morning, VersaBank issued a news release reporting ...

Exhibit 99.1 Interim Consolidated Financial Statements April 30, 2023 (Unaudited) 1 VERSABANK Consolidated Balance Sheets (Unaudited) (thousands of Canadian dollars) | | | April 30 | | October 31 | | April 30 | | --- | --- | --- | --- | --- | --- | --- | | As at | | 2023 | | 2022 | | 2022 | | Assets | | | | | | | | Cash | $ | 223,661 | $ | 88,581 | $ | 198,157 | | Securities (note 4) | | 39,652 | | 141,564 | | - | | Loans, net of allowance for credit losses (note 5) | | 3,419,455 | | 2,992,678 | | 2,450,276 ...

VersaBank (NASDAQ:VBNK) Q1 2023 Results Conference Call March 8, 2023 9:00 AM ET Company Participants David Taylor - President, CEO Shawn Clarke - CFO Conference Call Participants David Feaster - Raymond James Mike Rizvanovic - KBW Research Stephanie Woo - LodeRock Research Trevor Reynolds - Acumen Capital Brad Ness - Choral Capital Operator Good morning, ladies and gentlemen. Welcome to VersaBank's First Quarter Fiscal 2023 Financial Results Conference Call. This morning, VersaBank issued a news release re ...

[Interim Consolidated Financial Statements](index=2&type=section&id=Interim%20Consolidated%20Financial%20Statements) This section provides VersaBank's interim consolidated financial statements, covering balance sheets, income, equity changes, and cash flows [Consolidated Balance Sheets](index=2&type=section&id=Consolidated%20Balance%20Sheets) As of January 31, 2023, VersaBank's total assets increased to **$3,531.7 million**, driven by a rise in net loans to **$3,235.1 million**, with deposits growing to **$2,925.5 million** Consolidated Balance Sheet Highlights (in thousands of Canadian dollars) | Balance Sheet Item | Jan 31, 2023 | Oct 31, 2022 | Jan 31, 2022 | | :--- | :--- | :--- | :--- | | **Total Assets** | **$3,531,690** | **$3,265,998** | **$2,415,346** | | Cash | $201,372 | $88,581 | $155,239 | | Loans, net | $3,235,083 | $2,992,678 | $2,215,638 | | **Total Liabilities** | **$3,180,513** | **$2,915,323** | **$2,078,395** | | Deposits | $2,925,452 | $2,657,540 | $1,847,003 | | **Total Shareholders' Equity** | **$351,177** | **$350,675** | **$336,951** | [Consolidated Statements of Income and Comprehensive Income](index=3&type=section&id=Consolidated%20Statements%20of%20Income%20and%20Comprehensive%20Income) For Q1 2023, VersaBank's net income significantly increased by **69.2%** to **$9.4 million**, driven by a **43.8%** rise in net interest income to **$24.3 million**, with EPS reaching **$0.34** Income Statement Highlights (in thousands of Canadian dollars) | Metric | Q1 2023 (3 months ended Jan 31) | Q1 2022 (3 months ended Jan 31) | YoY Change | | :--- | :--- | :--- | :--- | | Net Interest Income | $24,274 | $16,885 | +43.8% | | Total Revenue | $25,918 | $18,266 | +41.9% | | Income Before Income Taxes | $13,198 | $7,628 | +73.0% | | **Net Income** | **$9,417** | **$5,566** | **+69.2%** | | **Basic and Diluted EPS** | **$0.34** | **$0.19** | **+78.9%** | [Consolidated Statements of Changes in Shareholders' Equity](index=4&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Shareholders%27%20Equity) Shareholders' equity increased to **$351.2 million** year-over-year, primarily due to **$9.4 million** in net income, partially offset by **$7.1 million** in share repurchases and **$0.9 million** in dividends - The Bank purchased and cancelled common shares during the period, reducing share capital by **$7.1 million**[5](index=5&type=chunk) - Retained earnings increased to **$116.6 million**, reflecting the net effect of **$9.4 million** in net income, less **$1.2 million** for share cancellations and **$0.9 million** in dividends paid[5](index=5&type=chunk) [Consolidated Statements of Cash Flows](index=5&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For Q1 2023, cash provided by operations significantly shifted to **$126.2 million** from a prior year usage of **$112.9 million**, resulting in a **$116.8 million** increase in cash to **$201.4 million** Cash Flow Summary (in thousands of Canadian dollars) | Cash Flow Activity | Q1 2023 (3 months ended Jan 31) | Q1 2022 (3 months ended Jan 31) | | :--- | :--- | :--- | | **Cash provided by (used in) Operations** | **$126,203** | **($112,864)** | | Cash used in Purchase of investment | ($25) | ($32) | | Cash used in Financing | ($9,407) | ($1,103) | | **Change in Cash** | **$116,771** | **($113,999)** | | Cash, end of the period | $201,372 | $155,239 | [Notes to Interim Consolidated Financial Statements](index=6&type=section&id=Notes%20to%20Interim%20Consolidated%20Financial%20Statements) This section provides detailed notes to the interim consolidated financial statements, elaborating on key accounts and accounting policies [Note 5. Loans, net of allowance for credit losses](index=9&type=section&id=Note%205.%20Loans%2C%20net%20of%20allowance%20for%20credit%20losses) The Bank's net loan portfolio expanded to **$3,235.1 million**, with **Point-of-Sale loans** at **$2,414.3 million**, and the total allowance for credit losses at **$2.29 million** [Summary of loans and allowance for credit losses](index=10&type=section&id=Summary%20of%20loans%20and%20allowance%20for%20credit%20losses) The gross loan portfolio reached **$3,221.7 million**, primarily comprising **Point-of-Sale loans** at **$2,414.3 million**, with a total allowance for credit losses of **$2.29 million** Loan Portfolio Breakdown (in thousands of Canadian dollars) | Loan Category | Jan 31, 2023 | Oct 31, 2022 | Jan 31, 2022 | | :--- | :--- | :--- | :--- | | Point-of-sale loans and leases | $2,414,266 | $2,220,894 | $1,439,781 | | Commercial real estate mortgages | $752,138 | $710,369 | $722,829 | | Other | $55,334 | $48,617 | $45,847 | | **Total Loans (Gross)** | **$3,221,738** | **$2,979,880** | **$2,208,457** | | **Allowance for credit losses** | **($2,289)** | **($1,904)** | **($1,455)** | ECL Allowance by Stage as of Jan 31, 2023 (in thousands of Canadian dollars) | Stage | Loan Amount | ECL Allowance | Expected Loss % | | :--- | :--- | :--- | :--- | | Stage 1 (Performing) | $3,131,875 | $2,212 | 0.07% | | Stage 2 (Increased Credit Risk) | $88,181 | $77 | 0.09% | | Stage 3 (Impaired) | $1,682 | - | 0.00% | | **Total** | **$3,221,738** | **$2,289** | **0.07%** | [Expected Credit Loss Model and Sensitivity](index=11&type=section&id=Expected%20Credit%20Loss%20Model%20and%20Sensitivity) The Bank's IFRS 9 ECL model uses third-party macroeconomic scenarios, with sensitivity analysis showing a **downside scenario** could increase the allowance to **$4.0 million** from the reported **$2.3 million** - The Bank uses third-party forward-looking credit risk parameter modeling systems from Moody's Analytics due to its limited historical loss data, which is crucial for estimating expected credit losses[37](index=37&type=chunk) ECL Sensitivity Analysis as of Jan 31, 2023 (in thousands of Canadian dollars) | Scenario | Estimated ECL | Variance from Reported ECL | Variance % | | :--- | :--- | :--- | :--- | | **Reported ECL** | **$2,289** | **-** | **-** | | 100% Upside | $1,857 | ($432) | (19%) | | 100% Baseline | $2,772 | $483 | 21% | | 100% Downside | $4,025 | $1,736 | 76% | [Impaired loans](index=18&type=section&id=Impaired%20loans) Impaired loans significantly increased to **$1.7 million** as of January 31, 2023, up from **$279 thousand** at October 31, 2022 - The value of impaired loans increased to **$1.7 million** as of January 31, 2023, up from **$279,000** at October 31, 2022[51](index=51&type=chunk) [Note 9. Share capital](index=19&type=section&id=Note%209.%20Share%20capital) The Bank repurchased and cancelled **822,296 common shares** for **$8.3 million** under its NCIB, with **26.4 million common shares** outstanding as of January 31, 2023 - The Bank initiated a Normal Course Issuer Bid (NCIB) to purchase up to **1,700,000 common shares**, as management believes the market price is at a material discount to book value[57](index=57&type=chunk) - During the quarter ended January 31, 2023, the Bank purchased and cancelled **822,296 common shares** for **$8.3 million**[59](index=59&type=chunk) [Note 15. Capital management](index=22&type=section&id=Note%2015.%20Capital%20management) VersaBank maintained strong capital ratios above OSFI minimums, with **CET1 at 11.19%** and **Total Capital at 15.34%**, despite a slight decrease due to risk-weighted asset growth - The Bank's policy is to maintain a strong capital base to support future growth and retain market confidence, while balancing returns to shareholders[70](index=70&type=chunk) Regulatory Capital Ratios | Capital Ratio | Jan 31, 2023 | Oct 31, 2022 | Minimum Requirement | | :--- | :--- | :--- | :--- | | CET1 Capital Ratio | 11.19% | 12.00% | 7.0% | | Tier 1 Capital Ratio | 11.66% | 12.50% | 8.5% | | Total Capital Ratio | 15.34% | 16.52% | 10.5% | | Leverage Ratio | 9.21% | 9.84% | 3.0% | [Note 18. Operating segmentation](index=25&type=section&id=Note%2018.%20Operating%20segmentation) The Bank's **Digital Banking segment** generated **$24.3 million** in revenue and **$9.9 million** in net income, while the DRTC cybersecurity segment reported a **$516 thousand net loss** Segment Performance (in thousands of Canadian dollars) | Segment (Q1 2023) | Total Revenue | Net Income (Loss) | Total Assets | | :--- | :--- | :--- | :--- | | Digital Banking | $24,276 | $9,933 | $3,522,279 | | DRTC | $1,833 | ($516) | $23,797 | | **Consolidated** | **$25,918** | **$9,417** | **$3,531,690** | - The Digital Banking segment remains the primary driver of profitability, while the DRTC cybersecurity segment continues to be in an investment phase, reporting a net loss[88](index=88&type=chunk)

VersaBank (NASDAQ:VBNK) Q4 2022 Earnings Conference Call December 7, 2022 9:00 AM ET Company Participants David Taylor - President & CEO Shawn Clarke - CFO Conference Call Participants Greg MacDonald - LodeRock Research Stephen Ranzini - University Bank Brad Ness - Choral Capital Operator Good morning, ladies and gentlemen. Welcome to VersaBankÂ's Fourth Quarter and Year-End Fiscal 2022 Financial Results Conference Call. This morning, VersaBank issued a news release reporting its financial results for the f ...

Financial Data and Key Metrics Changes - Total assets surpassed $3 billion for the first time, reaching $3.1 billion, up 35% year-over-year and 14% sequentially [20] - Total loan portfolio grew to a record $2.81 billion, an increase of 44% year-over-year and 15% sequentially [22] - Consolidated revenue increased 35% year-over-year and 14% sequentially to a record $21.2 million [24] - Net income for Q3 was $5.7 million, reflecting a 5% year-over-year and 16% sequential growth [25] - Earnings per share for Q3 was $0.20, down 20% year-over-year but up 18% sequentially [26] Business Line Data and Key Metrics Changes - The Canadian Point-of-Sale financing business saw a 75% year-over-year and 24% sequential increase, reaching $2 billion, representing 71% of the total loan portfolio [28] - The commercial real estate portfolio increased 1% year-over-year but decreased 3% sequentially to $804 million [29] - Net interest income for digital banking operations increased 38% year-over-year and 16% sequentially to a record $20.1 million [31] - DRTC's revenue from cybersecurity services increased 7% year-over-year but decreased 12% sequentially [38] Market Data and Key Metrics Changes - The U.S. small business Point-of-Sale financing market is valued at $1.8 trillion and is growing rapidly [18] - Insolvency Professional deposit balances contracted slightly in Q3, but growth is expected in early fiscal 2023 due to anticipated increases in consumer bankruptcies [35] Company Strategy and Development Direction - The company announced the acquisition of Stearns Bank, a national U.S. bank, which is a key part of its long-term growth strategy [14] - The U.S. receivable purchase program will be launched to address the underserved U.S. market, leveraging the successful Canadian Point-of-Sale model [15][16] - The company is focused on expanding its digital deposit receipts as a regulated alternative to the unregulated stablecoin market [42][43] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the continued growth of the loan portfolio and profitability, driven by strong demand in the Point-of-Sale financing sector [45][47] - The company anticipates that the costs associated with strategic growth initiatives will normalize in 2023 [27] - Management noted that the current economic environment may lead to increased consumer insolvencies, which could benefit the company's deposit strategy [55] Other Important Information - The company incurred approximately $3 million in transitory costs related to strategic growth initiatives and NASDAQ listing [13][26] - The CET1 ratio was 12.51%, up from 11.94% year-over-year, while the leverage ratio was 10.38%, up from 9.99% year-over-year [23] Q&A Session Summary Question: Outlook for DRTC business - Management indicated that there is seasonality in DRTC's business, with expectations for recovery towards the end of the year and positive reception for new products [51][52] Question: Insights on insolvency deposit strategy - Management noted that current insolvency rates are below normal, but expects an increase in consumer insolvencies due to rising interest rates, which will drive deposit growth [55] Question: Breakdown of transitory costs - Approximately 60% of the $3 million in transitory costs were related to legal and consulting fees for the Stearns acquisition, with the remainder associated with insurance renewals [60] Question: Current balance of U.S. Point-of-Sale loans - The current balance of U.S. Point-of-Sale loans is $39 million [69] Question: Timeline for VCAD commercial launch - Management aims for a launch before the end of the fiscal year, pending final approvals from regulatory bodies [72]

Q3 2022 Conference Call Presentation August 31, 2022 Follow us Post Conference Call Q&A 2 Toll-free: 1 (888) 664-6392 (Canada/US) Local: (416) 764-8659 For those wishing to ask questions during the Q&A, please access today's call through the telephone dial-in: Advisory 3 The Bank occasionally makes forward-looking statements about its objectives, operations and targeted financial results. These statements may be written or verbal and may be included in such things as press releases, corporate presentations, ...