Summary of VersaBank Conference Call Company Overview - **Company Name**: VersaBank - **Stock Symbols**: NASDAQ: VBNK, TSX: VBNK - **Type**: Fully digital, branchless bank operating in North America - **Founding**: Established in the early 1990s, first federal license in Canada in 18 years, and a national bank license in the U.S. after three decades [2][3] Core Business Model - **Receivable Purchase Program (RPP)**: Flagship product allowing the purchase of receivables from point-of-sale finance companies, which finance consumer purchases like vehicles and home improvements [4][12] - **Operational Efficiency**: The bank operates with approximately 100 employees, leveraging technology to maintain low fixed costs and high scalability [5][18] - **Credit Risk Management**: Utilizes a put-back arrangement to return delinquent loans to originators, resulting in minimal credit risk [5][13][19] Recent Innovations - **Digital Vault (VersaVault)**: Launched in 2018, allows tokenization of deposits, offering a digital representation of bank deposits [7][9] - **AI Enhancements**: Developed AI modules to process data and documentation significantly faster than human capabilities, improving operational efficiency [21][22] - **Real-Time Receivable Purchases**: Future plans to enable real-time purchases of receivables, enhancing cash flow for partners [22][23] Market Position and Expansion - **U.S. Market Entry**: Recently expanded operations into the U.S., targeting the point-of-sale market, which is significantly larger than the Canadian market [12][17] - **Competitive Landscape**: Currently, no direct competitors in the U.S. market; however, some competition exists in Canada [24][25] - **Securitization**: Plans to incorporate securitization into the product offering to enhance funding options [24] Financial Metrics and Performance - **Return on Equity (ROE)**: Historically high ROE, with margins around 250 basis points, expected to improve with asset growth [6][26] - **Efficiency Ratios**: Focus on improving efficiency ratios to enhance pre-tax earnings, currently at a 30% tax rate [26] - **Asset Growth**: Key metric for investors; growth in assets directly correlates with increased profitability [26] Future Outlook - **Divestment of Cybersecurity Firm**: Plans to divest a cybersecurity firm, which may positively impact book value [14][19] - **Market Potential**: The stablecoin industry has seen $27 trillion in transactions, presenting a significant growth opportunity for VersaBank's digital deposit products [15] Additional Insights - **Consumer Behavior**: Noted differences in financing behavior between U.S. and Canadian consumers, with U.S. consumers financing more readily at point-of-sale [17] - **Scalability**: The bank's model is described as "almost infinitely scalable," with no need for traditional branch networks [18] This summary encapsulates the key points discussed during the conference call, highlighting VersaBank's innovative approach, market expansion, and financial performance metrics.

Core Insights - VersaBank reported its third quarter results for fiscal 2025, highlighting significant growth in its digital banking operations and the expansion of its Receivable Purchase Program (RPP) in both the US and Canada [2][8][9] Financial Performance - Total revenue for Q3 2025 reached $31.6 million, a 17% increase year-over-year and a 5% increase sequentially [4][13] - Consolidated net income was $6.6 million, down from $9.7 million in Q3 2024 and $8.5 million in Q2 2025, impacted by $4.2 million in non-interest expenses related to the Proposed Realignment of Corporate Structure [4][13][18] - Adjusted net income, excluding the aforementioned costs, was $9.7 million, unchanged year-over-year and up 11% sequentially [4][13][18] Asset Growth - Total assets increased by 21% year-over-year and 9% sequentially to a record $5.5 billion, primarily driven by growth in credit portfolios, particularly the RPP [4][13] - Total Digital Banking operations credit assets rose 18% year-over-year and 6% sequentially to $4.78 billion, with the RPP portfolio increasing by 15% year-over-year and 5% sequentially [4][13][18] Operational Developments - The company added two new partners to its RPP in Canada, including its first securitization partner, which is expected to enhance asset and earnings growth [9][14] - A pilot program for tokenized deposits in the US is underway, which could provide a competitive edge in the digital banking space [9][10] Strategic Initiatives - The Proposed Realignment of Corporate Structure aims to align with a standard US bank framework, expected to create additional shareholder value and reduce corporate costs [3][8][9] - The company is focusing on enhancing its digital banking efficiency and profitability, particularly in the US market, as it continues to grow its RPP [8][9][10]

Group 1 - VersaBank has added two new partners to its Receivable Purchase Program (RPP) in Canada, including its first partner under the newly expanded RPP to include a securitized financing offering [1][2] - The first funding transaction for the RPP Securitization partner has been completed, with funding for the other new partner expected to commence soon [1][2] - The addition of these partners enhances VersaBank's position in Canada and is expected to significantly expand its addressable market in both Canada and the United States [2] Group 2 - VersaBank's RPP Securitized Financing strategy will focus on investment in senior-level tranches of target securitized credit assets, typically AAA-rated, and will establish a platform for securitization of assets from financing partners [2] - The strategy aims to meet the current demand from larger financing companies for lower-cost securitized financing in the existing interest rate environment [2] Group 3 - VersaBank operates a branchless, digital, business-to-business banking model, leveraging proprietary technology to serve underserved segments of the banking industry [3] - The bank has successfully launched its Receivable Purchase Program funding solution for point-of-sale finance companies in the US market, building on nearly 15 years of success in Canada [3] - VersaBank also owns DRT Cyber Inc., a leader in cybersecurity services, and Digital Meteor Inc., which focuses on next-generation digital assets for the banking and financial community [3]

Company Overview - VersaBank is a North American bank with a unique branchless, digital, business-to-business model that leverages proprietary technology to serve underserved segments of the banking industry in a risk-mitigated manner [5] - The bank has a significant operating leverage due to its electronic deposit acquisition and funding through financial intermediary partners, which enhances efficiency and return on common equity [5] - VersaBank launched its Receivable Purchase Program in August 2024, targeting the underserved multi-trillion-dollar US market, building on its successful Canadian operations [5] - The bank owns DRT Cyber Inc., a leader in cybersecurity services, addressing the increasing cyber threats faced by financial institutions and corporations [5] - Through its subsidiary Digital Meteor Inc., VersaBank holds proprietary technology for next-generation digital assets, including Digital Deposit Receipts (DDRs) [5] Upcoming Financial Results - VersaBank will report its third quarter 2025 financial results on September 4, 2025, at 7:00 a.m. ET, followed by a conference call at 9:00 a.m. ET [1] - The conference call will feature presentations by the President and CFO, along with a question and answer session [1] Accessing Information - Investors can join the conference call via telephone or through a live webcast available on the bank's website [2][3] - An archived version of the webcast will be accessible for 90 days post-event, and a replay of the teleconference will be available until October 4, 2025 [4]

Group 1 - VersaBank will participate in the Sidoti Virtual Investor Conference on June 11-12, 2025, with a presentation by President David Taylor scheduled for June 12 at 2:30 p.m. ET [1] - The Bank will also hold one-on-one meetings with interested institutional investors during the conference [2] Group 2 - VersaBank operates as a federally chartered bank in both Canada and the US, utilizing a branchless, digital, business-to-business model that leverages proprietary technology to serve underserved banking segments [3] - The Bank launched its Receivable Purchase Program in August 2024, targeting the US market for point-of-sale finance companies, building on its success in Canada [3] - VersaBank owns DRT Cyber Inc., a leader in cybersecurity services, and Digital Meteor Inc., which holds proprietary technology for digital assets, including Digital Deposit Receipts (DDRs) [3]

Core Viewpoint - VersaBank reported strong financial results for Q2 2025, with record total revenue and significant growth in credit assets, driven by its Receivable Purchase Program and digital banking operations [2][12][19]. Financial Performance - Total revenue for Q2 2025 reached CAD 30.1 million, a 6% increase year-over-year and an 8% increase sequentially [12][18]. - Net income for Q2 2025 was CAD 8.5 million, compared to CAD 8.1 million in Q1 2025 and CAD 11.8 million in Q2 2024 [12][18]. - Earnings per share for Q2 2025 were CAD 0.26, down from CAD 0.28 in Q1 2025 and CAD 0.45 in Q2 2024 [12][18]. Asset Growth - Total assets increased by 15% year-over-year and 2% sequentially to a record CAD 5.0 billion, primarily due to growth in credit portfolios [12][20]. - Total credit assets reached CAD 4.52 billion, marking a 13% year-over-year increase and a 4% sequential increase [11][12]. Digital Banking Operations - Digital Banking operations generated total revenue of CAD 28.1 million, a 6% increase year-over-year and a 9% increase sequentially [15]. - The net interest margin on credit assets for Digital Banking operations increased to 2.59%, reflecting a 3% year-over-year increase and a 10% sequential increase [15][12]. Strategic Initiatives - The company is pursuing a structural realignment to align with a standard US bank framework, which is expected to enhance shareholder value and reduce costs [9][12]. - The Receivable Purchase Program in the US is on track to reach at least USD 290 million by fiscal year-end [8][19]. Market Position - VersaBank operates a branchless, digital business-to-business model, leveraging technology to address underserved segments in the banking industry [22]. - The bank's cybersecurity subsidiary, DRT Cyber Inc., positions it as a leader in addressing the growing volume of cyber threats [22].

Group 1 - VersaBank will report its second quarter fiscal 2025 financial results on June 4, 2025, at 7:00 a.m. ET, followed by a conference call at 9:00 a.m. ET [1] - The conference call will feature presentations by David Taylor, President & CEO, and John Asma, CFO, with a question and answer session to follow [1] - The financial results will be released via news release at approximately 7:00 a.m. ET on the same day [1] Group 2 - For those wishing to join the conference call, registration can be done in advance for an automated call back, or participants can dial in directly [2] - A live webcast of the presentation will be available on the Bank's website and through a specific link [3] - An archived version of the webcast will be accessible for 90 days post-event, and a replay of the teleconference will be available until July 4, 2025 [4] Group 3 - VersaBank operates as a federally chartered bank in both Canada and the US, utilizing a branchless, digital business-to-business model [5] - The Bank has launched a Receivable Purchase Program funding solution aimed at underserved markets in the US, building on its success in Canada [5] - VersaBank also owns DRT Cyber Inc., a leader in cybersecurity services, and has proprietary technology for digital assets, including Digital Deposit Receipts [5]

Group 1 - VersaBank will hold its annual meeting of shareholders on April 24, 2025, at the VersaBank Innovation Centre of Excellence in London, Ontario, and it will be livestreamed from the Nasdaq MarketSite in New York City [1] - David Taylor, Founder, President, and CEO of VersaBank, along with Tel Matrundola, President of VersaBank USA, will ring the Nasdaq Closing Bell on April 25, 2025, at 4:00 p.m. ET, with a livestream available [2] Group 2 - VersaBank operates as a federally chartered bank in both Canada and the US, utilizing a branchless, digital, business-to-business model that leverages proprietary technology to serve underserved segments of the banking industry [3] - The bank launched its Receivable Purchase Program funding solution in August 2024, targeting the underserved multi-trillion-dollar US market, building on its success in Canada [3] - VersaBank owns DRT Cyber Inc., a leader in cybersecurity services, and its subsidiary Digital Meteor Inc. holds proprietary technology for next-generation digital assets, including Digital Deposit Receipts (DDRs) [3] Group 3 - VersaBank's common shares are traded on the Toronto Stock Exchange and NASDAQ under the symbol VBNK [4]