VersaBank(US:VBNK)2022-08-31 18:23Financial 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]