VersaBank(US:VBNK)2025-03-05 16:34Financial 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]