VersaBank(VBNK) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The fourth quarter of fiscal 2025 showed a year-over-year revenue growth of 29% to a record CAD 35.1 million, with total assets growing 20% year-over-year to over CAD 5.8 billion [11][12] - Adjusted net income increased by 91% year-over-year to CAD 10.5 million, or CAD 0.33 per share, excluding one-time costs associated with corporate realignment [12][18] - The CET1 ratio was reported at 12.92%, and the leverage ratio was 8.47%, both above internal targets [11] Business Line Data and Key Metrics Changes - Revenue from Canadian banking operations was CAD 27.6 million, up 17% year-over-year, while U.S. banking operations revenue reached CAD 5.2 million, a 67% sequential increase [13][14] - The receivable purchase program (RPP) assets grew to CAD 293 million, with total fundings for fiscal 2025 reaching CAD 310 million, surpassing targets [7][14] - The cybersecurity segment generated CAD 1.9 million in revenue, down from CAD 2.3 million in the previous year, reflecting higher operating expenses [15] Market Data and Key Metrics Changes - Credit assets grew to a record CAD 5.07 billion, driven by a 19% year-over-year increase in the RPP portfolio [15] - The multi-family residential loans portfolio grew 11% year-over-year, while the overall portfolio saw a slight decrease of 3% sequentially [15][16] Company Strategy and Development Direction - The company is focused on capitalizing on operational efficiency and leveraging its digital banking model, particularly in the U.S. market [17][18] - Plans to realign corporate structure to that of a standard U.S. bank are progressing, with a shareholder vote expected in April [21][20] - The company aims to divest its cybersecurity business to enhance regulatory capital and reduce costs by approximately CAD 10 million [21] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the momentum in the U.S. RPP program and expects to target CAD 1 billion in RPP funding for fiscal 2026 [18][25] - The yield curve's return to an upward slope is anticipated to benefit net interest margins, with expectations for stability and potential upside in 2026 [19][54] - The company is well-positioned to provide custodial services for stablecoin issuers, leveraging its advanced technology [27][28] Other Important Information - The company has enhanced its CMHC-insured lending program, which is expected to contribute a minimum of CAD 2 million in incremental revenue in fiscal 2026 [10] - The RealBank Deposit Tokens initiative is seen as a significant opportunity for new deposit channels and potential licensing revenue [22][56] Q&A Session Summary Question: Can you talk about your partner pipeline for the U.S. RPP program? - Management confirmed that the existing partners can help reach the CAD 1 billion target for fiscal 2026, with a strong pipeline for new partners [25] Question: Can you provide an update on the DRT Cyber sales process? - Management acknowledged delays in the sales process but indicated that they are in the final stages of a quality of earnings report, with several interested parties [29] Question: What is the expected base for non-interest expenses in 2026? - Management indicated that the budgeted figure for non-interest expenses is around CAD 72 million, excluding one-time costs [40] Question: What verticals are driving growth in the U.S. RPP? - Management noted that growth is driven by home improvement, HVAC, and recreational vehicles, similar to the Canadian market [44]