VersaBank (VB) Investor Summit Summer 2024 Forum summary

Strategic vision and risk mitigation

• Built a digital bank from scratch to minimize traditional banking risks, focusing on lending risk, liquidity, and economic exposures.

• Eliminated need for collection departments by designing a model with minimal loan losses over decades.

• Avoided reliance on demand deposits, using term deposits and GICs/CDs to reduce vulnerability to bank runs.

• Developed a counter-cyclical deposit channel through insolvency professionals, providing stability during recessions.

• Maintains a highly risk-mitigated model, leveraging proprietary software for efficient portfolio management.

Digital expansion and operational efficiency

• Operates as a fully digital, branchless North American bank, with tech centers in Canada and a cloud facility in Iowa.

• On track to close a U.S. OCC bank acquisition by August 30, enabling direct U.S. market access.

• Highly scalable B2B model, leveraging software innovation to maintain efficiency and low fixed costs.

• Achieved efficiency ratios below 40% and return on equity rising toward 15% as assets grow.

• Created an in-house cybersecurity firm, DRT Cyber, with 400 clients, to protect operations and add value.

Point-of-sale financing and growth strategy

• Core product is point-of-sale receivable financing, partnering with vendors to finance consumer purchases across sectors.

• Maintains minimal credit risk by returning delinquent loans to vendors, avoiding collection activities.

• Point-of-sale portfolio has grown over 26% annually for five years, with CAD 3.1 billion currently on the books.

• U.S. market entry targets a $2 trillion opportunity, with first U.S. partner expected by September.

• U.S. growth will be managed prudently, with regulators limiting rapid expansion; plans to service other banks using proprietary software.