VersaBank (VB) Spring MicroCap Rodeo Conference summary

Strategic vision and expansion plans

• Plans to expand a fully digital, B2B, point-of-sale finance bank model from Canada to the U.S., leveraging a unique technology platform and cloud-based operations.

• U.S. market entry depends on regulatory approval to acquire Stearns Bank Holdingford, with a decision expected by the end of the month.

• The U.S. point-of-sale market is seen as 100 times larger than Canada, offering significant growth potential.

• No need for physical branches due to the cloud-based model, enabling rapid and cost-effective scaling.

• The bank's model is considered unique by U.S. regulators, with no direct equivalent currently in the market.

Business model and risk management

• Operates as a fully digital bank with partners handling both deposit gathering and lending, minimizing operational complexity.

• Maintains a 250 basis point net interest margin, among the highest in the industry.

• Loan losses are avoided through put-back arrangements with lending partners and required cash deposits as collateral.

• Deposit risk is mitigated by using term deposits (GICs/CDs) that cannot be withdrawn before maturity.

• Economic and interest rate risks are minimized through a scalable, technology-driven model and diversified funding.

Financial performance and efficiency

• Total assets reached CAD 4.2 billion, with a target of CAD 5 billion by Q1 2025 due to a slower Canadian economy.

• 2023 net income was CAD 42 million, with pre-tax earnings of CAD 92 million and a 25% tax rate.

• Year-over-year loan growth was 18%, total revenue up 9%, net income up 25%, and EPS up 29% due to share buybacks.

• Efficiency ratio improved to 39 cents per dollar of revenue, expected to drop below 40% as assets grow.

• Return on equity and operating leverage are increasing as the bank scales.