• Total Assets: Reached a record high of $4.8 billion, a 15% year-over-year increase.
• Revenue: Total consolidated revenue was $27.3 million, down from $29.2 million last year.
• Net Income: Excluding one-time impacts, net income for the quarter was $10 million or $0.38 per share.
• Net Interest Margin: On loans was 2.34%, a decrease of 35 basis points year-over-year.
• Non-Interest Expenses: Consolidated non-interest expense was $19.4 million, up from $12.4 million last year.
• Book Value Per Share: Increased to a record $15.35.
• CET1 Ratio: 11.24%.
• Leverage Ratio: 7.38%.
• Loan Portfolio: Grew to a record $4.24 billion, driven by a 15% year-over-year increase in the point of sale receivable purchase program.
• Provision for Credit Losses: Remained negligible at negative 0.01% on average assets.

• Warning! GuruFocus has detected 4 Warning Sign with VBNK.

Release Date: December 09, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• VersaBank (NASDAQ:VBNK) achieved a record high of total assets at $4.8 billion, driven by 15% year-over-year growth in its Canadian Receivable Purchase Program (RPP) business.
• The bank reported record net income for the year, excluding one-time impacts from the US acquisition, driven by strong growth in its Canadian point of sale receivable purchase program.
• VersaBank (NASDAQ:VBNK) is providing fully segmented financial results for the first time, offering a clearer view of profitability and efficiency across its Canadian and US banking operations.
• The bank's real estate portfolio is transitioning towards CMHC insured loans, which are zero risk-weighted and deliver a favorable spread.
• VersaBank (NASDAQ:VBNK) is expanding its US RPP business, expecting to add new partners imminently and benefit from greater efficiencies compared to its Canadian operations.

Negative Points

• The fourth quarter earnings were impacted by one-time non-interest expenses related to the US Bank acquisition, reducing EPS by $0.18 for the quarter.
• Net interest margin was dampened by an atypical inverted yield curve and higher cash balances, impacting profitability.
• The bank experienced higher than typical putbacks of loans in arrears, reflecting increased defaults among borrowers in tougher economic times.
• Non-interest expenses were atypically high due to one-time costs associated with the US acquisition, affecting the overall financial performance.
• VersaBank (NASDAQ:VBNK) faced lower non-interest income from its cybersecurity operations, impacting total consolidated revenue.

Q & A Highlights

Q: Could you provide an update on how the conversations with new partners in the US are going? How many partners should we expect to be fully launched over the next few months? A: We have very productive discussions with one US Bank as a partner and have tested the data flow successfully. We expect to have our first RPP new point of sale partner soon, with a partner Bank sharing in those loans. We are in discussions with about 30 potential partners, and the constraint is how fast we can complete the paperwork to sign them up. - David Taylor, President and CEO

Q: How should we think about the origination trajectory in the US and the balance sheet growth over the course of the year? A: We are looking to have about $250 million on balance sheet by the end of the year, sharing at least 50% with other Banks, totaling around $500 million in administration. Growth will depend on how quickly we can sign up partners. - David Taylor, President and CEO

Q: What is the expense outlook for next year once we exclude some of the one-time costs? Are most of the costs associated with running the US business now in the run rate? A: Most of the expenses are now in the run rate as we have hired almost everyone needed to run the US operations. There may be a couple more hires, but the major positions are filled. - David Taylor, President and CEO

Q: Can you provide more details on the differences between the small ticket and larger ticket opportunities in the US? Where do you see the most opportunity? A: We are mainly focused on larger ticket items such as home improvement and new HVAC systems. Our software can handle small loans, but the sweet spot is larger ticket items, similar to our experience in Canada. - David Taylor, President and CEO

Q: How has the increased putbacks to your partners in Canada impacted them, and how is their ability to absorb those losses? A: Our partners have been able to handle the increased putbacks, as we select strong point of sale partners. Despite the economic downturn, our model has held up well, and our partners are in good shape. - David Taylor, President and CEO

For the complete transcript of the earnings call, please refer to the full earnings call transcript.