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All amounts are unaudited and in Canadian dollars and are based on financial statements prepared in compliance with International Accounting Standard 34 Interim Financial Reporting, unless otherwise noted. Our third quarter 2024 ("Q3 2024") unaudited Interim Consolidated Financial Statements for the period ended July 31, 2024 and Management's Discussion and Analysis ("MD&A"), are available online at www.versabank.com/investor-relations, SEDAR at www.sedarplus.ca and EDGAR at www.sec.gov/edgar. Supplementary Financial Information will also be available on our website at www.versabank.com/investor-relations.
LONDON, ON, Sept. 5, 2024 /PRNewswire/ - VersaBank ("VersaBank" or the "Bank") (TSX: VBNK) (NASDAQ: VBNK), a North American leader in business-to-business digital banking, as well as technology solutions for cybersecurity, today reported its results for the third quarter and the first nine months of fiscal 2024 ended July 31, 2024. All figures are in Canadian dollars unless otherwise stated.
CLOSING OF THE ACQUISITION OF STEARNS BANK HOLDINGFORD N.A.
In June 2024, the Bank obtained approval from the US Office of the Comptroller of the Currency (the "OCC"), US Federal Reserve, and OSFI (Canada) to acquire Stearns Bank Holdingford N.A. ("SBH"), a privately held, wholly-owned subsidiary of Stearns Financial Services Inc. ("SFSI") based in St. Cloud, Minnesota. On August 30, 2024, the Bank, through its wholly-owned US subsidiary VersaHoldings US Corp., completed the acquisition, acquiring 100% of the outstanding shares of SBH for cash consideration of approximately US$14.0 million (CA$19.3 million), subject to closing related adjustments. Based in Minnesota, SBH is a fully operational, OCC-chartered, national bank, focused on small business lending. Upon closing, SBH was renamed VersaBank USA.
Several factors associated with preparations for the closing of the acquisition of SBH dampened VersaBank's third quarter fiscal 2024 financial results. In preparation to fund the capital requirements of the US subsidiary following closing of the SBH acquisition, VersaBank maintained higher than typical cash balances. The higher than typical cash balances exacerbated the impact of the temporary dampening of net interest margin that usually occurs when interest rates decline, the result of the lag in the adjustment of the Bank's term deposit rates. In addition, non-interest expense was higher due to acquisition-related costs, some of which were specific to the third quarter and some of which are being incurred ahead of asset growth and revenue generated by the launch of US Receivable Purchase Program ("RPP") in the US through VersaBank USA.
Net income and earnings per share for the first nine-months of fiscal 2024 increased 15% and 17%, respectively, from the first nine months of fiscal 2023.
CONSOLIDATED AND SEGMENTED FINANCIAL SUMMARY
(unaudited) | As at or for the three months ended | As at or for the nine months ended | |||||||||||
July 31 | April 30 | July 31 | July 31 | July 31 | |||||||||
(thousands of Canadian dollars, except per share amounts) | 2024 | 2024 | Change | 2023 | Change | 2024 | 2023 | Change | |||||
Financial results | |||||||||||||
Total revenue | $ 26,996 | $ 28,501 | (5 %) | $ 26,859 | 1 % | $ 84,348 | $ 79,462 | 6 % | |||||
Cost of funds* | 4.17 % | 4.21 % | (1 %) | 3.62 % | 15 % | 4.12 % | 3.30 % | 25 % | |||||
Net interest margin* | 2.23 % | 2.45 % | (9 %) | 2.57 % | (13 %) | 2.38 % | 2.72 % | (13 %) | |||||
Net interest margin on loans* | 2.41 % | 2.52 % | (4 %) | 2.69 % | (10 %) | 2.58 % | 2.89 % | (11 %) | |||||
Return on average common equity* | 9.63 % | 12.36 % | (22 %) | 11.15 % | (14 %) | 11.79 % | 11.24 % | 5 % | |||||
Net income | 9,705 | 11,828 | (18 %) | 10,003 | (3 %) | 34,232 | 29,683 | 15 % | |||||
Net income per common share basic and diluted | 0.36 | 0.45 | (20 %) | 0.38 | (5 %) | 1.29 | 1.10 | 17 % | |||||
Balance sheet and capital ratios** | |||||||||||||
Total assets | $ 4,516,436 | $ 4,388,320 | 3 % | $ 3,980,845 | 13 % | $ 4,516,436 | $ 3,980,845 | 13 % | |||||
Book value per common share* | 15.23 | 14.88 | 2 % | 13.55 | 12 % | 15.23 | 13.55 | 12 % | |||||
Common Equity Tier 1 (CET1) capital ratio | 11.75 % | 11.63 % | 1 % | 11.15 % | 5 % | 11.75 % | 11.15 % | 5 % | |||||
Total capital ratio | 15.40 % | 15.33 % | 0 % | 15.10 % | 2 % | 15.40 % | 15.10 % | 2 % | |||||
Leverage ratio | 8.54 % | 8.55 % | 0 % | 8.53 % | 0 % | 8.54 % | 8.53 % | 0 % | |||||
* See definitions under 'Non-GAAP and Other Financial Measures' in the Q3 2024 Management's Discussion and Analysis. | |||||||||||||
** Capital management and leverage measures are in accordance with OSFI's Capital Adequacy Requirements and Basel III Accord. |
(thousands of Canadian dollars) | |||||||||||||||
for the three months ended | July 31, 2024 | April 30, 2024 | July 31, 2023 | ||||||||||||
Digital | DRTC | Eliminations/ | Consolidated | Digital | DRTC | Eliminations/ | Consolidated | Digital | DRTC | Eliminations/ | Consolidated | ||||
Banking | Adjustments | Banking | Adjustments | Banking | Adjustments | ||||||||||
Net interest income | $ 24,944 | $ - | $ - | $ 24,944 | $ 26,242 | $ - | $ - | $ 26,242 | $ 24,929 | $ - | $ - | $ 24,929 | |||
Non-interest income | 175 | 2,219 | (342) | 2,052 | 262 | 2,336 | (339) | 2,259 | 101 | 2,020 | (191) | 1,930 | |||
Total revenue | 25,119 | 2,219 | (342) | 26,996 | 26,504 | 2,336 | (339) | 28,501 | 25,030 | 2,020 | (191) | 26,859 | |||
Provision for (recovery of) credit losses | (1) | - | - | (1) | 16 | - | - | 16 | 171 | - | - | 171 | |||
25,120 | 2,219 | (342) | 26,997 | 26,488 | 2,336 | (339) | 28,485 | 24,859 | 2,020 | (191) | 26,688 | ||||
Non-interest expenses: | |||||||||||||||
Salaries and benefits | 5,945 | 1,562 | - | 7,507 | 5,724 | 1,685 | - | 7,409 | 5,891 | 1,562 | - | 7,453 | |||
General and administrative | 4,729 | 446 | (342) | 4,833 | 3,445 | 451 | (339) | 3,557 | 4,257 | 380 | (191) | 4,446 | |||
Premises and equipment | 824 | 370 | - | 1,194 | 845 | 374 | - | 1,219 | 610 | 370 | - | 980 | |||
11,498 | 2,378 | (342) | 13,534 | 10,014 | 2,510 | (339) | 12,185 | 10,758 | 2,312 | (191) | 12,879 | ||||
Income (loss) before income taxes | 13,622 | (159) | - | 13,463 | 16,474 | (174) | - | 16,300 | 14,101 | (292) | - | 13,809 | |||
Income tax provision | 3,811 | (53) | - | 3,758 | 4,484 | (12) | - | 4,472 | 3,999 | (193) | - | 3,806 | |||
Net income (loss) | $ 9,811 | $ (106) | $ - | $ 9,705 | $ 11,990 | $ (162) | $ - | $ 11,828 | $ 10,102 | $ (99) | $ - | $ 10,003 | |||
Total assets | $ 4,507,158 | $ 27,285 | $ (18,007) | $ 4,516,436 | $ 4,378,863 | $ 26,980 | $ (17,523) | $ 4,388,320 | $ 3,971,781 | $ 25,485 | $ (16,421) | $ 3,980,845 | |||
Total liabilities | $ 4,102,239 | $ 29,471 | $ (24,259) | $ 4,107,451 | $ 3,982,924 | $ 29,069 | $ (23,776) | $ 3,988,217 | $ 3,609,832 | $ 29,123 | $ (23,153) | $ 3,615,802 | |||
MANAGEMENT COMMENTARY
"The highlight of the third quarter was the Bank's receipt of the US and Canadian regulatory approvals for our acquisition of a national, OCC-chartered US bank, which we completed last week," said David Taylor, President and Chief Executive Officer, VersaBank. "We are now embarking on a transformational opportunity for VersaBank, broadly launching our Receivable Purchase Program financing solution, which has been proven out in Canada over the last nearly 15 years, to the underserved, multi-trillion-dollar point-of-sale market in the United States."
"Importantly, outside of several factors related specifically to close our US acquisition, our financial results continue to demonstrate the underlying strength and efficiency of our business model. Earnings per share for the first nine-months of fiscal 2024 were another record, up 17% from the same period last year."
"Our US Receivable Purchase Program opportunity, alongside our anticipated continued steady growth in Canada, is expected to generate strong, sustainable expansion of our loan portfolio for years to come, enabling us to further capitalize on the significant operating leverage in our business model to drive growth in profitability and return on common equity and efficiency, that we believe is unmatched in the North American banking industry."
HIGHLIGHTS FOR THE THIRD QUARTER OF FISCAL 2024
Consolidated
Digital Banking Operations
DRTC's Cybersecurity Services Operations (Digital Boundary Group)
FINANCIAL SUMMARY
(unaudited) | for the three months ended | for the nine months ended | |||||||
July 31 | July 31 | July 31 | July 31 | ||||||
(thousands of Canadian dollars, except per share amounts) | 2024 | 2023 | 2024 | 2023 | |||||
Results of operations | |||||||||
Interest income | $ 71,646 | $ 60,089 | $ 212,181 | $ 163,245 | |||||
Net interest income | 24,944 | 24,929 | 77,754 | 73,812 | |||||
Non-interest income | 2,052 | 1,930 | 6,594 | 5,650 | |||||
Total revenue | 26,996 | 26,859 | 84,348 | 79,462 | |||||
Provision for (recovery of) credit losses | (1) | 171 | (112) | 793 | |||||
Non-interest expenses | 13,534 | 12,879 | 37,743 | 37,940 | |||||
Digital Banking | 11,498 | 10,758 | 31,927 | 31,600 | |||||
DRTC | 2,378 | 2,312 | 6,834 | 6,914 | |||||
Net income | 9,705 | 10,003 | 34,232 | 29,683 | |||||
Income per common share: | |||||||||
Basic | $ 0.36 | $ 0.38 | $ 1.29 | $ 1.10 | |||||
Diluted | $ 0.36 | $ 0.38 | $ 1.29 | $ 1.10 | |||||
Dividends paid on preferred shares | $ 247 | $ 247 | $ 741 | $ 741 | |||||
Dividends paid on common shares | $ 650 | $ 648 | $ 1,950 | $ 1,962 | |||||
Yield* | 6.40 % | 6.19 % | 6.50 % | 6.02 % | |||||
Cost of funds* | 4.17 % | 3.62 % | 4.12 % | 3.30 % | |||||
Net interest margin* | 2.23 % | 2.57 % | 2.38 % | 2.72 % | |||||
Net interest margin on loans* | 2.41 % | 2.69 % | 2.58 % | 2.89 % | |||||
Return on average common equity* | 9.63 % | 11.15 % | 11.79 % | 11.24 % | |||||
Book value per common share* | $ 15.23 | $ 13.55 | $ 15.23 | $ 13.55 | |||||
Efficiency ratio* | 50 % | 48 % | 45 % | 48 % | |||||
Efficiency ratio - Digital Banking* | 46 % | 43 % | 41 % | 43 % | |||||
Return on average total assets* | 0.85 % | 1.00 % | 1.03 % | 1.07 % | |||||
Provision (recovery) for credit losses as a % of average loans* | 0.00 % | 0.02 % | 0.00 % | 0.03 % | |||||
as at | |||||||||
Balance Sheet Summary | |||||||||
Cash | $ 247,983 | $ 87,726 | $ 247,983 | $ 87,726 | |||||
Securities | 153,026 | 182,944 | 153,026 | 182,944 | |||||
Loans, net of allowance for credit losses | 4,049,449 | 3,661,672 | 4,049,449 | 3,661,672 | |||||
Average loans | 4,033,954 | 3,540,564 | 3,949,927 | 3,327,175 | |||||
Total assets | 4,516,436 | 3,980,845 | 4,516,436 | 3,980,845 | |||||
Deposits | 3,821,185 | 3,328,017 | 3,821,185 | 3,328,017 | |||||
Subordinated notes payable | 101,641 | 101,585 | 101,641 | 101,585 | |||||
Shareholders' equity | 408,985 | 365,043 | 408,985 | 365,043 | |||||
Capital ratios** | |||||||||
Risk-weighted assets | $ 3,273,524 | $ 3,047,172 | $ 3,273,524 | $ 3,047,172 | |||||
Common Equity Tier 1 capital | 384,496 | 339,894 | 384,496 | 339,894 | |||||
Total regulatory capital | 504,112 | 460,065 | 504,112 | 460,065 | |||||
Common Equity Tier 1 (CET1) ratio | 11.75 % | 11.15 % | 11.75 % | 11.15 % | |||||
Tier 1 capital ratio | 12.16 % | 11.60 % | 12.16 % | 11.60 % | |||||
Total capital ratio | 15.40 % | 15.10 % | 15.40 % | 15.10 % | |||||
Leverage ratio | 8.54 % | 8.53 % | 8.54 % | 8.53 % | |||||
* See definitions under 'Non-GAAP and Other Financial Measures' in the Q3 2024 Management's Discussion and Analysis. | |||||||||
** Capital management and leverage measures are in accordance with OSFI's Capital Adequacy Requirements | |||||||||
and Basel III Accord. |
This news release is intended to be read in conjunction with the Bank's Consolidated Financial Statements and Management's Discussion & Analysis (MD&A) for the three & nine months ended July 31, 2024, which will be filed on SEDAR ( www.sedarplus.ca ) and will be available at www.versabank.com.
About VersaBank
VersaBank is a North American bank (federally chartered in Canada and the US) with a difference. VersaBank has a branchless, digital, business-to-business model based on its proprietary state-of-the-art technology that enables it to profitably address underserved segments of the banking industry in a significantly risk mitigated manner. Because VersaBank obtains substantially all of its deposits and undertakes the majority of its lending electronically through financial intermediary partners, it benefits from significant operating leverage that drives efficiency and return on common equity. In August 2024, VersaBank launched its unique Receivable Purchase Program (RPP) funding solution for point-of-sale finance companies, which has been highly successful in Canada for nearly 15 years, to the underserved multi-trillion-dollar US market. VersaBank also owns Washington, DC-based DRT Cyber Inc., a North America leader in the provision of cyber security services to address the rapidly growing volume of cyber threats challenging financial institutions, multi-national corporations and government entities.
VersaBank's Common Shares trade on the Toronto Stock Exchange ("TSX") and Nasdaq under the symbol VBNK. Its Series 1 Preferred Shares trade on the TSX under the symbol VBNK.PR.A.
Forward-Looking Statements
VersaBank's public communications often include written or oral forward-looking statements. Statements of this type are included in this document and may be included in other filings and with Canadian securities regulators or the US Securities and Exchange Commission, or in other communications. All such statements are made pursuant to the "safe harbor" provisions of, and are intended to be forward-looking statements under, the United States Private Securities Litigation Reform Act of 1995 and any applicable Canadian securities legislation. The statements in this management's discussion and analysis that relate to the future are forward-looking statements. By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, many of which are out of VersaBank's control. Risks exist that predictions, forecasts, projections and other forward-looking statements will not be achieved. Readers are cautioned not to place undue reliance on these forward-looking statements as a number of important factors could cause actual results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements. These factors include, but are not limited to, the strength of the Canadian and US economies in general and the strength of the local economies within Canada and the US in which VersaBank conducts operations; the effects of changes in monetary and fiscal policy, including changes in interest rate policies of the Bank of Canada and the US Federal Reserve; global commodity prices; the effects of competition in the markets in which VersaBank operates; inflation; capital market fluctuations; the timely development and introduction of new products in receptive markets; the impact of changes in the laws and regulations pertaining to financial services; changes in tax laws; technological changes; unexpected judicial or regulatory proceedings; unexpected changes in consumer spending and savings habits; the impact of wars or conflicts and the impact of both on global supply chains and markets; the impact of outbreaks of disease or illness that affect local, national or international economies; the possible effects on our business of terrorist activities; natural disasters and disruptions to public infrastructure, such as transportation, communications, power or water supply; and VersaBank's anticipation of and success in managing the risks implicated by the foregoing. For a detailed discussion of certain key factors that may affect VersaBank's future results, please see VersaBank's annual MD&A for the year ended October 31, 2023.
The foregoing list of important factors is not exhaustive. When relying on forward-looking statements to make decisions, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. The forward-looking information contained in the management's discussion and analysis is presented to assist VersaBank shareholders and others in understanding VersaBank's financial position and may not be appropriate for any other purposes. Except as required by securities law, VersaBank does not undertake to update any forward-looking statement that is contained in this management's discussion and analysis or made from time to time by VersaBank or on its behalf.
Conference Call
VersaBank will be hosting a conference call and webcast today, Thursday, September 5, 2024, at 9:00 a.m. (ET) to discuss its third quarter results, featuring a presentation by David Taylor, President & CEO and John Asma, CFO, followed by a question and answer period. To join the conference call by telephone without operator assistance, you may register and enter your phone number in advance at: https://emportal.ink/3X576am to receive an instant automated call back. Alternatively, you may also dial direct and be entered into the call by an Operator at: 1-437-900-0527 or 1-888-510-2154 (toll free).
For those preferring to listen to the presentation via the Internet, a live webcast will be available at https://app.webinar.net/dAJV25PoRaz or on the Bank's web site at: https://www.versabank.com/investor-relations/events-presentations/. The slide presentation management will use during the conference call/webcast will be available on the Bank's web site at: https://www.versabank.com/investor-relations/financial-results/.
The archived webcast presentation will be available for 90 days following the live event at https://app.webinar.net/dAJV25PoRaz and on the Bank's web site at: https://www.versabank.com/investor-relations/events-presentations/. Replay of the teleconference will be available until October 5, 2024 by calling 289-819-1450 or 1-888-660-6345 (toll free) and the passcode is: 69262#
Visit our website at: www.versabank.com
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SOURCE VersaBank