VersaBank

Good morning, ladies and gentlemen. Welcome to VersaBank fourth quarter and fiscal year 2024 financial results conference call. This morning, VersaBank issued news release reporting its financial results for the fourth quarter and year ended October 31st, 2024. That news release, along with the bank's financial statements, MD&A and supplemental financial information are available on the bank's website, in the Investor Relations section, as well as on CDAR Plus and EDGAR. Please note that in addition to the telephone dial-in, Mercer Bank is webcasting this morning's conference call. The webcast is listen-only. If you are listening to the webcast but wish to ask a question in the Q&A session following Mr. Taylor's presentation, please dial in to the conference line, the details of which are included in this morning's news release and on the bank's website. For those participating in today's call by telephone, the accompanying slide presentation is available on the bank's website. Also, today's call will be archived for replay both by telephone and via the internet beginning approximately one hour following completion of the call. Details on how to access the replays are available in this morning's news release. I would like to remind our listeners that the statements about future events made on this call are forward-looking in nature and are based on certain assumptions and analysis made by VersaBank management. Actual results could differ materially from our expectations due to various material risks and uncertainties associated with VersaBank's businesses. Please refer to VersaBank's forward-looking statement advisory in today's presentation. And I would like to turn the call over to David Taylor, President and Chief Executive Officer of VersaBank. Please go ahead, Mr. Taylor.

Good morning, everyone, and thank you for joining us for today's call. With me today is our Chief Financial Officer, John Asmus. And incidentally, one of the beauties of being able to operate throughout all of North America is that I'm talking to you today from Fort Lauderdale. Turning to our financial results, as expected, as a result of preparation for and completion of the closing of our U.S. bank acquisition on August 30th, there was a significant amount of noise in the fourth quarter that impacted our earnings numbers. We have done our best to describe and quantify those to provide a clear picture of the continuing underlying strength of our business model. John will describe these in more detail in a few minutes, but at a high level, these fall into three buckets, which in aggregate total approximately $5.6 million for the quarter and $6.5 million for the year, and tax adjusted reduced EPS by an equivalent of $0.18 for the quarter and $0.20 for the year. These were one-time non-interest expenses, a change in the base of the acquired assets of VersaBank USA, and the impact of holding higher than typical cash balances ahead of the acquisition and funding the U.S. bank upon close of the acquisition. We are also for the first time providing fully segmented financial results that is broken out by Canadian banking operations, our U.S. banking operations, and DRT Cyber. We believe this provides a clearer view of the profitability, efficiency, and return on common equity of the existing Canadian banking business while also allowing you to not only definitively track the growth of our Receivable Purchase Program portfolio in the U.S., but also see the greater efficiency that we expect from that business as it wraps up. When we remove the noise associated with the acquisition, the underlying story for the fourth quarter is pretty straightforward and importantly paints a very positive picture heading into 2025 and the ramp up of our US RPP business. Q4 saw yet another record high of total assets at $4.8 billion. driven by 15% year-over-year growth in our Canadian RPP business, which expanded by 2% sequentially, even as discretionary spending in Canada generally remains soft. Growth continued to dampen by higher than typical putbacks of loans that have gone 90 days in arrears to our partners due to higher defaults among the borrowers, as would be expected in these tougher economic times. As we're made whole on these loans through our cash holdbacks, this higher rate of putback to our partners has no impact on our provisioning for credit losses, which for Q4, as it always is, de minimis. Non-interest expenses were atypically high due to one-time costs associated mainly with the U.S. acquisition. we expect to return to normalized NIEs in the first quarter of 2025 with the addition of the U.S.

bank expenses, including the new leadership team.