VersaBank

Good morning, ladies and gentlemen. Welcome to VersaBank's first quarter fiscal 2025 financial results conference call. This morning, VersaBank issued a news release reporting its financial results for the first quarter ended January 31st, 2025. 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 Cedar Plus and EDGAR. Please note that in addition to the telephone dial-in, Vrsa 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 into 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. I would now 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 is our Chief Financial Officer, John Asma. Before I begin, I will note that you will see a change in a number of terms we use to describe our business. With the start of a new fiscal year and the context of the evolution of the bank including the U.S. bank acquisition, we have taken the opportunity to update the manner in which we are describing our asset and deposit classes. The first quarter of fiscal 2025 has been a tremendously busy and eventful one in terms of moving our strategy forward. We signed our first RPP partner in the United States following the U.S. bank acquisition. We completed a very successful $86 million capital raise, including full execution of over-allotment option to support our U.S. RPP opportunity. We aligned the structure of DRT Cyber to position our digital deposit receipts for renewed opportunity and our cybersecurity service business for planned divestment. And we accomplished all of this as we achieved yet another record for total assets. Let me start with signing of our first US partner post US bank acquisition. We are thrilled to partner with Watercress Financial, a rapidly growing point of sale originator of home improvement loans in the US. Watercress has proven track record of originating high-quality consumer loans through its expanding network of contractors nationwide. It's no accident that our first partner finances home improvement sector, as that has been our biggest driver of significant growth in our Canadian business in recent years. Immediately following the agreement, we provided our first tranche of funding and shortly thereafter our second, Importantly, the program is functioning just as it should and meeting both our partners and our expectations. We expect our funding with Watercraft to steadily expand throughout the year and contribute meaningfully to U.S. growth this year. We are working with multiple other firms in our robust pipeline to add them as our next partners, and we are confident that these can be finalized quicker now that we have been through this one. Moreover, with the program now formally functioning in the United States under our U.S. license, we have further evidence of its value for potential new partners. John will run through Q1 numbers in detail in a few minutes, but I want to highlight a few items to provide some perspective on the quarter. One, from a consolidated perspective, the quarter reflects the startup nature of the U.S. operations. That is essentially full costs ahead of any generation of revenue and profits from our US RPP. Specifically, we had close to a full cost load, but a de minimis revenue as we signed our first US partner only at the very end of the quarter. Two, our Canadian digital banking operations continues to demonstrate the power of the operating leverage in the business. in particular the power of receivable purchase program at scale to drive efficiency and return on common equity. I will note here that our Canadian banking operations bear the vast majority of our corporate overhead costs, including our public company costs, so as an indicator of its true potential efficiency and return on equity of our U.S. business, it is actually significantly understated. and as the U.S. business is expected to be even more efficient than the Canadian business at scale. Three, I noted on our last call that there are a number of favorable trends that we believe will support incremental expansion of our net interest margin in 2025. While NIM on credit assets continues to be dampened by the lag effect of the atypical inverted yield curve that existed throughout fiscal 24, we began to see small sequential increases in NIM on credit assets in Q1. This was driven to a large extent by the cost of funds catching up to yields as market interest rates declined. Notably, with an outsized proportion of term deposits coming due in the near term, as well as continued expansion of our insolvency trustee deposits, we expect further declines in our cost of funds in the near term. And finally, our EPS for the quarter reflects the significantly higher number of shares outstanding in Q1, as a result of our December capital raise. In fact, the weighted average shares of Q1 was 12% higher than Q1 last year. And this is, of course, ahead of being able to put that capital to work. as we have now started to do. As a reminder, this provided a 30% increase in our capital base, which we deploy it approximately 12 times or more at around 2.5% spread. That is very accretive. I'd now like to turn the call over to John to review our financial results in detail. John?

Thanks, David. Before I begin, I will remind you that our financial statements and MD&A for the first quarter are available on our website under the investor section, as well as on CDAR and EDGAR. All of the following numbers are reported in Canadian dollars as per our financial statements, unless otherwise noted.