VersaBank

Good morning, ladies and gentlemen. Welcome to VersaBank's third quarter fiscal 2026 financial results conference call. This morning, VersaBank issued a news release reporting its financial results for the third quarter ended July 31st, 2026. That news release, along with the bank's financial statements, MVNA, 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, in addition to the telephone dial-in, VersaBank 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 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, founder and president of VersaBank. Please go ahead, Mr. Taylor.

Good morning, everyone, and thank you for joining us for today's call. With me again is our Global Chief Financial Officer, Nicolas Ospina, and for the first time, Lawrence Chamberlain, our new Global SVP, Investor and Stakeholder Relations, who joined us full-time in August after working for us on a consulting basis for the last six years or so. As expected, Fiscal 2026 has continued to be a breakout year in terms of top-line growth. The third quarter once again saw new records for credit assets, revenue, and net interest income with a very strong year-over-year growth. This was once again driven mainly by the momentum in our structured receivable program. In the United States, in fact, our U.S. operations generated nearly 25% of Q3's Digital Banking Revenue. But notably, we have continued to see steady growth in Canada as we continue to increase business with our existing partners and expand our market share. And I am very pleased to report that subsequent to the quarter end, for the first time, we surpassed $7 billion in total assets. And in fact, as if yesterday, we were at $7.2 billion. That's up nearly $5 billion over the past five years for a compounded annual growth rate of more than 25%. With this year's strong growth, we are increasingly realizing the offering leverage of our cloud-based, branchless, business-to-business model. With year-over-year increases in net income and adjusted or corn net income of 53%, and 27% respectively. I will once again note that we achieved these metrics with significantly higher than typical levels of liquidity at this early point for expansion in the United States, although these are steadily moving back to more historic levels. That said, it was another noisy quarter in terms of costs with the number of items which total over 4.6 million that are not part of our Go Forward Cost Structure in 2027. These included non-core costs of $3.1 million, which was composed mainly of an additional $2.5 million in reorganization costs that we noted on our last call. There were also $1.5 million in transitory core costs, that is, costs that we did not adjust for, but that were specific to Q3. as well as 0.8 million related to share compensation resulting from the increase in share value. Nicole will go into these in more detail in a few minutes. Looking ahead, as I will discuss in a little bit, we expect the broader implementation of AI throughout our organization will not only increase our efficiency but create significant opportunities for meaningful cost savings going forward. Finally, on the Q3 results, as I have discussed in the past, our net interest margin can vary from quarter to quarter, and we saw that somewhat in the third quarter. Much of this is due to the higher than typical liquidity levels, and we therefore expect NIM to trend back to the 2.3% range going forward. Of course, we will continue to benefit from more cheaper deposits through increased activity in our insolvency professional business. In Canada, we recently saw that deposit base reach $1 billion for the first time as we both expand that business and insolvencies in Canada continue to increase. More specifically, The SRP business in the United States, we continue to steadily build momentum during Q3 with increased business from our existing U.S. partners and the addition of new partners. Q3 saw another $220 million in new fundings with a subsequent $127 million since the end of Q3. That brings us to more than $720 million in new fundings year to date. as of today. Q3 saw the initial contribution from our most recently added SRP partner in the United States, another wholly owned subsidiary of ECN Capital. This latest partner is expected to contribute at least $300 million in additional U.S. SRP funding annually, but both we and our partner believe the program could grow well beyond U.S. dollars $500 million per year in funding. I will note again, this order, the vast majority of additional fundings in the U.S. were through our original, more profitable SRP, as demand for our core solutions continues to exceed our expectations. Our growth in the United States continues to prove out the efficiency of our U.S. operations, with an efficiency ratio excluding non-core write-off associated with the branch sale for Q3 of 37%. And we continue to remain on track for our year-end goal to be in the low 20s. Clearly, as expected, SRP has rapidly taken its rightful place as a uniquely attractive alternative funding option for point-of-sale finance companies in the United States. Reliable, efficient, economical. all benefits of our proprietary technology. During the quarter, we took the value proposition of our SRP to an entirely new level with a launch of an AI-enabled real-time version of SRP, which enable our partners to finance their loans with even more efficiency, cost effectiveness, with lower risk. Instead of our partners having to accumulate Thank you for joining us today. The cost savings and lower equity requirements are significant, and it eliminates the interest rate risk that our partners are exposed to during the warehousing period. During the quarter, following a successful pilot program, one of our largest SRP partners, FinanceIT, became the first to implement our real-time SRP in Canada. And I'm pleased to report that earlier this week, ECN Capital, One of our first US SRP partners became the first to implement real-time program in the United States. Feedback on our real-time solution has been overwhelmingly positive, and we are seeing considerable incremental demand from both existing and prospective new partners, including in Canada, where we believe it will generate significant incremental growth to the solid performance we are achieving this year. But to ensure we are fully maximizing this opportunity and doing so rapidly as possible, we are privileged to have point-of-sale financing industry veteran Mo Dennis rejoin First Bank as part of our SRP team with a particular focus on specialized large partner opportunities for our real-time SRP in the United States market. Mo has had a very busy first month and a half. and has initiated discussions with numerous new prospect partners. With that, I'd now like to turn the call over to Nico to review our financial results in detail. Nico?

Thanks, David. Before I begin, I will remind you that our full financial statements and MD&A for the third quarter are available in our website under the investor section, as well as on CEDAR and EDGAR. All the following numbers are reported in Canadian dollars after our financial statements, unless otherwise noted. Starting with our balance sheet, total assets at the end of the third quarter of fiscal 2026 grew 26% year-over-year and 7% sequentially to a new high of just under $6.9 billion. Cash and securities was $624 million, or 9% of total assets. down slightly compared to the end of Q2, 2026. And I will reiterate here David's earlier comment about this number still being higher than our historical levels of around 7% as a result of our entry into the United States. Book value per share increased to another record of $17.45. Our CET1 ratio was 11.5%, and our leverage ratio was 7.6%, both down meaningful year over year. and remaining comfortably above our internal targets. The year-over-year change is mainly due to putting capital to work for growth in the US SRP portfolio following our capital raise in December 2024. Our strong growth in assets drove total consolidated revenue to a record of $38.8 million, up 23% year-over-year and 1% sequentially. Non-interest expenses, or NIEs, for Q3 were $25.2 million. As David noted, NIEs for Q3 included $3.1 million in non-core expenses, $2.5 million of additional costs related to a reorganization project, and $0.6 million for the write-off of capitalized software costs following the sale of our sole physical branch on May 1st of this year. Consolidated NIEs excluding the one-time cost were $22.1 million. compared to $17.4 million in Q3 last year and $20.8 million for Q2. As David also noted, Q3 included approximately $2.3 million pre-tax in additional transitory costs that are not part of our run rate cost structure. This was composed of $0.8 million in share-based long-term incentive award driven by the bank's strong share price performance during the quarter. as well as $1.5 million in other transitory costs that were specific to the quarter and the bank does not expect to recur. And as a reminder, the RTC cyber expenses are included in the consolidated NIEs and totaled $2.6 million in Q3, more or less in line with last year. Reported net income was $10.1 million, year-over-year increase of 53% from $6.6 million for the third quarter last year. and Consolidated Earnings Per Share was $0.31 compared to $0.20 last year. Excluding the $3.1 million non-core NIEs I mentioned earlier, Consolidated Adjusted Net Income was $12.3 million or $0.38 per share with Adjusted Net Income increasing 27% year-over-year. Again, that number includes $0.8 million pre-tax and share-based compensation resulting from our Share Appreciation, and our transitory cost of $1.5 million pre-tax. Looking at our income statement on a segmented basis, revenue for the Canadian digital banking operation was $27.6 million, up 4% year-over-year. I will remind you that our bank corporate expenses flow to our Canadian banking segment and, as a result, reported net income includes those reorganizational costs. Canadian banking net income for Q3 was $6.6 million. However, that number is dampened by the $1.8 million after-tax impact of the one-time cost associated with the reorganization. Revenue for our U.S. banking operations was $9.3 million, up 18% sequentially and 199% year-over-year, primarily due to the ramp-up in the U.S. SRP. That drop A 10% increase in net income sequentially and an 803% increase year-over-year to 3.9 million as we see the U.S. operating leverage take effect. Q3 net income was impacted by 400,000 after-tax costs related to a software write-off resulting from the sale of the branch I described earlier. Digital Meteor net income was $114,000 compared with net income of $23,000 for the third quarter last year and net income of $351,000 for the second quarter of 2026. Within the RTC, the cybersecurity service component generated revenue of $1.9 million with net loss of $578,000, pretty much in line with last quarter. Our credit asset portfolio grew a new record just shy of $6.2 billion at the end of Q3, driven once again by our structured receivable program, which increased 40% year-over-year and 11% sequentially to $5.2 billion. Our SRP portfolio represented 85% of our total credit asset at the end of Q3, up from 82% in Q2. Our multifamily residential loans and other portfolio decreased 10% year-over-year and 5% sequentially to $934 million. As we continue to strategically transition some of our higher yield, higher risk weighted uninsured loans to lower yield, lower risk weighted insured loans. As a reminder, our enrolled portfolio is primary business to business mortgages and construction loans for residential properties. We have almost no exposure to commercial use properties. Now turning to the income statement for our digital banking operations, net interest margin on credit assets that is excluding cash and securities was 2.44%. That represented a decrease of 11 basis points year-over-year and 27 basis points sequential. Although I will remind you that our Q2 NIM is typically the highest of the year due to normal seasonality, the decrease in NIM reflect higher than typical GIC term deposit rates relative to government of Canada bond yields. The replacement of retail deposit with broker deposit resulting from the sale of the bank, only physical branch in the U.S., as well as our decision to maintain greater liquidity amidst a challenging Canadian economy. It also reflects lower credit asset yields in Canada due to a shift in our credit asset mix resulting from the continued growth in our SRP portfolio as well as our strategic shift in our MRO loans I just mentioned. Overall NIM including the impact of cash, securities and other assets was 2.19%, a decrease of 6 basis points year-over-year and 14 basis points sequentially for the same reason I noted above. Our NIM still remains among the highest of the publicly traded Canadian federally licensed banks. Our provision for credit losses in Q3 continued to be the minimus as a percentage of average credit assets and in fact was negative at 0.02%, meaning we had a recovery of credit losses during the quarter. This compares to a positive 0.03% from Q2 with the recovery primary due to a sale of the branch assets to Sterns and updates in the forward-looking information used by the bank in these credit risk models. I would now like to turn the call back to David for some closing remarks.