Good morning, ladies and gentlemen. Welcome to VersaBank's Fourth Quarter and Year End Fiscal 2023 Financial Results Conference Call. This morning, VersaBank issued a news release reporting its financial results for the fourth quarter and fiscal year ended October 31, 2023. The 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 the SEDAR+ and EDGAR. Please note that in addition to the telephone dial-in, VersaBank is webcasting this morning's conference call. The webcast is listen-only. If you are listening through 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 1 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 Shawn Clarke, our Chief Financial Officer. Before I begin, I'd like to remind you that our financial results are reported and will be discussed in this call in our reporting currency of Canadian dollars. For those interested, we provide U.S. dollar translations for most of our financial numbers in our standard investor presentation, which will be updated and available on our website shortly. Now, for the results. Another record quarter capped off another record year for our bank as we realized the significant and increasing operating leverage in our branchless, business-to-business, partner-based digital banking model with the continued growth in our loan portfolio. 94% year-over-year growth in net income was more than triple that of our healthy 29% growth in our loan portfolio. And that drove an 86% increase in average return on common equity to nearly 14%. Looking more closely at our fourth quarter performance, our results once again show the predictability and momentum of our business. Those of you that have followed VersaBank for some time will have heard me say that the $4 billion mark for total assets was the point in which we begin to see the operating leverage in our digital banking model. That can clearly be seen in Q4 numbers. With total assets crossing $4 billion mark during Q4, ending the quarter and the year at $4.2 billion, we are seeing the outsized positive impact on efficiency, profitability, and our return on equity. Continued steady growth in our loan portfolio, due primarily to the continued strength of our Point-of-Sale, receivable purchase program, drove very healthy sequential revenue growth of 9%, which contributed to 20% growth year-over-year. We achieved this growth while holding non-interest expenses flat. In reality, it was…

Thank you, David, and good morning, everyone. Before I begin, I will remind you that our full financial statements and MD&A for the fourth quarter and the full year are available on our website under the Investors section as well as on SEDAR and EDGAR. And as David mentioned, all of the following numbers are reported in Canadian dollars as per our financial statements unless otherwise noted. Starting with the balance sheet. Total assets at the end of the fourth quarter of fiscal 2023 grew to a new high of just over $4.2 billion. It was up 29% from $3.3 billion at the end of Q4 of last year and up 6% sequentially from $4 billion at the end of Q3 of this year. Cash and securities at the end of Q4 were $230 million or 7% of total assets, which is unchanged from both Q4 last year and Q3 of this year. Our total loan portfolio at the end of the fourth quarter expanded to another record balance of $3.85 billion, an increase of 29% year-over-year and 5% sequentially. Book value per share increased 13% year-over-year and 3% sequentially to a record $14. These increases were the result of higher retained earnings as well as fewer shares outstanding due to our share repurchase program, offset partially by dividends paid. Our CET ratio at the end of the quarter was 11.33%, down from 12% at the end of Q4 of last year and up from 11.15% from Q3 of this year. Our leverage ratio is 8.30%, down from 9.84% at the end of Q4 last year and down from 8.53% at the end of Q3 of this year. Both our CET1 and leverage ratios remain well above our internal targets. Turning to the income statement. Total consolidated revenue for the…

Thank you, Shawn. Those of you who read the entirety of our news release this morning will know that with the conclusion of fiscal 2023, we are undertaking a strategic realignment of certain roles within our senior management team to ensure we're prepared to move forward immediately and aggressively should we receive the relevant regulatory approvals to broadly launch our RPP financing solution in the United States. My partner on these calls for the last several years, Shawn Clarke, will move from his current role of CFO to the newly created role of Chief Operating Officer. During his decade-and-a-half with VersaBank, Shawn has made tremendous contributions to our growth and success in a variety of capacities, including roles in corporate development, technology, risk, and of course, finance, including holding the titles of Chief Risk Officer, Senior Vice President, Operations, as well as Chief Operating Officer of the subsidiary of the bank. In addition to his normal course -- CFO duties over the course of the past years, he has been integral to the development of the business plan and the implementation of the strategy for the RPP in the United States, as well as the U.S. regulatory approval process. As COO, he will help lead our charge into the United States. Taking on the CFO role will be John Asma, who has served as our Treasurer for the past year-and-a-half and who previously served in a variety of senior executive roles with the bank, including Senior Vice President of Treasurer, Senior Vice President of Structured Finance and Treasurer, Senior Vice President of Credit and Treasurer. In his recent tenure as Treasurer, John has been instrumental in enhancing our return on treasury balances while further mitigating risk and enhancing liquidity as well as expanding our base of business development. John's financial…

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Our first question comes from the line of David Feaster from Raymond James. Please go ahead.

Hi. Good morning, everybody.

Good morning, David.

I just wanted to start on kind of the pulse of the market and the driver -- the growth outlook. If I'm hearing you correctly, it's great to hear the update of the $5 billion target, given the starting point and the growth that you're seeing. It seems obviously pretty achievable. I'm just curious, it sounds like that's exclusive of the Stearns deal. And so, I'm just curious kind of how you think about the growth trajectory and the contribution from the U.S. RPP program that you've been rolling out as a part of that?

Well, just purely based on Canada, the quarter we've just completed would have been about 6% prior to the sale of that [$64 million] (ph) portfolio. So, we're running in Canada about 6% a quarter. And there's no -- we don't see any dampening of that. We're applying for a lot of home improvement loans where folks looking for more energy-efficient furnaces and other devices to save costs. So, it doesn't appear that just the Canadian market will deliver much less than, say, about a 25% growth in, say, approximately 6%-and-a-bit per quarter. We have got three customers now in the United States and the product is very keenly being thought after. So, it looks like despite not having the U.S. banking license at this point, that will be additional growth on top of the Canadian market. Now, we're in a fairly unstable world. And as I said in the talk, you could see a shock or two and consumers tend to stop buying at that point and cocoon a little bit. But presently, that's the run rate, 6% or so per quarter in Canada and some further growth in the United States.

Yeah. No, that's great. And again, the U.S. license is kind of icing on the cake above that. But could you maybe talk about the loan sale and kind of the drivers behind that, what you sold, and kind of what drove that sale?

Yeah. We were -- somebody requested the repurchase of receivables that we had -- they originally sold to us due to some internal background requirements, And the actual yield on that portfolio was somewhat anemic compared with the rest of our portfolio. So, it made sense from our perspective to increase profitability, and it made sense for them in that they wanted to repay the rates that they had originally put on. So, it was a win-win, and we don't do much of that. It was just sort of an anomaly, somebody asked for it. We looked at the numbers and said, "Gee, that makes sense."

Okay. That makes sense. Yeah. No, that's great. And one thing, the CRE growth was a little bit higher kind of accelerated in the quarter. And just kind of reading your commentary and listening to you, it sounds like you're a bit more cautious on the CRE space. I'm curious what drove the kind of a higher pace of growth there. And just how you think about credit quality and underwriting at this point just given the higher rate environment, kind of where LTV and debt services at these higher rates?

The CRE growth was probably just a result of the accelerated construction during the warmer summer months. So, it would be -- just a natural result of the construction loans that we'd have in place drawing down more rapidly during the summer. My view on the market is that it's one that deserves a lot of caution going into and we're emphasizing government-insured construction mortgages out there. In Canada, there's an insurance company called CMHC and they have a wonderful program for ensuring residential construction mortgages and we're planning in 2024 to take full advantage of that. I don't see much else in 2024 non-insured mortgages. For example, I just assume staying in the comfort of the CMHCs. And additionally, there's much more favorable risk weighting. The assets are risk weighted at zero versus 70%, 100%, 150% on some of the other asset categories. So, it's a very efficient use of capital and we're still providing financing for our customers who are trying to make up the need -- the tremendous need for residential units in Canada. You're probably aware we've had a lot of immigration into Canada. It's a very popular country. But it's created a huge demand for residential units and our customers, our developers that we've been banking, in my case personally, I'm 46 years, are doing their best to sort of fill that need. And we're thinking that CMHC vehicles is the best way to do that.

That makes sense. And maybe switching gears to DRT Cyber, nice to see the uptick in revenues and expense control was really impressive. I know there was some timing issues with last quarter, but I'm just curious how the pipeline is trending. You talked about the major win that you had here in the States, but I'm just curious kind of how the pipeline is at DRT Cyber and just how you think about that business going forward.

Well, the pipeline has increased quite significantly in the last while. The month of November, I've just seen the numbers, and it's way up over the previous -- the last year November. So, they -- in the last quarter or so, we've seen a kind of a significant increase in the demand for our product. I'm not sure why that is, maybe just nervousness of these terrible people out there hacking everybody. And we have a premium product, particularly in the area of penetration testing and app testing. So, in the last quarter or so, we saw a big increase and it looks like it's continuing right on.

How do you think about expansion of that business? I mean, are there any other new products or innovations or just add-on services that you're looking to expand into?

Yeah, there's a few that we developed off the shelf. That would be RAVEN, our anti-spam software filter, prevents employees and the corporation sending emails to those that have gone on the unsubscribe list, for example. Also, it screens incoming spam emails. We like that product. It was in-house development, and we're rolling that one out. We have our machine learning capability that we are actively promoting our customers use. It's the sort of early warning that some hacker is trying to find their way in, gives them, as you'd expect, kind of alarm bells that something unusual is taking the system or trying to get our customers to use that. Those that have this test periodically, that's fine, but it'd be nice if they also had their system, the big brother looking over it all the time too. So, we've got that product to roll out. There's other products that are right now presently unutilized, that being the VersaVault. I mean, it has tremendous applicability in the digital world. Tactically, we're keeping up on sort of unoccupied with digital assets while we're in the process of our bank application. I'm expecting sometime in the future, not too distant future, we'll hopefully see the green light on that. And then, it might be the DRTC should become the property of some other entity with a strong relationship to the bank. And then, products like VersaVault can come back to life. Right now, it's probably incompatible with a bank, but I'm sure this other -- as a standalone company, DRTC would have quite a bit more value than sitting at sub of a bank. Then those other products could be utilized.

Absolutely. Terrific. Well, I appreciate the questions. Thank you.

Well, thank you, David. Look forward to seeing you in sunny Florida on one of these nice days.

Absolutely. It's gorgeous out.

Yeah. I'm planning to head down there just before Christmas, so hopefully in the New Year we can catch up.

Let's do it. Thank you.

Thank you. [Operator Instructions] We have our next question coming from the line of [Ian Gillespie] (ph). Please go ahead.

Good morning, David, and congratulations on the quarter, the year, and the realignment of management responsibilities, all super initiatives. A couple of questions. One, you referred to the positive interactions with the U.S. regulator. I am curious whether there is extensive back and forth currently, or are they asking for more information, or they have all the information they need and it's just going through their own particular process?

Well, good question, Ian. And thanks. It was quite a vindication of that model I put together about 30 years ago seeing it finally unfold and start to deliver the numbers. It should deliver. With respect to your question, there's very little back and forth between us and the U.S. regulators for the last few months. We feel we've answered all the questions they had about our banking business. There's just been some sort of tidy up in the last while asking about our major shareholder. That's kind of routine for understanding these types of things where we have a U.S. -- or we would have a U.S. bank holding company. They sort of tidy-up questions of if nothing changed sort of thing. So, for months, we have been really interacted with the U.S. regulator on anything about the bank.

Presumably, you've kept us the up-to-date so that you would be able to pull that trigger as soon as you do receive the go ahead. Do you have to, in any way, renegotiate the deal with Stearns Bank just because of the protracted period of time it's taken?

No, there's no requirement for that. Stearns has been working well with us throughout this longer than we thought recently a period of time. We're both keenly interested in putting the deal to bed and looking forward to other transactions that we can do together. We've got some on the drawing board right now. I expect a wonderful relationship going forward that's turning some -- no we're all just being patient. I know you were once in the governments and the regulatory world, and patience is the virtue that you need in these things. If a regulator does want more information, the bank endeavors to provide it as fast as anything, it's answered in the afternoon.

And presumably, you wouldn't anticipate any problems with OSFI at this end?

No. I think from OSFI's perspective, it just allows us, the bank, to diversify and grow in a market that's probably quite conducive to our product. We've got over the last year or so nothing but positive remarks back. OSFI is of course doing the job they always do and asking about it. But I will go further on -- publicly I can say I've just seen green lights recently.

And last question, is there currently an approved NCIB, or are you kind of holding off on that until you see what happens?

It's on pause. We submitted the NCIB, but we asked OSFI to pause it, and we'd like to see the final shake of our capital post-closing. It depends. These numbers are fairly, I think, remarkably significant. I would expect the stock not to stay -- maybe I'm dreaming optimistically, three quarters of book value. It was a bargain and obviously [indiscernible] we got almost a double. But I can't imagine that stays -- that sort of bargain stays there that much longer with the kind of numbers we're posting.

Well, that's great, David. Thank you for that. You're starting to sound more and more like one of those greedy bankers. All I can say is keep up the good work.

Yeah. And I don't apologize for that while I got my banker hat on. But yesterday, we were at the Salvation Army giving some back. Of course, it's Christmas time and we're doing our part there too.

Very good. Thank you.

Well, I didn't have my hat on yesterday, but today I've got it squarely on my head.

Thanks very much.

Thank you. This concludes our Q&A session. I'd now like to turn the call back over to Mr. Taylor for final closing remarks.

Well, I'd like to thank everybody for listening in and the good questions that I received. And I wish you all a Merry Christmas and happy holidays. Stay safe. Look forward to talking to you at the end of Q1. Hopefully, we'll have more good news to share. And should you have any questions in the meantime, we're just an email away. We're happy to answer questions on the fly too. Again, happy holidays. [Ms. Lang] (ph), thank you.

Thank you, sir. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating, and ask that you please disconnect your lines. Have a lovely day.