Good morning, ladies and gentlemen. Welcome to VersaBank Fourth Quarter and Fiscal Year 2024 Financial Results Conference Call. This morning, VersaBank issued a news release reporting its financial results for the fourth quarter and year ended October 31, 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 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 to 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 Asma. 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 30, 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 CAD5.6 million for the quarter and CAD6.5 million for the year, and tax adjusted reduced EPS by an equivalent of CAD0.18 for the quarter and CAD0.20 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 and typical cash balances ahead of the acquisition and funding of 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…

Thanks, David. Before I begin, I will remind you that our full financial statements and MD&A for the fourth quarter and full-year are available on our website under the Investor Section, as well as on SEDAR and EDGAR. All of the following numbers are reported in Canadian dollars, as per our financial statements, unless noted. Starting with the balance sheet, total assets at the end of the fourth quarter of fiscal 2024 grew 15% year-over-year and 7% sequentially to a new high of CAD4.8 billion. Cash and securities were CAD525 million or 11% of total assets, up from 7% in Q4 last year and 9% in Q3 of this year. Book value per share increased to a record CAD15.35. Our CET1 ratio was 11.24% and our leverage ratio was 7.38% with both remaining above our internal targets. Turning to the income statement. As David described, there were a number of one-time items mostly related to the U. S. Bank acquisition that impacted the fourth quarter and the full-year results. A number of one-time non-interest expenses, the expense of a deferred tax asset due to a change in tax base of the acquired assets of VersaBank USA, maintaining higher than typical cash balances ahead of the closing of the acquisition, which was exasperated by the impact of a temporary dampening of net interest margin that usually occurs when interest rates decline and $90 million in funding provided to VersaBank USA at closing of the SBH acquisition. Total consolidated revenue was CAD27.3 million, compared to CAD29.2 million last year. The year-over-year difference was driven primarily by lower non-interest income from the Bank's cybersecurity operations DRTC, but was also impacted by higher cash assets associated with the funding of the U.S. Bank. Consolidated non-interest expense was CAD19.4 million, compared to CAD12.4 million last…

Well, thank you, John. 2025 promises another year of growth in our loan portfolio and profitability, driving continued improvements in our efficiency ratio and return on common equity as we continue to capitalize on the operating leverage in our business model. We have a strong foundation in our Canadian digital banking operations where we are very proud to lead the publicly traded banks in net interest margin, which is even more impressive given that we don't give anything back for loan losses. We expect continued steady growth in Canada with our receivable purchase program expanding in line with 2024 and some upside should interest rates continue their downward trend as is forecast. And we expect to begin to see the contribution of our growing CMHC insured loan business in our opportunistic real estate portfolio. As a reminder, these are zero risk weighted loans requiring no capital and delivering a very nice spread. We also expect to see continuation of several favorable trends that support net interest margin. As noted earlier, we are starting to see the flattening of the yield curve, which will be beneficial to the spread of our RPP loans. In addition, we should continue to see favorable impact of our low cost insolvency professional deposit business in Canada as bankruptcies continue to steadily trend upward. We're moving aggressively forward in U.S. RPP opportunity. We are in the process of moving our first U.S. partners from our pilot program to First Bank USA balance sheet. More importantly, we expect to add our first post-acquisition partner eminently and others to follow in due course. I will note that it does take some time to finalize these contracts and onboard new partners. However, we do expect the pace of new additions to accelerate going forward. We have a robust and…

Thank you, Mr. Taylor. [Operator Instructions] And your first question will be from Tim Switzer at KBW. Please go ahead.

Hey, good morning, guys. Thank you for taking my questions.

Good morning, Tim.

Did you provide an update on how the conversations with new partners in the U.S. are going? And how many partners should we expect to be, kind of, fully launched over the next few quarters?

Well, we have very productive discussions with one U.S. Bank as a partner. And we've tested the data flow. It works exceptionally well. So we'd expect very soon to have our first RPP new point-of-sale partner. And we'll also have a partner bank sharing in those loans. So, I said eminently, and we're just in the paper stage where the lawyers are working as quickly as they can to put that one to bed. With respect to additional partners, there's been about 30 or so that we've been talking to, and I think the constraint has just been how fast we're going to be able to do the paperwork to sign them up.

Okay, great. And, you know, related to that, how should we think about the origination trajectory in the U.S. and the balance sheet growth over the course of the year? Is it a gradual acceleration, kind of, evenly each quarter or is there a point in the year where you think it really starts to significantly pick up?

Well, it's sort of a quantum jumps in growth depending on how fast we signing up to partners. Right now we're looking to have on balance sheet about CAD250 million by the end of the year and that would be sharing at least 50% with other banks. So in total, as the administration about CAD500 million and it may grow a lot faster depending on how quickly we can get the paperwork done.

Okay. And if I can get one more, please. What is the expense outlook for next year? Once we exclude some of the one-time rates you guys reported, are most of the costs associated with running the U.S. business now in the run rate, or is there kind of another lift to the expense base of some of these customers?

Most of the expenses are now in the run rate in that we've hired almost everybody we need to run the U.S. and they may have a couple more to put on about the heavy hitters are already on board.

Perfect. Okay, that's all for me. Thank you, David.

Thanks, Tim.

Next question will be from David Feaster at Raymond James. Please go ahead, David.

Hi. Good morning, everybody.

Good morning, David. I'm enjoying [Technical Difficulty] today, thankfully.

I love it. That's great. You know, one thing that you touched on was, you know, given the governors, the growth governors on the U.S. expansion, you know, you all are going to be syndicating some loans out to be able to support the growth, but not necessarily have it all on balance sheet. I'm curious where you are in the build out in that process and the platform and whether you've started to test that yet?

Well, we built it. It's called AMS 3.0. that's short for Asset Management System 3.0. Canada, we use AMS 2.0. It's in the cloud facility in Des Moines, Iowa, at the Azure Facility, and it's fully functional. It's also on the syndication side, it's also able to parse each individual loan to the component parts, so that we'd retain it on our balance sheet and our partners would retain it. So that's all set to go. We're just waiting for the finalized documentation for the first brand new point-of-sale partner. Hopefully, that's very soon. And then the data starts to flow representing the loans being parsed for us and for our first community bank partner.

Okay, and then you touched on some of the differences too between kind of the small ticket opportunity and the larger ticket opportunity? I'm curious maybe, where are you focused in the U.S. currently? Like where do you see the most opportunity here? Is it in the smaller ticket or maybe some of the larger stuff?

It's mainly the larger stuff, although our software is capable of dealing with tiny loans too. But the sweet spot is the larger ticket items such as home improvement, new HVAC systems, that sort of thing. That’s -- I think United States would be quite similar to what we experience in Canada about 50% of our point-of-sale portfolio is home improvement.

Okay. And then, you know, last one for me, you know, on the -- you talked about 100 basis point better spread in the States. Do you see more opportunity? Is that on the funding side or is it on the loan yield side? And then just kind of to the funding side, you touched on the election and the potential tailwinds maybe from digital currencies? I'm curious if there's any interest in bringing back CADV, you know, in that opportunity?

Well, good point. We've seen on the test market we did in the United States, we got better yields, and we got lower cost of funds to give rise to that approximately 1% additional spread. So it was both on the yield and on the funding side. With respect to DRTC's technology that we announced about four years ago, we're quite proud of it. We have what we call VUSD and VCAD, our digital deposit receipts on Algorand, Stellar, and Ethereum. We had it SOC 2 reviewed and obtained SOC 2 Taiwan rating. So that technology is all set to go. But as Paul Masson, as George Orwell said, no wine before its time. It’s -- I find the regulatory environment wasn't mature enough to receive that product, but it appears with the Trump appointing or pending appointees and it looks like a favorable environment for digital commerce that this product that we have that's been tested and actually fully functional would be sort of wonderful for the smaller FIs in the United States to use. And we're at your cheese stands ready to provide that service for them. With respect to our own bank, we have such wonderful access to cheap deposits through the large brokerage firms. There isn't some -- a lot of need for us to adopt that. We have our work cut out for us to expand the RPP program, but DRT Cyber could provide that service to other small banks, community banks that don't have this, the water flux as we do to very cheap funding. So it'd be a product for DRTC and sometime in the future it may be something that our U.S. bank adopts too, but there isn't any burning need for our bank to adopt it.

Okay, and then maybe if I could squeeze one more in, you touched about increased putbacks to your partners in Canada, and we're really validating your business model and that's great, you've had no credit issues, but I'm curious, maybe how has this impacted the partners in Canada and the health of their balance sheet and their ability to absorb those losses so far?

Well, to touch wood, Dave they've all been able to do that. We tend to pick the strongest point-of-sale partners we can and they've been dealing with it. It's sort of the inevitable downturn some people in Canada are calling it a recession and considering our trustee deposits have increased by 20% year-over-year, that's a big number for -- that's a 20% increase in bankruptcies. We probably are in a bit of a recession. But our partners have stood up and to be fine. They're all sort of eagerly awaiting perhaps a jumbo decrease in the overnight rates for the Bank of Canada that might be announced on Wednesday. So generally speaking, our model has held up wonderfully and it's just slow growth with a record high putback this year. And our partners seem to be in good shape and if the Bank in Canada drops the rates as people are hoping and predicting, then that might return us to that upward sloping yield curve again where we were scoring about 300 basis points in that interest margin. So sort of stay tuned. I hope Wednesday is good news for the Canadian economy.

That's great, color. Thanks, everybody.

Thank you.

[Operator Instructions] Next question will be from Andrew Scutt at the Roth Capital Partners. Please go ahead, Andrew.

Hey, good morning, guys, and thanks for taking my questions. First one for me, you guys saw a return on growth in your CRE portfolio. I know you guys have been recently, kind of, right-sizing that portfolio, maybe changing up the mix? Can you kind of talk about how you feel about the portfolio where it is now and then maybe provide some additional color on the CMHC portfolio?

Absolutely. So this portfolio is almost all composed of loans on residential properties and there's two types. One, we call conventional loans. So these are the normal loans that banks have made over the years that are risk-weighted fairly highly. Those can be multi-family, normally construction, apartment block construction, and some low-rise. And because of the high risk weighting and there's a little additional risk involved. We're running a loan to value ratio around 60% on these. We pivoted over to CMHC insured construction mortgages. These are wonderful in that they're 0% risk weighted, so don't absorb any CET1 capital and match really nicely against our floating rate trustee deposits. On average, we pay about, say, prime minus 285 on those, and we earn maybe prime minus 20 on the CMHC. So we're making about a 265 basis point spread on a zero risk weighted asset, no capital required. That's the portfolio that John talked about that’s we have a CAD600 million right now in committed facilities to draw down in 2025, almost double that we had last quarter. We're looking at probably that figure increasing by the end of 2025, say to CAD1.5 billion or maybe even CAD2 billion. So it's a really wonderful opportunity for us to help with the construction in Canada, but not take hardly any risk because the government insured and get a really good rate of return.

Great. Well, thank you for the additional color. And then second one for me, you've kind of expanded on this earlier, but you know as you look out in 2025, can you kind of just talk through the pipeline of business activity for DRTC?

Well, DRTC's cybersecurity business has been growing quite by the sign-up of new customers quite dramatically. We've had some really big well-known names and the revenue hasn't flowed into the statements yet, but not all of it is starting to come in. So this increased demand for DRTC cybersecurity product amongst the big players, the brand name retailers and other financial institutions. But the product that we have in DRTC that we just sort of kept under wraps for a while, pending a more favorable regulatory environment, is the ability to issue digital deposit receipts. So this is the state-of-the-art. And I was just at a conference where a very smart individual pointed out there's a huge difference between a stablecoin that's backed up by an asset or a deposit held by somebody else and an actual digital deposit receipt, which represents the deposit held by a real bank. And we developed this technology about four years ago and approved it all out and tested it and had it audited. We just kept it on the shelf until the right time. But it looks like it is the right time. So we could host this for 1,000s of community banks in the United States and bring them to this new state-of-the-art way to raise deposits, let their customers have the deposits in e-wallets and such, and [trans like] (ph) business in almost negligible fees and it's almost instantaneous. It's a state-of-the-art payment vehicle, state-of-the-art deposits. For example, say you bought Bitcoin at CAD1,000 and you see that CAD100,000 and you like to swap it into a bank deposit. Well, that can be done seamlessly in your e-wallet with our VUSD product or VCAD courtesy of our technology and our VersaVault. And I think time is right, I was quoting George Orwell long back saying, no wine before it's time. And that's why we just did promote it or just kept it on the shelf, because the regulatory environment had to mature and regulators had to get the rules in place. And I think regulators would like banks to issue these types of products rather than the unregulated entities that have in some cases got into trouble in the past. So it's a service for DRTC to provide and I'm pretty excited about it. I think it's something that a lot of community banks will want to take us up on.

All right, yes, that sounds like a wonderful opportunity. Congrats on the growth and thanks for taking my questions.

Well, Thank you, Andrew. Look forward to talking to you later on.

[Operator Instructions] And at this time, Mr. Taylor, we have no other questions. Please proceed.

All righty. Well, I'd just like to thank everybody for joining the call and look forward to talking to you at the end of the next quarter. Stay safe and so long. I'll have to put some suntan lotion on here. Being a cloud-based bank and a U.S. operation now, I've got the luxury of operating anywhere in North America. And today it's a very sunny day in Lauderdale. Thank you. Bye.

Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we ask that you please disconnect your lines.