Good morning, ladies and gentlemen. Welcome to VersaBank's Second Quarter Fiscal 2025 Financial Results Conference Call. This morning, VersaBank issued a news release reporting its financial results for the second quarter ended April 30, 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 on SEDAR+ and EDGAR. Please note that in addition to the telephone dial-in, VersaBank is webcasting this morning's conference call. [Operator Instructions]. 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 our Chief Financial Officer, John Asma. The second quarter of fiscal 2025 unfolded as planned with a number of positive highlights that will continue to drive momentum in our business. We saw the first drawdowns of our U.S. RPP portfolio, which by the end of the quarter had surpassed USD 70 million. We saw growth in our Canadian residential construction loan portfolio. We saw a meaningful expansion of our net interest margin due to several factors that are trending positively. John will go into these in more detail, and we do expect these trends to continue to support NIM around these levels for the remainder of the year. This drove record assets, record credit assets, record revenue alongside sequential improvements in banking efficiency and return on common equity based on our core earnings. And subsequent to quarter end, we initiated a structural realignment of our business to that of the standard U.S. bank framework, which, if approved by regulatory authorities and shareholders, we expect will realize additional shareholder value, reduce costs and further mitigate risk. Looking at the financial highlights in more detail. As I noted, record credit assets and very healthy expansion of our net interest margin drove record revenue. Credit assets on both sides of the border are expanding more or less in line with expectations this year. Net interest margin also expanded as we saw several favorable trends continue, driving 23 basis point increase in NIM on credit assets sequentially. I will note here, there were 2 items that did slightly dampen our income. The first is some preliminary costs associated with our proposed structural realignment. The second is the impact of foreign exchange translation of U.S. subsidiary assets, which was a…

Thanks, David. Before I begin, I will remind you that our financial statements and MD&A for the second quarter are available on our website under the Investors section as well as on SEDAR and EDGAR. 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 second quarter of fiscal 2025 grew 15% year-over-year and 2% sequentially to a new high of over $5 billion. Cash and securities were $445 million or 9% of total assets, down from 11% at the end of Q1 as we steadily deploy the capital we raised in December of last year. Book value -- sorry, book value per share increased to a record $16.25. Our CET1 ratio increased to 14.28% and our leverage ratio was 9.61%, both remaining above our internal targets. Total consolidated revenue was a record at $30.1 million, up 6% year-over- year and 8% sequentially. The increase was driven primarily by our continued growth in credit assets with the sequential growth being additionally driven by solid expansion of our net interest margin. Consolidated net interest expense was $17.5 million compared to $12.2 million in Q2 of last year and $15.7 million for Q1 of this year. As David discussed, Q2 NIEs included $900,000 related to the preliminary costs associated with the bank's proposed structural realignment as well as an atypically high unrealized foreign exchange translation loss. Excluding these costs, NIEs were in line with our expectations. Otherwise, the year-over-year increase in net interest expenses was primarily due to the addition of VersaBank USA. As a reminder, DRT Cyber expenses were included in our consolidated net interest expenses and totaled $2.7 million for the quarter. Reported net income was $8.5 million and consolidated…

Thanks, John. Looking ahead to the second half of the year, we expect positive trends of Q2 to continue into the third and fourth quarters, which we expect will drive steady sequential growth in core earnings, meaning excluding the investment in the structural realignment. Credit assets should continue to steadily grow, driven by momentum in our U.S. Receivable Purchase Program, which we continue to expect to reach at least USD 290 million by the end of the year. The U.S. has vastly underserved market for big ticket point-of-sale financing, and we have a unique solution that offers a number of clear advantages over existing alternatives. We see some potential for incremental growth in Canada amidst what remains a challenging environment for consumer spending, and we expect to see an increasing contribution from our growing CMHC-insured Multifamily Residential Loan business in this opportunistic part of our Canadian business and remain on target to achieve $1 billion in commitments by the end of the year. We will increasingly benefit from the operating leverage in our business model as those assets scale, especially as we deploy the capital from our equity offering last December, contributing to further improvements in efficiency and return on common equity on core earnings. We expect to see the continuation of this favorable trend in support of our net interest margins that are in line with our expanding Q2 levels. further replacement of maturing higher cost term deposit receipts with those at the current rates, the normalized yield curve, which benefits from our RPP spreads, the higher spread we generate on RPP assets in the U.S. and the higher deposits in our low-cost Insolvency Deposit business. Q2's insolvency balances were up another 5% sequentially and 22% year-over-year, and we continue to expect those deposits to grow to about $1…

[Operator Instructions]. With that, our first question comes from the line of Joe Yanchunis with Raymond James.

So in your prepared remarks, I believe you said that you expect insolvency deposits will reach $1 billion. What's the timing for that target? And in conjunction with this tailwind and the several others that you listed, do you have a sense for the magnitude of NIM expansion in the out quarters?

Can you repeat the second half of that? It broke up a little bit.

Yes. It was the timing for the $1 billion and then kind of an outlook -- a near-term outlook for the NIM expansion?

Well, with the $1 billion, I'm thinking by the end of the calendar year, we should get there. As you can see, we're growing at 22% year-over-year. And unfortunately, for Canada, we almost a record low for consumer sentiment and insolvency. So while it's a tough time for most Canadians, it's a good time for the insolvency business. And it should -- it supplies us with some economically priced deposits. So I think we continue -- the balances continue to grow at the present rate by the end of the calendar year should hit about $1 billion. Now with respect to NIM expansion, very pleased to see the 29 basis points sequentially in the credit assets. There's a little bit of a dampening effect right now happening in Canada, even though we have about $700 million in GICs maturing in the next few months at about 1% less than -- and the replacement GIC is about 1% less. So that's all very favorable for us. But the yield curve is still pretty flat and might have a little tiny inversion in the short end. That puts a bit of damper on it. So it hasn't quite swung back up as it normally is. And the marginal Government of Canada bonds that our GICs have over the last while are high, too. It's about 80-odd basis points, usually around 50. So right now, I'm thinking NIM will stay where it is and probably start edging up again when some of this noise gets out of the system.

Got it. I appreciate that. And then kind of moving over to expenses. So excluding the realignment costs, how should we think about noninterest expenses kind of trending from here? And then what are the expected annual savings from redomiciling in the U.S.?

Well, excluding the -- those onetime expenditures with respect to reorganizing, there's probably a little bit more in NIE in the states. We've got maybe one more hire to do. And out of that, it should stabilize. So maybe a slight increase in the U.S. bank's expenses going forward and then stable. And with respect to the savings, you could probably pencil in around $2 million, $3 million a year once we've got the reorganization done.

Excellent. I appreciate that. And just last one for me. With respect to capital, and perhaps I missed this in the materials, but it didn't look like you utilized your recent share repurchase authorization. How should we think about your appetite for repurchases in the out quarters?

Well, routine to buy our stock back less than book value, and it looks like it's less than book value, maybe to say it has been the last. So we are keen to buy it back at that price. Personally, I don't expect it to stay down there that long. But if it is, we've got loads of capital and probably the best place to deploy our capital is buying back our stock less than book.

And your next question comes from the line of Tim Switzer with KBW.

Can you update us on the expectations you have on to sell DRTC Cyber (sic) [ DRT Cyber ] and the time line there?

Well, -- we're in the sort of the final stages of engaging a firm to look after that sale. And I would expect by the end of this fiscal year, we'll have a deal done. It's, I think, a very popular business, unfortunately, but a terrible comment on humanity that cybersecurity attacks just seem to be relentless and DRT Cyber is seem to be a world leader, particularly in their penetration testing. So we're actively in the sale process now. And as I say, we expect fairly soon to engage a firm to look after that for us.

Okay. Great. That's good to hear. And can you provide an update on how the conversations with new partners in the U.S. are going? Maybe how many new programs you expect to be fully launched by the end of the year?

Well, the conversation is going quite well. And of course, it's a very attractive product. But the onboarding process is a little longer than I would like. We've got 3 signed up now. And by the end of the year, say we have another 3 signed up. I'm hoping for a lot more than that, but it has taken a while to onboard. The legal work is different in the States versus what we have in Canada, not that much different, but it is -- there are nuances to it. So 3 now, maybe another 3. And if the guys pleasantly surprised me, maybe another 3 on top of that.

Okay. That sounds good. And the last question I have is, can you just provide some commentary on the credit trends you're seeing in the CRE book where we've seen some reserve release over the last few quarters, but have also had some charge-offs. Just would love to hear what you guys are seeing there?

Well, the charge-offs actually are sort of an academic charge-off and that they're part of the U.S. portfolio that we purchased when we purchased that U.S. bank. So they're not in the Canadian real estate area. We have no charge-offs. No real charge-offs at all in our book. But we purchased the portfolio by the bank. And along with it, we purchased their expected loss provision that's being charged against it. The Canadian real estate market is in a bit of a turmoil. So it's really a heads-up game lending in that area. We've been at it for, I guess, in my case, 48 years. So this is one of those periods of time where you have to be really careful. Hence, our focus on the government-insured CMHC mortgages. And we intend to keep that focus. And we tend to lend to our clients that we've to for decades around the London, Ontario area. So yes, if -- even our real estate developer clients are, for the most part, sitting on a lot of cash sort of waiting until things smooth out a bit in the economy. No problem, Tim. Maybe I'll see in New York, I'm heading in there next week sometime.

Okay, yes. We'll be in touch.

[Operator Instructions]. Your next question comes from the line of Andrew Scutt with ROTH Capital Partners.

So my first one here is a little bit of a 2-parter. You guys had nice growth in the RPP portfolio. So kind of breaking it out by geography, with the softness in the Canadian economy, can you just kind of talk about what verticals you did see strength in? And then maybe within the active U.S. portfolio, is there anything you've kind of learned that surprised you thus far?

Well, actually, Andrew, it surprised me the Canadian portfolio grew and that all the stats in Canada are pretty negative, like consumer sentiment at an all-time low, insolvencies at an all-time high. So I was surprised to see any growth in Canada. I think in last quarter, I said that. But the vertical really is home improvement. And I suppose that maybe that's to be expected. Canadians are buying new furnaces and energy-efficient furnaces and hot water heaters and that sort of things are saving them ultimately in the monthly expenses. So that's where we see the growth in Canada still, strangely enough. And it's probably going to continue right through the end of the year. So you may very well see about a 10% increase year-over-year in the RPP in Canada. And of course, on the other side of that, we're seeing 22% growth year-over-year in the insolvency deposits, which are helping drive the expansion of our margin. In the United States, the -- I suppose the lesson is that the alternate source of financing is securitization and the credit spreads in that area have been pretty narrow. So even though virtually everybody we talk to in the States wants to sign up for our program as sort of a continuous, steady, reliable source of capital to fund their loans. The market is giving money pretty cheap right now. So it means that we're maybe not the top priority that would be otherwise if credit spreads were really wide. So that's -- the American point-of-sale customers tend to be a lot larger than the Canadian ones. But the Canadian ones don't have -- because of their size, don't have really access to the securitization programs. But the American ones do because they're so much larger. And so their appetite for our program is sort of modified by the credit spreads.

Really appreciate the detail there. And second one for me, if I may. You guys added an additional deposit broker in the quarter, noted this could potentially be a tailwind to NIM. So can you kind of talk us through how that could be a benefit to you guys and if you're interested to further expand your network?

Well, absolutely right. We were fortunate that Bank of Montreal put us on their board. In my early career, I started off with Bank of Montreal. So it was justice that they should have us on their board. Bank of Montreal is a huge channel for distributing our deposits. So that is a tailwind on NIM that would be contributing to our net interest margin expansion and the diversity of our deposit base. So we're thankful that Bank of Montreal added us. There may be one large bank left in Canada to put us on their board. And again, that helps with the diversity and the NIM expansion. And just to spell it out, the more channels we have that distribute our deposits, the less we have to pay for our deposits and that we don't overwhelm one particular channel because we're so well distributed all across the entire country of Canada. So that's helpful. And like I said, there may be one more bank that in the very early days of -- when I was just conceiving this model was actually a supplier and then the market changed a bit, the industry changed. So we should really sign them up too, and then we had the entire country.

And your next question comes from the line of Jeff Wagman with Raymond James.

Are you in the baking hot St. Petersburg right now?

No, no. I'm actually getting warmer in Toronto.

No kidding. Sorry [indiscernible]. Thought you were down to the headquarters.

No. I hope to be in London sometime through the summer. But anyway, just a general question, given the political climate and the expansion and wisely, I think, the concentration of business to the United States. Are you experiencing or hearing of any possible pushback given the political environment regarding foreigners in the U.S.?

No, not yet, but we've heard sort of statements earlier on about Canadian banks in general, and it hasn't affected us negatively. In fact, on the balance, the current U.S. administration's propensity for digital commerce has helped us a lot. As you know, we have the world's first digital deposit receipt. We pioneered it in Canada under the Canadian regulatory environment. And now it seems that it's absolutely perfect for what the U.S. administration is talking about. So other than a little bit of rhetoric about Canadian banks, the overwhelming positive thing is the endorsement of digital commerce and our digital deposit receipt, of course, is at least 2 years ahead of the game. We not only pioneered it in the regulatory environment, but we also obtained a SOC type 2 audit on it, which is you can only get by having it actually be functional. So everybody else that's dreaming of doing this, they've got a few years to go. And we've got the thing ready to roll in the United States. So anything on the balance, it's positive to be in the United States.

All right. So no proposed -- they're talking about tax increases on foreigners investing in the States and the increase in withholding taxes for -- on dividends and that sort of thing. But I don't know about business operations yet. I haven't heard anything about that.

Yes. And a good portion of our shareholders are U.S. other than our major holding company, it's 80% U.S. shareholders.

But it won't impact your business as an operational thing, will it?

Also, obviously, with us adopting the same holding company structure that the other international U.S. banks have, that minimizes the risk that there might be some sort of aversion to Canadian banks in the United States. We'll have a holding company structure identical Yes. That's a 35-minute flight for me out of London Airport here where located. But I've got a new set of garment instruments going That's right. I'm tied up this month. We got our kids in from overseas. So it will be July or August, hopefully July. It will be sometime burdens and foreign exchange translations that you saw us get hit with this quarter. So that's all underway. to that of, say, JPMorgan. So that minimizes all that stuff.

Okay. I'll give you a shout. And hopefully, when you guys are in London, I'll make a plan to come down and see you.

Yes. Well, I'm in London right now, right at the VersaBank's Innovations Center of Excellence here. And -- but last time without an airplane, so I can't fly in the island to visit with you. I got to say...

No, I'm in Toronto. It's Jeff.

I know, Island Airport, of course.

The Island Airport I forgot about that.

in and seems to take forever like a lot of things in life nowadays. Everything seems to take a lot longer than you hope for.

in July. But I'll message you and John, and see if we can...

Yes, absolutely. I'm in regularly once I got my wings back.

And we have no further questions at this time. I would like to turn it back to David Taylor for closing remarks.

Well, I'd like to thank everyone for joining us today, and I look forward to speaking to you at the time of our third quarter results.

Thank you, presenters. And ladies and gentlemen, this concludes today's conference call. Thank you all for joining. You may now disconnect.