VERSABANK REPORTS THIRD QUARTER FISCAL 2024 RESULTS: RESULTS CONTINUE TO DEMONSTRATE STRENGTH OF BUSINESS MODEL AS BANK ENTERS US MARKET
Rhea-AI Summary
VersaBank reported its Q3 2024 results, highlighting the completion of its acquisition of Stearns Bank Holdingford N.A., now renamed VersaBank USA. The bank's total assets increased 13% year-over-year to a record $4.5 billion, driven primarily by growth in its Point of Sale Receivable Purchase Program portfolio. However, net income decreased 3% year-over-year to $9.7 million, impacted by factors related to the US acquisition preparation. Key financial highlights include:
- Total revenue increased 1% year-over-year to $27.0 million
- Loans increased 11% year-over-year to $4.05 billion
- Earnings per share decreased 5% year-over-year to $0.36
- Return on common equity decreased to 9.63% from 11.15% year-over-year
The bank maintains a strong capital position with a CET1 ratio of 11.75% and is poised for growth in the US market through its newly acquired national bank charter.
Positive
- Total assets increased 13% year-over-year to a record $4.5 billion
- Loans increased 11% year-over-year to $4.05 billion
- Total revenue increased 1% year-over-year to $27.0 million
- Completed acquisition of US-based Stearns Bank Holdingford N.A., providing entry into US market
- Maintained strong capital position with CET1 ratio of 11.75%
- Provision for credit losses remained negligible at 0.00%
Negative
- Net income decreased 3% year-over-year to $9.7 million
- Earnings per share decreased 5% year-over-year to $0.36
- Return on common equity decreased to 9.63% from 11.15% year-over-year
- Net interest margin decreased 34 bps year-over-year to 2.23%
- Efficiency ratio increased to 50% from 48% year-over-year
News Market Reaction – VBNK
On the day this news was published, VBNK declined 4.19%, reflecting a moderate negative market reaction.
Data tracked by StockTitan Argus on the day of publication.
All amounts are unaudited and in Canadian dollars and are based on financial statements prepared in compliance with International Accounting Standard 34 Interim Financial Reporting, unless otherwise noted. Our third quarter 2024 ("Q3 2024") unaudited Interim Consolidated Financial Statements for the period ended July 31, 2024 and Management's Discussion and Analysis ("MD&A"), are available online at www.versabank.com/investor-relations, SEDAR at www.sedarplus.ca and EDGAR at www.sec.gov/edgar. Supplementary Financial Information will also be available on our website at www.versabank.com/investor-relations.
CLOSING OF THE ACQUISITION OF
In June 2024, the Bank obtained approval from the US Office of the Comptroller of the Currency (the "OCC"), US Federal Reserve, and OSFI (
Several factors associated with preparations for the closing of the acquisition of SBH dampened VersaBank's third quarter fiscal 2024 financial results. In preparation to fund the capital requirements of the US subsidiary following closing of the SBH acquisition, VersaBank maintained higher than typical cash balances. The higher than typical cash balances exacerbated the impact of the temporary dampening of net interest margin that usually occurs when interest rates decline, the result of the lag in the adjustment of the Bank's term deposit rates. In addition, non-interest expense was higher due to acquisition-related costs, some of which were specific to the third quarter and some of which are being incurred ahead of asset growth and revenue generated by the launch of US Receivable Purchase Program ("RPP") in the US through VersaBank
Net income and earnings per share for the first nine-months of fiscal 2024 increased
CONSOLIDATED AND SEGMENTED FINANCIAL SUMMARY
(unaudited) | As at or for the three months ended | As at or for the nine months ended | |||||||||||
July 31 | April 30 | July 31 | July 31 | July 31 | |||||||||
(thousands of Canadian dollars, except per share amounts) | 2024 | 2024 | Change | 2023 | Change | 2024 | 2023 | Change | |||||
Financial results | |||||||||||||
Total revenue | $ 26,996 | $ 28,501 | (5 %) | $ 26,859 | 1 % | $ 84,348 | $ 79,462 | 6 % | |||||
Cost of funds* | 4.17 % | 4.21 % | (1 %) | 3.62 % | 15 % | 4.12 % | 3.30 % | 25 % | |||||
Net interest margin* | 2.23 % | 2.45 % | (9 %) | 2.57 % | (13 %) | 2.38 % | 2.72 % | (13 %) | |||||
Net interest margin on loans* | 2.41 % | 2.52 % | (4 %) | 2.69 % | (10 %) | 2.58 % | 2.89 % | (11 %) | |||||
Return on average common equity* | 9.63 % | 12.36 % | (22 %) | 11.15 % | (14 %) | 11.79 % | 11.24 % | 5 % | |||||
Net income | 9,705 | 11,828 | (18 %) | 10,003 | (3 %) | 34,232 | 29,683 | 15 % | |||||
Net income per common share basic and diluted | 0.36 | 0.45 | (20 %) | 0.38 | (5 %) | 1.29 | 1.10 | 17 % | |||||
Balance sheet and capital ratios** | |||||||||||||
Total assets | $ 4,516,436 | $ 4,388,320 | 3 % | $ 3,980,845 | 13 % | $ 4,516,436 | $ 3,980,845 | 13 % | |||||
Book value per common share* | 15.23 | 14.88 | 2 % | 13.55 | 12 % | 15.23 | 13.55 | 12 % | |||||
Common Equity Tier 1 (CET1) capital ratio | 11.75 % | 11.63 % | 1 % | 11.15 % | 5 % | 11.75 % | 11.15 % | 5 % | |||||
Total capital ratio | 15.40 % | 15.33 % | 0 % | 15.10 % | 2 % | 15.40 % | 15.10 % | 2 % | |||||
Leverage ratio | 8.54 % | 8.55 % | 0 % | 8.53 % | 0 % | 8.54 % | 8.53 % | 0 % | |||||
* See definitions under 'Non-GAAP and Other Financial Measures' in the Q3 2024 Management's Discussion and Analysis. | |||||||||||||
** Capital management and leverage measures are in accordance with OSFI's Capital Adequacy Requirements and Basel III Accord. | |||||||||||||
(thousands of Canadian dollars) | |||||||||||||||
for the three months ended | July 31, 2024 | April 30, 2024 | July 31, 2023 | ||||||||||||
Digital | DRTC | Eliminations/ | Consolidated | Digital | DRTC | Eliminations/ | Consolidated | Digital | DRTC | Eliminations/ | Consolidated | ||||
Banking | Adjustments | Banking | Adjustments | Banking | Adjustments | ||||||||||
Net interest income | $ 24,944 | $ - | $ - | $ 24,944 | $ 26,242 | $ - | $ - | $ 26,242 | $ 24,929 | $ - | $ - | $ 24,929 | |||
Non-interest income | 175 | 2,219 | (342) | 2,052 | 262 | 2,336 | (339) | 2,259 | 101 | 2,020 | (191) | 1,930 | |||
Total revenue | 25,119 | 2,219 | (342) | 26,996 | 26,504 | 2,336 | (339) | 28,501 | 25,030 | 2,020 | (191) | 26,859 | |||
Provision for (recovery of) credit losses | (1) | - | - | (1) | 16 | - | - | 16 | 171 | - | - | 171 | |||
25,120 | 2,219 | (342) | 26,997 | 26,488 | 2,336 | (339) | 28,485 | 24,859 | 2,020 | (191) | 26,688 | ||||
Non-interest expenses: | |||||||||||||||
Salaries and benefits | 5,945 | 1,562 | - | 7,507 | 5,724 | 1,685 | - | 7,409 | 5,891 | 1,562 | - | 7,453 | |||
General and administrative | 4,729 | 446 | (342) | 4,833 | 3,445 | 451 | (339) | 3,557 | 4,257 | 380 | (191) | 4,446 | |||
Premises and equipment | 824 | 370 | - | 1,194 | 845 | 374 | - | 1,219 | 610 | 370 | - | 980 | |||
11,498 | 2,378 | (342) | 13,534 | 10,014 | 2,510 | (339) | 12,185 | 10,758 | 2,312 | (191) | 12,879 | ||||
Income (loss) before income taxes | 13,622 | (159) | - | 13,463 | 16,474 | (174) | - | 16,300 | 14,101 | (292) | - | 13,809 | |||
Income tax provision | 3,811 | (53) | - | 3,758 | 4,484 | (12) | - | 4,472 | 3,999 | (193) | - | 3,806 | |||
Net income (loss) | $ 9,811 | $ (106) | $ - | $ 9,705 | $ 11,990 | $ (162) | $ - | $ 11,828 | $ 10,102 | $ (99) | $ - | $ 10,003 | |||
Total assets | $ 4,507,158 | $ 27,285 | $ (18,007) | $ 4,516,436 | $ 26,980 | $ (17,523) | $ 4,388,320 | $ 25,485 | $ (16,421) | $ 3,980,845 | |||||
Total liabilities | $ 4,102,239 | $ 29,471 | $ (24,259) | $ 4,107,451 | $ 29,069 | $ (23,776) | $ 3,988,217 | $ 29,123 | $ (23,153) | $ 3,615,802 | |||||
MANAGEMENT COMMENTARY
"The highlight of the third quarter was the Bank's receipt of the US and Canadian regulatory approvals for our acquisition of a national, OCC-chartered US bank, which we completed last week," said David Taylor, President and Chief Executive Officer, VersaBank. "We are now embarking on a transformational opportunity for VersaBank, broadly launching our Receivable Purchase Program financing solution, which has been proven out in
"Importantly, outside of several factors related specifically to close our US acquisition, our financial results continue to demonstrate the underlying strength and efficiency of our business model. Earnings per share for the first nine-months of fiscal 2024 were another record, up
"Our US Receivable Purchase Program opportunity, alongside our anticipated continued steady growth in
HIGHLIGHTS FOR THE THIRD QUARTER OF FISCAL 2024
Consolidated
- Total assets increased
13% year-over-year and3% sequentially to a record$4.5 billion - Consolidated total revenue increased
1% year-over-year and decreased5% sequentially to$27.0 million - Consolidated net income decreased
3% year-over-year and decreased18% sequentially to$9.7 million USA ; - Consolidated earnings per share decreased
5% year-over-year and decreased20% sequentially to$0.36 - Return on common equity decreased to
9.63% from11.15% year-over-year and decreased22% from12.36% sequentially.
Digital Banking Operations
- Loans increased
11% year-over-year and1% sequentially to a record$4.05 billion 16% year-over-year and4% sequentially; - Total revenue increased marginally year-over-year and decreased
5% sequentially to$25.1 million - Net interest margin on loans decreased 28 bps, or
10% , year-over-year and 11 bps, or4% , sequentially at2.41% . The decreases were due primarily to the strong growth of the POS/RPP Financing portfolio (which is composed of lower-risk weighted, lower yielding but higher Return on Common Equity ("ROCE") assets than the CRE portfolio, lower CRE lending balance, as well as the impact of temporarily elevated GIC (term deposit) rates relative to Government ofCanada bonds due to the adjustment lag typically experienced in a decreasing interest rate environment. The impact of the adjustment lag was exacerbated by the higher cash balances described above. This was offset partially by higher yields earned on the Bank's lending assets; - Net interest margin decreased 34 bps, or
13% , year-over-year and decreased 22 bps, or9% , sequentially to2.23% ; - Provision for credit losses as a percentage of average loans remained negligible at
0.00% , compared with a 12-quarter average of0.01% , which remains among the lowest of the publicly traded Canadian Schedule I (federally licensed) Banks; and, - Efficiency ratio (excluding DRTC) was
46% compared to43% a year ago and38% sequentially.
DRTC's Cybersecurity Services Operations (Digital Boundary Group)
- Revenue for the Cybersecurity Services component of DRTC (Digital Boundary Group, or DBG) increased
8% year-over-year to$2.5 million 5% to$1.9 million 8% and6% , respectively, due primarily to seasonally lower service engagements. DBG's gross profit amounts are included in DRTC's consolidated revenue which is reflected in non-interest income in VersaBank's consolidated statements of income and comprehensive income. DBG remained profitable on a standalone basis within DRTC.
FINANCIAL SUMMARY
(unaudited) | for the three months ended | for the nine months ended | ||||||||
July 31 | July 31 | July 31 | July 31 | |||||||
(thousands of Canadian dollars, except per share amounts) | 2024 | 2023 | 2024 | 2023 | ||||||
Results of operations | ||||||||||
Interest income | $ 71,646 | $ 60,089 | $ 212,181 | $ 163,245 | ||||||
Net interest income | 24,944 | 24,929 | 77,754 | 73,812 | ||||||
Non-interest income | 2,052 | 1,930 | 6,594 | 5,650 | ||||||
Total revenue | 26,996 | 26,859 | 84,348 | 79,462 | ||||||
Provision for (recovery of) credit losses | (1) | 171 | (112) | 793 | ||||||
Non-interest expenses | 13,534 | 12,879 | 37,743 | 37,940 | ||||||
Digital Banking | 11,498 | 10,758 | 31,927 | 31,600 | ||||||
DRTC | 2,378 | 2,312 | 6,834 | 6,914 | ||||||
Net income | 9,705 | 10,003 | 34,232 | 29,683 | ||||||
Income per common share: | ||||||||||
Basic | $ 0.36 | $ 0.38 | $ 1.29 | $ 1.10 | ||||||
Diluted | $ 0.36 | $ 0.38 | $ 1.29 | $ 1.10 | ||||||
Dividends paid on preferred shares | $ 247 | $ 247 | $ 741 | $ 741 | ||||||
Dividends paid on common shares | $ 650 | $ 648 | $ 1,950 | $ 1,962 | ||||||
Yield* | 6.40 % | 6.19 % | 6.50 % | 6.02 % | ||||||
Cost of funds* | 4.17 % | 3.62 % | 4.12 % | 3.30 % | ||||||
Net interest margin* | 2.23 % | 2.57 % | 2.38 % | 2.72 % | ||||||
Net interest margin on loans* | 2.41 % | 2.69 % | 2.58 % | 2.89 % | ||||||
Return on average common equity* | 9.63 % | 11.15 % | 11.79 % | 11.24 % | ||||||
Book value per common share* | $ 15.23 | $ 13.55 | $ 15.23 | $ 13.55 | ||||||
Efficiency ratio* | 50 % | 48 % | 45 % | 48 % | ||||||
Efficiency ratio - Digital Banking* | 46 % | 43 % | 41 % | 43 % | ||||||
Return on average total assets* | 0.85 % | 1.00 % | 1.03 % | 1.07 % | ||||||
Provision (recovery) for credit losses as a % of average loans* | 0.00 % | 0.02 % | 0.00 % | 0.03 % | ||||||
as at | ||||||||||
Balance Sheet Summary | ||||||||||
Cash | $ 247,983 | $ 87,726 | $ 247,983 | $ 87,726 | ||||||
Securities | 153,026 | 182,944 | 153,026 | 182,944 | ||||||
Loans, net of allowance for credit losses | 4,049,449 | 3,661,672 | 4,049,449 | 3,661,672 | ||||||
Average loans | 4,033,954 | 3,540,564 | 3,949,927 | 3,327,175 | ||||||
Total assets | 4,516,436 | 3,980,845 | 4,516,436 | 3,980,845 | ||||||
Deposits | 3,821,185 | 3,328,017 | 3,821,185 | 3,328,017 | ||||||
Subordinated notes payable | 101,641 | 101,585 | 101,641 | 101,585 | ||||||
Shareholders' equity | 408,985 | 365,043 | 408,985 | 365,043 | ||||||
Capital ratios** | ||||||||||
Risk-weighted assets | $ 3,273,524 | $ 3,047,172 | $ 3,273,524 | $ 3,047,172 | ||||||
Common Equity Tier 1 capital | 384,496 | 339,894 | 384,496 | 339,894 | ||||||
Total regulatory capital | 504,112 | 460,065 | 504,112 | 460,065 | ||||||
Common Equity Tier 1 (CET1) ratio | 11.75 % | 11.15 % | 11.75 % | 11.15 % | ||||||
Tier 1 capital ratio | 12.16 % | 11.60 % | 12.16 % | 11.60 % | ||||||
Total capital ratio | 15.40 % | 15.10 % | 15.40 % | 15.10 % | ||||||
Leverage ratio | 8.54 % | 8.53 % | 8.54 % | 8.53 % | ||||||
* See definitions under 'Non-GAAP and Other Financial Measures' in the Q3 2024 Management's Discussion and Analysis. | ||||||||||
** Capital management and leverage measures are in accordance with OSFI's Capital Adequacy Requirements | ||||||||||
and Basel III Accord. | ||||||||||
This news release is intended to be read in conjunction with the Bank's Consolidated Financial Statements and Management's Discussion & Analysis (MD&A) for the three & nine months ended July 31, 2024, which will be filed on SEDAR (www.sedarplus.ca) and will be available at www.versabank.com.
About VersaBank
VersaBank is a North American bank (federally chartered in
VersaBank's Common Shares trade on the Toronto Stock Exchange ("TSX") and Nasdaq under the symbol VBNK. Its Series 1 Preferred Shares trade on the TSX under the symbol VBNK.PR.A.
Forward-Looking Statements
VersaBank's public communications often include written or oral forward-looking statements. Statements of this type are included in this document and may be included in other filings and with Canadian securities regulators or the US Securities and Exchange Commission, or in other communications. All such statements are made pursuant to the "safe harbor" provisions of, and are intended to be forward-looking statements under, the United States Private Securities Litigation Reform Act of 1995 and any applicable Canadian securities legislation. The statements in this management's discussion and analysis that relate to the future are forward-looking statements. By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, many of which are out of VersaBank's control. Risks exist that predictions, forecasts, projections and other forward-looking statements will not be achieved. Readers are cautioned not to place undue reliance on these forward-looking statements as a number of important factors could cause actual results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements. These factors include, but are not limited to, the strength of the Canadian and US economies in general and the strength of the local economies within
The foregoing list of important factors is not exhaustive. When relying on forward-looking statements to make decisions, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. The forward-looking information contained in the management's discussion and analysis is presented to assist VersaBank shareholders and others in understanding VersaBank's financial position and may not be appropriate for any other purposes. Except as required by securities law, VersaBank does not undertake to update any forward-looking statement that is contained in this management's discussion and analysis or made from time to time by VersaBank or on its behalf.
Conference Call
VersaBank will be hosting a conference call and webcast today, Thursday, September 5, 2024, at 9:00 a.m. (ET) to discuss its third quarter results, featuring a presentation by David Taylor, President & CEO and John Asma, CFO, followed by a question and answer period. To join the conference call by telephone without operator assistance, you may register and enter your phone number in advance at: https://emportal.ink/3X576am to receive an instant automated call back. Alternatively, you may also dial direct and be entered into the call by an Operator at: 1-437-900-0527 or 1-888-510-2154 (toll free).
For those preferring to listen to the presentation via the Internet, a live webcast will be available at https://app.webinar.net/dAJV25PoRaz or on the Bank's web site at: https://www.versabank.com/investor-relations/events-presentations/. The slide presentation management will use during the conference call/webcast will be available on the Bank's web site at: https://www.versabank.com/investor-relations/financial-results/.
The archived webcast presentation will be available for 90 days following the live event at https://app.webinar.net/dAJV25PoRaz and on the Bank's web site at: https://www.versabank.com/investor-relations/events-presentations/. Replay of the teleconference will be available until October 5, 2024 by calling 289-819-1450 or 1-888-660-6345 (toll free) and the passcode is: 69262#
Visit our website at: www.versabank.com
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SOURCE VersaBank
FAQ
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