VersaBank Q1 FY2026 earnings call

• David Taylor introduced Nico Espina as Global CFO and John Asma's new role. Mentioned Q1 costs for reorg were $1.5M before tax, down from Q4. Changed Receivable Purchase Program to Structured Receivable Program. Q1 was great start, credit assets up 23% YOY, revenue up 31% YOY. US structured receivable program had over $200M additional fundings in Q1, majority from core SRP. US ops more efficient than Canadian. On track to add at least $1B in funding in fiscal 2026. - Nico Espina reviewed financials, mentioned balance sheet growth, capital ratios. Segmented revenue and net income by operations. - David Taylor closed with talk of strong year ahead, momentum in core business, US SRP growth on track, expectations for net interest margin and non - interest expense, progress on reorg and divestiture of cybersecurity business, digital asset strategy including RBTDs and stablecoin custody.

Total assets at end of Q1 2026 grew 24% YOY and 6% QOQ to over $6.1B. Cash and securities $729M (12% of total assets). Book value per share $16.93. CET1 ratio 12.8%, leverage ratio 8.2%. Consolidated revenue $36.5M, up 31% YOY and 4% QOQ. Non-interest expenses $20.5M (including $1.5M one - time reorg costs). Reported net income $11.1M, EPS 35 cents. Excluding reorg costs, adjusted net income $12.2M, up 49% YOY and 15% QOQ. Canadian banking ops revenue 27.6% YOY, level QOQ, net income $8.7M (dampened by $1.1M reorg impact). US banking ops revenue $6.8M, up 30% QOQ, net income $2.8M, up 40% QOQ. DRTC cybersecurity revenue $2M, net loss $630K. Digital Meteor revenue $528K, net income $179K. Credit asset portfolio $5.33B, SRP $4.4B, up 29% YOY and 9% QOQ, 83% of total credit assets. Multifamily residential loans other portfolio $0.9B, down 1% YOY and 8% QOQ. Net interest margin on credit assets 2.64% YOY, overall net interest margin 2.25% YOY. Provision for credit losses 5 basis points Q1, down from 11 basis points Q4 2025.

• On US SRP, on track to add at least $1B in funding in fiscal 2026, could be more than a billion. - Expect net interest margin to be relatively flat to higher levels of last year with some upside potential. - Expect non - interest expense to be relatively flat to last year with some year - over - year cost savings. - Reorg costs: expect additional costs of four to four and a half million in Q2. - Divestiture of cybersecurity business expected to be completed by end of summer, hopefully earlier.

• Risks associated with forward - looking statements, actual results could differ due to various material risks and uncertainties. - Reorg process had more work than initially thought by external legal counsel and auditors. - Uncertainty around the stickiness of stablecoin deposits and how it may impact net interest margin. - Concerns surrounding AI potentially disrupting the cybersecurity space, which could affect DRTC Cyber. - Macro - economic factors in Canada such as the state of the economy affecting insolvency deposits and multifamily residential loans other portfolio.

Q: On the stablecoin custody opportunity, any update on StableCorp's coin launch progress and volume expectations?

A: It's imminent for full - blown launch, hard to say on volume, partners are top in industry, Canada's market is 10% of US, but right partners and product, expect to see soon.

Q: How plan to monetize StableCorp partnership?

A: Initially traditional net interest margin on deposits, earning around 50 basis points net interest margin.

Q: Has StableCorp partnership spurred more conversations for VersaVault and custody?

A: Put us on radar screen, had many conversations with industry players, endorsement of state - of - the - art technology.

Q: Update on real bank deposit tokens distribution strategy, partners?

A: All of the above, having conversations with banks, regulators, working on white papers for regulators, expecting regulators to sign off, then partners will come, willing to share technology.

Q: Value proposition for community banks vs competitors?

A: Community banks not getting help from big guys, we can help, ahead of pack in discussions with regulators.

Q: Pipeline of partners for US Structured Receivable Program, mix of legacy portfolioing and securitized offering?

A: Tremendous interest in unbalanced sheet securitized receivable product, Q1 mix about 85% on - balance sheet securitized receivables, pipeline strong, expect to add more, could be over $1B by end of year.

Q: Thoughts on AI disrupting cybersecurity space for DRTC Cyber?

A: Have AI module, state - of - the - art, bad actors use AI too, need good team, DRT Cyber has good team and technology.

Q: Canadian insolvency deposits decline, expectations?

A: Signed up more new accounts for insolvency proceeds, Canada in deeper recession, deposits may increase, slid back due to seasonality, expect to reach around a billion by end of year.

Q: Mix for US Structured Receivable Program as year progresses?

A: Expect increase in purchase securitizations in next few quarters, first quarter anomaly, strong demand for traditional on - balance sheet securitization, end of year may enhance product with instant purchase program.

Q: When excess liquidity on balance sheet will be bled off for US program growth?

A: Sometime this year, treasurer has liquidity, will dissipate end of year, start entertaining other community banks.

Q: Pace of growth for US SRP?

A: Will accelerate, partners signing up, products good, catching on.

Q: Prioritization of US SRP partners?

A: Primarily from homeowners doing home improvement in energy savings areas, etc.

Q: Reorg costs, back half of year and beyond?

A: Heart - stopping, but will plow through, efficiency ratio in US will improve, end of reorg will be better, see efficiency ratio get lower.

Q: Long - term attractiveness of US market?

A: US market will get way bigger than Canada, more exposure than Canada, more efficient due to software, deposit gathering network, lower funding costs.