Good morning, everyone, and thank you for joining us for today's call. With me again is our Global Chief Financial Officer, Nicolas Ospina, and for the first time, Lawrence Chamberlain, our new Global SVP, Investor and Stakeholder Relations, who joined us full-time in August after working for us on a consulting basis for the last six years or so.

As expected, fiscal 2026 has continued to be a breakout year in terms of top-line growth. The third quarter once again saw new records for credit assets, revenue, and net interest income, with a very strong year-over-year growth.

This was once again driven mainly by the momentum in our structured receivable program. In the United States, in fact, our US operations generated nearly 25% of Q3's digital banking revenue.

Notably, we have continued to see steady growth in Canada as we continue to increase business with our existing partners and expand our market share. I am very pleased to report that subsequent to quarter end, for the first time, we surpassed $7 billion in total assets.

In fact, as of yesterday, we were at $7.2 billion. That's up nearly $5 billion over the past five years, for a compounded annual growth rate of more than 25%.

With this year's strong growth, we are increasingly realizing the operating leverage of our cloud-based, branchless, business-to-business model, with year-over-year increases in net income and adjusted or core net income of 53% and 27%, respectively. I will once again note that we achieved these metrics with significantly higher than typical levels of liquidity at this early point in our expansion in the United States, although these are steadily moving back to more historic levels.

That said, it was another noisy quarter in terms of costs, with a number of items which total over $4.6 million that are not part of our go-forward cost structure in 2027. These included non-core costs of $3.1 million, which was composed mainly of an additional $2.5 million in reorganization costs that we noted on our last call.

There were also $1.5 million in transitory core costs, that is, costs that we did not adjust for, but that were specific to Q3, as well as $0.8 million related to share compensation resulting from the increase in share value. Nico will go into these in more detail in a few minutes.

Looking ahead, as I will discuss in a little bit, we expect the broader implementation of AI throughout our organization will not only increase our efficiency, but create significant opportunities for meaningful cost savings going forward. Finally, on the Q3 results, as I have discussed in the past, our net interest margin can vary from quarter to quarter, and we saw that somewhat in the third quarter.

Much of this is due to the higher than typical liquidity levels, and we therefore expect NIM to trend back to the 2.3% range going forward. Of course, we will continue to benefit from more cheaper deposits through increased activity in our insolvency professional business.

In Canada, we recently saw that deposit base reach $1 billion for the first time as we both expand that business and insolvencies in Canada continue to increase. More specifically, the SRP business in the United States, we continue to steadily build momentum during Q3 with increased business from our existing US partners and the addition of new partners.

Q3 saw another $220 million in new fundings, with a subsequent $127 million since the end of Q3. That brings us to more than $720 million in new fundings year-to-date as of today.

Q3 saw the initial contribution from our most recently added SRP partner in the United States, another wholly owned subsidiary of ECN Capital. This latest partner is expected to contribute at least $300 million in additional US SRP fundings annually, but both we and our partner believe the program could grow well beyond US$500 million per year in fundings.

I will note again this quarter, the vast majority of additional fundings in the US were through our original, more profitable SRP as demand for our core solutions continues to exceed our expectations. Our growth in the United States continues to prove out the efficiency of our US operations, with an efficiency ratio, excluding non-core write-off associated with the branch sale for Q3, of 37%.

We continue to remain on track for our year-end goal to be in the low 20s. Clearly, as expected, SRP has rapidly taken its rightful place as a uniquely attractive alternative funding option for point-of-sale finance companies in the United States: reliable, efficient, economical—all benefits of our proprietary technology.

During the quarter, we took the value proposition of our SRP to an entirely new level with the launch of an AI-enabled real-time version of SRP, which enabled our partners to finance their loans with even more efficiency, cost effectiveness, with lower risk. Instead of our partners having to accumulate, warehouse, and batch their loans over a period of time, typically as much as 30 days or more, these loans can now be funded individually as they are made.

This effectively eliminates the need for our partners to warehouse multiple receivables over a period of time. That is, they can finance individual loans within just hours, reducing the overall financing costs and the need for warehouse financing.

The cost savings and lower equity requirements are significant, and it eliminates the interest rate risk that our partners are exposed to during the warehousing period. During the quarter, following a successful pilot program, one of our largest SRP partners, Financeit, became the first to implement our real-time SRP in Canada.

I'm pleased to report that earlier this week, ECN Capital, one of our first US SRP partners, became the first to implement real-time program in the United States. Feedback on our real-time solution has been overwhelmingly positive, and we are seeing considerable incremental demand from both existing and prospective new partners, including in Canada, where we believe it will generate significant incremental growth to the solid performance we are achieving this year.

To ensure we are fully maximizing this opportunity and doing so as rapidly as possible, we are privileged to have point-of-sale financing industry veteran Moe Danis rejoin VersaBank as part of our SRP team, with a particular focus on specialized, large partner opportunities for our real-time SRP in the United States market. Moe has had a very busy first month and a half and has initiated discussions with numerous new prospect partners.

With that, I'd now like to turn the call over to Nico to review our financial results in detail. Nico?

Thanks, David. Before I begin, I would remind you that our full financial statements and MD&A for the third quarter are available on our website under the Investor section, as well as on SEDAR and EDGAR.

All the following numbers are reported in Canadian dollars as per our financial statements, unless otherwise noted. Starting with our balance sheet, total assets at the end of the third quarter of fiscal 2026 grew 26% year-over-year and 7% sequentially to a new high of just under $6.9 billion.

Cash and securities was $624 million, or 9% of total assets, down slightly compared to the end of Q2 2026. I will reiterate here David's earlier comment about this number still being higher than our historical levels of around 7% as a result of our entry into the United States.

Book value per share increased to another record of $17.45. Our CET1 ratio was 11.5% and our leverage ratio was 7.6%, both down meaningful year-over-year and remaining comfortably above our internal targets.

The year-over-year change is mainly due to putting capital to work for growth in the US SRP portfolio following our capital raise in December 2024. Our strong growth in assets drove total consolidated revenue to a record of $38.8 million, up 23% year-over-year and 1% sequentially.

Non-interest expenses, or NIEs, for Q3 were $25.2 million. As David noted, NIEs for Q3 included $3.1 million in non-core expenses: $2.5 million of additional costs related to a reorganization project and $0.6 million for the write-off of capitalized software costs following the sale of our sole physical branch on May 1st of this year.

Consolidated NIEs, excluding the one-time costs, were $22.1 million, compared to $17.4 million in Q3 last year and $20.8 million for Q2. As David also noted, Q3 included approximately $2.3 million pre-tax in additional transitory costs that are not part of our run-rate cost structure.

This was composed of $0.8 million in share-based long-term incentive award driven by the bank's strong share price performance during the quarter, as well as $1.5 million in other transitory costs that were specific to the quarter and the bank does not expect to recur. As a reminder, the DRTC cyber expenses are included in the consolidated NIEs and total with $2.6 million in Q3, more or less in line with last year.

Reported net income was $10.1 million, year-over-year increase of 53% from $6.6 million for the third quarter last year. Consolidated earnings per share was 31 cents, compared to 20 cents last year.

Excluding the $3.1 million non-core NIEs I mentioned earlier, consolidated adjusted net income was $12.3 million, or 38 cents per share, with adjusted net income increasing 27% year-over-year. Again, that number includes $0.8 million pre-tax in share-based compensation resulting from our share appreciation and other transitory cost of $1.5 million pre-tax.

Looking at our income statement on a segmented basis, revenue for the Canadian digital banking operations was $27.6 million, up 4% year-over-year. I would remind you that our bank corporate expenses flow through our Canadian banking segment, and as a result, reported net income include those reorganizational costs.

Canadian banking net income for Q3 was $6.6 million. However, that number is dampened by the $1.8 million after-tax impact of the one-time costs associated with the reorganization.

Revenue for our US banking operations was $9.3 million, up 18% sequentially and 199% year-over-year, primarily due to the ramp-up in the US SRP. That drove a 10% increase in net income sequentially and an 803% increase year-over-year to $3.9 million as we see the US operating leverage take effect.

Q3 net income was impacted by $400,000 after-tax costs related to a software write-off resulting from the sale of the branch I described earlier. Digital media net income was $114,000, compared with net income of $23,000 for the third quarter last year and net income of $351,000 for the second quarter of 2026.

Within DRTC, the cybersecurity service component generated revenue of $1.9 million, with net loss of $578,000, pretty much in line with last quarter. Our credit asset portfolio grew a new record just shy of $6.2 billion at the end of Q3, driven once again by our structured receivable program, which increased 40% year-over-year and 11% sequentially to $5.2 billion.

Our SRP portfolio represented 85% of our total credit assets at the end of Q3, up from 82% in Q2. Our multi-family residential loans and other portfolio decreased 10% year-over-year and 5% sequentially to $934 million, as we continue to strategically transition some of our higher-yield, higher-risk-weighted uninsured loans to lower-yield, lower-risk-weighted insured loans.

As a reminder, our MROL portfolio is primarily business-to-business mortgages and construction loans for residential properties. We have almost no exposure to commercial use properties.

Now, turning to income statement for our digital banking operations, net interest margin on credit assets, that is, excluding cash and securities, was 2.44%. That represented a decrease of 11 basis points year-over-year and 27 basis points sequentially.

Although, I will remind you that our Q2 NIM is typically the highest of the year due to normal seasonality. The decrease in NIM reflect higher than typical GIC term deposit rates relative to Government of Canada bond yields, the replacement of retail deposit with broker deposit resulting from the sale of the bank only physical branch in the US, as well as our decision to maintain greater liquidity amidst a challenging Canadian economy.

It also reflects lower credit asset yields in Canada due to a shift in our credit asset mix resulting from the continued growth in our SRP portfolio, as well as our strategic shift in our MROL loans I just mentioned. Overall NIM, including the impact of cash, securities, and other assets, was 2.19%, a decrease of 6 basis points year-over-year and 14 basis points sequentially, for the same reason I noted above.

Our NIM still remains amongst the highest of the publicly traded Canadian federally licensed banks. Finally, our provision for credit losses in Q3 continued to be de minimis as a percentage of average credit assets and, in fact, was negative at 0.02%, meaning we had a recovery of credit losses during the quarter.

This compares to a positive 0.03% from Q2, with the recovery primarily due to a sale of the branch assets to Stearns and updates in the forward-looking information used by the bank in its credit risk models. I would now like to turn the call back to David for some closing remarks.

David?

Thanks, Nico. As I noted earlier, fiscal 2026 has been a breakout year in terms of top-line growth, which is expected to further accelerate next year based on both the continued expansion of our SRP in the United States, as well as this year's introduction of our revolutionary real-time SRP.

Fiscal 2027, however, will be the year when the true power of our model in terms of both growth and operating leverage comes into focus for our investors. In fact, we are seeing so much near-term demand for our core SRP that during the third quarter, we made the decision to, at least in the short term, limit the amount of fundings through our lower-spread purchased securitized SRP.

It's simply a more efficient, and more profitable, use of capital. You'll recall that on the fourth quarter call last year, we estimated that fiscal 2026 SRP fundings in the United States would be composed of roughly 60% of our profitable core SRP and 40% would be of our lower-spread purchased securitized SRP.

As of today, that ratio stands at 90% core SRP and just 10% securitized SRP. That translates to around $650 million in core SRP year-to-date, with well in excess of the $600 million represented by our 60% of our target $1 billion.

As a result of limiting our purchased securitized SRP, we now anticipate that we will reach our $1 billion target of additional fundings since October of last year sometime before the calendar year-end. This positions us very well for our new US SRP target: at least US$3 billion in additional fundings in the United States in fiscal 2027.

That's the equivalent of more than $4 billion Canadian dollars and alone represents 60% growth in our credit asset portfolio. Two important points here: one, we believe there is significant potential upside to our target of $3 billion in additional US fundings, the demand there especially with the addition of our real-time enhancement; and two, we believe our real-time enhancement will accelerate growth in Canada through both additional business with our existing partners and the addition of new partners.

In fact, we believe that growth in our Canadian operations will continue to lead the Canadian banking industry and significantly outpace growth this year. The operating leverage benefits of this growth are enormous, of course.

The other side of the operating leverage equation is cost. Like Q3, fiscal 2026 on whole has been a noisy year in this respect.

Not only have we had costs associated with the reorganization, as I noted earlier, we have incurred significant costs during the transition that we do not expect to repeat going forward. Even with this expected growth, at most, we think our core non-interest expenses will be in line with this year, excluding the $10 million cost associated with the portion of DRTC we plan to divest.

To even further capitalize on our operating leverage, we are undertaking numerous AI-based initiatives across the broader organization to drive even greater efficiency as we grow, while further strengthening our risk profile. As a fully digital bank with our own proprietary core banking software, we are well positioned to realize significant benefits from increased implementation of AI.

Our opportunities in the rapidly developing digital asset industry continue to come into focus. Both stablecoins and bank-issued tokenized deposits are gaining widespread acceptance and the ecosystem is taking shape.

At this early stage for the industry, we are being deliberately thoughtful and prudent in our approach to these opportunities, with a focus on long-term value. With our unique and proprietary technology that has been consistently validated by other leaders in the industry, further strengthened by our status as a federally licensed bank in both the United States and Canada, we are very well positioned to capitalize on this revolution in the banking and payment systems.

Before I open the call to questions, a quick update on our reorganization. The week after next, we will hold a special meeting of our shareholders to vote on and approve the reorg, for which our board has unanimously recommended shareholders vote in favor.

The materials associated with the special meeting are available on our website. In parallel, we are preparing to request the requisite regulatory approvals, specifically from the Fed in the United States and the Minister of Finance in Canada.

Our target, subject to these approvals, is to have the reorganization completed by the end of October 2026. I will note here that we expect to incur an additional roughly $4 million in non-core costs related to the reorganization in the fourth quarter of this year.

We expect the realignment of our corporate structure to a standard US bank framework to drive meaningful additional value for our shareholders as we align our structure and financial reporting to those with which global investment community are more familiar: potential future stock index inclusion and improved access to capital, if needed, to further accelerate our growth, as well as significant cost savings. Finally, on the topic of divestiture of cybersecurity business, we had been looking at some additional potential alternatives to meet the Fed's requirement that we divest this business by September of this year.

Last quarter, we asked the Fed for an extension that was granted last week, such that we have now until August 30th of next year to exit. We are proceeding accordingly.

With that, I would like to open the call to questions. Operator?

Good morning.

Good morning, Joe.

Good morning, Joe.

In your prepared remarks, you said the NIM should trend back towards 2.3% kind of range as liquidity normalizes. What do you need to have happen for that to occur, and how much of that recovery is driven by lower liquidity, better deposit mix, or stronger SRP yields?

Are you expecting that the NIM to return to those levels in the fourth quarter?

Yes, Joe, the liquidity we've been maintaining, of course, was partly due to beginning operations in the United States, we just thought prudent to maintain a lot more cash. With some anomaly happening in Canada with our deposit rates increasing to about 70 basis points over the same term Government of Canada bond, that means liquidity actually costs us a few basis points, maybe 10, 15 negative.

Now that we're well established in the United States, we can bring our liquidity levels back down to around 5, 5.5%, which means we won't be losing money on liquidity. In the past, we didn't actually lose money on liquidity; we actually made a few basis points.

It's important for us to get it down. With respect to timing, gee, we're growing so rapidly now, we put on about $300 million since the end of the quarter, July 31st.

Again, we're up to $7.2 billion right now, from what was $6.9 billion, or so, Nico?

Yeah. It's

coming on fast and furious, and those are high, high-yielding traditional SRP rather than the purchased once, where we only made maybe 80, 90 basis points. On our home-grown SRPs, we make about 250 or so.

I'd say NIM will get back to around 2.30% for next quarter and the rest of the year. For the Canadian listeners, it was still about 50% better NIM than the entire banking industry in Canada, and it's even better than that in that most of the banking industry, well, all the banking industry, is providing extraordinary expected loss provisions.

You might note that ours is averaging close to zero. I think it was 2 basis points last, wow.

Not only do we have the widest margins in the country by far, but we give nothing back for loan losses, either. While we're obsessing on NIM, let's face it, we're incredible in the country where most of our assets are situated.

It gets better in the States because that anomaly over risk-free rate in the States is only 10, 15 basis points over US Treasuries. As we start booking assets in the States, as we're predicting at least $3 billion more going on soon, it just gets better and better.

It's sort of amazing, oh, the market's kind of missed it, but we have revolutionized the $1 trillion asset-backed security market by bringing out this real-time purchase program. We not only do our clients get their money back right away, not having to wait 60, 90 days to package up and pay accountants and investment bankers and lawyers, they also run a huge interest rate risk while they're doing this, and rates move up, that means their portfolio dropped.

With us, they get to lock the rate in virtually in 10 minutes. One big firm said to me, "Once a day would be great, Dave."

I kind of find it odd that we're obsessing on a few basis points in margin, we just brought something out that renders the traditional asset-backed security method obsolete. It's interesting that that seems to be missed.

However, it's always the case when you're an innovator, you bring something out brand new and folks take a while to catch on. When I came out with a branchless bank model in 1993, everybody told me that was impossible and couldn't be done, and everything else.

Here we are again with the adaptation of AI to this traditional ABS market and revolutionizing it, which you'd think that's what people would be looking at. I guess it's when the horse and buggy came out, horse and buggies were means of transportation, someone came out with the automobile, it was still folks that needed to have horses and buy hay and stuff like that to keep going until, well, it caught on.

Sorry about the long-winded one there, Joe, but you got me started.

That's all right. I appreciate the color there.

I just wanted to drill down on the expected growth in fiscal '27. You're expecting at least $3 billion of growth in the US, which would effectively take you to $4 billion exiting the next fiscal year.

How much of that target is already effectively spoken for through existing partners like Financeit and ECN, and how much is still dependent on signing new partners?

I'd say about half through the existing and the other half is prospects that we're already talking to. I've doubled the size of the team in the United States, the SRP team, with the addition of Moe Danis and Luke.

More hands at the pump and may add another two to it, also. It's a huge market in the United States, and the sooner we get it on the books, the better.

If you look at $3 billion to say 250 basis points spread, and use an effective tax rate of about 25%, that's about $1.75 a share increase in US dollars that we just put out there. That's just United States.

In Canada, might be able to do the same, let's hedge my bet, call it Canadian dollars, because our existing partners in Canada, including Financeit and some of the huge ones, they're signing up as fast as they can to get the real-time working for them. As I was saying, they don't want to run interest rate risk.

Why should you? You like to get your money back right away.

Because they're not borrowing, they don't have to have an onerous sort of debt-to-equity ratio to contend with. They can get their capital back faster, their ROE goes through the roof, eliminate interest rate risk, when I say revolutionary, that's what Moe Danis said when I was receiving this undeserved award for Canadian Financial Executive of the Year.

Moe said, "This is a revolution to the industry." I said, "Hey, you're coming back on board, right, Moe?"

It's great. I may bring another team in, too, but so, mark in $3 billion in the United States additional and maybe another $3 billion Canadian just from our existing partners, and there's a few more just signed up, I think two or three more just signed up in Canada, too.

You're talking about truly explosive growth here. At what point does additional capital become necessary to support this runway?

If we get our dream come true, we'll be risk-weighting our homegrown asset-backed securities the same as if we had purchased them under the new Basel III rules, which is 20%. That if we can get that done, I've hired a guy to make that happen.

Chian, who used to be bank analyst for KBW, has come on board for that mission. If we can get that put to bed, which is quite realistic considering Basel III allows for it, and why would your homegrown ABSs be risk-weighted different than the ones you just purchased from somebody else or if once we sold to somebody else?

Then we're at 20% risk-weighted, and then there's no need for any more capital. At that point, we're generating capital at a fast and furious rate.

We'd self-fund. Sorry, investment bankers, although it is a $1 trillion market, even with that, maybe we'll be back.

We're only looking at 1% of a $1 trillion market in the near future with $10 billion, but I can't see anybody using anything else than what we've got on the table. Why run those monster risks with interest rates, and why not get your money back in your pocket?

Why not give your shareholders some of their money back? You don't need all the equity that you've got supporting your business anymore.

That would be dreaming in Technicolor, but I have hired the guy and we are on the way with that, and Basel III did change and it did allow for it. It makes sense.

Why would a regulator let's you risk-weight your asset at 20% just because you bought it from somebody else when it's identical to the one you've homegrown?

All right. I appreciate the color.

Thank you for the thorough answers. I will hop back in the queue.

All righty. Thanks, Joe.

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

Go ahead, Tim. We're here in the fog in Canada here.

I've got Nico beside me here. He traveled all the way up from St.

Pete's to find it just as foggy and steamy and hot here in Canada.

Lucky you, Nico. A quick follow-up on your comment about the risk-weighting here.

What's the process like for getting a lower risk-weighting on your RPP loans, and is there any timeline on when you think you can get approval for that?

I'm guessing sometime mid-2027 our sort of died-went-to-heaven program would be in place. That would be the assets that we have are risk-weighted the same as those that we would purchase.

We'd make a presentation to OCC to have our assets risk-weighted in that fashion. I'm hedging my bet a bit, mid-2027.

There are some phases in between where we can probably get most of that effect done a lot sooner. There are methods in Canada in particular to employ kind of an insurance policy on your assets and get a much lower risk-weighting.

Other banks have already done and used, the regulators are familiar with it. Then there's some companies have approached us that would take the B-tranche on their own books, and that's already gone through the regulatory works and been approved.

The died-went-to-heaven, the Holy Grail is maybe mid-2027. I hope it's sooner, because I've got a really good guy in the job.

Chian, are you listening? The other phases, the first one with the insurance, maybe I'll get that in a bit sooner, like a month or two from now.

Interesting. Then your comment about 2027 core expenses should be in line with this year, just given all the one-timers and transitory costs, what's the base we should be using for 2027?

Or if you can provide a dollar range, that would be helpful.

Nico's sitting beside me here, $19.8 million, or something like that?

$19.8 million is kind of like the run rate that we have right now, Tim.

Can you repeat that?

$19.8 million.

$19.8 million, Tim. Tim, the other thing to keep in the back of your mind is, as we put it out there, we fully endorsed AI in this bank, and of course it was really easy for us because we're all tech anyways.

There's a lot of savings coming. Obviously just demonstrating what we can do with AI on the real-time purchase program, that's phenomenal.

There's lots of other areas in our bank that our team is looking to using AI to make themselves much more efficient. I'll put it out there.

It might take a week in the past to compose a credit application for a new SRP customer, say a week. That would be pushing it.

That'd be our guys working really hard on that. That could be done now in less than a day with AI.

Okay. If I heard you correctly, you said $19.8 million, so that'd be about $78 million Canadian annualized?

That's what we're looking at now without any improvements with AI that we have well underway here. We have what we call an aquarium, Microsoft aquarium, all the data at the bank sits nicely, securely, and safely in this aquarium, but our staff has access to copy the AI to manipulate data and do statistical analysis.

It's so cool. We have a data warehouse that's part of our core banking system that I invented many years ago.

It gives our staff the ability to ask, "How many motorcycle loans do we have in Alberta?" Not only does it do it, it'll actually put it in a PowerPoint presentation for you.

It's fantastic. That's maybe the reason why I'm so bullish on this as opposed to maybe my fellow bankers.

Maybe this has been missed by the market: we own our core, we created our core, it's the VersaBank core. We're not beholden to some other core provider that you may have to go into a queue and wait maybe three or four years to have some sort of innovation put through.

VersaBank's core banking system was conceived to never constrain what our lenders could think of. If they put a loan together that had uneven cash flows, maybe payments in the summer, not in the winter, anything they could think of, different basis for Bank of Montreal Prime, CIBC Prime, bankers' acceptances, whatever, that core banking system that we put together gives a huge advantage.

This is why we can do this stuff. Where, how could you invent a real-time purchase program and launch it, what did we do, we announced it about 60 days ago, it's now fully functional and we're signing up customers.

Just imagine if you had to contend like the rest of the banking industry with one of these archaic core providers that's struggling through. There's no comparison.

Hey,

Tim, Lawrence here. Let me just jump in and remind that of that $80 million, $10 million is directly attributable to the cybersecurity business.

When that gets divested, that goes away.

Yeah. All right, that's helpful.

Then one last one for me. Just given the extension on the divestment there, could you provide some color on where we are in the process of a potential sale here, and is there anything else being considered like a spin-off?

Then in terms of a sale, there's been some nice movement upwards in cyber stocks lately. Should that help speed this process along, maybe, and help with the valuation you could receive?

It it definitely should. Obviously we live in a terrible world where cyber criminals are abound, and it's there's no there's no end in sight to that, unfortunately.

We were just thankful the Fed gave us a little longer to divest of it. We have in mind divesting a lot sooner than the one-year extension.

It just takes the heat off us, and it's more of a human thing. We're fully deployed with this Project OptiMZ.

It's big project, and everybody's kind of really really busy doing that. This the divestiture of DRTC was a bit of a distraction.

Now we've got a bit of time, we're re-engaged with a few likely purchasers, and I'm sure some somebody become the new proud owner, but we're thankful the Fed gave us cut us a bit of slack, because as they say in negotiations, he who wants it the most loses. We certainly didn't want to be in a in any hurry while we're while we've got all this other Project OptiMZ distracting us.

Great. Thank you, David.

All righty, Tim.

Hey, good morning, guys. Congrats on the continued progress, and thanks for taking my questions.

Just one quick two-parter for me on the expected '27 US SRP growth. First one, can you kind of remind us where you're funding these deposits specifically for the US business, and kind of help us quantify any incremental spread you may be picking up growing in the US versus Canada?

Then, sorry if I missed this earlier, but just secondly, on the expected $3 billion in growth in '27, did you guys target a number in which you will keep on your balance sheet versus securitize?

We'll keep the whole works on our balance sheet, Andrew, just for quick answer. Now, it I think it'll happen fairly quickly in that with a with a new team out there marketing it, it's should go on rather rapidly.

Understood. Then just the first part on the NIMs across the borders?

Oh, okay. Yeah.

The NIM in Canada has been unusually compressed by the margin over the risk-free rate going to a historic high of 70 basis points. In the States, it's running around 10, 15 basis points over the same-term US Treasury.

Our method of gathering deposits on both sides of the borders is the same: we go exclusively to broker deposits, and we're a drop in the bucket and have no issue whatsoever raising as much money as we need virtually instantaneously from our deposit broker partners. That's what we've done since the beginning, 1993.

I created that industry by telephone modems and IBM PCs put in the offices of what I call deposit brokers, they weren't called that then, they were financial service providers and investment bankers and such. Now, dreaming in Technicolor, as we have got the world's first tokenized deposit up and running ready to roll, and sooner or later, we'll roll that out, and that puts FDIC-insured CDs in the digitally represented as we call them tokenized deposits out throughout the entire United States and serves as a beautiful payment vehicle, too.

With FDIC stamp of approval on it, it's virtually risk-free, And that's coming. I think the entire banking industry is waking up to that.

You see in the newspaper almost every day you see some group of banks or banks talking about stablecoins, I think, are a little bit a thing of the past. They'll evolve into tokenized deposits, but when my dream comes true, we'll be raising our deposits through the tokenized deposit networks and paying a lot less, because it's our competition right now is stablecoins, which so far aren't able to pay any yields.

That's the dream come true, but in the meantime, it's just the traditional deposit brokers that are sending us money no issue whatsoever. Part of that is because we're a drop in the bucket.

I think it's like $10 trillion deposit market. Our aspirations maybe $10 billion, $15 billion, $20 billion, well, that's still a drop in the bucket.

Understood. Appreciate the color, and congrats again on the continued progress.

Thanks, Andrew. Exciting times.

Morning, guys. Nico, I hope you didn't fly in yesterday with the storm we had here.

No, I came earlier in the week.

Good. I guess starting off on that $3 billion target, given the attractiveness of the real-time SRP, you guys have talked about 90/10 split this year on funded volumes.

I'm wondering, should we be thinking the same split for $3 billion in fiscal '27?

Eli, I guess right now I don't think there's any need to purchase anymore. We've got so much demand for the on-balance-sheet securitization that I can't see buying anymore.

They come in a much thinner spread, and even though they are 20% risk-weighted, now we're well underway with the homegrown SRP that's used in real-time way. I'd go 100% 100% on the homegrown.

Then, we got the Canadian side, too, Eli, of course, because I just threw that out there for the US growth, but our Canadian business is well established, and we have 20 25 or so partners, and every one of them would rather get their money sooner rather than later. I expect let's just say $3 billion Canadian on our side of the border here.

That's pretty realistic. We have maybe half of Financeit's business and they have $3 billion already on the books with this.

There's a bunch more lined up. It's so attractive.

It's one of those ones you don't have to market. "I can get my money back right away?"

Theoretically, it's 10 minutes it takes us to turn it over. If it's just once a day they do a batch comes in, that's the money back in the till, can be lent out the next day to some other guy that wants to buy a motorcycle.

How much equity does a point-of-sale finance company have to have? Theoretically nothing.

They're just a supply chain for us. We're holding back sufficient cash to soak up what we think would be the delinquencies.

Theoretically, for those that are mathematically inclined, that the holdback we have is what some other lender might have in their expected loss provision. It's the same math, and as long as we hold back enough, what you see hit our bottom line, our ECL is next to nothing.

That's what you've seen over the decades, plus or minus 2 or 3 basis points. It's a good model.

We proved it out kind of doing it a clunky way by buying batches, and now we just adapted the program to AI. We built it ourselves downstairs in the tech facility here.

It was constructed by our guys and put into play. Of course, as you'd expect, everybody's sort of said, "Where do I sign?

How come I can't have that?" That's what we hear.

"Jeez, of course

you can." I imagine it's a pretty easy sales process for you guys.

Maybe specifically on the rollout of the real-time program, maybe more qualitative question than anything, but could you give a sense for maybe Financeit, for example, how much of their volumes are running through the real-time versus the traditional program? I assume the idea is that everything goes over there at some point, but is it already there, or is there kind of a ramp-up period to get to that point?

I think their entire flow henceforth is going through the real-time program. As it should, it's rather than send to us and have it batched up and maybe take a month to process, why not get done every day?

The system's up and running and running well. Thankfully, our partners in the States, ECN, decided to try it out, too, and we say, "Try it, you'll love it."

I have a terrible analogy for that, it's like getting hooked, you're hooked on it. Once you're used to getting your money every day, are you going to go back to waiting for months and months and running interest rate risk?

Man, that's a big deal with these point-of-sale finance companies while they're batching up, is that some central bank moves the rates up a little bit and they just lost maybe they lost their entire profit on that batch of loans that they were batching up for a securitization. Interest rates go up a few basis points, whoops, there goes my profit.

Our system prices it immediately. This is AI doing it.

Just takes the Government of Canada bond rate, click, okay, you got it, there you are, rates done. Instantaneously purchase.

No, and it seems as you've described, it's a game-changer for your partners. Then on the ECN subsidiary, I feel like that's a good transition in there.

If they're getting all this value from the real-time program, would you expect that, I know $300 million was the original target and there's confidence in getting over $500 million a year there, how quickly is this one ramping up relative to maybe some partners in the past that you've signed? Is this the type of thing where, as you said, they kind of get a taste for this program and now they're trying to push as much volume through as they can?

Absolutely. We're up $300 million in the last 30 days or so, right?

Went from $6.9 billion to $7.2 billion. On our daily dashboard showed $7.2 billion yesterday.

That's just the thin edge of the wedge. Everybody's quite, they've been for 30 years have been using the traditional asset-backed securities way to fund themselves, and they've got friends that are investment bankers, they've got friends they play golf with that are accountants and lawyers, and it's the traditional way of doing it, and a lot of mouths being fed in that industry.

We're basically saying, "Forget those guys, they're going to they're going to go hungry." It takes a while for humans to sort of move.

I use the horse and buggy thing. You got the horses out there, people like horses, they like hay, they have their kids working in the barn taking care of it, it was an industry.

Then all of a sudden comes out Henry Ford with the automobile and say, "Those things are smelly, and they make a lot of noise, and whatever." It's going to change.

It has to change, because those the the factors that talked about: fixing your rate, getting your money back early, dropping your equity requirement, Jesus. Of course they're going to do it.

It's just

It's just the stickiness of our our fellow humans who take a while to to adopt to things. When I lived that in Canada when I came out with this branchless banking model, I was the first guy in 18 years to get a federal bank license.

People lectured me that I needed a I need buildings. One guy, senior federal government guy in Canada told me, "It has to have pillars, too."

I said, "Things are going," I won't say his name, he knows who he is. I said, "Things are going to change.

There's a different way of doing business." And, "Oh no, people like to walk down to a branch and wait in line to get that to get the loan to buy their motorcycle."

I said, "No, they don't. The new generation doesn't want to do that.

They want to they want to throw their leg over that bike right right now and drive away with the Ducati." Like me, I threw it, it's a Ducati.

Anyway, Eli, yeah, it's exciting times, and I've staffed up a little bit. I got Moe Danis and Luke on the job, too, so that's double doubled in the States.

We'll probably do more. It's it's always in banking, it's kind more hands at the pump, the more deals you get.

That's

There is still a human factor, even though we're using AI. It's still, you make the phone calls, you got to see the people, it's still a paramount human interaction to to get somebody on board.

I might need a few more humans interface.

Makes sense. Given the $3 billion target, if I heard you correctly earlier, half of that would be coming from potential new partner wins.

Maybe on that piece specifically, what you guys are seeing in your pipeline there? I don't know if you can quantify, but you look at the $300 million from the ECN deal, potential for $500 million, as far as size of what's in your pipeline in terms of funding potential, I'm sure it varies, but are there more chunky ones like that?

Are there more deals that could be a real step-change in volumes as soon as they're signed, or is it a larger number of smaller deals?

No, they're all big ones. That's the difference between the Canadian and US market.

They're all big. Every one of them is as big as Financeit in Canada in the States.

They all use the asset-backed securities as their go-to way of funding, whereas in Canada, they're all kind of small and they weren't using ABS. ABS wasn't a competition for us in Canada, but in the States, it is.

When we came out with this change, they were able to buy instantly, that hit the ABS market right in the heart. They're all big guys.

There's nobody little in the States. Everybody is as big as Financeit, and they're all using ABS, and our new product is aimed right at the heart of ABS, it renders ABS obsolete.

Whereas in Canada, they're little ones. They like the idea of getting your money back faster, but it didn't have that wait time like the big guys do in the States to get their money.

They're borrowing by line of credit or something. Some Canadian bank was lending them, gave them a line of credit margin against the receivables, and so it's way bigger market in the States, and I would say every single one of the ones we're talking to are at least as big as Financeit.

Wow. Okay.

Somewhere you get like $300 to $500 million a pop, $1.5 billion coming from new deals, really only takes, three to five deals to get there. Great.

The last one for me just on maybe framing up '27 is obviously some non-core costs coming through '26 that should largely be in the rearview for '27, and then you're talking about some really large numbers on the asset growth side. Internally, do you guys have a frame for how you're thinking about ROE targets for '27, or it's just a range that you're expecting to land in?

I think we have one on our website at $10 billion, don't we get about 20% ROE, something like that, Nico? We've got a model up on our website, Eli,

and

it goes $10, $20, $30 or something in asset size and shows it. Bottom line is, it seems being quite aggressive saying this, but I don't see any increase in NIEs with the volume increase because even though we may be adding some more humans, we're making a lot of savings using AI in every aspect of our business now.

That's the offset. We will need some more specialized help, maybe more commenders in the States, like say maybe another team, but the processing of the credit applications is so much faster than it used to be, and the analysis is so much better.

You ask Claude, in Canada, we call it Claude, of course, not Claude. You ask Claude to do the stats.

Back in the early days when I used to be doing analysis for fish populations using FORTRAN, that could have been a good afternoon trying to do the stats on the population. You can ask Claude to do the stats, give it all the data and say, "I would like to be 95% confident that we've taken enough cash holdback to offset the inevitable delinquencies."

I think you're talking a minute to analyze the data. This is the entire data stream.

Maybe 10 years through the cycle, we've signed up for one of the huge databases in the United States that a whole lot of lenders use. Holy smokes, we're way more precise in what we're holding back and we're getting the math done super fast.

It's the new world where I just looking at incremental revenue from the assets. I use rough math: 250 basis points, $3 billion, $75 million of incremental pre-tax earnings and we got about a 25% tax rate.

You got a $1.75 a share right there US, and incremental.

Yeah. Yeah.

No, exciting times. I'll pass the line.

Thank you. Thank you, Eli.

Good luck in the fog. You're in Toronto right now, right?

Thank you, operator, and thanks again for everybody for joining us today. I look forward to speaking to you at the time of our third quarter results.

If you have any other questions that come to mind, don't hesitate to give me a call. We're familiar with Teams, we use Teams regularly here, and it can answer further questions, should you have any.

It's certainly exciting times be a bank. I've been doing it for almost half a century.

Started when posting machines were humanly powered with great huge levers, and then thankfully seeing the industry evolve and evolve and evolve to where we are today, where, holy smokes, yeah, it's just wonderful to be able to analyze our portfolios with such precision using the AI and to be able to deliver these new products to our clients, which, in fact, trickles down to consumers. This is the altruistic Dave that maybe most bankers you don't hear say.

Bottom line is, what it means is that consumers and small businesses that rely on these point-of-sale finance companies for their capital, they can do their thing, well, they should theoretically be able to provide those services at better rates because we're going to give them their money cheaper, better, faster, and that should trickle down to the economy and help folks out. Thank you again, ladies and gentlemen.