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 Senior Vice President, 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 U.S. In fact, our U.S.

operations generated nearly 25% of Q3 digital banking revenue. But 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 CAD 7 billion in total assets. In fact, as of yesterday, we were at CAD 7.2 billion.

That's up nearly CAD 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 to our expansion in the U.S. 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 CAD 4.6 million that are not part of our go-forward cost structure in 2027. These included non-core costs of CAD 3.1 million, which was composed mainly of an additional CAD 2.5 million in reorganization costs that we noted on our last call.

There were also CAD 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 CAD 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 CAD 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 continued to steadily build momentum during Q3 with increased business from our existing U.S. partners and the addition of new partners.

Q3 saw another CAD 220 million in new fundings with a subsequent CAD 127 million since the end of Q3. That brings us to more than CAD 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 U.S.

SRP fundings annually. But both we and our partner believe the program could grow well beyond $500 million per year in fundings.

I will note again, this quarter, the vast majority of additional fundings in the U.S. 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 U.S. operations with an efficiency ratio, excluding non-core write-off associated with the branch sale for Q3 of 37%.

And 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 SRP, which enable 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 cost 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 am pleased to report that earlier this week, ECN Capital, one of our first U.S.

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 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 would now like to turn the call over to Nico to review our financial results in detail. Nico?

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

All the following numbers are reported in CAD as per our financial statements, unless otherwise noted. Starting with our balance sheet.

Total asset 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 CAD 6.9 billion. Cash and securities was CAD 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 entering to the United States. Book value per share increased to another record of CAD 17.45.

Our CET1 ratio was 11.5% and our leverage ratio was 7.6%, both down meaningfully 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 U.S.

SRP portfolio following our capital raise in December 2024. Our strong growth in assets drove total consolidated revenue to a record of CAD 38.8 million, up 23% year-over-year and 1% sequentially.

Non-interest expenses, or NIEs, for Q3 were CAD 25.2 million. As David noted, NIEs for Q3 included CAD 3.1 million in non-core expenses, CAD 2.5 million of additional costs related to a reorganization project, and CAD 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 cost, were CAD 22.1 million, compared to CAD 17.4 million in Q3 last year and CAD 20.8 million for Q2. As David also noted, Q3 included approximately CAD 2.3 million pre-tax in additional transitory costs that are now a part of our run rate cost structure.

This was composed of CAD 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 CAD 1.5 million in other transitory costs that were specific to the quarter and the bank does not expect to recur. As a reminder, DRTC cyber expenses are included in the consolidated NIEs and totaled CAD 2.6 million in Q3, more or less in line with last year.

Reported net income was CAD 10.1 million, a year-over-year increase of 53% from CAD 6.6 million for the third quarter last year. Consolidated earnings per share was CAD 0.31 compared to CAD 0.20 last year.

Excluding the CAD 3.1 million non-core NIEs I mentioned earlier, consolidated adjusted net income was CAD 12.3 million, or CAD 0.38 per share, with adjusted net income increasing 27% year-over-year. Again, that number includes CAD 0.8 million pre-tax in share-based compensation resulting from our share appreciation and other transitory cost of CAD 1.5 million pre-tax.

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

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

Revenue for our U.S. banking operations was CAD 9.3 million, up 18% sequentially and 199% year-over-year, primarily due to a ramp up in the U.S.

SRP. That drove a 10% increase in net income sequentially and an 803% increase year-over-year to CAD 3.9 million as we see the U.S.

operating leverage take effect. Q3 net income was impacted by CAD 400,000 after-tax costs related to a software write-off resulting from the sale of the branch I described earlier.

Digital Meteor net income was CAD 114,000 compared with net income of CAD 23,000 for the third quarter last year and net income of CAD 351,000 for the second quarter of 2026. Within DRTC, the cybersecurity service component generated revenue of CAD 1.9 million with net loss of CAD 578,000, pretty much in line with last quarter.

Our credit asset portfolio grew a new record just shy of CAD 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 CAD 5.2 billion. Our SRP portfolio represented 85% of our total credit assets at the end of Q3, up from 82% in Q2.

Our multifamily residential loans and other portfolio decreased 10% year-over-year and 5% sequentially to CAD 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 MRO portfolio is primary business-to-business mortgages and construction loans for residential properties.

We have almost no exposure to commercial use properties. Turning to the 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. I will remind you that our Q2 NIM is typically the highest of the year due to normal seasonality.

The increase 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 U.S., 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 MRO loans I just mentioned.

Overall NIM, including the impact of cash, securities, and other assets, was 2.19%, a decrease of six 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 our 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 Bank National Association 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 is 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 U.S.

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 CAD 650 million in core SRP year to date, with well in excess of the CAD 600 million represented by our 60% of our target CAD 1 billion. As a result of limiting our purchased securitized SRP, we now anticipate that we will reach our CAD 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 U.S. SRP target, at least US$3 billion in additional fundings in the U.S.

in fiscal 2027. That's the equivalent of more than CAD 4 billion 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 US$3 billion in additional U.S.

fundings. The demand there, especially with the addition of our Real-Time SRP enhancement.

Two, we believe our Real-Time SRP 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 the 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 CAD 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 organizations 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 U.S. 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 U.S.

and the Department of Finance 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 CAD 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 U.S.

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 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 U.S., so 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 the liquidity actually costs us a few basis points, maybe 10, 15 negative.

Now that we're well established in the U.S., 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 CAD 300 million since the end of the quarter, July 31st.

We are up to CAD 7.2 billion right now from what it was CAD 6.9 or so, Nico?

That is right.

It is coming on fast and furious. Those are high yielding traditional SRP rather than the purchased ones where we only made maybe 80, 90 basis points.

On our homegrown SRPs, we make about 250 or so. I would say NIM will get back to around 230 for next quarter and the rest of the year.

For the Canadian listeners, we are still about 50% better NIM than the entire banking industry in Canada, and it is 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 the last quarter. Not only do we have the widest margin in the country by far, but we give nothing back for loan losses either.

While we are obsessing on NIM, a space that we are incredible at 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 U.S.

Treasuries. As we start booking assets in the States, as we are predicting at least US$3 billion more going on soon, gee whiz, it just gets better and better.

It is sort of amazing. One of the markets kind of missed it, but we have revolutionized the US$1 trillion asset-backed security market by bringing out this Real-Time SRP, where not only do our clients get their money back right away, not have 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 are doing this. 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 March, and we just brought something out that renders the traditional asset-backed security method obsolete. Interesting that that seems to be missed.

However, it's always the case where 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 adoption 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 an automobile.

It was still folks that needed to have horses and buy hay and stuff like that to keep going until it caught on. Sorry about the long-winded one there, Joe, but, you're-

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

I just wanted to drill down on the expected growth in fiscal 2027. So you're expecting at least US$3 billion of growth in the U.S., which would effectively take you to US$4 billion exiting the next fiscal year.

So 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 are prospects that we're already talking to. I've doubled the size of the team in the U.S., the SRP team, with the addition of Moe Danis and Luke.

So, more hands at the pump. I may add another two to it.

Also, it's a huge market in the U.S., and the sooner we get on the books, the better. But if you look at US$3 billion to, say, 250 basis point spread and use an effective tax rate of about 25%, that's about a US$1.75 a share increase in U.S.

dollars that we just put out there.

Yeah.

That's just the U.S. And Canada might be able to do the same.

Let's hedge my bet, call it CAD, 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 Real-Time SRP working for them. They're saying they don't want to run interest rate risk.

Why should you? They like to get their money back right away.

Because they're not borrowing, they don't have to have an onerous debt to equity ratio to contend with. They can get their capital back faster.

Their ROE goes through the roof. They eliminate interest rates.

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 say, "Yeah, you're coming back on board, right, Moe?" Yeah, it's great.

I may bring another team in too. Mark in $3 billion in the U.S.

additional and maybe another CAD 3 billion, just from our existing partners. 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?

Well, 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%. If we can get that done, I've hired a guy to make that happen.

Chiaki used to be with Bank of Canada, so 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, why would your homegrown ABSs be risk weighted different than the ones you just purchased from somebody else or the ones 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, and we'd self-fund.

Sorry, investment bankers. Although, it is a trillion-CAD market, so even with that, maybe we will be back.

We are only looking at 1% of a trillion-CAD market in the near future with CAD 10 billion. I cannot see anybody using anything else other than what we have got on the table.

Why run those monster risks with interest rates? Why not get your money back in your pocket?

Why not give your shareholders some of their money back? You do not need all the equity that you got supporting a business anymore.

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

It makes sense. Why would a regulator let you risk weight your asset at 20% just because you bought it from somebody else when it is identical to the one you have homegrown?

All right. Well, I appreciate the color and thank you for those thorough answers.

I will hop back in the queue.

All righty. Well, thanks, Joe.

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

Well, go ahead, Tim. We are here in the fog in Canada here.

I have Nico beside me here. He traveled all the way up from St.

Pete 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 is the process like for getting a lower risk weighting on your SRP loans? Is there any timeline on when you think you can get approval for that?

Well, I am guessing sometime mid-2027 our sort of Dime 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.

It would go through, we would make a presentation to OCC to have our assets risk-weighted in that fashion. So, I am hedging my bet a bit mid-2027.

There are some phases in between where we could 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, so the regulators are familiar with it. Then there are some companies who have approached us that would take the B tranche on their own books, and that has already gone through the regulatory frameworks and been approved.

The Dime went to heaven, the holy grail, is maybe mid-2027. I would hope it is sooner because I have a real good guy on the job.

Keenan, are you listening? The other phase is the first one with the insurance.

Maybe I will get that in a bit sooner, like a month or two from now.

Okay. Interesting.

Your comment about 2027 core expenses should be in line with this year. Just given all the one-timers and transitory costs, what is the base we should be using for 2027?

If you can provide a CAD range, that would be helpful.

Nico is sitting beside me in the room. CAD 19.8 or something like that.

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

Can you repeat that?

19.

19.8.

19.8, Tim. Tim, the other thing to keep in the back of your mind as we put it out there, we fully endorsed AI in this bank.

Of course, it was real easy for us because we're all tech anyways. There's a lot of savings coming.

I mean, obviously just demonstrating what we can do with AI on the Real-Time SRP, 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.

Now that would be pushing it. That'd be our guys really working 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, so it'd be about CAD 70 million annualized?

Yeah, that's what we're looking at. 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 company 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, say, ask, "How many motorcycle loans do we have in Alberta?" Not only does it give it to you, but it'll actually put in a PowerPoint presentation for you.

It's fantastic. 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 beholding 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 paying some summer, not the winter, anything they could think of, different bases 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.

How could you invent a Real-Time SRP and launch it? What are we doing?

We announced about 60 days ago. It's now fully functional, and we're assigning our customers.

I mean, just imagine if you had to contend with the rest of the banking industry with one of these archaic core providers that's struggling through it. Geez.

There's no comparison.

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

When that gets divested, that goes away.

Yep. Okay.

All right. That's helpful.

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?

Is there anything else being considered, like a spinoff? 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?

Yeah, it definitely should. I mean, obviously, we live in a terrible world where cybercriminals abound.

There's no end in sight to that, unfortunately. We were just thankful the Fed gave us a little longer to divest a bit.

We haven't 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 were fully deployed with this Project Optimize. It's a big project and everybody's really busy doing that.

The divesture DRTC was a bit of a distraction. So now we've got a bit of time.

We're engaged with a few likely purchasers, and I'm sure somebody will become the new proud owner. But we're thankful the Fed cut us a bit of slack.

As they say in negotiations, he who wants it the most loses. As we certainly didn't want to be in any hurry while we've got all this other Project Optimize distracting us.

Okay, great. Thank you, David.

All right. Thanks, 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 2027 U.S. SRP growth.

Firstly, can you kind of remind us where you're funding these deposits, specifically for the U.S. business, and help us quantify any incremental spread you may be picking up growing in the U.S.

versus Canada? Secondly, on the expected US$3 billion in growth in 2027, did you guys target a number in which you will keep on your balance sheet versus securitize?

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

Understood. Just the first part on the NIMs across the borders.

Oh, okay. 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, U.S. Treasury.

Our method of gathering deposits on both sides for us is the same. We go exclusively to broker deposits.

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. So that's what we've done since the beginning, 1993.

I created that industry by telephone modems and IBM PCs, putting them in the offices of what I call deposit brokers, so they weren't called that then. They were financial service providers and investment bankers and such.

Now, dream in Technicolor, as you know, we have got the world's first tokenized deposit up and running, ready to roll. Sooner or later, we'll roll that out.

That puts FDIC-insured CDs viciously 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's virtually risk-free.

That's coming. I think the entire banking industry is waking up to that.

In the newspaper almost every day, you see some group of banks. The banks talking about stablecoins.

Stablecoins, I think, are a little bit of thing of the past. They'll evolve into tokenized deposits.

When my dream comes true, we'll be raising our deposits through the tokenized deposit networks and paying a lot less because our competition right now is stablecoins, which so far aren't able to pay any yields. That's the dream come true.

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

I think it's what, a CAD 10 trillion deposit market. Our aspiration is maybe CAD 10 billion, CAD 15 billion, CAD 20 billion.

That's still a drop in the bucket.

Understood. Well, appreciate the color and congrats again on the continued progress.

Well, thanks, Andrew. Exciting times.

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

Yeah. No, I came early in the week.

Good. Starting off on that CAD 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 CAD 3 billion in fiscal 2027?

Yeah. Eli, I guess right now I don't think there's any need to purchase any more.

We've got so much demand for the on-balance sheet securitization that I can't see buying any more. They come in a much thinner spread, and even though they are 20% risk-weighted, now we're well underway with the homegrown SRP used in real time way.

I go 100% on the homegrown. When we got the Canadian side, too, Eli, of course, because I just threw that out there for the U.S.

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.

So I expect, let's just say CAD 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 CAD 3 billion already on the books. There's a bunch more lined up.

It's so attractive. It's one of those ones you don't have to market.

I get all 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 Ducati motorcycle. How much equity does the point-of-sale finance company have to have?

Well, 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 who are mathematically inclined, the holdback we have is what some other lender might have in their expected loss provision.

It's the same math. As long as we hold back enough, what you see hit our bottom line, our ECL, is next to nothing, and that's what you've seen over the decades, like 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 and we built it ourselves downstairs in the tech facility here.

It was constructed by our guys and put into play, and of course, as you'd expect, everybody sort of said, "Where do I sign? How come I can't have that?"

That's what we hear. Geez, well, of course.

Yeah. No.

I imagine it's a pretty easy sales process for you guys. Maybe on that, specifically on the rollout of the Real-Time SRP, maybe a 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.

Rather than send it to us and have it batched up and maybe take a month to process it, why not get it done every day? Yeah, the system's up and running well, and thankfully, our partners in the States, ECN Capital, decided to try it out too.

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 is a big deal with these point-of-sale finance companies while they are 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.

Rate is done, like instantaneously purchased.

Yeah. No, it seems, as you have described, it is a game changer for your partners.

On the ECN Capital subsidiary, I feel like that is a good transition in there. If they are getting all this value from the Real-Time SRP, would you expect that I know CAD 300 million was the original target, and there is confidence in getting over CAD 500 million a year there.

How quickly is this one ramping up relative to maybe some partners in the past that you have signed? Is this a type of thing where, as you said, they kind of get a taste for this program and now they are trying to push as much volume through as they can?

Yeah, absolutely. We are up CAD 300 million in the last 30 days or so, right?

We went from 6.9 to 7.2. On our daily dashboard, it showed 7.2 yesterday.

Yeah, and that is just the thin edge of the wedge. Everybody is quite- For 30 years, they have been using the traditional asset-backed securities way of funding themselves, and they have got friends that are investment bankers, and they have got friends they play golf with that are accountants and lawyers.

It is a traditional way of doing it, and a lot of mouths being fed in that industry. We are basically saying, "Forget those guys.

They are 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 liked horses. They like hay.

They have their kids working in the barn, taking care of it. It was an industry.

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." Well, you know it is going to change.

It has to change because of the factors, that we talked about, fixing your rate, getting your money back early, dropping your equity requirement. Jesus.

Of course, they are going to do it.

Yeah, correct.

It is just the stickiness of our fellow humans who take a while to adopt to things. I lived that in Canada when I came up 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 buildings.

One guy, a senior federal government guy in Canada, told me, "It has to have pillars, too." I said, "Things are" I will not say his name.

He knows who he is. I said, "Things are going to change.

This is a different way of doing business." "Oh, no.

People like to walk down to a branch and wait in line to get the loan to buy their motorcycle." I said, "No, they do not.

The new generation does not want to do that. They want to throw their leg over that bike right now and drive away with a Ducati."

Like me, it is a Ducati. Anyway, Eli, yeah, it is exciting times.

I have staffed up a little bit. I got Moe Danis and Luke on the job, too, so it is double in the U.S.

We could probably do more. In banking, it is kind of more hands at the pump, the more deals you get.

Yes.

There is still a human factor, even though we are using AI. You make the phone calls.

You got to see the people. It is still a fair amount of human interaction to get somebody on board.

So I might need a few more humans interface.

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

Yes.

So maybe on that piece specifically, what you guys are seeing in your pipeline there, I do not know if you can quantify, but you look at the CAD 300 million from the ECN deal, potential for CAD 500 million. As far as size of what is in your pipeline, in terms of funding potential, I am 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 are signed, or is it a larger number of smaller deals?

No, they are all big ones. That is the difference between the Canadian and U.S.

market, that they are all big. Every one of them is as big as Financeit in the States.

They all use the asset-backed securities as their traditional, their go-to way of funding. Whereas in Canada, they are all kind of small, and they were not using ABS.

So ABS was not a competition for us in Canada. But in the States, it is.

So when we came up with this change, being able to buy instantly, that hit the ABS market right in the heart. So yeah, they are all big guys.

There is nobody little in the States. Everybody is as big as Financeit.

They are all using ABS, and our new product is aimed right at the heart of ABS. It renders ABS obsolete.

Whereas in Canada, they are little ones. So yeah, they like the idea to get their money back faster.

But if they did not have that wait time like the big guys do in the States to get their money, they are borrowing a line of credit or something. Some Canadian bank gave him a line of credit margined against the receivables.

So it is a way bigger market in the States. I would say every single one of the ones we are talking to are at least as big as Financeit.

Wow, okay. Somewhere you got CAD 300 million-CAD 500 million a pop, CAD 1.5 billion coming from new deals.

It really only takes 3-5 deals to get there. Okay, great.

Yeah.

The last one for me, just on maybe framing up 2027, is obviously some non-core costs coming through 2026 that should largely be in the rearview for 2027. Then you are talking about some really large numbers on the asset growth side.

Internally, do you guys have a frame for how you are thinking about ROE targets for 2027, or is it just a range that you are expecting to land in?

I think we have it on our website. At CAD 10 billion, do not we get about 20% already?

Something like that, maybe? We have got a model up on our website, Eli.

Okay.

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 do not see any increase in NIEs with the volume increase because even though we may be adding some more humans, we are making a lot of savings using AI in every aspect of our business now.

That is the offset. We will need some more specialized help, maybe more account managers in this space, like I 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 can ask Claude. In Canada, we call it Claude, of course, not Claude.

Claude can 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 talk in a minute to analyze the data, and this is the entire data stream.

Make 10 years through the cycle. We've signed up for the huge database that the U.S., all the lenders use.

Holy smokes, we're way more precise in what we're holding back, and we're getting the math done super fast. Yeah, it's a new world.

I'm just looking at incremental revenue from the assets. I use rough math, 250 basis points, CAD 3.075 billion of incremental pre-tax earnings, and we got about a 25% tax rate.

You got a buck 75 a share right there, USD. And incremental.

Yeah. Exciting times.

I'll pass the line.

Thank you. Thank you, Eli.

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

Well, 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, do not hesitate to give me a call. We are familiar with Teams.

We use Teams regularly here and can answer further questions should you have any. It is certainly exciting times VersaBank.

I have been doing it for almost half a century. Started when posting machines were humanly powered with great huge levers.

Then thankfully, seeing the industry evolve and evolve and evolve to where we are today, where, holy smokes, it is 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 effect, trickles down to consumers. This is the altruistic, Dave, that maybe most bankers you do not hear say.

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

Thank you again, ladies and gentlemen.