VersaBank (VBNK) Earnings Call Transcript & Summary

Good morning. My name is Tom Hockin. I am the Chair of VersaBank's Board and I've been a Director of the bank since 2014. And it's my privilege this morning to welcome all of you here. I can't guarantee you an exciting morning, but thank you for being here. The annual and special meeting of the shareholders of VersaBank will now come to order. In accordance with the bylaws of the bank, I shall preside as Chair of the meeting. Brent Hodge, our Senior Vice President, General Counsel and Corporate Secretary of VersaBank will act as secretary of the meeting. Today's meeting is held in person at the TMX Market Center in Toronto, and made available by live video webcast. Before commencing the formal business of the meeting, I would like to introduce the other directors of VersaBank who are with us here today. Please stand as I introduce you. Gabrielle Bochynek. Gabrielle, she's from Toronto and currently resides in Stratford. She has been a director of the bank since 2019 -- excuse my Louie Armstrong voice. Sorry. Robbert-Jan Brabander. Robbert-Jan is from Richmond Hill and has been a director of the bank since 2009. Peter Irwin. Peter is from Toronto, and has been a director of the bank since 2021. Rick Jankura. Rick is from London, Ontario and has been a director of the bank since May 2022. Art Linton. Art is from Kitchener and has been a director of the bank since 2020. Susan McGovern. Susan is from Aurora and has been a director of the bank since 2011. She's also vice chair of the bank. Paul Alder. Paul is from Markham, and has been a director to the bank since 2005. David Taylor. David is from Ilderton and has been a director of the bank since 1993. David is also the President and Chief Executive Officer of VersaBank. Absent from the meeting today is David Bratton. David is from London, Ontario and has been a director of the bank since 1993. We're also pleased to have many of the other officers of the bank here today. And I would like to ask them to stand as I call them by name. Tammie Ashton, Chief Risk Officer; Shawn Clark, Chief Financial Officer; Garry Clement, Chief Anti-Money Laundering Officer; Mike Dixon, Senior Vice President, Point-of-Sale Financing; Jim Gardiner, Real Estate Credit Officer; Brent Hodge, Senior Vice President, General Counsel, Corporate Secretary and Chief Compliance Officer, Brent; Joanne Johnston, Chief Internal Auditor; Wooi Koay, Chief Information Officer, Wooi; Nick Kristo, Chief Credit Officer; Tel Matrundola, Executive Vice President; Nancy McCutcheon, Vice President, TIB Business Development; Rick Smyth, Senior Vice President, Real Estate Lending; Jonathan Taylor, Chief Human Resources Officer; Barbara Todres, Vice President, Deposit Services. Absent from the meeting today are John Asma, Andy Min, Saad Inam, David Thoms, and Deborah Savage. I'd also like to introduce Lawrence Chamberlain, our Director of Investor Relations who just stood up and sat down there; and Gurpreet Sahota, Chief Operating Officer [ DRT Cyber Inc. ]. Ernst and Young slide is posted. The shareholders proposed auditors, Ernst and Young LLP is represented here today by [ Andrea Fidella Fatima ] -- thank you -- and Sivan Ilangko. In order to make the best use of our time, certain individuals have been asked to move and second the resolutions which are set out in the notice of meeting. I will call them at the appropriate time. Moving to scrutineers. Laura Stone of Computer Investor Services will act as scrutineer of this meeting to report on the shareholders present in person and by proxy at this meeting to compute the votes cast by ballots, if any, and to report to me on these matters. Prior to the -- prior to the commencement of this meeting, the scrutineer has reported that based on the registration of shareholders this morning and the proxies submitted, a quorum has been reached. In accordance with the bylaws of the bank, I declare the meeting therefore regularly called and properly constituted for the transaction of business. I direct that the scrutineer's report be annexed to the minutes of the meeting. Notice of the meeting. The notice calling this meeting and the accompanying material had been mailed to all shareholders of the bank who were shareholders of record on February 24, 2023. The secretary of the meeting has provided the proof of mailing of such material. Accordingly, the reading of the notice of meeting will be dispensed with and a copy of the notice with proof of mailing will be kept with the secretary of the meeting. I propose that we now proceed with the business of the meeting. The financial statements of the bank for the year ended October 31, 2022, together with a report of the auditors there have had been mailed to the shareholders of the bank. It is not proposed to ask shareholders to approve the financial statements. However, we would be pleased to deal with the relevant questions concerning the statements during the general question period, which follows the formal business of the meeting. Matters to be voted on. First, appointment of auditors. The next item of business is the appointment of auditors for the current year and the authorization of the directors to fix the remuneration of the auditors. Following a rigorous and thorough process carried out by the bank's auditor selection committee, the committee recommended to the Board of Directors the appointment of Ernst and Young LLP as auditors for the bank. On December 5, 2022, the board approved the appointment subject to shareholder approval at today's meeting. A change -- a notice of change of auditors was delivered to the former and proposed new auditors and responses were received together with the reporting package and subsequently filed on SEDAR. The reporting package is attached as Exhibit A to the management of proxy circular which was mailed to the shareholders of the bank in connection with this meeting. In respect of voting on the appointment of auditors, each holder of common shares with the bank is entitled to one vote for each share held by him or her. Please note, therefore, that only those who are registered shareholders and appear on the registered shareholder list as provided by our transfer agent and those persons who are authorized proxy holders were and are eligible to vote for today's meeting. I propose to conduct the yes vote on the matter of the appointment of auditors by a show of hands. Please note that each registered shareholder or proxy holder present in person at this meeting has the right to demand that a ballot be conducted either before the show of hands or following that vote. When a ballot is conducted on a resolution, I will vote by ballot all proxies submitted to me as proxy holder as required. I will now ask Shawn Clarke to move the resolution appointing the auditors for the current year and Mike Dixon to second the motion. Shawn Clarke?

Mr. Chairman, I move that we dissolve that Ernst and Young LLP chartered accountants as auditors of the bank to hold office until the close of the next annual meeting of shareholders or until the successors are duly appointed. As representatives of the bank, be authorized to fix the remuneration of the auditors for such amount as they may [indiscernible].

May I have the motion seconded?

Second the motion.

Thank you, Mike. The motion is now open for discussion. You have now heard the motion. And that as there is no further discussion, I now put the resolution to the meeting. For this resolution to be passed, it must be approved by the affirmative vote of not less than a majority of the votes cast in respect thereof, by shareholders present at the meeting in person or represented by proxy. All those in favor of the resolution please so signify by raising your hand. Contrary, if any? I declare the resolution carried. Moving to the election of directors. In respect of voting for the election of directors, which is to proceed by way of cumulative voting, each holder of common shares of the bank has the right to cast a number of votes equal to the number of votes attached to the shares held by the shareholder multiplied by the number of directors to be elected. And the shareholder may cast all such votes in favor of one candidate or distribute them among candidates in any manner. If a shareholder has voted for more than one candidate, without specifying the distribution of the votes among the candidates, the shareholder is deemed to have distributed the votes equally among the candidates for whom the shareholder voted. If the number of candidates nominated for director exceeds the number of positions to be filled, the candidate who received the least number of votes will be eliminated until the number of candidates remaining equals the number of positions to be filled. To comply with the provisions of the Bank Act the election of directors will be decided by a vote by ballot where a ballot is conducted on a resolution will vote by ballot all of the proxies submitted to me as proxy holder as required by law. Please note that only those who are registered shareholders and appear on our registered shareholder list as provided by our transfer agent and those persons who are authorized proxy holders are eligible to vote at today's meeting. We will now proceed with the election of directors. The number of directors the bank is fixed at 10 and it is necessary for such a number to be elected. I now declare the meeting open for nominations for the election of 10 directors to hold office for the ensuing year or until their successors are elected or appointed. Jonathan Taylor will now nominate each of the individuals listed in the management proxy circular for election as directors for the coming year each of whom has agreed to serve as a director if elected. I will ask Mike Dixon again to second the nominations. John?

I nominate each of the Honorable Thomas Hockin, David Taylor, Gabrielle Bochynek, Robbert-Jan Brabander, David Bratton, Peter Irwin, Richard Jankura, Art Linton, Susan McGovern, and Paul Alder for election as a director of the bank for the ensuing year or until a successor is elected or appointed.

May I have each of the nominations seconded?

I second each of the nominations.

Thank you. Are there any further nominations? Well, I declare nominations closed. Jonathan Taylor will now move the confirming resolution and Mike Dixon will second the motion.

I move that it be resolved that each of the Honorable Thomas Hockin, David Taylor, Gabrielle Bochynek, Robbert-Jan Brabander, David Bratton, Peter Irwin, Richard Jankura, Art Linton, Susan McGovern, Paul Alder be elected as a director of the bank the ensuing year or until a successor is duly elected or appointed.

Okay. May I have the motion in respect to the election of each director seconded?

I second the motion.

Okay. The scrutineers have distributed a form of ballot to all registered shareholders and authorized proxy holders present. Each registered shareholder or proxy holder should record his or her vote in respect of the resolution which has been put to the meeting in the usual manner by indicating whether they are voting for all nominee -- voting for all nominees, or withholding in respect of all nominees or withholding in respect to one or several nominees. Each registered shareholder or proxy holder should then sign his or her name on the ballot. I would also ask each registered shareholder or proxy holder to print his or her name on the ballot. The scrutineers will then collect the ballots. I would ask the scrutineer to deliver the report to the secretary of the meeting as promptly as possible. I understand that the report on the ballot from the scrutineer has been received. And the scrutineer reports that the resolution with respect to the election of directors has been duly carried by a majority of the votes cast, both in advance and at this meeting. And accordingly I declare the resolution carried. If any registered shareholder or proxy holder is interested in the exact number of votes cast in respect to the resolution which has been voted upon by ballot, he or she may obtain these particulars after the meeting on inquiry to the secretary of the meeting. Moved out of further business. Is there any further business? Well, thank you for being so patient and listening so carefully, but this concludes the formal business of this annual and special meeting of shareholders. I would now ask Shawn Clarke to move the final resolution.

Mr. Chair, I move that formal business [indiscernible].

The motion has been accepted. And I declare the formal business of the meeting terminated. Thank you very much. We now -- I will now ask the President and CEO of the bank, David Taylor, to make his remarks concerning the bank. David?

Thank you, Tom. Well, good to see you all again. Another year has gone by and a lot of changes in the world with central banks from dampen enthusiasm, particularly for us banks. So not filling a great big monster-sized term is quite understandable that banks are maybe not in favor. But our particular bank, of course, is designed to be somewhat countercyclical to these times. And I think you'll be quite impressed about what I'm about to show you. Before I get into that, I often get asked a question of why haven't I retired yet. I've put 4 more years behind me like the [ Edmund Fitzgerald ] would have done if it made Whitefish Bay and I'll have a half century of being a banker. So I've already hit the record of the longest-serving bank CEO and I guess Canadian history, maybe world history, what more records do I want to hit? With this warning I've got here, pay particular attention to forward-looking side of it. So to answer that question, well, there's a few records, of course last year. Record after record. And these are numbers that are not often seen by banks. This is sort of the numbers you see with biotechs or racy FinTech type companies that are roaring ahead. 42% growth in our loan portfolio, while 74% in our key point-of-sale business. Record revenue, record interest income, record net income, strong profitable cybersecurity business. And then there's the other characteristics that our bank has and others don't seem to be able to do. No loan losses, lots of liquidity, lots of capital and about to enter the world's largest market for point-of-sale. So that's why I'm here, still here. There's just too much fun. There's too many more records to hit. Already looking back, in F '22, what did we accomplish? Well, we move well along the way to acquiring a U.S. bank license. That would be an OCC, Office of the Comptroller Currency bank license. It's been slowed down a little. We were hopefully it would have taken place bit of got the license a little bit earlier. And now we're looking to the summer of this year. And the slowdown has nothing to do with us. I think the regulators in the U.S. have never seen a bank that presented as we did, i.e., without losses and capital and liquidity and growth and all those things. They spent a lot of time looking at that, like how could that be, they've got no losses. That's something must be up. But I think generally speaking, they started to smile and then ran out of questions to ask us some time ago. So we're optimistic that during the summer hopefully, we're blessed with the opportunity to take our proven point-of-sale model into the United States south of the border where market might be 100x bigger. You'll still, as last year, still seeing us invest in new technology. We think you can't rest on your laurels in this world, tech and banking world. We like to improve what we're doing all the time. Make it better and better, more and more efficient. So you're going to see that this year coming and you did see that last year. Looking at this slide again, what needs to be said, those are big numbers and they're all pointing in the right direction. The next slide illustrates the, sort of, leverage that this bank has and that the -- we're sort of at an inflection point where we should be able to turn some -- maybe never seen the banking industry for a return on equity type figures. And it's driven by assets. So the blue bar chart there represents assets $3.53 billion, and you can see that revenue is sort of directly proportionate to the increase in assets. And so as our assets grow, generally speaking, you're going to see our net interest income grow by about 3% of assets. That's sort of what we budget. But the good news is that our fixed costs, i.e., the cost to keep the lights on, should be plateauing as it has been $49 million-$49 million, not much more of an increase in that. There'll still be a little bit, but not anywhere near the level of the growth that you'll see in the revenue figures. So it's like classic inflection point in a business where the volumes are starting to build and then you end up with the outstanding return on equity type figures. So that's why at this juncture, you're starting to see those big, profitable numbers flip up as they should. So looking into United States, why we want to in effect erase the U.S. border and just bring this proven point-of-sale program that we pioneered here in Canada for the last 10 years. Well, the market might be 100x bigger than the Canadian market and the propensity to finance at the point-of-sale in United States seems to be a lot more than in Canada. I mean, we Canadians can think of it this way, we're pretty conservative bunch, and when we see that a Ducati motorcycle, that's $20,000, you might say, jeez, that's a lot, and the guy says, hey, but you can finance it. In United States, they say where do I sign? In Canada, if it's me, I say where do I sign? But maybe somebody else might want to ask their wife if it's a good idea to buy a motorcycle still in Canada. So we're really excited about that U.S. market and I know a lot of you, or our shareholders, that's where I got a lot of our stock. But if there ever was a time to buy, like Warren Buffett says, and I think most of you know -- I try to go to see the Oracle of Omaha each year because there's nuggets of wisdom that fall from his table and it's sort of you buy when everybody is fearful, I'm sure everybody is fearful in the world today and you sell when everyone is greedy. So the stock at a 30% discount to book value, I think, represents a huge bargain. So with this OCC acquisition, saying it looks imminent. But a little caveat. The U.S. regulator is quite rightly a little nervous right now with the recent failures and that might be slowing it down. But with our particular bank -- Shawn Clarke's been handing up the charge -- I think they ran out of questions. So that bodes well for us. This is a nice graph here. It sort of shows what I was talking about the efficiency and hitting an inflection point in earnings. And just for illustration, I've put -- we hope to be more than $4 billion. I hope to keep on going and going in the United States. And that should take our efficiency ratio to ratios that aren't seen in our industry, I'm saying less than 35%. And what that means for you nonbankers is that's the cost to earn $1 of revenue. So $0.35 to earn a buck of revenue. And it goes without saying, if your revenue is growing and your fixed costs aren't growing as quickly, that the costs are in $1 of revenue gets less and less. For some sort of pie in the sky numbers, I use $5 billion as a number because I'd like to see our $3.6 billion or so we are today get into not too distant future into $5 billion. If you use $5 billion at 3%, your $150 million in net interest income. If your fixed costs are $50 million, you made about $100 million pretax. If your tax rate is 70% retention, you've made $70 million, and you've got about $350 million shareholders' equity. Certainly in the 20s, return on equity, but that's just taking a snapshot because by the time we get there, hopefully, we've earned a lot and our shareholders' equity is even large [indiscernible] got more. We're going to see how the math works. It works really well. And it really, at this point in time, it's just a question of the math. The more we put on in assets, the better the numbers get. And there's a little bit of uncertainty with respect to how fast those assets can be accumulated. But there isn't much uncertainty in how the math works. So it's a matter of time with respect to that. Now if Gurpreet is here, he should take a bow. Well, there he is, take a bow. Your pre-runs are DRT Cyber operations, or cybersecurity operations, I think probably most of you know, we have about 400 of the leading enterprises in Canada that rely on us for cybersecurity. That would include energy companies, rail lines, big retailers, police departments, some states. And what we say for -- we shareholders, this is a free option. It's not even entering the valuation of our bank. And we think it's a wonderful business because unfortunately, the world is chock-full of people trying to steal your stuff and they're doing it digitally and they're coming out with innovative ways to do it. And Gurpreet and his team have found very good ways to prevent that from happening. So as shareholders, VersaBank that happened to own DRT Cyber, we get that as a free option right now. So why would Warren Buffett want to buy our stock? Well, hasn't Warren Buffet bought our stock? Yes, maybe we're too small. Well, as I said, we're at the inflection point. Obviously, you have to do a lot of work to build all this out and we did that work. And now you're starting to see the outrageous profit figures taking place that I hope I'll be able to say in a few years, that's another record that not only am I the longest-serving CEO in banking history, but I also have the best numbers ever seen in the banking history. That's my goal. The proposed acquisition, that's got to be a catalyst. I would say some people might think that's a miracle nowadays if you're able to complete the acquisition of a U.S. Bank, given the regulatory nervousness. But if you do want a new bank in the United States, this is the one you want, one that won't present you with any embarrassments. For those that are listening, if you're thinking about liquidity, 98% of our deposits are CDIC-insured. All of our wealth deposits are term deposits, i.e., they have a term. We don't boast about an award-winning website where you can go in and play with your daily interest, high rate daily interest, savings accounts and actually get a little nervous, take your money right away that afternoon as you've seen happen. We don't have such award-winning websites. So when you make a deposit with us, it's a term deposit. So it stays to the maturity. I designed this bank. And in that almost 50 years, I've seen a lot of failures, a lot of troubles of things. So having the opportunity to design a bank from a whiteboard, all those things that I saw other banks suffer with I've made sure that this bank wasn't vulnerable. I also, strangely enough, did away with you folks, you pesky humans I call them or bio-units. Our bank has virtually no interface with the actual end customers, the depositors or those, the guys that bought the motorcycle. That's all handled by our partners and our software solution. And with respect to risk, as I was saying earlier, this bank has actually does a little better in a recession in that we have an extremely low risk appetite. [ Nick Chris ] to make sure that's the case. His job is to preside over those things. And I thought when I occurred to the bank, there was no need to take a lot of risk as long as you can be super-efficient and gather your deposits without paying too much for them. You didn't have to reach for yield and take on risk. And that was the original thesis and that's what we've stuck to. And it particularly serves us well in times of a recession. When the rest of the banking industry is sort of worried about their credit portfolio, cracks, some are doing better than others, some are doing terrible, our low-risk strategy means that our current portfolio is always in very good shape. And I thought back in '93 that a small bank shouldn't be taking a lot of risk, doing a whole lot of capital. And we haven't been designated too big to fail either. So we haven't got that special designation that our large bank colleagues do. So we really have to look after ourselves and taking out a lot of risk was certainly not in my list of things to do. Yes, current valuation is super. All I can say there is that we're caught in the waterfalls with all the other banks going down. We're a good little salmon [indiscernible], but hopefully, we can get our head above water too and again the free option. So our time's arrived, and strangely enough in a recession, it's even better. Questions. You need at a questioner? Something else?

[indiscernible].

Yes, sir.

I've got a question or 2 if I might.

Absolutely.

This is the joy of annual general meetings that you get an opportunity to see management directors in that we have.

Absolutely. Yes.

[indiscernible] about 3 years ago before COVID...

Well, you know what, there's no COVID, so we're good for...

[indiscernible]. A few things. One, with regard to the U.S. bank acquisition, what has happened with their performance with their deposit base post Silicon Valley blow-up, et cetera, et cetera? And can you -- is there an opportunity if need be to renegotiate that arrangement if their performance or their deposit base, for example, shrinks?

Well, to answer this way, we're not really buying much of a bank. The holding for bank may have $60 million-$70 million in loans. Maybe -- they book maybe 12 loans a year. They have a tiny little premises in the village of Holdingford. So from our -- and that hasn't changed. So the metrics that we agreed upon, nothing has changed. If there is anything that turns, the parent tends to still gather deposits it did in the past. So don't change the metrics. It was really us trying to gain access to the U.S. market and utilize the systems we have in Canada to serve it. So it's still the same deal as it was before. It's still kind of a curiosity in our world in that it's actually got a premises with real-life people in it and tellers. The rest of Canada and we are servicing some clients in the States, it's all serviced from Canada. The 2 tech centers we have, one in the University of Saskatchewan's campus and the other one at the airport.

And is there a break fee if you decide for some reason...

I think there is a little break fee, but we'd never do that. This is like the opportunity of a lifetime to...

You referred to the R&D side was one of the premier IT service here. I'm surprised the growth hasn't sort of reflected that sort of outsized growth. Can you talk a little bit about why that hasn't occurred yet?

Yes. And when we say the premier service for a cybersecurity firm, it's one particular arm of DRT Cyber, it's we call penetration testing. And that came to us through the acquisition of Digital Boundary Group. And that is the company that provides the most of that 400 clients service. Our plan was to cross-sell the other cybersecurity products that Gurpreet's team had built to these various clients. And some of those cybersecurity solutions have been taking some time to finish up. One in particular is done now. It's compliance with anti-spam legislation. We call it Raven. And we're having quite a bit of progress on that. So as the quarters progress, we've segmented these numbers out. You'll be able to see that DRT Cyber's revenues will start to grow pretty rapidly because now we're deploying these new products. So hopefully entice the existing client base to use them.

And in terms of grow rapidly, in terms of 25% annually?

That's the kind of number I would hope is a baseline for growth with DRT Cyber. I mean, last year, I had about $10 million of revenue. I mean, I'd like to see $30 million, $40 million of revenue. United States is trying this market and if we think our products are ideally suited, kind of the challenge we have is getting the products out there, the marketing of the products. So we are working on that aspect of it.

And in one of the webcasts that you had some quarters ago, I think a comment was made by you as well that down the road, you might look at spinning off some part of that. Is that still the plan?

Yes. It is the plan, and it's actually mandatory. When we obtained the U.S. bank, then the U.S. regulator would like that cybersecurity sub spun off in, say, a 2-year time frame, possibly longer. But we're targeting 2 years afterwards after getting the approval from the Fed and the OCC.

All things rolling off, or can you maintain an interest?

Well, we could maintain interest. I think the rule is we have to sell the controlling interest. And DRT Cyber has a contract with the bank to provide cybersecurity type services. But we're -- obviously, we're hoping that within a 2-year period of time, as we were hoping that DRT Cyber's revenues are going to be way up and those new products that we're bringing out are well-accepted and it's a nice viable stand-alone company.

And as an option that is recognized in the market as you're saying, let's start a number. I think you paid $10 million for margin business?

Well, some analysts have -- one analyst back in the heady days a few years ago when tech companies were getting huge multiples said it might be worth more in your bank. I would say it's -- at this juncture, it might be $30 million, $40 million, something like that. Given the revenues increase, the technology we've developed and all that sort of thing.

Right. You didn't talk about sort of the instant margin. Is that coming along?

It is indeed. I suppose a lot of things we've got in here, we call them [indiscernible]. The instant mortgages is coming along quite nicely. And there's quite an opportunity, a better opportunity now in that field than there was before. And that's that the spread that we can earn net interest margin on a conventional mortgage has increased from almost nothing to maybe 200 basis points. And conventional mortgages have a 35% risk weighting on them. So if you run the math of investing $3.50 and getting back $2, those are enormous return on equity figures. But the trick is we have to source the mortgages directly using instant mortgage app. So we're in the stages of building a department to support that. I would say early in the new year, fiscal year, it will be on, it will be up.

Okay. And another item you've mentioned on previous calls, some focus on sort of the north, the indigenous lending program. Where does that stand? Is that kicked in here or...

Well, it hasn't. It's going really slowly, which is kind of disappointing because in the past, that used to be a very good business for us. We have 2 indigenous people on staff and they're working on those projects. They're trying to work for the federal government with respect to sort of helping out. It's just a slow go. Most recently, I saw an indigenous group has advertised -- they've done a deal with CMHC on housing. That bodes well. We're not really on -- although we would do housing projects, we're more inclined to do hospital [indiscernible], rec centers, facilities in the Arctic. But it has been disappointing. It has been very slow. Back in the early days, when I used to fly my little airplane out there, we were doing deals every month. And everybody was really happy about that too. It's just a terrible shame that we had to curtail that, thanks to our federal government.

Last question. You referred to a [indiscernible] a 30% discount, also kind of indicated that hopefully you'll get to an ROE of 18%, perhaps by a year from now in previously about 8% since you've made that comment about 18% start [indiscernible] and that must have frustrated you, but [indiscernible] as well and what's going on. 2 things, confirms that question being that what is your sense as to reason for that? And number 2, is there any suggestion of trying to gear up the purchase plan NCIB to a greater extent than you have previously -- take advantage of [indiscernible]?

Well, those are really good questions. And with respect to the 18%, so I'm sort of dreaming. I think we're at 11% last quarter and it just keeps getting better and better as we add assets. But it doesn't seem to count, didn't make a bit of difference. So what I mainly attribute that to is when we did our initial public offering in the United States list on the Nasdaq, we had about 12 investment firms come in. And it's oversold by maybe a factor of 2 or 3. So it was very popular. And these were investment firms that specialized in tech-enabled small FIs. I talked to them all in the video and met some of them and they loved our business. But their entire portfolio with our kind of bank, tech-enabled FIs and they got devastated in the last while. I'm sure if a lot of them were just like us. They got the stock tanked for no good reason other than they're a small tech-enabled FI. So we had a lot of selling for -- I knew a lot of people who have been starting for liquidity purposes. They've been dumping. And we have been buying our stock back. We bought back over 1 million shares. Now we're down from 27.2 million shares down to 26 million shares. So I guess the good news was we were really popular with these firms. And then the firms themselves would have been really slapped hard by the environment they find themselves in needing liquidity, selling everything they've got. We've been buying it. We're almost running out of our capacity. And we have to go back, I have got a cap here in my hand to go [indiscernible] and ask to reload. Hopefully, they'll let us reload. We've got tons of capital and there's no better -- another Warren Buffett statement, there's no better investment than our own company. And again, and that helps on my return on equity figures too, in the earnings per share, of course. We're almost looking at doubling our earnings per share this year. There's another metric that you would have thought the stock would have reacted to. You've seen earnings, $0.39 -- $0.35 this last quarter. I mean all in, this year, that run rate we're at $0.35 -- about $0.35 versus half of that last year. But I guess, bottom line, we shareholders are going to buy all we can and keep doing what we're doing. I think this will pass as it always does and we're going to come out of it with some outstanding figures. Thank you. Those are good questions. I was fearful I wasn't going to get any questions here, I'm looking at the crowd here and a lot of them already have asked me a bunch of questions.

Just a quick question. The federal government's tax policies on the banks, will that have any pairing on your results?

I would say no. The tax on buybacks of shares comes to next year. I'm not sure we'll be buying back next year if our stock is finally surfaced again. So that could hurt us if we were still buying back shares. The other -- we're already paying a higher tax rate, a total tax rate than the other banks. We're averaging 30%, they're averaging 20%. We've got some room to move a little lower. Generally speaking, I think we're in a favorable environment from the government's perspective in that we are a bank that provides choice for consumers, i.e., the capital that we're pushing through our partners enables consumers to get fast on the spot point-of-sale financing at more economical rates. I think that's what our federal government wants is Canadian taxpayers to have access to maybe more appropriate financing at the point-of-sale. So a little bit of a wind at our back on that front. Many years ago, it was the liberals that gave us our license too. Thank you. Greg MacDonald.

There's been a lot of discussion about funding, risk issues. Obviously, there's some discussion on the stock [indiscernible]. One of the things I've always liked to understand is the institutional [indiscernible]. And for that reason, by definition will have less volatility. But [indiscernible] institutional partners that you have and are they seeing any indication of retail and/or client base for deposits? Or do you think that that's maybe for [indiscernible]?

Well, we don't see indication of deposits diminishing. But we have seen kind of a metric that indicates there is some nervousness in the deposit area and that prior to all this, we were budgeting around 50 basis points over government candidates, same turn government candidate ones for our deposit rates. Some case that's 100. So I interpret that as other FIs, who remain mainly nameless, probably quite rightly are going into the term market a little more than the high rate daily interest savings accounts because it just kind of got a lesson in California of how fast those deposits can disappear. I think some folks might think because we call ourselves a tech bank that we might actually have award-winning websites where folks can take the money out in a heartbeat. We don't have such things because I thought a little bank after watching it, it's a wonderful life as a little kid. I've watched him run a bank. You want to keep -- make sure your deposit base is as sticky as possible. So I would guess that some of the other FIs that have quite a reliance on high rate interest savings accounts and accessible on the internet are probably leaning into more term deposits to offset the risk that some ridiculous statements made in the internet and it causes havoc. We know ridiculous statements are made all the time now. And in our industry, that can be very troublesome if you can get your money out in a hurry.

And so correlated to that one, can you talk about any [indiscernible] as an economist when the regulators are talking about attention to this to be extended tail issue in the U.S. market specifically...

Yes.

Maybe not so much in Canadian market because we have that capital intentions. Can you talk about that issue overall...

Well, the way we look at it is we have to be careful in the United States. It's a huge market. So we can be cherry pickers and say choose partners that are the very best. But generally speaking, I'm nervous about the market in the United States in that I think their credit risk is very high. And it will sort of start with office buildings, not going into foreclosure. And then it will spread throughout the smaller FIs that have been financing them. And then there's been, I think, a little loose credit in the consumer area too and that always comes home. So we know United States is a huge market. We know we're bringing in a better mousetrap, but we can be also quite discerning on who we bring on board because what you're saying, I think is absolutely true. You just need to go down into New York and have a look at all the empty office buildings and say, holy smokes, who's paying the property taxes on those buildings? You know someone's going to suffer soon. So it's no surprise to me that Jamie Dimon is saying workers need to come back to work. Of course, they do, they've got to get back to work fast because you can't have a ghost town city with that expensive property. And some bankers finance that.

And just one last one. The last question. You're still in the past or this might be an opportunity to [indiscernible]...

Yes.

Since COVID, a lot of financial institutions have come back from that point of sale...

Yes.

Do you see this ironically this -- ironically an opportunity there?

Yes, it is. That's why -- another reason why we're somewhat countercyclical in that when the capital market funding dries up, the cheap, cheap money that's never been out there in the first place dries up. And the community bank syndicates are financing, our target market are looking at their shoes, worrying about their credit. It just -- it creates an opportunity for us to say to their clients, well, try us, you'll like us. And our marketing strategy is never to say we want to replace your business because I know full well that those relationships that our point-of-sale targets have had with our community banks probably goes decades and decades. Their kids go to the same school, they golf together. So our strategy -- and we did this in a way in Canada -- we said, well, just try us. Isn't it better to diversify your funding sources? No one says no. So you just try us. And then what happens, they get used to us, providing some of the financing and we grow that way. We really don't want to replace the entire financing of a company. We like being partners. We believe as a bank, you should be fully diversified in your funding sources and we believe our point-of-sale partners should be too. We just want to be one of them. So it is a good time. It's the happy -- what would Top Gun say? The target-rich environment. Well, that's it for questions. So one more, [ Robbie Nash ]. How are you, sir?

I'd like to congratulate on a wonderful year and great questions. And If I just might stay on that. I came through brokerage business as a stockbroker. And you know, we all know, the game has changed so much. We did a very difficult small cap right on the basement. Bloomberg, the latest even yesterday, the confidence in the stock market [indiscernible] since 2009 and we know that it makes it even more difficult for a wonderful company like VersaBank and even though change in technical 2,000, 5,000, whatever that you just probably got -- it's probably going to take time and you have a company like VersaBank that can do it over time and I think it's [indiscernible] work that is extremely frustrating, real frustrating time which went back over the years where you had this bank that did the right things and it became very difficult to what's happening and today is very, very proud of -- if I talk to other people that I talk to [indiscernible].

Well, thank you, Robbie. I guess, over almost a half century, you learn a few things, right? Well, thanks very much. I look forward to seeing most of you. I think you're going to join us for lunch. And if you have any more detailed questions, of course, staff is here. Happy to answer them. And we'll see you. Thanks.