VERSABANK ANNOUNCES WATERCRESS FINANCIAL AS ITS US RECEIVABLE PURCHASE PROGRAM PARTNER

Rhea-AI Summary

VersaBank (TSX: VBNK) (NASDAQ: VBNK) has announced a strategic partnership with Watercress Financial Group through its US subsidiary, VersaBank USA National Association. The agreement enables Watercress, a growing point-of-sale originator of home improvement loans, to utilize VersaBank's Receivable Purchase Program (RPP) for funding its originations.

This marks VersaBank's first American partnership following its US bank acquisition, targeting the world's largest point-of-sale financing market. The partnership leverages VersaBank's 15-year experience with RPP solutions in Canada, where home improvement financing has been a significant growth driver. Watercress Financial brings extensive experience in originating and servicing home improvement loans across North America, with funding set to commence immediately.

Positive

• Entry into US point-of-sale financing market, the world's largest
• First US partnership following strategic bank acquisition
• Immediate commencement of funding operations
• Partnership with established player in home improvement lending

Negative

• None.

Insights

Financial Services Analyst

This strategic partnership represents a pivotal moment for VersaBank's US expansion strategy, marking its first major deal following its US bank acquisition. The collaboration with Watercress Financial is particularly noteworthy for several reasons:

Market Opportunity: The US home improvement financing market presents a substantial growth vector, with the point-of-sale financing sector experiencing rapid expansion. Watercress's established nationwide contractor network provides VersaBank with immediate market access and a proven origination channel.

Strategic Advantages: VersaBank brings three critical elements to this partnership:

• A battle-tested RPP solution with 15 years of successful implementation in Canada
• Digital banking infrastructure that can scale efficiently
• A regulated banking platform through their recent US bank acquisition

Risk Management: Home improvement loans typically demonstrate strong performance metrics due to their secured nature and homeowner quality. Watercress's track record in originating high-quality consumer loans aligns with VersaBank's conservative risk approach, suggesting a well-matched partnership focused on sustainable growth.

This deal positions VersaBank to replicate its Canadian success in the larger US market, potentially accelerating its revenue growth trajectory while maintaining its disciplined approach to credit quality. The immediate commencement of funding indicates both parties' readiness and could translate to near-term impact on VersaBank's loan portfolio growth.

LONDON, ON, January 31, 2025 /PRNewswire/ - VersaBank (TSX: VBNK) (NASDAQ: VBNK), a North American leader in business-to-business digital banking, as well as technology solutions for cybersecurity, today announced through its wholly owned subsidiary, VersaBank USA National Association, it has entered into an agreement with Watercress Financial Group LLC ("Watercress"), a rapidly growing point-of-sale originator of home improvement loans in the US. Watercress has a proven track record of originating high quality consumer loans through its expanding nationwide network of contractors and will leverage VersaBank's innovative Receivable Purchase Program ("RPP") to fund a portion of its originations. Funding will commence immediately.

"The United States represents the largest point-of-sale financing market in the world. So, we are proud to announce this partnership with Watercress Financial as we roll out our unique RPP solution, which we have proven out in Canada over the last 15 years," said David Taylor, President and Chief Executive Officer, VersaBank. "Watercress Financial is our first American partner following our transformational acquisition of a US bank. Home improvement financing has been one of the biggest drivers of the significant growth in our Canadian business in recent years, so we are naturally excited to team up with a fast-growing leader in this expanding market. We look forward to continuing to work with the incredible team at Watercress Financial to support their accelerating growth."

"We believe Watercress management's long and successful history of originating and servicing home improvement loans in North America, along with our previous success of working with VersaBank, makes us an ideal partner for VersaBank's expansion into the US," said Matt Melius, Chief Executive Officer, Watercress Financial. "This new funding program continues our efforts to expand and diversify funding sources.  We appreciate VersaBank's collaborative approach and demonstrated reliability, proven performance, and long-term relationship orientation."

About VersaBank's Receivable Purchase Program

VersaBank's Receivable Purchase Program (RPP) is an innovative and highly attractive digital funding solution for finance companies that lend money to consumers and small businesses for what are typically "big ticket" purchases (e.g. consumer home improvement/HVAC projects and a wide variety of commercial equipment). It was specifically designed to address an unmet need in the market for consistently available, readily accessible, economically attractive capital using VersaBank's proprietary, state-of-the-art banking technology. Consistent with its branchless, business-to-business, partner-based digital banking strategy, VersaBank's RPP enables it to access the massive and growing consumer and small business financing market in an indirect, efficient and highly risk-mitigated manner.

As of October 31, 2024, VersaBank's RPP portfolio exceeded CAD$3.3 billion (US$2.4 billion) and has been growing at a compounded annual rate of over 27% over the last five years. Since VersaBank's RPP was first launched in Canada in 2010 and launched on a limited basis in the US in April 2022, VersaBank has provided more than CAD$10.5 billion (US$7.5 billion) in funding to North American finance companies.

About Watercress Financial

Watercress Financial partners with contractors to provide financing options to individuals planning home improvement projects. Their intuitive platform allows contractors to easily research financing products, quickly enabling them to close more deals and grow their business. Founded in 2021 by consumer finance experts with decades of experience, Watercress Financial combines knowledge with a white-glove approach to ensure contractors have the support they need throughout each project.

About VersaBank

VersaBank is a North American bank (federally chartered in Canada and the US) with a difference. VersaBank was the world's first fully digital financial institution and today has a cloud-based, branchless, digital, business-to-business model based on its proprietary state-of-the-art technology that enables it to profitably address underserved segments of the banking industry in a significantly risk mitigated manner. Because VersaBank obtains substantially all of its deposits and undertakes the majority of its lending electronically through financial intermediary partners, it benefits from significant operating leverage that drives efficiency and return on common equity. In September 2024, following its acquisition of a US bank, the Bank broadly launched its unique Receivable Purchase Program (RPP) funding solution for point-of-sale finance companies, which has been highly successful in Canada for nearly 15 years, to the underserved multi-trillion-dollar US market. VersaBank also owns Washington, DC-based DRT Cyber Inc., a North America leader in the provision of cyber security services to address the rapidly growing volume of cyber threats challenging financial institutions, multi-national corporations and government entities.

VersaBank's Common Shares trade on the Toronto Stock Exchange ("TSX") and Nasdaq under the symbol VBNK. 

Visit our website at: www.versabank.com
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SOURCE VersaBank

FAQ

What is the significance of VersaBank's partnership with Watercress Financial for VBNK stock?

The partnership marks VersaBank's entry into the US point-of-sale financing market, expanding its successful Receivable Purchase Program beyond Canada and potentially driving growth through the world's largest market.

How will VersaBank's RPP program work with Watercress Financial in 2025?

VersaBank's RPP program will fund a portion of Watercress Financial's home improvement loan originations through their nationwide network of contractors, leveraging VersaBank's 15-year experience in Canada.

What market opportunity does the January 2025 Watercress partnership present for VBNK?

The partnership gives VBNK access to the US point-of-sale financing market, the world's largest, particularly in home improvement financing which has been a significant growth driver in their Canadian operations.

When will VersaBank's partnership with Watercress Financial begin operations?

The funding operations through VersaBank's Receivable Purchase Program will commence immediately following the January 31, 2025 announcement.