VERSABANK RECEIVES CANADIAN REGULATORY APPROVAL FOR U.S. BANK ACQUISITON: TRANSACTION TARGETED TO CLOSE AUGUST 30, 2024

Rhea-AI Summary

VersaBank (TSX: VBNK, NASDAQ: VBNK) has received final approval from the Office of the Superintendent of Financial Institutions (OSFI) to proceed with its acquisition of Stearns Bank Holdingford N.A., a Minnesota-based bank with US$79 million in assets. This follows earlier approvals from U.S. regulators.

The acquisition is scheduled to close on August 30, 2024. This strategic move aims to launch VersaBank's successful Receivable Purchase Program (RPP) in the U.S. market. The RPP is designed to provide point-of-sale financing solutions, leveraging a decade of growth in Canada and positive feedback from a U.S. pilot program.

Stearns Holdingford will transition smoothly under VersaBank, maintaining its service to the local community. The acquisition excludes other banks owned by Stearns Financial Services, which will continue to operate independently.

Positive

• VersaBank received final Canadian regulatory approval for acquiring Stearns Bank Holdingford.
• The acquisition will close on August 30, 2024.
• Stearns Bank Holdingford has US$79 million in assets.
• The acquisition enables VersaBank to launch its Receivable Purchase Program (RPP) in the U.S. market.
• The RPP has shown strong growth in Canada and positive results in a U.S. pilot program.

Negative

• None.

Insights

Financial Analyst

The acquisition approved by the Office of the Superintendent of Financial Institutions (OSFI) signifies an important milestone for VersaBank. By acquiring Stearns Bank Holdingford, VersaBank can broaden its footprint significantly into the U.S. market. This move aligns with VersaBank's growth strategy and its ambition to leverage its Receivable Purchase Program (RPP) financing solution in the largest point-of-sale financing market globally.

From a financial perspective, the acquisition will likely lead to increased revenues and expanded market reach. With $79 million in assets from Stearns Holdingford and a strong RPP portfolio, VersaBank positions itself for potential growth in a highly competitive market. However, investors should consider the integration risks and the expenses associated with the acquisition. The financial impact will depend on how well VersaBank can integrate Stearns Holdingford’s operations and capitalize on the demand for RPP in the U.S.

Key points to watch will be operational costs post-acquisition and how these affect VersaBank’s profitability. Additionally, monitoring the performance of the RPP in the U.S. market will be crucial. This acquisition potentially brings high rewards but not without inherent risks.

Market Research Analyst

Market-wise, VersaBank's strategic move into the U.S. indicates a substantial expansion of its business operations. The successful deployment of its Receivable Purchase Program (RPP) in the Canadian market and the positive reception of its U.S. pilot program suggest a strong market demand that VersaBank aims to address. This initiative could see the bank tapping into a larger customer base.

One area worth noting is the competitive landscape of the U.S. financial services industry, which is heavily saturated with well-established players. VersaBank's ability to successfully market and grow its RPP will depend largely on its differentiation strategy and how effectively it can communicate the unique benefits of its program. Investors should watch for VersaBank's marketing and customer acquisition strategies moving forward.

While this expansion offers potential for substantial market growth, market participants should remain cautious about the bank’s capacity to navigate regulatory environments and competitive pressures in a new territory.

–  Acquisition Will Enable VersaBank to Broadly Launch its Unique and Highly Successful Receivable Purchase Program (RPP) Financing Solution in the United States –

LONDON, ON, June 25, 2024 /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 that it has received approval from  its Canadian regulator, the Office of the Superintendent of Financial Institutions (OSFI), to proceed with VersaBank's acquisition of Minnesota-based Stearns Bank Holdingford N.A. ("Stearns Holdingford") (the "U.S. Bank Acquisition").  OSFI's approval follows approvals by U.S. regulators and is the final approval required to enable VersaBank to complete the U.S.  Bank Acquisition.  VersaBank is targeting close of the U.S. Bank Acquisition for August 30, 2024.

Stearns Holdingford is an independent OCC-chartered national bank with US$79 million in assets located in Holdingford, Minnesota that is wholly owned by Stearns Financial Services, Inc. ("Stearns Financial"). Stearns Financial, a multi-bank holding company owning two additional and separate national bank charters, Stearns Bank Upsala National Association and Stearns Financial's flagship and largest national bank, Stearns Bank National Association (headquartered in St. Cloud, Minnesota), is not part of the VersaBank transaction and will continue to exist and operate independently.

"OSFI's approval of our U.S. bank acquisition – the final regulatory hurdle for this transformational next step in our growth strategy – paves the way for the launch of our unique and highly successful Receivable Purchase Program (RPP) to the largest point-of-sale financing market in the world," said David Taylor, President and Chief Executive Officer, VersaBank.  "Building on more than a decade of very strong growth in our RPP portfolio in Canada and the very favourable response to our RPP pilot program in the U.S., we are actively working toward broadly launching our RPP solution this autumn to address the significant demand that has developed since first announcing  our intention to enter the U.S. market."

Mr. Taylor added, "We are actively working with the Stearns team toward closing of the Stearns Holdingford acquisition, ensuring a smooth transition and integration, and continuing the outstanding legacy of Stearns Holdingford in serving the local community."

About VersaBank's Receivables Purchase Program

VersaBank's Receivable Purchase Program is an innovative and highly attractive digital funding solution for finance companies who 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 April 30, 2024, VersaBank's Receivable Purchase Program portfolio was in excess of C$3.1 billion (US$2.3 billion), growing at compounded annual rate of more than 26% over the last five years (fiscal year ended October 31).  Since the Bank's RPP was first launched in Canada in 2010 and launched on a limited basis in the U.S. in April 2022, VersaBank has provided more than C$9 billion (more than US$6.5 billion) in funding to North American finance companies.

About VersaBank

VersaBank is a Canadian Schedule I chartered (federally licensed) bank with a difference. VersaBank became the world's first fully digital financial institution when it adopted its highly efficient business-to-business model in 1993 using its proprietary state-of-the-art financial technology to profitably address underserved segments of the Canadian banking market in the pursuit of superior net interest margins while mitigating risk. VersaBank obtains all of its deposits and provides the majority of its loans and leases electronically, with innovative deposit and lending solutions for financial intermediaries that allow them to excel in their core businesses. In addition, leveraging its internally developed IT security software and capabilities, VersaBank established wholly owned, Washington, DC-based subsidiary, DRT Cyber Inc. to pursue significant large-market opportunities in cyber security and develop innovative solutions to address the rapidly growing volume of cyber threats challenging financial institutions, multi-national corporations and government entities on a daily basis.

VersaBank's Common Shares trade on the Toronto Stock Exchange ("TSX") and Nasdaq under the symbol VBNK. Its Series 1 Preferred Shares trade on the TSX under the symbol VBNK.PR.A.

Forward-Looking Statements 

VersaBank's public communications often include written or oral forward-looking statements. Statements of this type are included in this document, and may be included in other filings and with Canadian securities regulators or the U.S. Securities and Exchange Commission, or in other communications. All such statements are made pursuant to the "safe harbor" provisions of, and are intended to be forward-looking statements under, the United States Private Securities Litigation Reform Act of 1995 and any applicable Canadian securities legislation. The statements in this press release that relate to the future are forward-looking statements. By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, many of which are out of our control. Risks exist that predictions, forecasts, projections, and other forward-looking statements will not be achieved. Readers are cautioned not to place undue reliance on these forward-looking statements as several important factors could cause actual results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements. These factors include, but are not limited to, the strength of the Canadian and U.S. economy in general and the strength of the local economies within Canada and U.S. in which we conduct operations; the effects of changes in monetary and fiscal policy, including changes in interest rate policies of the Bank of Canada and the U.S. Federal Reserve; changing global commodity prices; the effects of competition in the markets in which we operate; inflation; capital market fluctuations; the timely development and introduction of new products in receptive markets; the impact of changes in the laws and regulations pertaining to financial services; changes in tax laws; technological changes; unexpected judicial or regulatory proceedings; unexpected changes in consumer spending and savings habits; the impact of wars or conflicts including the crisis in Ukraine and the impact of the crisis on global supply chains; the impact of new variants of COVID-19 and the Bank's anticipation of and success in managing the risks implicated by the foregoing. For a detailed discussion of certain key factors that may affect our future results, please see our annual MD&A for the year ended October 31, 2023.

The foregoing list of important factors is not exhaustive. When relying on forward-looking statements to make decisions, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. The forward-looking information contained in this document and the related management's discussion and analysis is presented to assist our shareholders and others in understanding our financial position and may not be appropriate for any other purposes. Except as required by securities law, we do not undertake to update any forward-looking statement that is contained in this document and the related management's discussion and analysis or made from time to time by the Bank or on its behalf.

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SOURCE VersaBank

FAQ

What date is the closing of VersaBank's acquisition of Stearns Bank Holdingford?

The acquisition is targeted to close on August 30, 2024.

What regulatory approval did VersaBank receive for the U.S. bank acquisition?

VersaBank received final approval from the Office of the Superintendent of Financial Institutions (OSFI).

How much are Stearns Bank Holdingford's assets worth?

Stearns Bank Holdingford has US$79 million in assets.

What program will VersaBank launch in the U.S. following the acquisition?

VersaBank will launch its Receivable Purchase Program (RPP) in the U.S.

Has the Receivable Purchase Program (RPP) been tested in the U.S. market?

Yes, the RPP has shown positive results in a U.S. pilot program.