AnnualFirst Quarter Meeting of2019 Shareholders VersaBankVersaBank April 24, 2019 State-of-the-art Financial Technology Serving Lucrative Niche Markets
2 Board of Directors
Honourable Thomas A. Hockin Chairman
David Taylor President & CEO
Robbert-Jan Brabander Director
David Bratton Director
R.W. (Dick) Carter Director
Arnold Hillier Director
Colin Litton Director
Susan McGovern Director
Paul Oliver Director
Avery Pennarun Director
3 Senior Management
David Taylor President & Jean-Paul Beker Vice President, Chief Executive Officer Real Estate Lending Shawn Clarke Chief Financial Officer & Steve Creery Vice President, Credit Corporate Secretary Nick Kristo Chief Credit Officer Joanne Johnston Chief Internal Auditor
Michael Dixon Executive Head & Wooi Koay Vice President, SVP, eCommerce Information Technology
Ross Duggan Executive Head & Aly Lalani Chief Risk Officer & Treasurer SVP, Commercial Lending Jonathan Taylor Executive Head & Andy Min Vice President, Finance & SVP, Deposit Services & Corporate Accounting Chief HR Officer Scott Mizzen Vice President, Real Estate Lending Tel Matrundola Executive Head VersaBank Innovation Centre of Excellence David Thoms Vice President, Structured & Corporate Finance Gurpreet Sahota Chief Architect, Cyber-Security
4 Auditors
5 State-of-the-art Financial Technology Serving Lucrative Niche Markets
6 Appointment of Auditors
7 Director Nominees
Honourable Thomas A. Hockin
David Taylor
Gabrielle Bochynek
Robbert-Jan Brabander
David Bratton
R.W. (Dick) Carter
Colin Litton
Susan McGovern
Paul Oliver
Avery Pennarun
8 State-of-the-art Financial Technology Serving Lucrative Niche Markets
9 Advisory The Bank occasionally makes forward-looking statements about its objectives, operations and targeted financial results. These statements may be written or verbal and may be included in such things as press releases, corporate presentations, annual reports and other disclosure documents and communications. By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, many of which are out of the Bank’s control. Risks exist that predictions, forecasts, projections and other forward-looking statements will not be achieved. Readers or users of this information are cautioned not to place undue reliance on these forward-looking statements as a number of 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 economy in general and the strength of the local economies within Canada in which the Bank conducts operations; the effects of changes in monetary and fiscal policy, including changes in interest rate policies of the Bank of Canada; global commodity prices, the effects of competition in the markets in which the Bank operates; inflation; capital market fluctuations; the timely development and introduction of new products in receptive markets; the impact of changes in the laws and regulations regulating financial services; changes in tax laws; technological changes; unexpected judicial or regulatory proceedings; unexpected changes in consumer spending and savings habits; and the Bank’s anticipation of and success in managing the risks implicated by the foregoing. The Bank makes no undertaking to update any forward-looking statement that is made from time to time by the Bank.
10 Management Presentation
David Taylor, President & CEO
Introduction & Performance Review: ▪ F2018 Business Line Performance ▪ Bank Financial Performance
Strategic Review: ▪ The Way Ahead ▪ Key Growth Drivers
11 Vision We aspire to be the preferred provider of innovative financial solutions to our select clients operating in niche markets across Canada.
Mission To provide our clients with ideally suited financial products, services and solutions n order to deliver a competitive and sustainable industry leading rate of return to our shareholders.
12 Strategic Priorities
Leverage existing financial product distribution channels to minimize Investment in physical infrastructure and human $ 1.8 Billion Total Assets resources. Borrower Accounts (~ 128,000), Depositor Accounts (~ 25,000). Maintain state-of-the-art custom banking business and administration software to maximize transaction capacity, Deposit & Loan velocity and efficiency. Origination Partners in order to(~255) maximize transaction capacity, velocity and operational efficiency and Leverage digital technology to further the Bank’s operational delivery new products and financial Independence. Employee’ s (86)
Ensure that our risk management framework, policies and procedures continue to evolve at a pace that is congruent VB with our business growth and complexity.
13 2018 Results
$1.8 $1.8B $1.4B $223M $18.1M $1.19
ASSETS DEPOSITS SHAREHOLDERS’ NET INCOME CORE CASH EPS EQUITY
14 Diversified Funding
▪ Personal deposits ▪ Commercial deposits ▪ Cash holdbacks
15 National Deposit Networks
113 Deposit Brokers Insolvency Industry and Financial Institutions
Deposits are sourced through a well-established and diversified national network consisting of 113 Deposit Brokerage Firms and 96 Insolvency Offices.
16 Low Cost Commercial Deposits
Commercial Deposits (No. of Accounts) Commercial Deposit Balances
$386M $385M 3910 4007
3369 $314M
2490 $210M
$113M 1109 852 $86M
$35M 198 22 $1M
2012 2013 2014 2015 2016 2017 2018 2019 Q1 2012 2013 2014 2015 2016 2017 2018 2019 Q1
Apr 2012 VersaBank launches Web based chequing accounts Jan 2019 96 Trustee Offices with over 4007 Accounts and $385MM on Deposit
17 Cost of Funds Trend
2.85%
2.35%
1.85%
1.35%
0.85%
0.35%
COFs GOC 2 yr Benchmark Bond Yield
18 Lending
▪ Commercial Banking ▪ eCommerce
19 Commercial Banking – Real Estate
20 eCommerce - Receivables Purchase Program
21 eCommerce - Receivables Purchase Program
A variety of consumer and small business loan and lease receivables purchased electronically from origination partners operating throughout Canada
22 Loan & Lease Receivable Portfolio
$921M $895M
$811M $784M
$608M
$392M
$187M $109M
2012 2013 2014 2015 2016 2017 2018 2019 Q1
Our Receivable Purchase Program continues to grow as we establish new relationships and increase our portfolio from 20 existing partners.
23 Balance Sheet Mix
Q118 Q119 33% 33% 8% Commerial Real Estate 8% Treasury and Other 3% 6% Assets 3% Non-Commercial Real 4% Estate Corporate and Public Sector Structured Finance
49% 53%
Total Assets $1,707 MM Total Assets $1,746 MM NIM 2.87% NIM 3.00%
24 Key Performance Trends
$60 4.00% Millions $50
Big 5 Bank 3.00% 3.00% Average NIM 2.91% $40 approx. 1.76% 2.57% 2.31% $30 2.21% 2.00% 1.96% $51 $44 $20 $39 $34 $28 1.00% $10 $13
$- 0.00% 2014 2015 2016 2017 2018 2019 Q1 NII($) NIM(%)
25 Credit Quality
Provision for Credit Losses Trend 0.35% 0.35%
Big Bank Average, 0.28%
0.25% 0.25%
0.15% 0.15% PCL(%) 0.12%
0.08% 0.05% 0.06% 0.05% 0.04% 0.02% -0.02% 2013 2014 2015 2016 2017 2018 2019 Q1 -0.05% -0.05% PCL(%) Big Bank Average
26 Core Cash Earnings Trend
$30 Millions $25 $25
$20 CCE - 5 yr. CAGR 48 % $18 $15
$13 $10 $9 $7 $5 $5 $4 $- 2013 2014 2015 2016 2017 2018 2019 Q1 Core Cash Earnings = pre-tax earnings adjusted for non-core operating income/expenses
27 Comparative Capital Ratios
CET1 (%) October 31, 2018
13.50%
12.26% 12.00% 11.50% 11.40% 11.40% 11.20% 11.10%
9.10% 8.90%
28 Comparative Leverage
Leverage (%) October 31, 2018
11.56%
8.50%
5.00% 4.50% 4.40% 4.30% 4.20% 4.20% 4.10% 4.10%
29 CCROCE vs. P/BV for CDN Banks 2.1
1.9 RBC
TD Bank 1.7 National Bank
1.5 Bank of Nova Scotia CIBC Bank of Montreal
1.3 P/B P/B
1.1 Canadian Western
0.9 Laurentian Bank Versabank 0.7
0.5 9.0% 10.0% 11.0% 12.0% 13.0% 14.0% 15.0% 16.0% 17.0% 18.0% 19.0% Annualized CCROCE – Q1 2019
30 Financial Overview
Common Shares: Preferred Shares: Preferred Shares: VB:TSX $7.56 VB.PR.A:TSX VB.PR.B:TSX
Issued Shares: 21,123,559 $10.00 (yield 7.0%) $10.00 (yield 7.0%)
Based on Recent Share Price of Non-cumulative 5-year rate Non-cumulative 6-year rate $7.56, Market Capitalization was preferred shares, series 1. reset preferred shares, series 3. $159,694,106. Issued Shares 1,461,460 Issued Shares 1,681,320 YTD Average trading volume/day 25,662 shares. Based on recent share price of Based on recent share price of $10.00 Market Capitalization $10.00 Market Capitalization was $14,614,600. was $16,813,200.
Reset date – Oct 31, 2019 Reset date – April 30, 2021
Reset rate – 543 Basis Points Reset rate – 569 Basis Points
31 In the Works:
• VersaVault Technology Licensing; • Prepaid and Secured Credit Cards; • Operating Deposit Accounts; • Enhancements to Receivable Purchase Program.
32 Summary
▪ Highly scalable model ▪ High growth rate
▪ Common share dividend ▪ Core Cash Earnings 5yr CAGR increased by 50% in Q1 F19 of 48% (October 31, 2018)
▪ Leverage digital technology ▪ High net interest margins, to serve niche markets low loan losses • Exciting new initiatives
33 State-of-the-art Financial Technology Serving Lucrative Niche Markets
34