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London’s little bank that grew is growing into the massive U.S. market.
VersaBank, an online commercial lender, has received approval, after a two-year wait, to buy the Minnesota-based bank Stearns Bank Holdingford, giving it a foothold in America, said chief executive David Taylor.
It means VersaBank, which has $4.4 billion in assets, may see big growth during the next five years, he said.
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“We’re soon to be an international organization,” Taylor said. “This is a game changer for VersaBank. We’re going into the largest market in the world. It’s a big deal.”
He forecast that within five years, VersaBank may grow by 10-fold.
VersaBank initially made the $13.5-million purchase in 2022 but only now has received two of three approvals needed. It has the green light from the U.S. Federal Reserve and the U.S. Office of the Comptroller of the Currency and will need Canadian regulatory approval as well.
Stearns Bank Holdingford, which has $79 million in assets, will see a name change to VersaBank USA once the transaction is completed, Taylor said.
“It speaks volumes that our Canadian neighbour, VersaBank, has chosen Holdingford as its home base for entry into the U.S. market,” Heather Plumski, Stearns Bank Holdingford president, said in a statement. “The VersaBank team shares our values and culture and is committed to continuing Stearns Bank’s legacy as a vital contributor to and supporter of the local economy.”
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Taylor’s confidence in VersaBank USA’s potential growth is based on new technology, called the receivable purchase program, that it uses for point-of-sale transactions, which is not available in the U.S.
“The point-of-sale product we pioneered in Canada has done very well, giving rise to huge earnings and there’s nothing like it in the U.S.,” Taylor said.
When making a point-of-sale transaction, such as a motorcycle, hot tub or cosmetic surgery, for example, VersaBank buys the loan and it exists on its books. In the U.S., point of sale businesses receive a loan and carry the debt, meaning it has to have about 25 per cent equity in a loan. If it lends $10,000 it has to provide $2,500.
“We don’t require any equity at all, and that’s super attractive to point-of-sale customers,” said Taylor. “They look at us as highly innovative.”
Further, if a loan is not paid for 90 days and is in arrears, the point-of-sale partner takes the loan back and pays out VersaBank, meaning VersaBank doesn’t have to make collections.
“We’ve never had collections; they’re messy,” Taylor said.
VersaBank recently reported its second quarter earnings. Assets increased 18 per cent year-over-year to a record $4.4 billion.
Its total revenue increased seven per cent year-over-year to $28.5 million for the quarter.
Net income increased 15 per cent year-over-year to $11.8 million.
“Our bank has the highest growth rate (earnings per share) in Canada. It’s the stuff other banks dream of,” Taylor said.
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