VersaBank's
The $3.2 billion-asset London, Ontario-based company received approval Tuesday from Canada's Office of the Superintendent of Financial Institutions to acquire Stearns Bank Holdingford in Holdingford, Minnesota.
The Office of the Comptroller of the Currency and the Federal Reserve put their stamps of approval on the transaction earlier this month.
VersaBank is targeting an Aug. 30 close. VersaBank
For VersaBank CEO David Taylor, there seems to be no hard feelings. Taylor expressed delight that the two-year process is nearing completion. "It's worked out wonderfully," Taylor said in an interview. "Being granted authority to operate as an OCC bank throughout the United States is a tremendous honor."
Taylor launched VersaBank, known initially as Pacific Western Bank of Canada, in 2002. His plan was to identify niches that were underserved by Canada's Big Six banks. "Canada in particular is really well-served by the large banks," Taylor said. "They serve virtually every nook and cranny in Canada [but] because they're so large there's probably little niches we can serve with targeted software and do a little better job. … We won't be all things to all people. We'll just be very specialized in certain markets."
The niche VersaBank eventually settled on, purchasing loan and lease receivables from point-of-sale lenders, has proved successful, generating a steady stream of worry-free assets and profits. VersaBank reported net income totaling $8.6 million for its second quarter, which ended April 30. For the first six months of its 2024 fiscal year, net income totaled $17.9 million. Similarly, point-of-sale loans increased 9%, totaling $2.27 billion on April 30.
Taylor, who holds a pilot's license and is an aviation enthusiast, has been acquiring U.S. point-of-sale assets on a limited scale since 2022 through a small subsidiary, Versa Finance. Now, Stearns Bank Holdingford will serve as the platform for a broader rollout, eyed for autumn. Lenders here are "keenly, eagerly awaiting us to be able to provide an economical, reliable source of capital to help them with their point-of-sale program," Taylor said.
For Taylor, winning permission to operate in the U.S. was worth the wait. The U.S. is "probably the largest market, maybe by far, for point-of-sale companies," Taylor said. Indeed, VersaBank estimates the U.S. point-of-sale market is growing at about a 20% clip and could reach $1.8 trillion in size in the next few years.
Acquiring a U.S. bank partner was critical since the VersaBank model uses deposits from point-of-sale lenders to offset any loan losses. At the same time, credit issues have been minimal, with VersaBank's provision for credit losses averaging 0.01% the past 12 quarters.
"We don't have a collection department," Taylor said. "We're not in the business of taking a lot of risk. Our model has been to take a minimal amount of risk and use our efficiencies to still make a decent rate of return."
VersaBank's 14-year-old Receivables Purchase Program currently has relationships with 275 lenders.
While VersaBank operates as a branchless digital bank in Canada, it has no plans to close Stearns Bank Holdingford's single office in Holdingford. A subsidiary of St. Cloud, Minnesota-based Stearns Financial Services, Stearns Bank Holdingford caters primarily to agricultural producers, Taylor said. "I live on a farm here in Ontario," Taylor said. "It's quite a privilege, we think, financing our fellow farmers in Minnesota. … It's only one branch for us. We'll look after it as best we can."
Stearns Financial CEO Kelly Skalicky had not responded to a request for comment at deadline.
