VersaBank (“VersaBank” or the “Bank”) (TSX: VBNK) (NASDAQ: VBNK), a North American leader in business-to-business digital banking, as well as technology solutions for cybersecurity, announced that, on August 30, 2024, it closed its previously announced acquisition of Stearns Bank Holdingford N.A. (“SBH”). SBH is a national bank chartered under the laws of the United States and regulated by the national Office of the Comptroller of the Currency (OCC) (the “Acquisition”). Upon closing, SBH was renamed VersaBank USA N.A. (“VersaBank USA”). The closing of the Acquisition marks the formal launch of VersaBank’s unique Receivable Purchase Program (RPP) funding solution for point-of-sale finance companies in the underserved multi-trillion-dollar U.S. market.
VersaBank acquired SBH, a $62 million asset-sized bank from Stearns Financial Services, Inc. (“Stearns Financial”), a multi-bank holding company owning several banks including its flagship Stearns Bank National Association having over $3 billion in assets.
“This is a transformational event in VersaBank’s growth strategy, enabling us to bring our unique and highly attractive RPP solution, which has been very successful in Canada, to the largest point-of-sale financing market in the world,” said David Taylor, President and Chief Executive Officer, VersaBank. “Over the last 14 years in Canada, we have proven the value proposition of our RPP solution to point-of-sale finance companies, while validating the very low-risk nature of the RPP cash holdback model, both of which are the direct result of our proprietary, state-of-the-art banking technology. To date, our RPP portfolio has never had a loan loss. We are actively working toward finalizing our first U.S. RPP partners as VersaBank USA.”
“Importantly, because our Bank effectively operates in the cloud, we are able to launch our RPP solution in the U.S with essentially no capital expenditures and de minimus additional operating expenditures. As a result, the monumental U.S. RPP opportunity, alongside our expected continued steady growth in Canada, is expected to generate a strong and sustainable expansion of our loan portfolio for years to come, enabling us to further capitalize on the significant operating leverage in our digital, branchless model to drive growth in profitability and return on common equity and efficiency, that we believe is unmatched in the North American banking industry.”
Mr. Taylor added, “With the acquisition of SBH complete, I want to personally reiterate VersaBank’s commitment to continuing to serve the community of Holdingford, building on the proud legacy of the SBH team.”
“The community of Holdingford is in good hands with VersaBank and I have full confidence that they will continue to provide the same levels of service that SBH customers have come to expect, while playing a meaningful role in support of the broader community,” said Kelly Skalicky, President and Chief Executive Officer, Stearns Financial. “It has been a pleasure to work with the VersaBank team, we share important core values and we at Stearns Financial look forward to a long fruitful relationship with VersaBank as we continue to discover a myriad of additional opportunities for collaboration between our two organizations.”
Summary of the Acquisition
VersaBank acquired 100% of the outstanding shares of SBH from Stearns Financial for cash consideration of approximately US$14.0 million (CAD$19.3 million). As part of the Acquisition, VersaBank acquired approximately US$61.1 million in assets and assumed approximately US$54.1 million in deposits and other liabilities. Upon closing, SBH was renamed VersaBank USA N.A. and VersaBank anticipates that the Acquisition will be accretive to earnings per share within the first year following the closing.
Stearns Financial’s flagship and largest national bank, Stearns Bank National Association (“Stearns Bank”) (headquartered in St. Cloud, Minnesota) having more than $3 billion in assets, and Stearns Bank Upsala National Association (located in Upsala, Minnesota), are not part of the Acquisition and will continue to operate independently of VersaBank as they have for more than 60 years.
Raymond James & Associates, Inc. served as financial advisor, Davis Polk & Wardwell LLP served as U.S. legal counsel, Stikeman Elliott LLP served as Canadian legal counsel and Chain Bridge Partners, LLC acted as regulatory advisor to VersaBank in the Acquisition. Stinson LLP served as legal counsel to Stearns Financial and SBH.
