Crossing Borders Into U.S. With Announcement of OCC-Chartered Bank Acquisition
Event: Earlier this morning, VersaBank (VBNK) announced they have reached a definitive
agreement to acquire OCC-Chartered Stearns Bank Holdingford, N.A. (“SBH”) headquartered
in Holdingford, MN, the wholly-owned subsidiary of Stearn Financial Services, Inc (LINK). Per
the acquisition agreement, Versa will acquire SBH through its wholly owned U.S. subsidiary
VersaHoldings US Corp and will pay an estimated $13.5 million USD ($17.4 million CAD). SBH is
expected to add ~$60 million in total assets to VersaBank and, upon the expected closing in F4Q22
(subject to regulatory approval in both the U.S. and Canada), will be renamed as VersaBank USA
National Association. Notably, Versa expects the acquisition to be accretive to earnings within the
first year after closing.
Our take: From a strategic perspective, we view the announcement positively for Versa, as the
acquisition of an OCC-chartered, U.S. domiciled bank will provide the bank a national lending and
deposit gathering platform in the U.S. for which they can accelerate growth in their point-of-sale
(“POS”) lending program, which recently launched in the U.S. with the recent announcement of
its first partner. Additionally, in the longer term, we believe the acquisition of the OCC-charter
also provides the bank the initial regulatory framework for the launch of its USD-backed digital
depository receipt, VUSD, though we anticipate that Versa will seek to successfully complete the
commercial launch its Canadian counterpart, VCAD, before entertaining the idea of launching
a USD-backed stablecoin. Ultimately, we believe the acquisition provides Versa the necessary
regulatory platform to achieve its aspirations for POS growth in the U.S., which we believe are set
to accelerate following the acquisition, though we will look for additional color on the financial
impacts of the transaction in our follow-up discussion with management.