# VersaBank (VB)



## james4beach (Nov 15, 2012)

VersaBank used to be called Pacific & Western Bank of Canada. It's tiny, only $315 million market cap.

The stock price is erratic. Compared to the TSX, it went nowhere until the end of 2020, then it went crazy in 2021. Does anyone know what's going on with this?

Their loan portfolio is mostly "point-of-sale loans/leases". It sounds like it's real estate lending, related to homes, condos, new constructions, and home renovations.



> A software-based solution for home and condo developers and sales brokerages that enables “on-the-spot” financing approvals, *with a specific focus on newcomer home and condo buyers with significant wealth but no credit history in Canada*


So they're in the business of giving real estate loans to people with no credit history? If these people have 'significant wealth', why are they trying to get loans from an alternative lender? VersaBank's slides also say their software platform is all about giving instant, automatic financing to borrowers.

During a real estate mania.
To people with no credit history.

This makes me wonder how solid their loan portfolio is. They certainly don't disclose or explain much in their financial statements. There is wording saying that there isn't much credit risk because the loan is structured so that the default risk lies with the 'lending partner'. The partners appear to be real estate financing firms who fund things like RE development, new condo developments, renovations.

It smells fishy to me. I wonder who is holding the risk? Are they exposed to counterparty risk of the intermediaries? One thing we learned from 2008 was that fast and loose RE lending during a mania ends in tears. Everyone drops their standards and gets wrapped up in the greed of handing out loans as fast as humanly possible.


----------



## MrBlackhill (Jun 10, 2020)

james4beach said:


> So they're in the business of giving real estate loans to people with no credit history? If these people have 'significant wealth', why are they trying to get loans from an alternative lender?


I recall when my ex-girlfriend was 24, studying, not working, had $1M and wanted to buy a $350k condo, but had issues to get approved for a mortgage because she had no credit history and no job.

While me, 26, fresh out of school, near $0 in my bank account, with a fresh first job at $48k, I could get approved.

I don't know what's the reasoning. It's not because I have a job now that I'll have a job tomorrow. And it's not because she had no job but $1M that she'll burn all of it within a year.

Why not paying the condo cash? Well, she was making 8% to 9% profits with her money while the mortgage rate was below 3%.


----------



## Beaver101 (Nov 14, 2011)

^^ Do not touch with a 10' pole?


----------



## birdman (Feb 12, 2013)

I agree James and I spent over an hour trying to understand the financial statements and accompanying notes which are difficult to understand. I have no idea how they operate albeit the financial margins reported seem good. Not for me.


----------



## Fain (Oct 11, 2009)

Big entry into the Crypto Space. Guy I knew in the crypto space had 6M of their stock wayback a few years ago. Was the only stock in his account. Great to see his forecast was right about this company.


----------



## Fain (Oct 11, 2009)

Fain said:


> t. Great to see his forecast was right about this company.





birdman said:


> I agree James and I spent over an hour trying to understand the financial statements and accompanying notes which are difficult to understand. I have no idea how they operate albeit the financial margins reported seem good. Not for me.


They take deposits and give loans and earn a fee off the spread. Their spread is a lot higher than industry norm but higher risk loans and less diversified.


----------



## james4beach (Nov 15, 2012)

Fain said:


> Big entry into the Crypto Space


Their involvement in crypto coinz is strange, and makes me even more suspicious about the company -- especially about the integrity of their top decision makers.



Beaver101 said:


> ^^ Do not touch with a 10' pole?


Yup

By the way, they are also heavily involved in something called the insolvency professional deposit business. What on earth is this? I've never heard of it. They apparently get their funding from a mix of GICs and "insolvency professionals".

Does anyone know what this means? Why are "insolvency professionals" lending money to VersaBank at zero interest rates? This doesn't make sense to me.


----------



## Fain (Oct 11, 2009)

james4beach said:


> Their involvement in crypto coinz is strange, and makes me even more suspicious about the company -- especially about the integrity of their top decision makers.
> 
> 
> 
> ...


I will leave the crypto comment alone as that seems to be a trigger in the forum battles. 

Insolvency pros are not rate shopping, and they likely wouldn't be able to benefit from higher rates. they just need the accounts to be flexible. The NIM on the deposits is quite high.


----------



## james4beach (Nov 15, 2012)

Fain said:


> Insolvency pros are not rate shopping, and they likely wouldn't be able to benefit from higher rates. they just need the accounts to be flexible.


Can you explain this "insolvency pro" thing so that those of us who've never heard of it understand?

Whose money is being put into a deposit? And why do you they choose VersaBank at nearly 0% interest when they have other options?


----------



## Fain (Oct 11, 2009)

james4beach said:


> Can you explain this "insolvency pro" thing so that those of us who've never heard of it understand?
> 
> Whose money is being put into a deposit? And why do you they choose VersaBank at nearly 0% interest when they have other options?


Without going into a rabbit hole of info concerning bankruptcy law. Insolvency Pros act as trustees and deal with bankruptcy & restructuring situations.


----------



## Fain (Oct 11, 2009)

james4beach said:


> Whose money is being put into a deposit? And why do you they choose VersaBank at nearly 0% interest when they have other options?


Versabank has the software and most banks offer 0% in trust accounts anyways.


----------



## Fain (Oct 11, 2009)

james4beach said:


> Whose money is being put into a deposit?


The insolvent business's money. To be paid out to creditors, employees, clients etc (whatever the court later decides).


----------



## Covariance (Oct 20, 2020)

When a company files, a judge (bankruptcy court) reviews and determines if it makes sense to continue to operate the business or immediately wind it up. Continuing to run it assumes that either more cash can be paid over time, or it can be sold as going concern for more than what the assets are worth if disposed of immediately. If it continues to run the court appoints officials to control the cash, pay cheques, oversee all material decisions. The cash being accumulated is as described by Fain, above.


----------

