VersaBank: Low-cost funds from fixed-to-floater sale is ‘encouraging’

By Devika Patel

Knoxville, Tenn., Sept. 2 – VersaBank management was encouraged by the cost of funding it managed to secure when selling $75 million of fixed-to-floating notes in April, thanks to the company’s high ratings.

“On April 30, we completed a private placement with U.S. institutional investors of fixed to floating rate subordinated notes payable in the principal amount of $75 million,” president and chief executive officer David R. Taylor said on the company’s third quarter ended July 31 earnings conference call on Wednesday.

“This tax-deductible, non-dilutive regulatory growth capital with favorable terms allowed us to take advantage of both the extremely low interest rates, as well as our favorable debt and issuer rating of A- and A, respectively, assigned by U.S. rating agency Egan-Jones.

“Our success in continuing to lower our cost of funding is especially encouraging,” he said.

On April 21, VersaBank sold an upsized offering of $75 million of fixed-to-floating-rate notes due 2031 in a Rule 144A and Regulation S transaction.

The notes start with a 5% fixed rate that converts to a floating rate on May 1, 2026. The floating rate is based on the Banker’s Acceptance Rate plus 361 basis points.

The offering was upsized from $50 million.

The notes can be redeemed at par plus interest any time after the reset date.

The notes were also be offered and sold on a private placement basis in Canada.

The proceeds were earmarked for general corporate purposes.

VersaBank is a Canadian schedule one chartered bank based in Ontario.

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