Good morning, ladies and gentlemen. Welcome to the VersaBank's twenty twenty one Annual Meeting of Shareholders. A note that for those who are participating in today's call by telephone, the accompanying slide presentation is available on the bank's website. I would now like to turn the call over to David Taylor, President and Chief Executive Officer of VersaBank. Please go ahead, Mr.
Taylor.
Good morning. My name is David Taylor, and I am President and CEO of VersaBank. I would like to welcome you to our meeting today. This is another unusual year amid COVID-nineteen pandemic. It is also the second annual meeting, which is being offered by webcast.
We hope you find the format convenient, and thank you for staying safe and joining us remotely. I further wish to thank you for providing your advanced voting instructions by proxy, which will allow the meeting to proceed efficiently. The Annual and Special Meeting of the Shareholders of VersaBank will now come to order. In accordance with the bylaws of the bank, I shall preside as Chairman of the meeting. Brent Hodge, General Counsel and Corporate Secretary of VersaBank, will look at that.
One sec, ladies and gentlemen, we're just having technical difficulty here. We'll act as secretary of the meeting. Before commencing the formal business of this meeting, I would like to introduce the other directors of VersaBank, the Honorable Thomas Hawken. Tom is from London and currently resides in Rancho Mirage, California. He has been a Director of the Bank since 2014.
Gabriela Boynichuk. Gabriela is from Toronto and has been a Director of the Bank since 2019. Robert Jean Brebonder. Robert Jean is from Richmond Hill and has been a Director of the Bank since 02/2009. David Bratton.
David is from London and has been a Director of the Bank since 1993. Dick Carter. Dick is from Regina and has been a Director of the Bank since 2014. Peter Irwin. Peter is from Toronto and has been a Director of the Bank since January one of this year.
Art Linton. Art is from Kitchener and has been a Director of the Bank since 2020. Sue McGovern is from Gormley and has been a Director of the Bank since 2011 Paul Oliver, Paul is from Markham and has been a Director of the Bank since 02/2005. I would also like to take the opportunity to acknowledge the contribution of Colin Lytham, a longtime Director of VersaBank, who passed away unexpectedly in December. For nearly thirty years, Colin was an outstanding contributor to the success of VersaBank.
He was initially our auditor, KPMG, and later joined our Board where he served for more than a decade. We will all miss his kind spirit, deep wisdom, friendship on our Board. We're also pleased to introduce the other officers of the bank. Sean Clark is our Chief Financial Officer Mike Dixon, Senior Vice President, Ecommerce Ross Duggan, Senior Vice President, Commercial Lending Nick Christo, Chief Credit Officer Ali Lalani, Senior Vice President, Deposit Services and Treasurer Tammy Ashton, Chief Risk Officer Jean Paul Becker, Vice President, Commercial Lending Steve Curry, Vice President, Credit Barb Hale, Chief Compliance Officer and Chief Anti Money Laundering Officer Sadi Anam, Vice President, Credit Joann Johnson, Chief Internal Auditor Wui Khoi, Chief Information Officer Nancy McCutcheon, Vice President, Trust Insolvency Business Development Andy Min, Vice President, Finance and Corporate Accounting Scott Mizen, Vice President, Commercial Lending David Toms, Vice President, Structured Finance Barb Chaudhrys, Vice President, Deposit Services Terri Wilson, Vice President, Investment and Risk Control. I would also like to introduce John Taylor, our Chief Human Resources Executive Wade McBain, our Director of Investor Relations Tel Matrandola, Chief Strategist and Gurpreet Sahota, Chief Architect of Cybersecurity.
Thank you. The shareholders' auditors, KPMG LLP, is represented by Jim Cassidy. In order to make the best use of our time, individuals were identified as movers and seconders in advance for the resolutions which were set out in the notice of the meeting. With the consent of the meeting, Laura Stone of Computershare Investor Services, Inc. Will act as scrutineer of this meeting to report on the shareholders represented by proxy at this meeting and to report to me on these matters.
Prior to the commencement of this meeting, the scrutineers reported that on the basis of the proxy submitted, a quorum had been reached. In accordance with the bylaws of the bank, I declare the meeting regularly called and properly constituted for the transaction of business. I direct that the scrutineers' report to be annexed to the minutes of this meeting. The notice calling this meeting and the accompanying material have been mailed to all shareholders of the bank who were shareholders of record on 03/04/2021, and the secretary of the meeting has provided proof of mailing of such material. Accordingly, the reading of the notice of the meeting will be dispensed with and a copy of the notice with a proof of mailing and filed amended notice will be kept with the Secretary of the meeting.
I propose that we now proceed with the business of the meeting. The financial statements of the Bank for the year ended 10/31/2020, together with the report of the auditors thereon, have been mailed to the shareholders of the bank. It is not proposed to ask shareholders to approve the financial statements. However, we would be pleased to deal with any relevant questions concerning the statements during the general question period, which follows the formal business of the meeting. Copies of the report of the auditors and financial statements are available for inspection at this meeting.
The next item of business is the appointment of the auditors for the current year and the authorization of directors to fix the remuneration of the auditors. Sean Clark and Andy Min have agreed in advance to move and second the resolution appointing the auditors for the current year. The motion reads as follows: KPMG LLP chartered accountants be appointed auditors of the bank to hold office until the close of the next annual meeting of the shareholders or until their successors are duly appointed and that the directors of the bank be authorized to fix the remuneration of the auditors for the current year in such an amount as they may in their discretion determine. You have now heard the motion. In accordance with the results of the voting complete in advance of the meeting, I declare the resolution carried.
We will now proceed with the election of directors. The number of directors of the bank is fixed at 10, and it is necessary for such number to be elected. In advance of this meeting, Jonathan Taylor agreed to nominate each of the individuals listed in the management proxy circular for election as directors for the coming year, each of whom has agreed to serve as a director if elected. Ali Lalani agreed in advance to second the nominations. In accordance with the results of the voting completed in advance of this meeting, I declare the resolution carried.
Be it resolved that each of honorable Thomas Hawken, David Taylor, Gabrielle Boynchak, Robert Jean Braibonder, David Bratton, Richard Carter, Peter Erwin, Art Linton, Susan McGovern and Paul Oliver be elected as director of the bank for the ensuing year or until a successor is duly elected or appointed. If any registered shareholder or proxy holder is interested in the exact number of votes cast in respect of the resolution, he or she may obtain particulars after the meeting on inquiry to the Secretary of the meeting. The next item of business is the approval of the long term incentive program. A full copy of the long term incentive program is attached as Exhibit A to the management proxy circular mailed to the shareholders of the bank in connection with this meeting. On 02/23/2021, the bank's board approved the LITP and now require confirmation of the shareholders by the ordinary resolution.
The form of resolution is contained at page 15 of the circular. Sean Clark and Jonathan Taylor agreed in advance to move and second the resolution approving the long term incentive program. The motion reads as follows: The adoption of the long term incentive program as described in the circular dated 03/04/2021 is hereby approved, ratified and confirmed. The maximum number of shares which may be issued under the long term incentive program and all the other share compensation arrangements as defined in the long term incentive program of the bank shall not exceed 10 of the total number of shares issued and outstanding from time to time on a non diluted basis. The bank has the ability to grant and to continue granting restricted share units, performance share units, deferred share units, and stock options under the LTIP until 04/21/2024, that being the date that is three years from the date of the meeting of the shareholders of the bank at which shareholder approval is being sought.
And any director or officer of the bank be and such director or officer of the bank hereby is authorized and empowered, acting for, in, the name of, and on behalf of the bank to execute or to cause to be executed under seal of the bank or otherwise, and to deliver or cause to be delivered all such other documents and instruments, and to do so to cause to be done all such other acts and things as in the opinion of such director or officer of the bank may be necessary or desirable in order to fulfill the intent of the foregoing resolution. You now have heard the motion. In accordance with the results of the voting completed in advance of the meeting, I declare the resolution carried. This concludes the formal business of this meeting of the shareholders. In advance of the meeting, Sean Clark agreed to move the final resolution terminating the formal business of the meeting.
Andy Min is seconding. The motion has been accepted, and I declare the formal business of the meeting terminated. With the formal parts of the meeting concluded, I would now like to provide an update on our business and why I've never been so enthusiastic about the prospects of VersaVent. Before I begin, I'll refer you to our advisory regarding forward looking statements. VersaBank's annual meeting last year was on April 22.
We were just a matter of weeks into the pandemic here in Canada, and the full extent of the economic impacts were unknown. This uncertainty was clearly being factored into the stock market. We knew that we were in challenging times when even Warren Buffett responded, I don't know to questions after questions and interviews. But what we did know that VersaBank is a digital bank with significant risk mitigation embedded throughout our model and employed in every decision we make, we were well prepared to weather the storm and to look forward into the future. We then took a very prudent stance amidst the uncertainty out of an abundance of caution to protect the bank and its shareholders by increasing our cash position.
When all was said and done, 2020 turned out to be a very good year for It wasn't long after the initial uncertainty that we had some clarity and we were able to not only mitigate the risks, but to advantageously position VersaBank for growth. As a result, we emerged from the uncertainty as a much stronger organization, not only compared to where we were prior to the start of the pandemic, but compared to our peers as well. We are very clearly seeing the positive impact of our decisions in our rapid growth over the past several months. Additionally, we are seeing an accelerated acceptance of our digital banking, both at the regulatory and market levels. As a digital bank, in fact the world's first digital bank, our time has arrived.
While in retrospect, we may have been overly cautious, it was ultimately the right decision for the health of the bank and the well-being of our shareholders. In the fourth quarter of twenty twenty, we saw very strong sequential growth across all our key financial metrics and year over year growth in most, as we redeployed our cash into the high market demand for financing in certain sectors of the economy, while we continued to lower our cost of funds. Even with our very cautionary stance, VersaBank was still very profitable in 2020. We just didn't grow that profitability for the first time in the last six years. And even with no earnings growth in 2020, VersaBank still delivered a 23% compounded annual growth rate in net income over the past six years and a 31% compounded annual growth rate in core cash earnings over the past six years.
Our first quarter results, which we announced in February, very clearly demonstrated that our continuing momentum. Our core digital banking operations delivered a number of record results. We delivered nearly record net income, even with cash balances still well above our pre pandemic levels. Net interest income increased 5% sequentially and 6% year over year. When the non interest income contributed by Digital Boundary Group is added into total revenue, hit our new record.
Cost of funds decreased to a record 1.42%. Net interest margin increased sequentially to 2.86% and would have been 2.99 at historical cash balances. And net income increased both sequentially and year on year to 5,300,000 or $0.22 a share, the third highest in our history. We're off to a great start in 2021, which is shaping up to be the best year in the history of our digital banking operations. 2020 was a year in which we not only positioned VersaBank to resume its outsized growth trajectory from existing operations, but also a year in which we added new opportunities that significantly expanded our future earnings potential.
In our lending business, we began beta testing our proven point of sale technology for a channel, the CAD 200,000,000,000 home financing market. We call this offering instant mortgage, and it is poised to disrupt the way mortgages are approved and generated through builders, developers and new home and condo sales groups in Canada. Although somewhat protracted due to the pandemic, testing has been completed and we are currently in the process of preparing for the commercial launch of this product and begin taking new mortgages. On the deposit side of our business, and I'm a little hesitant to simply frame this as just a deposit opportunity, we spent a good amount of time in fiscal twenty twenty working on our revolutionary digital deposit receipt, VCAD. VCAD will be facilitated via blockchain and in effect will be a digital currency and represented by Canadian dollars on a one to one basis.
BCAT is not only the world's first bank deposit based digital currency, but it is further enhanced by the bank's investment grade rating. It addresses two major drawbacks of today's digital currencies: stability and certainty of value and security. The potential opportunities for VCAG go far beyond. We have already been approached by third parties who recognize the power of what we have developed, a Ferrari compared to a Model T. As the world's payment system rapidly shifts to a digital world, for these reasons we expect strong demand for VCAD when we launch in the coming months as well as for our intended follow on offerings for vUS, vEuro and vPound sterling versions.
Certainly, it has been a very busy and very productive last twelve months, and that's just in our digital banking operations. The past year has been transformational for our DRT Cyber subsidiary as well, where we are leveraging our internally developed proprietary technology to provide comprehensive suite of innovative cybersecurity solutions that address high demand, underserved segments of this rapidly growing market. We operationalized that business with the acquisition of Digital Boundary Group in early December, adding a profitable growing revenue stream and significantly expanding future opportunities. Digital Boundary Group or DBG is the leading North American cybersecurity penetration testing operation. In a world where there are multiple headlines daily about another major IT systems breach, the value proposition of DBG is clear.
It has a customer roster that includes the who's who of North American corporations and government entities. DBG is experiencing significant organic growth in its business and provides considerable additional opportunities as we start to leverage the business development and revenue synergies of DRT Cyber. For the sixty two days in which we owned VBG during the first quarter, it contributed $1,000,000 in non interest income and was immediately accretive to the bank's earnings. Cash contribution for the most recent quarter was up 50% year on year, and that's before marketing the business development initiatives we have planned for DBG this year as part of DRT's hybrid. We acquired DBG for $10,000,000 a very attractive valuation given its own organic growth prospects, the significant potential to leverage business development synergies through DRT Cyber and their tremendous growth forecasts for the sector.
To conclude, 2020 and our continued strong steady momentum in the first part of twenty twenty one has positioned VersaBank for the resumption of our long term trend of outsized growth with additional significant opportunities. Our core digital banking operations are setting new records and experiencing the highest growth in our history. We expect origination activity to remain strong as we continue our rapid deployment of our still somewhat higher than typical cash balances to drive continued growth in net interest income and net income. We will enter the 200,000,000,000 plus Canadian residential financial market through the commercial launch of our new instant mortgage application. We expect to further reduce our cost of funds as we continue to expand our insolvency professional deposits and additionally launch BCAT.
We're even starting to actively pursue opportunities south of the Canadian border. And we are doing all of this with our new investment grade credit rating, which is not only the validation of our low risk model, but also provides us with new business opportunities. To support our growth plans, we are pleased to have just this morning announced an offering of US50 million dollars aggregate principal amount of fixed floating rate subordinate notes in a private offering to qualified institutional buyers. In addition to the positive outlook for our digital banking operations, we now have visibility into long term profitable high growth potential contribution from DRT Cyber, as I discussed earlier. VersaBank has never, in its thirty year plus history, been in a better position for growth, success and shareholder value creation.
I will now move to the question and answer period. Questions can be submitted either by typing your questions into the Q and A box in the webcast or by phoning into the audio call. The call in details are listed on the final slide of the presentation as well as on the Bursin Bank website.
Thank you. Thank you, ladies and gentlemen. Should you have any questions over the phone, please press star followed by 1. You will hear a three tone prompt acknowledging your request. If you are using your hands speakerphone, please lift your handset before pressing any keys.
A reminder, press star 1 if you have any questions over the phone. No questions on the phone at this time.
And, David, we do not have any questions submitted online as of yet. We will give everyone a couple of minutes. David, we have a question from somebody online who would like to know if the bank has any plans to buy back stock.
No, the bank does not have any plans to buy back stock. Sorry for the short answer, but obviously we are growing very rapidly and need all the CET1 capital we have to fuel the growth going forward.
It appears, David, there are still no questions on the phone, and I'm not seeing any further questions online.
It's early in the morning, Guy. Maybe our shareholders are just having the morning coffee.
Well, David, I'm going to suggest we turn the call back to you for closing comments.
Perfect. Thank you, Laurence. I would like to once again thank everyone for joining us today. Are first David,
we do have sorry to interrupt. We do have a question that just came in, and I think it's a good one. Any thoughts on how the central bank digital currencies fit with VersaBank's initiatives?
Yes, indeed, I do have some thoughts on that subject. I think it's inevitable that central banks will adopt digital currencies. The distinctive feature about our digital deposit receipt we call VCAD is in fact that it is a digital deposit receipt, not a central bank currency. And in this very, very low interest rate environment, they both look very similar that neither one pays interest. But as interest rates inevitably increase, I would expect that our depositors, our VCAD depositors and of course our other depositors will want interest.
And we have the facility to be able to push interest to VCAD owners. So that's the major distinction between a fiat currency that's being digitized and a digital deposit receipt. The digital deposit receipt will perhaps pay interest depending on interest rate environment and the fiat currency wouldn't. We think that VCAT and other digital currencies ideal for transacting business, as will be digitized central bank currencies. But the added bonus of what we are bringing out is that, of course, while you're patiently sitting on your deposit, you're earning a little interest until you decide to spend it, say buying a bicycle on Amazon or some other commodity.
So it may very well look little more attractive than a central bank currency.
And David, that looks like the end of the questions now.
Well, thank you, Laurence. And if anybody has any further questions, they can always send us an email, and we'd be happy to field the questions using that format. So once again, I'd like to thank everyone for joining us today. We at VersaBank appreciate your continued support. The bank will report its second quarter twenty twenty one financial results in late May, and I hope you will join us for the conference on a webcast like this then.
The specific date and details of the call will be announced in the coming weeks. I look forward to the opportunity to meet with you in person again very soon. I extend my best wishes to you and your families in these uncertain times. Thank you.
Ladies and gentlemen, this concludes your conference call for today. We thank you for participating, and we ask that you please disconnect your lines.