Hello and welcome to Virtual Industry Conferences. On behalf of OTC Markets, we are very pleased you have joined us for our Financial Services Conference. Our first presentation of the day is from VersaBank. Please note you may submit questions for the presenter in the box to the left of the slides. You can also view a company's availability for a 1-on-1 meeting by clicking "Book a Meeting" in the top toolbar. At this point, I'm very pleased to welcome David Taylor, Founder and President of VersaBank, which trades on the NASDAQ under the symbol VBNK and on the TSX under the symbol VBNK. Welcome, David.
It's my pleasure, and good morning, everybody. I'm about to tell you an interesting story of a bank that I conceived in the early 1990s and that's evolved into the bank you see today, VersaBank. VersaBank is unique in the, it was very unique back in the early 1990s in that I used telephone modems and IBM PCs to create a digital branchless bank. That's indeed what it has remained today. It's a fully digital bank. In Canada, we were able to obtain the first federal license in about 18 years. In the United States, last year, I think it was about three decades that a foreign bank has obtained a national bank license. Presently, we're able to operate throughout the entire continent of North America and are using our digital cloud-based approach.
That, of course, has given us tremendous efficiency advantages over the traditional banks and allowed us to grow very rapidly, scale very rapidly without increasing our fixed costs all that much. We pride ourselves in providing innovative solutions to the financial markets, and I'm about to tell you about probably the most innovative thing we've done in our history in the next few slides. This little map just shows what I was talking about. We have a tech center located right dead center of Canada at the University of Saskatchewan. We have another tech center in London Airport, which I'm talking to you from right now. We have our cloud-based file server in Des Moines, Iowa, at the Microsoft Azure facility, and we have an office in Minneapolis.
Our claim to fame, our flagship product, our money-making machine, is something we invented about 15 years ago and tried out in Canada. We call it the Receivable Purchase Program. It's the technology we developed to allow us to purchase receivables from point-of-sale finance companies. These are the companies that provide you with a loan to buy a motorcycle, a car, or home improvements, or a hot tub. Virtually anything that is financed at the point of sale could very well end up on our bank's books. We've set up a partnership arrangement with partners all throughout Canada, and since we obtained our national bank license in the United States, we've been setting up partnership arrangements too. Through these partnership arrangements, they send us the loans and leases.
I'm talking a little bit generically there, loans and leases to us in a data stream, and so we're purchasing from them, and they reside on our balance sheet unless they go into 90 days in arrears. At that point, we have a put-back arrangement to give the delinquent loan back to the originator. That's kept us safe over the decades from loan loss experiences. Of course, we have no requirement to have a collection department. We've stayed very, very efficient. There's only about 100 or so people in the bank itself that look after the entire operation. It's extremely scalable and devoid of loan losses. Wonderful from the banker's perspective. This little chart shows how our assets have grown and profitability in terms of return on equity has improved and efficiency has got better.
The bigger we get, the more and more efficient we become, and the higher return on equity. There's a little bit of a plateau in the last couple of years in that we spend a fair amount of money entering the U.S. market. This whole timeline shows what we've been doing recently. Getting regulatory approved in Canada to expand our operations to the United States, having the various regulatory bodies in the United States approve our operations in the United States, and then signing up our first receivable partners. This slide illustrates the tremendous leverage that our model has, and what it shows is sort of the Canadian bank operations for illustration purposes. As the bank adds assets through our partner network, it becomes more and more profitable and more and more efficient. This next slide is another revolutionary new product that our bank has brought out.
If you've seen our press releases recently, you'll see some very, very exciting things that we've done. A few years ago, in 2018, we created the world's first digital vault, and that gave us the ability to tokenize our deposits. We called it VersaVault, and we called it in those days CAD VB because it was in Canada, C-A-D V B for VersaBank. Nowadays that's extremely popular in that the non-banks are issuing something similar they call a stablecoin. Ours is actually an additional representation of the real deposit with a real bank. We decided now that the winter's over, that we'd refresh our pilot project in Canada, and we've also decided to do a pilot project in the United States.
We're unique in the entire world banking industry in that we have two currencies, a USD VB in the United States in the pilot project, and we have the CAD VB in Canada in the pilot project. What these are is digital representations of deposits with our bank that can be used, of course, as any bank's deposit, a stored value. We, of course, intend on paying interest to our deposits, as we do for all our deposits. On top of that, they have the full functionality of the so-called stablecoins, i.e., they're on the three blockchains: Stellar, Ethereum, and Algorand. They serve as a wonderful payment vehicle. I suppose if you're familiar with these types of payment vehicles, you know that they're almost instantaneous payment vehicles. The gas fees that they refer to as the fees are fractions of a cent.
In our case, you don't only get this fantastic payment vehicle, but you also get a super storage value in that it is a real deposit with a real bank. This slide is talking about what I've been saying, USD VB and CAD VB. I would say we're perhaps years ahead of most banks on this front in that when we piloted it in Canada, it was a fair amount of work to get all the wrinkles out, to make sure it all worked properly. We had a third party do what's called a SOC 2 Type 1 certification to ensure that our systems and our governance and everything that banks need to have in place to run a product like this were indeed in place.
As opposed to others that may be dabbling or thinking about it in this area, we have a market-ready product that's going through the pilot process right now on both sides of the border. Hopefully, in the next 60-odd days or so, we'll be ready to roll it out with, of course, what I think is what's technically referred to in the United States as non-objection. I think Canada has something similar to that before we roll it out to the public. Why invest in VersaBank right now? We're clearly at an inflection point, and we've just opened up probably the largest market in the world, the point-of-sale market for our tried and true point-of-sale product. We call it the RPP, Receivable Purchase Program product, which is very well received in Canada and seems to be very well received in the United States too.
I think that in itself is probably a super reason to take a hard look at VersaBank. Very few banks have been able to do that. I asked ChatGPT when the last foreign bank was authorized in the U.S. as an Ashton Bank that goes back 30-odd years. It's quite a breakthrough to have access to the wonderful U.S. market with this wonderful new product that we've developed for the point-of-sale finance companies. When you're looking at investing in a bank, one thing you should really pay attention to is how risky that bank is. When I designed this bank basically from scratch, I tried to put in place all the mitigants to take the normal risks that a bank faces down to as close to zero as I possibly could.
Credit risk I was alluding to earlier with the put-back arrangement with our partners has been almost nonexistent over the decades. You can't say it's zero, but it's as close to zero as a bank gets. That means in terms of profitability that our margin, which has been running on credit assets around 250 basis points, you have to keep most of that, whereas all the other banks are handing some portion of that back as provisions for losses. Strangely enough, our stocks are still valued presently at just a book value. Basically, if you were to get the stock today, you're getting it at the same price that I've paid for it. There's a little bit of a bonus. We also started a cybersecurity firm some time ago to look after the high-value targets in North America.
That would be police departments and energy companies and transportation lines and big retailers that are our customers. We decided to divest of that cybersecurity firm, and I've got some interested parties looking at it now. That, of course, has not been reflected in our book value share price. You get sort of a bonus when we finally conclude the divesture in terms of increase in book value. With the digital deposit receipts I was referring to, we can also dream and technically call it on that. The market is tremendous for it. The stat that I got recently was that $27 trillion worth of transactions take place in the stablecoin industry in the last few years. It's a tremendous growth.
We think we're bringing the Cadillac of so-called stablecoins to this industry in that we have the ability to pay interest, and as a deposit, it should be deposit-insured, and it has all the functionality of the other stablecoins. The added bonus is that you get a bank-issued bank deposit, you get interest, and likely as the bank deposit, it will be deposit-insured on both sides of the border. That could be a tremendous new channel of economically priced deposits for our bank, which is the business we're in, bringing in deposits, tacking on a spread, and earning a nice net interest margin. There's also something we're doing that's in the works, and that is reorganizing ourselves to the traditional U.S. bank structure with a holding company and the Canadian bank as a subsidiary and the U.S. bank as a subsidiary.
That should make us Rothschild eligible, and that might add a little value to the stock with the additional liquidity. I'm going to stop there and open the floor for questions. Let's see. The first question here from Andrew. Have you noticed much difference in consumer behavior between the U.S. and Canada? Yes. In Canada, the consumers tend to finance less at point-of-sale than they do in the United States. Theoretically, you would think that the U.S. market would be 10 times bigger than the Canadian market. It looks like more than 100 times bigger, and the U.S. consumers tend to finance at the point-of-sale more readily than the Canadian consumers do. We got some more questions here. Let me see if I can... They've flipped ahead of me. Sorry for holding on for a sec here. My questions have flipped ahead. I'm on number eight.
Can you elaborate on the scalability of the branchless partner B2B model and how this provides operating leverage relative to the traditional banks? It's almost infinitely scalable. We've employed all the modern techniques. For example, we invented an AI module to review the data that flows in from our partners a zillion times faster than the humans are able to do it. We're able to grow at a huge rate without adding any more humans. We have to add more file servers and such and cook a bit more electricity in that these AI modules tend to be electricity hungry. There's no comparison to our model and the traditional community banks that have an abundance of lovely people working for them and have actual branch networks and such. We have none of those things to soak up expenses. There's a number seven popping up.
When will we expect a divestment of DRT Cyber Inc.? Fingers crossed before the end of the calendar year, or at least have a deal in place by that time. Here's another good question. Let me see. What measures are in place to maintain the highly risk-weighted model and avoid material loan losses at first bank expense in the U.S.? We haven't changed the model. I'm going to say it straight. We have the put-back arrangement with all our partners. To ensure that we can put back the delinquent loans as they occur, each one of our partners maintains a substantial amount of cash on deposit, which we feel, which has been in the last 15 years, sufficient to soak up the loan losses. I wouldn't say it's a riskless way of doing business, lending business, but it's about as close to riskless as you can get.
We have no intention whatsoever to change from this model. I am somewhat allergic to credit risk, and when I designed this bank, I didn't think it behooved a small bank to do riskier business. We'll leave that for the big guys that got huge balance sheets. Where are we going for another one? How and when the planned divestiture years, people say, it hurts that one. Fingers crossed by the end of the calendar year. How, we're employing investment bankers to seek out likely purchasers. Excuse me. Have you noticed much difference in consumer overlap? Sorry, answer that one. Let me see what else you got here. On your recent earnings call, you noted that you have internally developed an AI enhancement that will increase the attractiveness of your legacy Receivable Purchase Program offering.
Can you discuss what these AI enhancements entail, and when do you plan to implement the revamped model? That's a really good question. Immediately, we're seeing the benefits of the AI model in that it's able to process documentation in one minute per document, whereas the humans, let's just take, let's say, 10, 20 minutes. A tremendous increase. Secondly, our human audit team that's auditing the data that's coming in is only able to audit about 20%. It's still a statistically significant sample set, but the AI is able to audit 90%. It's a higher degree of comfort we have that the data that we're receiving fits the credit box that we've established for our partners. As time progresses, we have something on the drawing board that I'm sure our partners will love. By utilizing AI, we will eventually be able to provide real-time purchases of receivables.
As they're generated in, say, in the homeowner's home, when they're filling out the application on the iPad to pay for the new energy-efficient furnace, they hit the button, bingo, now that receivable is batched up and sent to us, and then we send the proceeds to purchase funding back. That could take two weeks, all that process. With AI and our own proprietary technology, it's quite possible that we could buy that on a real-time basis. I know our partners have absolutely loved that because right now they have to batch up, say, a couple of hundred million dollars' worth of receivables, and they have to fund it while they're waiting to conclude a purchase with us. Real-time is the holy grail in our industry. With the AI model that we built about a year and a half ago, that's actually functioning right below me here.
In the winter here in Canada, it produces lots of heat. We get a bonus, a little heat too, but it'll revolutionize the industry in that that's what all these point-of-sale partners are praying for, and that's that the receivables can be purchased instantly, not requiring them to have a load of cash to inventory, and they can get their cash back and get onto their business, which is doing the credit adjudication and marketing their lending products. Very good question. Have I got any more? Let me see here. Here's one. Who do you consider VersaBank's primary competitors in the digital banking and receivable funding space in North America, and what differentiates your offering? In the direct competitors, when we started the program in Canada about 15 years ago, we didn't have any. A few popped up and have tried to emulate us, and I'll be polite.
They're trying their best. As far as I'm aware, nobody's gotten close to our technology, especially the AI side. Really, direct competitors north of the border. South of the border, I can assume we weren't operating south of the border. No direct competitors at all. They do utilize securitization quite effectively to finance receivables in the United States. For the most part, the point-of-sale companies are way bigger than the ones in Canada, and it lends itself to securitizations. Becoming aware of this, we added securitizations to our product offering too. I still think eventually, when we come out with the instantaneous purchase of receivables, you have to look long and hard at your securitization programs because nothing beats that. Nothing beats getting your money back immediately. No commissions, no delays, no legals, no vagaries of the marketplace.
You can rely on getting your money back as soon as you made the loan. No real direct competitors. Looking ahead a little bit in the future, I don't think anybody can come close. Now, mind you, I'm sure that in Canada they'll try. Let's see what else we've got here. What key metrics should investors watch to assess whether the U.S. expansion and the product launches are translating into, I'm sure it says sustained business. Let me scroll that down a bit here. Earnings and growth. A key metric to look at is asset growth, of course. Asset growth means net interest margin growth. Because we're so efficient, I'll just throw a few numbers out there. You'll see the margin stay about the same. We're about 250-odd basis points. It could get a little higher. Assets translate into net interest margin using about 2.5%.
You can subtract from that something like about 30 basis points for our variable overheads, which is what they're referring to as efficiency ratios. Have a look at that efficiency ratio getting better and better. That produces our pre-tax earnings, and we're at about a 30% tax rate. 70% of that we get to keep. Those are the numbers to look at. At the very beginning, of course, the key metric is asset growth. The more assets we put on the books, the more simply the more money we make and the more efficient we become. The higher ROE we start producing. I think that might be the end of the questions. Let me see. That was number 15. Oh, there's a 16 here. Oh, sorry. Primary competitors, while I've answered that question. In the States, it's securitization programs and community banks like easy-to-get together syndicates that make traditional loans.
In Canada, we've had some that try to emulate us and do, I think, a fairly good job with spreadsheets and such. I would call that a horse and buggy versus an autopropel when you've got your own AI module processing the data way, way faster than a human could possibly even think about. That looks like the questions. If there's no more, I'll thank you all for your attendance. If you have any more questions and you want to send me an email, I'm happy to answer them too. We are a virtual bank, and I do most of my interaction with my fellow humans in this fashion and happy to answer questions directly if you have any more that you think of. Again, thank you very much for your attention. Bye.