Versabank (VBNK) 2022 Q1 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the VersaBank's First Quarter 2022 Financial Results Conference Call. This morning, VersaBank issued a news release reporting its financial results for the first quarter ended January 31, 2022. That news release, along with the bank's financial statements and supplement financial information are available on the bank's website in the Investor Relations section as well as on SEDAR and EDGAR.

Please note that in the additional addition to the telephone dial-in, VersaBank is webcasting the conference call live over the Internet. The webcast is listen-only. If you are listening to the webcast, but wish to ask a question in the Q&A session, following Mr. Taylor's presentation, please dial into the conference line, the details of which are included in this morning's news release and on the bank's website.

For those participating in today's call by telephone, the accompanying slide presentation is available on the bank's website. Also, today's call will be archived for replay, both by telephone and via the Internet beginning approximately 1 hour following the completion of the call. Details on how to access the replays are available in this morning's news release.

I would like to remind our listeners that the statements about future events made on this call are forward-looking in nature and are based on certain assumptions and analysis made by VersaBank management. Actual results could differ materially from our expectations due to various material risks and uncertainties associated with VersaBank's businesses. Please refer to VersaBank's forward-looking statement advisory in today's presentation.

I would now like to turn the call over to Mr. David Taylor, President and Chief Executive Officer of VersaBank. Please go ahead, Mr. Taylor.

Thank you, Kelsey. Good morning, everyone, and thank you for joining us for today's call. I have the pleasure of hosting this morning's call from New York City, where I'm participating in Keefe, Bruyette & Woods' Fintech Payments Conference. And yesterday spoke on a panel entitled, "How technology can advance fundamental banking." I can't think of a better panel topic to speak on. A recording of that panel will be available on our website later this week.

Joining me today for today's call at our headquarters back in London, Ontario is Shawn Clarke, our Chief Financial Officer.

The first quarter of fiscal 2022 saw the continuation of the momentum that drove a record year for VersaBank in 2021. As once again, our core banking operations delivered strong year-over-year growth in both loans and net income. We achieved another record loan portfolio at quarter end of just over $2.2 billion, up 24% year-on-year and 5% sequentially, while net income grew 5% year-on-year. And a quick reminder here that we report our financial results in Canadian dollars and all amounts in today's call will be in Canadian dollars unless otherwise stated.

Some other headline results for Q1. Total revenue increased 18% year-over-year and was essentially unchanged from Q4. Cost of funds decreased 13 basis points year-over-year and 2 basis points sequentially to 1.29%. And net interest margin was down 9 basis points year-over-year but up 4 basis points sequentially to 2.77%.

Notably, our cash balances returned to historic levels in the first quarter as we continue to deploy funds to interest-generating loans. Shawn will discuss the financials in more detail in a moment.

Q1 also saw a number of other highlights. Most notably, we completed our closed ecosystem testing of VCAD, the bank's Canadian dollar version of its revolutionary highly encrypted digital deposit receipts offering with each VCAD unit representing $1 deposits with the bank. More on this in a moment.

And for the first time this quarter, we are breaking out our cybersecurity business, DRT Cyber and our financials, which delivered a year-over-year increase in revenue and gross profit of 36% and 30%. I will remind you here, gross profit amount for DRT Cyber is included in noninterest income in the bank's income statement.

As noted a moment ago, we have completed our closed ecosystem testing for the first of our digital deposit receipts, the Canadian dollar-based VCAD. VCAD remains on Ethereum, Algorand and stellar blockchain, and we continue to transact internally, but our testing has satisfied our criteria.

We are now preparing for a commercial launch, which we expect upon the independent auditors completion of the SOC 2 compliance audit. SOC 2 is a widely recognized standard intended to verify the nonfinancial reporting controls relating to security, availability, processing integrity, confidentiality and privacy of the system.

While the audit is taking longer than anticipated, we recognize the critical importance of such a third-party evaluation and validation in what is rapidly evolving regulatory landscape. Our DDRs were developed to be a significantly better stable coin, a one-for-one representation of a fiat currency on deposit with our federally licensed bank, investment-grade rated bank and the highest level of security based on our own VersaVault technology.

In fact, we are increasingly hearing the term tokenized deposits, particularly in this town used to describe the ideal digital currency, and that is exactly what our digital deposit receipts are. As such, they serve the dual purpose of both acting as a safe store of value and as a digital currency for a transacting business.

We are very encouraged by recent trends towards regulation in North America and around the world, which we believe will be very firmly -- will put in a firm position for our DDRs of not only a compelling digital currency for the market, but also one that will become the gold standard amidst the future regulatory requirements. We are preparing for commercial launch as soon as possible following the completion of the SOC 2 audits.

Before I turn the call over to Shawn, I would like to take this opportunity to publicly welcome the newest member of our leadership team, Garry Clement, who joins VersaBank as our new Chief Anti-Money Laundering Officer or CAML for short. Garry is a financial crime prevention expert and an advocate recognized internationally in areas of money laundering, white-collar crime, organized crime and detection of suspicious activities, including cybercrime. He brings to our bank more than 40 years of policing and financial crime prevention experience, including 3 decades with the RCMP, including as National Director of Proceeds of Crime. I could go on and on, but instead, we'll refer you to Garry's extensive CV, which is summarized in yesterday's press release. I don't know if there's anyone more qualified than Garry to fill this vacancy. We are extremely fortunate to have him, especially given the upcoming commercial launch of our digital deposit receipt.

Garry fill a vacancy left by our long-time colleague, Barb Hale, who is retiring after 25 years with the bank, the last 20 of those in the CAML position. On behalf of the Board, I'd like to thank Barb for her outstanding contribution to the security and reputation of our bank during her tenure.

I'd now like to turn the call over to Shawn to review our financial results in detail. Shawn?

Thank you, David. Just a quick reminder to folks that our full financial statements and MD&A for the first quarter of 2022 are available on our website under the Investor Relations section as well as on SEDAR and EDGAR. And as David mentioned, all the following numbers will be denoted in Canadian dollars as per our financial statements, unless otherwise noted. We do offer U.S. dollar transformations of our key metrics in our standard investor presentation, which will be updated for the first quarter numbers and posted to our website very shortly.

Starting with an overview of the balance sheet. Total assets at the end of the quarter were $2.4 billion, up 18% year-over-year and unchanged from last quarter. Our cash balance at the end of Q1 were $155 million, returning to more typical historical levels at 6% of total assets, down from $272 million or 11% of total assets last quarter and down from $212 million or 10% of total assets last year. The decrease was the result of the bank deploying our temporarily elevated cash balances into higher yielding loans.

Loans were up 24% year-over-year and 5% sequentially to $2.22 billion, representing another record for loan balances. I will note that the bank has achieved continuous quarter-over-quarter loan growth since Q3 of fiscal 2020, shortly after the onset of the pandemic.

Looking a little more closely at the composition of our loan growth, our point-of-sale financing portfolio was up 43% year-over-year and up 13% sequentially to $1.4 billion. The increase continued to be driven primarily by strong demand for home finance, auto and home improvement receivable financing. For additional context, point-of-sale financing represents 65% of our total loan portfolio as at January 31, 2022, up from 61% of total loans last quarter.

Our commercial loan portfolio contracted 2% year-over-year and 6% sequentially to $769 million, the decrease being a function primarily of the timing of scheduled repayments over the course of the current quarter. Book value per share increased 8% year-over-year and 1% sequentially to $11.78 as a function primarily of higher retained earnings attributable to net income earned in each of the periods, offset partially by the payment of dividends.

Our CET1 capital ratio increased to 14.83%, up from 12.48% last year and down from 15.18% last quarter. And finally, our leverage ratio at the end of Q1 was 12.69%, up from 11.4% last year and up slightly from 12.6% last quarter. The year-over-year trends in our regulatory capital levels and ratios, including our leverage ratio for a function of a number of factors that include private place in subordinated notes payable to U.S. institutional investors in April 2021 for proceeds in the amount of CAD 92.1 million. Treasury offering of common shares completed in September 2021, patrolling net proceeds of CAD 75.1 million adjusted for tax effected issue costs, also contributing with retained earnings growth, cash provision recoveries related to the bank's deferred tax asset and the redemption of the bank's outstanding noncumulative Series 3 preferred shares in April 2021. Our CET1 total capital and leverage ratios remained well above our internal targets.

As David noted, the first quarter saw continued strong performance across most of our financial metrics. Total revenue for the first quarter increased 18% year-over-year to $18.3 million and was comprised of net interest income in the amount of $16.9 million and noninterest income in the amount of $1.4 million. As a reminder, our noninterest income is derived primarily from our cybersecurity services operation. Higher year-over-year revenue was driven mainly by higher interest income attributable to growth in the point-of-sale financing portfolio within our digital banking operations, also higher noninterest income as well as the deployment of cash into higher-yielding lending assets.

Q1 revenue was up only modestly from Q4 2021 with growth in interest income being substantially offset by lower noninterest income, which is a function of several factors. Seasonally, Q4 tends to be the strongest quarter for our cybersecurity services business as customers work to deploy budgeted funds before the calendar year-end, while Q1 tends to be slightly softer due to the holiday season and further this year was impacted negatively by delays in some offsite visits as COVID-19 restrictions came back into effect in many regions.

Net interest margin for the quarter was 2.77%, down 9 basis points from last year and up 4 basis points from last quarter. The year-over-year decrease was mainly due to a shift in the lending portfolio mix as growth in our lower risk point-of-sale financing portfolio outpaced growth in our commercial loan portfolio. The sequential increase in NIM was a function primarily of the redeployment of cash into higher-yielding lending assets.

Net interest income for the quarter was $16.9 million, up 17% year-over-year and up 5% sequentially. These trends are a function primarily of the strong growth in our point-of-sale funding portfolio and the redeployment of cash into higher using lending assets in the current quarter. Noninterest expenses for the quarter were $10.6 million, up 32% from last year and up 2% from last quarter. The year-over-year increase was due primarily to higher salary and benefit expense resulting from annual compensation adjustments and increasing staff levels, higher insurance premiums attributable to the banks listing on the NASDAQ and investments in the bank's business development initiatives. This quarter's noninterest expenses should be a reasonable proxy for our run rate over the remainder of fiscal 2022.

I will also note that the current quarter included 3 months of operating expenses of DBG compared to 2 months of operating expenses included in the comparative quarter last year due to the timing of the bank's acquisition of DBG on November 30, 2020. Sequential [NIE] trend was a function primarily of the same factors driving the year-over-year trends, but without the impact of the misalignment of the DBG expense item.

Net income for the quarter was $5.6 million or 19% per common share, basic and diluted, which was up 5% year-over-year and down 6% sequentially. The year-over-year trend was a function primarily of higher net interest income attributable substantially to loan growth, offset partially by higher noninterest expenses that I just described previously.

Sequential trend was a function primarily of higher noninterest expense, higher provision for credit losses and lower noninterest income, offset partially by higher net interest income, which is attributable to loan growth.

As David highlighted previously, first quarter once again saw our cost of funds decreased to 1.29%, down 13 basis points year-over-year and down 2 basis points from last quarter. The year-over-year trend was primarily a result of continued growth in our insolvency professional deposits, which currently pay interest at a rate of 0%, and the sequential trend was a function primarily the redeployment of existing cash balances into lending assets.

Credit quality of our loan portfolio remains very strong. We once again finished the first quarter with no impaired loans and no loans in arrears, which continues to be the case today. For Q1, we recognized provision for credit losses in the amount of $2,000 compared to a provision for credit loss in the amount of $57,000 for the same period last year and a recovery of credit loss provisions in the amount of $279,000 last quarter. Provision for credit losses as a percentage of average loans this quarter was 0.00% compared with historical 12 quarter averages of negative 0.01%, which remains amongst the lowest of the publicly traded Canadian federally licensed banks.

As a final comment, amidst the continuing evolution of the pandemic and being mindful of the elevated geopolitical risk resulting from the crisis in Ukraine, we continue to operate at a heightened level of awareness to ensure that our risk management, loan origination and underwriting practices remain highly disciplined and focused.

I'd now like to turn the call back to David for some closing remarks. David?

Thanks, Shawn. Q1 was a very solid start to fiscal 2022. We saw the continued momentum of our existing digital banking operations as well as a strong year-over-year growth from DRT Cyber. We expect this momentum to continue throughout the remainder of the year with a baseline of growth from these operations in line with 2021 with some potential upside. Demand for these types of goods and services that are financed through our point-of-sale business remains strong in Canada, and we are noting what appears to be a resurgence in commercial spending.

On the deposit side, we expect a return to sequential growth of our insolvency deposits as the pandemic-related government support payments end. And I want to note here that the bank additionally benefits in the short term during a period of rising interest rates.

In our cybersecurity service business, we have a solid momentum that we expect to continue into 2022. You will note that a moment ago, I referred specifically to existing digital banking operations. That is because in 2022 is a year in which we expect to meaningfully expand our point-of-sale finance business. On our call -- last call, I talked about an opportunity to bring our unique point-of-sale financing model, which has been so successful in Canada to the USD 1.8 trillion consumer finance market. It's a market where we see same potential for success that we did in Canada, a decade or so ago. But obviously, many, many times larger and with a proven solution that we know addresses the unmet need. We are steadily making progress with our plans.

And with that, I'd like to open the call for questions. Operator?

(Operator Instructions) Your first question comes from William Wallace from Raymond James.

Dave, maybe just starting with where you ended, you said making steady progress, I believe, on your plans to enter the U.S. with your point-of-sale business. Could you provide some more specific commentary around what needs to occur for an actual entry into the U.S. and where you kind of stand from a time line perspective and how maybe that entry might look?

Yes. Thank you, Wally. Wonderful weather here in New York City. Well, we've incorporated a company we call Versa Finance to serve a lending platform. We've identified at least 3 potential new customers. And our team has been working with the lawyers on documenting our program. There's, some differences between the Canadian law and U.S. law, and that's sort of what slowed it down.

But we're just in the stage now of finalizing the legal documents. So it shouldn't be too much long before you see us book the first deal. And as I say, there's a few more in the hopper that will follow after that now that we've settled on the legal documentation.

So do you think that could be a fiscal this quarter announcement?

Yes, we're looking for this -- I was hoping it would be the first quarter, but following through the legal nuances took a little longer than we expected.

Okay. But you feel like you've gotten through that process now, and we could expect to see some sort of announcement this quarter with your -- with the first partner, at least the first partner in the U.S.

Yes, that's right, Wally. And after that, it's -- now we've got the legal work sorted out then it's left to our team's marketing efforts.

Okay. And based on -- it sounds like you have identified 3 customers, just kind of based on their volumes, any willingness to give us a sense as to how big of a slash you could enter the U.S. with from a kind of a volume perspective or is that putting the car in front of the hole?

A little early to say -- with the -- as I said in the comments, what we're calling our baseline growth is about the same as we experienced last year, and it was about 43% yes that's based on the Canadian customers. U.S. would all be incremental to that. And it's hard to put a figure on it right now. But next quarter, I should be able to do that and that we'll have some real live customers.

Okay. And then you also mentioned towards the end in your commentary, I think you said what looks like a resurgence in commercial spending. Are you referencing the commercial real estate business or are you talking about small business or something to the point of sales side -- you are talking about the point of sales?

Partial equipment.

Okay.

There was quite a sensation in small business spending with the pandemic. It was more than offset, of course, by a lot of spending in the retail area, primarily on home improvement and that sort of thing. But now we're starting to see some commercial spending coming back finally, this pandemic certainly taking its toll on small business in the Canada.

And then I just wanted to shift gears and talk a little bit about VCAD and the SOC 2 audit. So we're delayed on the launch. The SOC 2 audit -- it's a pretty structured and formalized process. Is that correct?

Yes, absolutely.

So where are you in the audit process itself? And how soon do you anticipate completing the audit?

Right -- if you'd asked me that last quarter, I would have said few weeks. And I'm still saying a few weeks, it's taken a lot longer than I had expected. However, I ask [Harpreet], the lawyer who is in charge of that area, and he's looking for a few more weeks.

This was a self-imposed requirement that we place on ourselves thinking that it's a brand-new product for the world it is and that it would be good that our customers and our regulators would know that a third-party review that -- with that stringent SOC requirements. So yes -- maybe a few more weeks, there was a delay in actually physically reviewing our facility that the COVID restrictions in Canada brought about, but that's behind us now.

Okay. And then so assuming this is done within the next several weeks, what does the commercial launch look like? Will you launch with multiple customers that will be offering your VCAD stablecoin alternative? Will it be all launched at once or will you just say we're launching and then you have to go and start working on the customer agreements, et cetera. Just help us kind of think about what the launch might look like once this audit is complete?

Our partner, Stablecorp has already lined up customers to purchase the VCAD. So that's -- they're just waiting for us to be able to show the VCAD to them. So immediately, when we're ready to go, we'll be issuing VCAD to Stablecorp, and they in turn, will be issuing VCADs to their customers. They also announced some time ago that their QCADs would swap into our VCADs.

So as soon as we're ready to go, Stablecorp is ready to go. So that's the first. And there are some others that have contacted us about also distributing our VCADs, VUSD and perhaps key sterling and the euro. So as soon as we get them the green light, I'm sure Stablecorp's they have an account open with us and they're all set to go.

Okay. And then as it relates to VUSD, that would just be a potential kind of tackle and offering, right? You wouldn't need to undergo a whole additional audit for that specific DDR would you?

Yes, that's exactly right. It's -- in fact, we already have VUSDs on the blockchains for the close of testing. Now we only issue in Canada, of course, the denomination is U.S. or it could be sterling or euro to, it's just issued in Canada to Canadian purchasers that be in Stablecorp to start with thereafter -- we are looking into the United States -- to acquire a bank this year. We're engaged in discussions on that topic. But presently, the clients should just be a shooting canon.

Okay, great. So it seems like this quarter could be, I guess, hopefully, a potentially a quarter with some kind of meaningful progress on these 2 new sort of initiatives that we've been talking about just the IPO?

Exactly, Wally so it's taking longer than I expected. But with legal work and accountants doing the SOC audit and COVID with the second -- shutdown or restrictions in Canada, it slowed it down a bit. The other one that we didn't mention was our Instant Mortgage that it seems -- finally, we may have some -- a mortgage administration company lined up to look after the administration for us. That may very well hit this quarter to.

Okay. Great, I had a few more questions, but I'm going to hop out and let somebody else ask some of the -- they don't get asked. I'll come back.

(Operator Instructions) And your next question comes from Greg MacDonald from LodeRock Research.

How are you, David?

Very good, Greg. It's a nice day here in New York and thankfully, I'm overlooking Central Park. Oh, beautiful.

And the temperature is probably a little warmer there. I wanted to ask one on DRT. You talked about -- so revenue growth, 36% year-over-year. You talked about some sustainability of that. And "heightened threat alert" makes us all kind of come back to this as an important topic and realize that this is possibly a scenario where demand is outpacing ability to provide service for cybersecurity companies.

Can you just talk a little bit -- just give us a little bit of an update on DRT -- on sensing demand must be great, but this is a human resources business at the end of the day. Give us just an update on how things are going with respect to growth with respect to ability to staff, things like that.

Well, you're absolutely right that the penetration testing side is dependent on people. And I think everybody in the IT software industry knows that it's been harder and harder to retain and acquire new IT people. We've done purely well. London is a popular spot for people to live. So we've got that going for us. Secondly, we introduced options for our staff, which is kind of standard in the software industry to encourage people to stay with us and prosper with the increasing value of the shares.

So we're -- I suppose, vis-à-vis the industry, we're doing much better with retention and obtain staff. But on the penetration side of our DRT business, it is somewhat human dependent. We have other cybersecurity products that are highly scalable. So that isn't so human dependent. And we're hoping that folks who are, as you say, subject to a higher degree of tax will take us up on our machine driven products that -- basically given the heads up to someone is trying to pack into their systems.

So we continue to see a tremendous growth area for DRTC, One area is subject to dependent on hiring humans. So we think we've got that covered with an attractive compensation package. The other products we have are highly scalable and not very dependent on human.

Okay. And sense of growth profile on the top line, is this still primarily a Canadian business, i.e., Canadian Corporation serving Canadian government agency serving -- or have you made success moving into the U.S. market yet?

Well, we have a lot of U.S. customers. A number of states are using us for the 911 service, a lot of police departments here in the United States are using us of above the 350 or so customers that we have, a good portion are in the United States, and it's just what you'd expect. It's critical services, utility companies, rail lines that use us. So we're quite prevalent in the United States.

Okay. And then just a quick question on the Instant Mortgage product. You've expressed some opportunity for attractive growth there in the past. And it's nice to see that from an administrative perspective, that product is ready to roll?

Any sense of -- from what your loan origination partners are talking about any sense of change in optimism for growth there, is it an avenue that you think you're more optimistic about now? Just it's a new product, right so any updates there would be helpful for us?

Well, we are very optimistic about it. The holdup for the Instant Mortgage itself was finding a mortgage administration company that could look after the mortgages for us. As you know, our bonus or brands to partner out those types of activities and it looks like we have one that's keen to work with us. It's hard to say what the growth potential is, but it looks like a lot of demand mind you that could end very quickly.

As you know, Greg in Canada, we're looking at a highly unusual increase in property values and very well could be a settling back of pricing and maybe the demand for mortgages sort of settle back. But right now, it's a huge demand.

Also a highly unusual increase in immigration, which works in its favor?

Yes, absolutely and this is primarily what is the mortgage is aimed at for those that want a convenient way to obtain mortgage financing at the point of sale, of course. So it's designed for new Canadians.

Great. I'm curious to see how that product rolls out. It's imaginative and I think it's very interesting. David. I appreciate the answers to the question. I'll pass it on.

And your next question comes from William Wallace from Raymond James.

Dave, could you see you again?

Yes.

I just wanted to maybe follow-up a little bit on interest rates just for us, Americans who maybe are unfamiliar with the interest rate policy in Canada. As we look at the U.S. Fed likely starting to increase rates this month, how typically does, the interest rates in Canada follow?

And remind us how the point-of-sale loans are priced and what you would expect from a margin perspective, whether it's NII percent growth or margin basis point expansion for every move that we see in rates, whether it's baked in Canada or bad or whatever, however you would?

Well Wally, I think there is a long history of bank in Canada following the Fed -- interest rate increases. So it's not a certainty, but there's high probability that that increases VersaBank Canada will increase to. Our portfolio has started so about 155 basis point increase. A lot of that goes straight to our bottom line. And we -- a good portion of our deposits are priced at prime minus 4. So it takes about 155 basis points before we start paying additionally on our deposits.

But we have like CAD 600 million, CAD 700 million of prime-based loans that go up immediately. So we're positioned -- I think it like most banks there is an increasing interest rate environment is positive for us. Secondly, like all banks, we hold a lot of liquidity and we're earning next to nothing on the liquid assets. So we'll benefit on that. It's as usual, rates are extremely low now and if they move up a little bit, 150-odd basis points, say, in the next year or 2. That's all good for us.

With respect to the point-of-sale financing, they're priced over government Canada bonds, which tend to correlate highly with our fixed rate deposits. So the margins should stay about the same, anticipate any compression. Our positive rates go up at the same rate as government Canada bonds yields too. So margins there should stay the same. The other portfolio I was referring to is the real estate portfolio, the prime-based portfolio. And that's the one we get the boost.

How often do the real estate loans reprice?

Well, they're almost all prime based. So they reprice instantly yes Government Canada puts the rates up for that day bonus for a rate. It's a glow over it, but for quite a few years now, we banks since offered having rates extremely low. So the -- if rates move up a little bit, it means that our net interest margin will go back to probably historic levels around 3%.

Okay perfect that's very helpful. And then I believe Shawn mentioned in his remarks something about on-site visits being delayed. Was that around -- was that specific to what's going on with DRT Cyber, -- should we expect a bounce back in fee income or was that specific to something else? I apologize for missing...

So that was -- you got it right. It was DRT Cyber. And with the penetration testing, our guys do a lot of on-site visits, that's why it's human-intensive, the penetration side of the business.

And 2 things would have slowed that down this quarter. One is as the holiday season folks don't tend to invite us in to do our penetration testing in the festive season.

And the other thing with these COVID lockdowns we encountered here in Canada, that sort of slowed down the on-site business. It's also what slowed down the SOC audit, SOC 2 audit and that the auditors wanted to physically do with our facility and where it's located, there was some stringent pandemic lockdown, but that's all behind us. Now hopefully, it's behind us for good. These lockdowns have been quite disrupting.

Into that commentary. So in the DRT Cyber, any delayed site visits due to COVID lockdowns, can you catch back up on that in 1 given quarter or is it -- is the nature of your staffing, et cetera, such that everything just kind of gets pushed back?

I think we'd be catching it up this quarter. It's also a, seasonality to it that I was mentioning by the holiday season. So this -- typically, Q1 for DRTC is lower revenues and activities and then Q2, Q3 and Q4, it should make it back. And then, we've got these other products, too, that we're introducing the ongoing cyber surveillance.

So that when we do identify weakness in a corporation or government cyber security, we can present them with a solution, not just to patch it, but also to give them the assurance that heads for us if someone is trying to get in, they'll know about it while they're knocking on the door.

Okay. I really appreciate the time. So I have, take care...

No problem at all Wally, where about so are you calling from?

I'm sitting in Richmond, Virginia.

Well perfect so pretty close to where I am, I suppose, you getting the nice weather, too.

Yes, sir, yes it's nice.

Your last question comes from Trevor Reynolds from Acumen Capital.

Just I think most of the questions have been covered. I'm just wondering if you could give us an update on the indigenous infrastructure and housing initiatives that you've rolled out in the summer?

Well, we're sure working on it. It is taking longer than expected to. I would love to get some home financing on the books for indigenous Canadian. So we think there's a huge demand for it. Robert-Falcon Ouellette is -- are [mad] on the job there, and he's involved in the project. And they're all keen to get it started.

No loans yet, which is at this point for me, particularly in the Arctic, as I was saying to the guys the other day, if you don't hurry up and get something going, the ice roads are going to melt. It fails delivered material. So if anybody is listing on the line there, they know what I'm talking about. We'd love to provide you with financing it in nice homes, but we got to speed it up a bit.

So definitely taking longer than you had anticipated when you rolled this out?

Yes, there's progress kind of constant. Our team is working on it with their counterparts and working as far as they can. It's just that everything seems to take a little longer and a little longer. But there's sure a huge demand for -- an Instant Mortgage works quite well it's adaptable to serve the indigenous community with mortgage financing.

So that's why Robert got going with some other counterparts on the other side, we've got some good partners working with Robert on this.

How big do you think this could get?

As far to dream, I'd say it would be at least CAD 500 million, CAD 600 million of business, home financing that's the demand. So we got it all and not another question, but in the past, we provide a lot of finance, particularly in the Canadian Arctic as you mentioned, infrastructure projects and schools and hospitals and pipelines and pipelines and all kinds of good projects we did in the past. But for some reason, it takes a little longer to fire that back up longer than I would like.

Got it. And then maybe, apologies if I missed this, but just on the DRT side, has it -- maybe just an update on how those reseller agreements are working?

They're working well. Some of those products I was alluding to are -- come through our reseller arrangements. And it gives almost a complete suite of cybersecurity products. There's a couple more add-ons. I'd like to get -- we'll talk about that maybe another quarter. But yes, we have a wonderful relationship with our partner simulation.

Perfect appreciate it. That's it for me.

What's the like in Calgary.

It's warmed up a bit, but probably it doesn't sound like it's as nice as where you're sitting today.

I'll be back to the frozen north pretty soon probably tomorrow.

(Operator Instructions) And there are no further questions at this time. Mr. Taylor, you may proceed.

Well, thank you. I'd like to thank everybody for joining us today, and I look forward to speaking to you at a time of our year-end well, next quarter results come out. As we're talking -- look forward to some press release for this quarter on these key projects that we've been working on. Thank you again.

Ladies and gentlemen, this concludes your conference call for today. We thank you very much for participating and ask that you please disconnect your lines. Have a good day.