Mr. David Taylor reports

VERSABANK INITIATES COMMERCIAL PHASE OF TOKENIZED DEPOSIT PROGRAM IN THE UNITED STATES

VersaBank has initiated the commercial phase in the United States for its proprietary tokenized deposits in full compliance with U.S. federal banking regulations.

The first component of the bank's U.S. commercial strategy for its tokenized deposits is the issuance by VersaBank USA of the bank's own real bank tokenized deposits (RBTDs), which are highly encrypted versions of conventional digital bank deposits represented on the blockchain. Branded as VUSD, the interest-paying, FDIC (Federal Deposit Insurance Corp.) insurance-eligible, U.S.-dollar RBTDs are expected to be the first tokenized deposits available broadly to consumers and businesses of all sizes. The bank plans to list VUSD on the most popular bona fide digital asset exchanges as soon as feasible.

"With recent certainty around the bank's compliance with U.S. banking regulation for issuance of our own RBTDs, we are thrilled to enter the commercial phase of our market-leading digital asset initiative in the United States," said David Taylor, founder and president, VersaBank. "We expect to see a huge shift to tokenized deposits from conventional deposits, as well as a rapid migration to tokenized deposits from stablecoins as users recognize and embrace tokenized deposits' ability, as actual bank deposits, to pay interest, as well as their eligibility for deposit insurance, and with the soundness and security of a regulated bank, under bank regulatory scrutiny. Of critical importance for regulators, VersaBank's proprietary technology has the capability to 'freeze, seize and burn' any tokenized deposits that regulators determine are being used for illegal purposes."

"We are now moving forward in earnest towards the launch of our own, VersaBank-issued tokenized deposit, VUSD, which we believe will be a new source of inexpensive deposits, providing an additional source of incremental net income, initially through investment in zero risk-weighted U.S. treasury bills, which as 0-per-cent risk-weighted assets are meaningfully accretive to the bank's return on common equity. Following an initial period of T-bill investment, our RBTDs will support significant expected growth of our Structured Receivable Program in the United States."

Issuing VersaBank-issued RBTDs in the U.S. will also position the bank to pursue its strategy to provide its proprietary, market-ready, tokenized deposit technology to the thousands of community and regional banks in the U.S. challenged by the flow of deposits to alternative, non-bank-issued, blockchain-based deposit and payments alternatives.

"Our tokenized deposit technology was developed by a bank, for banks, within the context of federal banking regulation," said Mr. Taylor. "It is a proven solution that exists today and we look forward to providing it in compliance with federal regulation to address the rapidly increasing demand by small and medium-sized U.S. banks for a tokenized deposit, quickly, efficiently and cost-effectively, with industry-leading security."

VersaBank's RBTD technology is also broadly applicable to other currencies and the Bank is positioned to similarly advance to the commercial phase in Canada when all applicable regulatory and business environments are conducive to doing so.

About VersaBank

VersaBank is a North American bank with a difference. Federally chartered in both Canada and the U.S., VersaBank has a branchless, digital, business-to-business model based on its proprietary state-of-the-art technology that enables it to profitably address underserved segments of the banking industry in a significantly risk-mitigated manner. Because VersaBank obtains substantially all of its deposits and undertakes the majority of its funding activities electronically through financial intermediary partners, it benefits from significant operating leverage that drives efficiency and return on common equity. In August, 2024, VersaBank launched its unique Structured Receivable Program funding solution for point-of-sale finance companies, which has been highly successful in Canada for over 15 years, to the underserved multitrillion-dollar U.S. market. VersaBank also owns Minnesota-based DRT Cyber Inc., a North American leader in the provision of cybersecurity services to address the rapidly growing volume of cyber threats challenging financial institutions, multinational corporations and government entities. Through DRT Cyber, VersaBank owns proprietary intellectual property and technology to enable the next generation of digital assets for the banking and financial community, including the bank's revolutionary and proprietary Real Bank Tokenized Deposits.

We seek Safe Harbor.