VersaBank NASDAQ: VBNK reported record second-quarter fiscal 2026 credit assets and revenue, while management said results were affected by non-core costs tied to its planned corporate reorganization and the sale of its only physical bank branch.
President David Taylor said the quarter was “very much a continuation of the strong performance and growth” seen in the first quarter, citing operating leverage in the bank’s digital banking model. Credit assets rose 25% year-over-year and 6% sequentially, while revenue increased 27% from a year earlier and 5% from the prior quarter.
Global Chief Financial Officer Nicolas Ospina said total assets reached a new high of more than CAD 6.4 billion at quarter-end, up 28% year-over-year and 5% sequentially. Cash and securities totaled CAD 674 million, or 10% of total assets, which management said remains above the bank’s historical level of roughly 7% due to its U.S. expansion.
Adjusted Earnings Rise Despite Reorganization Costs
VersaBank reported net income of CAD 7.5 million, or CAD 0.23 per share, for the quarter. Excluding one-time costs, adjusted net income was CAD 12.4 million, or CAD 0.39 per share, up 35% year-over-year and 2% sequentially, according to Ospina.
Taylor said second-quarter results included CAD 4.5 million before tax in incremental non-core costs associated with the bank’s plan to realign its corporate structure into a standard U.S. bank framework. The quarter also included a CAD 2.2 million non-core non-cash expense related to the write-down of intangible assets from the sale of the bank’s sole physical branch.
Ospina said consolidated non-interest expenses were CAD 27.5 million including those costs. Excluding the reorganization expenses and the branch-related write-down, non-interest expenses were CAD 20.8 million, compared with CAD 16.6 million a year earlier and CAD 19 million in the first quarter. Taylor also noted CAD 600,000 in legal costs related to commercialization of the bank’s Real Bank tokenized deposits.
Book value per share increased to CAD 17.15. VersaBank’s common equity tier 1 ratio was 12.3%, and its leverage ratio was 7.9%, which Ospina said remained above internal targets.
U.S. Structured Receivable Program Drives Growth
Management pointed to continued momentum in VersaBank’s U.S. structured receivable program, or SRP, as a primary driver of credit asset growth. Taylor said the U.S. SRP generated another CAD 150 million in new fundings during the quarter, in line with the bank’s budget, while Canadian operations also contributed steady incremental growth.
The credit asset portfolio rose to nearly CAD 5.7 billion. Ospina said the SRP portfolio increased 32% year-over-year and 7% sequentially to CAD 4.7 billion, representing 83% of total credit assets. The multifamily residential loan and other portfolio increased to CAD 1 billion, up 2% year-over-year and 6% sequentially.
U.S. banking operations generated CAD 7.9 million in revenue, up 17% sequentially, driven primarily by the U.S. SRP ramp. Net income for the U.S. segment rose 28% sequentially to CAD 3.6 million. Taylor said U.S. banking operations are already producing more than 20% of VersaBank’s total revenue.
Net interest margin on credit assets was 2.71%, up 12 basis points from a year earlier. Ospina said the second quarter is seasonally stronger because of fewer days in the period. Overall net interest margin, including cash, securities and other assets, was 2.33%, up four basis points year-over-year but dampened by elevated cash balances.
Real-Time SRP Rollout Targeted for July
Taylor highlighted a planned artificial intelligence-enabled advancement to the SRP platform that would allow partners to fund individual loans as they are made, rather than accumulating and batching loans over periods that can run up to 30 days or more. He said the capability could reduce partners’ financing costs and the need for warehouse financing while also strengthening VersaBank’s risk mitigation through loan-level evaluation in real time.
The bank is piloting the real-time SRP solution with Financeit. Taylor said Financeit CEO Casper Wong called the capability a “game changer.” In response to an analyst question, Taylor said VersaBank is targeting July 1 for commercialization, initially with purchases or investments in receivables twice per day.
Taylor said the real-time capability could increase VersaBank’s market share with existing partners and attract new partners. He also said the bank’s software was designed to allow SRP assets to be shared or syndicated with other banks or funds if demand exceeds VersaBank’s balance sheet capacity.
VersaBank said it remains on track for at least CAD 1 billion in U.S. SRP additions in fiscal 2026. Taylor said that target was set before the real-time program became a reality and that potential demand from the new capability would be incremental.
Reorganization Filing Reaches SEC Milestone
Taylor said VersaBank publicly filed its S-4 registration statement with the U.S. Securities and Exchange Commission for its planned reorganization, calling the filing a “major milestone” that marks the move into final stages of the process. The plan would create a U.S.-domiciled holding company, VersaBancorp, as the parent of the bank’s Canadian and U.S. operations.
The S-4 has been confidentially reviewed and remains subject to further SEC review before becoming effective. Taylor said VersaBank intends to move forward with shareholder matters alongside other regulatory processes. He added that the bank expects to incur an additional CAD 2.5 million in reorganization costs in the third quarter.
Management also discussed digital asset initiatives. Taylor said VersaBank is generating incremental revenue from stablecoin custody services for QCAD, which he described as Canada’s first regulatory compliant stablecoin, through customer Stablecorp. In the question-and-answer session, Taylor said current QCAD-related deposit balances were in the CAD 700,000 to CAD 800,000 range and that broader use cases, including foreign exchange between Canadian and U.S. stablecoins, could drive higher balances.
On Real Bank tokenized deposits, Taylor said technology has been built and tested in Canada, and the bank is working with partners for a U.S. rollout. He said VersaBank would seek a regulatory non-objection when it is ready to commercialize with partners.
Expense Outlook and Credit Provisions
Ospina said management expects core non-interest expenses to be below CAD 21 million, with potential savings from the branch sale and other administrative optimization initiatives. Taylor said the sold branch had carried annual costs of about US$900,000, or roughly CAD 1.2 million.
Provision for credit losses remained low at three basis points of average credit assets, down from five basis points in the first quarter. Ospina attributed the decline primarily to changes in forward-looking information used in the bank’s credit risk models. Taylor said provisions are typically low because cash holdbacks supporting the SRP program generally stand ahead of expected losses.
Regarding the bank’s cybersecurity business, DRTC, Taylor said VersaBank had tactically paused the divestiture process. He said certain aspects of DRTC appear permissible within the bank, while the penetration testing component appears not to be. Taylor said the bank has requested an extension from regulators but had not yet heard back.
Looking ahead, Taylor said VersaBank’s outlook for the remainder of fiscal 2026 remains positive, with potential additional earnings upside. He cited continued credit asset momentum, favorable expectations for net interest margins and opportunities tied to real-time SRP, digital assets and the corporate reorganization.
About VersaBank NASDAQ: VBNK
VersaBank is a Canadian Schedule I chartered bank that operates as a fully digital institution, offering a range of deposit and lending solutions through its proprietary technology platform. Headquartered in London, Ontario, the bank has chosen to forego a traditional branch network in favor of online and digital distribution, enabling it to serve clients across Canada and the United States with efficiency and lower overhead.
The bank’s primary business activities include the origination and securitization of commercial loans, equipment financing, residential mortgages and construction loans.
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