VersaBank (NASDAQ:VBNK) reported record third-quarter fiscal 2026 revenue, credit assets and net interest income, as growth in its U.S. Structured Receivable Program, or SRP, continued to accelerate.
For the quarter ended July 31, 2026, total assets rose 26% from a year earlier and 7% sequentially to just under C$6.9 billion. Founder and President David Taylor said assets subsequently surpassed C$7 billion, reaching C$7.2 billion as of the day before the earnings call.
Revenue and Earnings Rise
Consolidated revenue reached a record C$38.8 million, up 23% year over year and 1% from the preceding quarter. Reported net income increased 53% to C$10.1 million, or C$0.31 per share, compared with C$6.6 million, or C$0.20 per share, a year earlier.
Adjusted net income, excluding C$3.1 million of non-core non-interest expenses, was C$12.3 million, or C$0.38 per share. That represented a 27% year-over-year increase.
Global CFO Nicolas Ospina said third-quarter non-interest expenses totaled C$25.2 million and included C$2.5 million in reorganization costs and a C$600,000 write-off of capitalized software costs following the May 1 sale of the company’s sole physical branch. Excluding one-time costs, consolidated expenses were C$22.1 million, up from C$17.4 million a year earlier and C$20.8 million in the second quarter.
The quarter also included about C$2.3 million of pre-tax transitory costs. Those included C$800,000 in share-based long-term incentive expenses tied to share-price appreciation and C$1.5 million in costs that management said were specific to the quarter and are not expected to recur.
- Canadian digital banking revenue was C$27.6 million, up 4% year over year.
- U.S. banking revenue was C$9.3 million, up 18% sequentially and 199% year over year.
- U.S. banking net income rose 10% sequentially and 803% year over year to C$3.9 million.
- Digital Meteor net income was C$114,000, compared with C$23,000 a year earlier.
SRP Portfolio and Real-Time Launch
VersaBank’s credit asset portfolio reached just under C$6.2 billion at quarter-end. Its SRP portfolio increased 40% year over year and 11% sequentially to C$5.2 billion, representing 85% of total credit assets, compared with 82% in the previous quarter.
Taylor said the company recorded C$220 million in new U.S. SRP fundings during the third quarter and another C$127 million after quarter-end, bringing year-to-date new fundings to more than C$720 million. A newly added U.S. partner, a wholly owned subsidiary of ECN Capital, is expected to contribute at least C$300 million in annual U.S. SRP fundings, with potential to exceed C$500 million, according to Taylor.
During the quarter, the bank launched an AI-enabled Real-Time SRP product that allows partners to finance individual loans as they are originated rather than warehousing loans and funding them in batches. Taylor said Financeit was the first partner to implement the product in Canada after a pilot program, while ECN Capital became the first U.S. partner to adopt it following quarter-end.
Management said the product is intended to reduce partners’ financing costs, equity requirements and interest-rate exposure. Taylor said the company is seeing incremental interest from existing and prospective partners, including in Canada.
Margin, Liquidity and Credit Performance
Net interest margin on credit assets was 2.44%, down 11 basis points year over year and 27 basis points sequentially. Overall net interest margin, including cash, securities and other assets, was 2.19%, down 6 basis points from a year earlier and 14 basis points from the second quarter.
Ospina cited relatively high liquidity, higher deposit costs, the replacement of retail deposits with broker deposits after the branch sale, and changes in the asset mix as factors affecting margin. Cash and securities totaled C$624 million, or 9% of total assets, above the bank’s historical level of about 7%.
Taylor said management expects liquidity to move closer to 5% to 5.5% of assets as U.S. operations become more established. He said net interest margin should return to approximately 2.3% in the fourth quarter and remain around that level thereafter.
The bank’s provision for credit losses was negative 0.02% of credit assets in the third quarter, reflecting a recovery. Ospina said the recovery was primarily related to the sale of branch assets to Stearns Bank National Association and updates to forward-looking information used in the company’s credit-risk models.
VersaBank’s CET1 ratio was 11.5% and leverage ratio was 7.6%, both lower year over year as the company deployed capital to support U.S. SRP growth, but still above internal targets, Ospina said.
Fiscal 2027 Growth and Corporate Actions
Management expects to reach its target of C$1 billion in additional U.S. SRP fundings since October 2025 before the end of calendar 2026. Taylor said the mix of U.S. funding has shifted toward the higher-spread core SRP offering: approximately 90% of year-to-date fundings were core SRP and 10% were purchased securitized SRP, compared with the company’s earlier expectation of a 60%-40% mix.
For fiscal 2027, VersaBank is targeting at least US$3 billion in additional U.S. SRP fundings. Taylor said roughly half of that goal is expected to come from existing partners and half from prospective partners already in discussion with the company. He said the bank expects to retain the targeted growth on its balance sheet rather than securitize it.
Management said core non-interest expenses in fiscal 2027 are expected to be in line with the current year, excluding roughly C$10 million tied to the cybersecurity business that VersaBank plans to divest. Ospina identified C$19.8 million as the current quarterly run rate. Taylor said the company is pursuing AI-based initiatives to improve efficiency and strengthen risk management.
The company also expects about C$4 million in additional non-core reorganization costs in the fourth quarter. VersaBank plans to hold a shareholder meeting to approve the reorganization and is targeting completion by the end of October 2026, subject to approvals from the Federal Reserve and Canada’s Department of Finance.
Separately, Taylor said the Federal Reserve extended the deadline for divesting VersaBank’s cybersecurity business to Aug. 30, 2027. The company said it is engaged with several potential buyers.
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.
