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1. Company Snapshot

1.a. Company Description

VersaBank, a schedule I chartered bank, provides various banking products and services in Canada.The company offers deposit products, such as guaranteed investment certificates, registered retirement savings plans, daily interest savings accounts, and tax-free savings accounts, as well as deposit insurance products.It also provides lending services, including point of sale financing that involves purchasing loan and lease receivables from finance companies operating in various industries; and commercial banking services comprising commercial real estate, public sector/infrastructure financing, condominium financing, and residential mortgages.


The company was formerly known as Pacific & Western Bank of Canada and changed its name to VersaBank in May 2016.VersaBank was incorporated in 1979 and is headquartered in London, Canada.

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1.b. Last Insights on VBNK

VersaBank's recent performance was driven by its Q3 earnings beat, with a 10% earnings surprise and record revenue growth. The company's strategic expansion efforts, including adding two new receivable purchase program partners in Canada, have contributed to its growth. Additionally, VersaBank's declaration of dividends and refreshed Canadian digital deposit pilot have likely boosted investor confidence. The company's robust quarter, despite increased noninterest expenses, has set a positive tone for its future prospects. Its revenue growth of 13% from Q3 2024 to CA$30.4m also indicates a strong financial position.

1.c. Company Highlights

2. VersaBank Delivers Strong Q2 Results with Record Assets and Expanding Margins

VersaBank reported a robust second quarter for fiscal 2025, with record assets, credit assets, and revenue. Total assets climbed 15% year-over-year to over $5 billion, driven by expansion in both Canadian and U.S. operations. The bank's net interest margin (NIM) improved significantly, increasing 23 basis points sequentially due to favorable trends such as a normalized yield curve and higher-margin U.S. receivable purchase program (RPP) assets. Record credit assets of $4.52 billion reflected growth in the U.S. RPP portfolio, which surpassed $70 million, and Canadian residential construction loans. Revenue reached a record $30.1 million, up 6% year-over-year and 8% sequentially, supported by credit asset growth and NIM expansion. Excluding costs related to a proposed structural realignment and unrealized foreign exchange losses, net income was $9.2 million, or $0.26 per share, slightly below consensus estimates of $0.28.

Publication Date: Jun -07

📋 Highlights
  • Record Asset Growth: Total assets grew 15% year-over-year to over $5 billion, driven by expansion in Canadian and U.S. operations.
  • Net Interest Margin Improvement: NIM increased by 23 basis points sequentially, benefiting from a normalized yield curve and higher-margin U.S. receivable purchase program (RPP) assets.
  • Revenue Growth: Revenue reached a record $30.1 million, up 6% year-over-year and 8% sequentially, supported by credit asset growth and NIM expansion.
  • U.S. RPP Portfolio Expansion: The U.S. RPP portfolio surpassed $70 million and is expected to reach at least $290 million by year-end, targeting underserved markets.
  • Proposed Structural Realignment: The bank announced a proposed realignment to a U.S.-style bank framework, expected to simplify regulatory oversight, reduce costs, and improve shareholder value.

Operational Highlights and Growth Drivers

The U.S. RPP portfolio is expected to reach at least $290 million by year-end, supported by a unique solution for underserved markets. In Canada, the bank anticipates incremental growth in its CMHC-insured multifamily residential loan business, targeting $1 billion in commitments by year-end. The bank also expects continued growth in low-cost insolvency deposits, which grew 22% year-over-year and are on track to reach $1 billion. VersaBank announced a proposed structural realignment to a U.S.-style bank framework, subject to regulatory and shareholder approvals. This realignment is expected to simplify regulatory oversight, reduce costs, and improve shareholder value. The bank estimates $8 million in costs for this initiative but expects significant long-term benefits, including improved efficiency and eligibility for certain U.S. indices.

Valuation and Shareholder Returns

VersaBank currently trades at a Price-to-Tangible Book Value (P/TBV) of 0.8, below its historical average, suggesting undervaluation. The stock offers a dividend yield of 0.7%, providing income appeal. With a return on equity (ROE) of 8.14% and a net debt-to-EBITDA ratio of -6.47, the bank demonstrates strong capital efficiency. Management's share repurchase program, highlighted by CEO David Roy Taylor, underscores confidence in the stock's value at current levels. Taylor emphasized the company's ample capital and the attractive opportunity to repurchase shares below book value.

Outlook and Strategic Initiatives

VersaBank expects steady sequential growth in core earnings, supported by operating leverage and capital deployment. The bank anticipates NIM to remain stable near current levels, with potential for expansion as the yield curve normalizes and lower-cost deposits replace maturing higher-cost deposits. The bank also highlighted opportunities in digital deposit receipts, positioning itself as a leader in stablecoin solutions for the banking industry. Despite challenges in the Canadian real estate market, the bank's focus on government-insured mortgages and long-standing client relationships has mitigated risks, with no charge-offs in the Canadian portfolio. The addition of Bank of Montreal as a deposit broker is expected to enhance net interest margin (NIM) and diversify the deposit base. With these initiatives, VersaBank is well-positioned to deliver sustainable growth and improve shareholder value.

3. NewsRoom

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Equitable Bank parent EQB to buy PC Financial from Loblaw

Dec -04

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VersaBank to Report Fourth Quarter and Fiscal 2025 Year End Results Wednesday, December 10, 2025 at 7:00 a.m. ET

Dec -03

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TSX Stocks That May Be Trading Below Estimated Value In December 2025

Dec -01

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/C O R R E C T I O N -- VersaBank/

Nov -26

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TSX Growth Companies With High Insider Ownership In November 2025

Nov -25

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VersaBank Expects $2 Million Additional Revenue From "Enhanced" CMHC Lending Program

Nov -20

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VERSABANK ANNOUNCES LARGEST US RPP PARTNER TO DATE; SURPASSES US RPP TARGET WITH US$310 MILLION FUNDED IN FISCAL 2025

Nov -03

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3 TSX Stocks That May Be Trading Below Their Estimated Value In October 2025

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4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (14.38%)

6. Segments

Digital Banking

Expected Growth: 15%

VersaBank's 15% growth in digital banking is driven by increasing adoption of online and mobile banking channels, rising demand for digital payment solutions, and strategic partnerships with fintech companies. Additionally, investments in AI-powered customer service, enhanced cybersecurity measures, and user-friendly interface have improved customer experience, contributing to the growth.

Cybersecurity Services and Banking and Financial Technology Development

Expected Growth: 10%

VersaBank's 10% growth in Cybersecurity Services and Banking and Financial Technology Development is driven by increasing demand for secure digital banking, rising cyber threats, and growing adoption of cloud-based services. Additionally, the need for regulatory compliance, digital transformation, and innovation in the financial sector are key growth drivers.

Eliminations / Adjustments

Expected Growth: 5%

VersaBank's 5% growth driven by strategic expansion into digital banking, increased adoption of cloud-based services, and growing demand for online lending platforms. Additionally, the bank's focus on cost reduction initiatives, improved operational efficiency, and enhanced customer experience have contributed to its growth momentum.

7. Detailed Products

VersaBank eDeposit

A digital deposit platform that allows businesses to deposit cheques remotely using a mobile app or desktop scanner

VersaBank ASC (Automated Settlement Centre)

A digital platform that automates the settlement process for businesses, allowing for faster and more efficient payment processing

VersaBank DDA (Demand Deposit Account)

A digital demand deposit account that provides businesses with a secure and flexible way to manage their cash flow

VersaBank API Banking

A suite of APIs that enable businesses to integrate banking services into their own applications and systems

VersaBank Commercial Loans

A range of commercial loan products that provide businesses with access to capital for growth and expansion

8. VersaBank's Porter Forces

Forces Ranking

Threat Of Substitutes

VersaBank's digital banking platform and online services reduce the threat of substitutes, as customers are less likely to switch to traditional banks.

Bargaining Power Of Customers

VersaBank's customers have some bargaining power due to the availability of alternative digital banking options, but the bank's unique services and features mitigate this power.

Bargaining Power Of Suppliers

VersaBank's suppliers, such as technology providers, have limited bargaining power due to the bank's strong market position and ability to negotiate favorable terms.

Threat Of New Entrants

The threat of new entrants is high in the digital banking space, as new fintech companies and traditional banks are expanding their online services, posing a threat to VersaBank's market share.

Intensity Of Rivalry

The intensity of rivalry in the digital banking space is high, with many players competing for market share, and VersaBank must continuously innovate and improve its services to remain competitive.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 22.79%
Debt Cost 9.32%
Equity Weight 77.21%
Equity Cost 9.32%
WACC 9.32%
Leverage 29.53%

11. Quality Control: VersaBank passed 4 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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Momentum: 6.0

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Value: 7.3

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Quality: 5.2

Yield: 5.0

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Versa

A-Score: 5.3/10

Value: 7.2

Growth: 8.8

Quality: 6.5

Yield: 1.0

Momentum: 2.5

Volatility: 6.0

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

17.02$

Current Price

17.02$

Potential

-0.00%

Expected Cash-Flows