0001437749-25-037310
SEC filingVersaBank's fiscal 2025 net income fell 28% to $28.5M, pressured by $9.9M in non-recurring reorganization costs, masking solid 13% net interest income growth from its core Receivable Purchase Program.
VersaBank reported total revenue of $124.6 million for the fiscal year ended October 31, 2025, a 12% increase from $111.6 million in the prior year. Net interest income, the primary revenue driver, rose 13% to $116.2 million as average credit assets grew 15% to $4.65 billion. The net interest margin on credit assets held steady at 2.52%, though the overall net interest margin narrowed 9 bps to 2.18% due to higher-than-typical liquidity held to support US RPP growth.
Non-interest income decreased 6% to $8.5 million, largely from lower cybersecurity client engagements at DRTC.
Operating income (income before taxes) fell 24% to $41.5 million, primarily because non-interest expenses surged 38% to $78.7 million. The increase was driven by $9.9 million in project costs associated with the planned corporate reorganization to domicile the parent company in the United States, as well as operating costs from the US banking subsidiary (VersaBank USA) acquired in August 2024.
Net income declined 28% to $28.5 million, or $0.90 per diluted share, from $39.7 million ($1.49) last year. Excluding the $9.9 million reorganization expense and a $1.1 million one-time income tax adjustment, adjusted net income was $36.9 million ($1.17 per share), down 7% from prior-year adjusted net income.
Total assets grew 20% to $5.81 billion, driven by a 20% increase in credit assets to $5.07 billion. The Receivable Purchase Program (RPP) portfolio expanded 22% to $4.04 billion, reflecting strong demand in Canada and the ramp-up of the US RPP after the August 2024 acquisition of Stearns Bank. Multi-family residential loans and other increased 11% to $1.01 billion.
Cash and securities totaled $663 million, up 26%, representing 11% of assets. Deposits increased 17% to $4.86 billion, funded by broker deposits and licensed insolvency trustee deposits.
Shareholders' equity rose 33% to $533 million, benefiting from a $114.8 million common share offering in December 2024 (6.5 million shares), partially offset by $9.2 million in share buybacks (573,251 shares) and $3.2 million in dividends. Book value per share increased to $16.67 from $15.35.
The CET1 capital ratio improved to 12.92% from 11.24%, well above the 7.0% regulatory minimum. The leverage ratio was 8.47% (minimum 3.0%).
Cash provided by operations was $44.5 million, compared to $272.7 million last year. The decline reflects heavy credit asset growth ($830 million increase) outpacing deposit growth ($724 million increase), partially offset by other liability increases ($122 million). Interest received exceeded interest paid by $106.5 million. Investing activities generated $212 million in net cash, primarily from $219 million in securities sales. Financing activities provided $102 million, mainly from the equity offering.
Free cash flow (operating cash flow less capex of $1.0 million) was approximately $43.5 million, though the bank's operating cash flow is inherently tied to balance sheet growth and may not be sustainable at this level.
Management attributed the revenue growth to expansion of the RPP, which benefited from a strong pipeline of US origination partners. The non-interest expense increase was largely one-time: $9.9 million in reorganization costs (legal, advisory, regulatory) for the proposed US domestications, which management expects will significantly reduce corporate costs over the long term. The bank expects reorganization completion in 2026.
Key strategic priorities include scaling the US RPP (ongoing US credit asset growth to $442 million from $65 million), completing the corporate reorganization, and commercializing Real Bank Deposit Tokens (RBDTs) after pilot programs. Cybersecurity subsidiary DRTC is being prepared for divestiture under Federal Reserve requirements by September 2026.
Management highlighted strong credit quality: 97% of credit assets were satisfactory, with provision for credit losses at 0.09% of average credit assets (still among the lowest in Canadian Schedule I banks). The ECL allowance increased to $7.3 million, primarily due to updated forward-looking macroeconomic assumptions.