VersaBank

Recent Developments

The Bank continued to realize rapid expansion of its credit asset portfolio in the US through the successful ramp up of its SRP. Following the achievement of its first-year target for SRP credit assets and the signing of an agreement with its largest US SRP partner to date at the end of Q4 2025, the Bank grew its total SRP assets to US$793 million at the end of the third quarter of fiscal 2026.

The Bank entered into an agreement with a wholly owned subsidiary of ECN Capital (the "ECN Subsidiary"), under which the ECN Subsidiary will utilize the Bank's core SRP in the United States. This is the second SRP program into which ECN Capital has entered with VersaBank in the United States. The ECN Subsidiary is expected to contribute at least US$300 million in additional US SRP fundings annually. VersaBank and ECN Capital believe the program could grow well beyond US$500 million per year in funding in the future.

The Bank launched its industry breakthrough Real-Time SRP, which is intended to provide the same reliable, economically attractive funding solution as the Bank's existing SRP, with the additional benefit of eliminating the need for SRP partners to warehouse multiple receivables over a period of time (typically from five to 30 or more days). This will enable the Bank's SRP partners to finance individual loans within just hours and is intended to reduce the overall financing cost and the need for warehouse financing, as well as the interest rate risk associated with the warehousing period. It also is intended to further strengthen VersaBank's exceptional risk mitigation capabilities by enabling the Bank to better leverage its own, internal AI platform through evaluation of the partner loans underlying the SRP receivables on an individual basis. The Bank expects its Real-Time SRP to enable it to obtain additional financing business with existing partners, while enabling it to acquire new partners with more specialized financing needs that it was previously unable to address. It also expects its Real-Time SRP to enable it to further capture market share from securitized financing providers.

The Bank added point-of-sale financing industry veteran Moe Danis, CFA, to the Bank's SRP team to support business development in response to increased demand following the Bank's launch of its Real-Time SRP, with a particular focus on specialized large-partner opportunities in the US market.

The Bank’s sale of certain assets associated with its only physical branch, located Holdingford, Minnesota, to Stearns Bank National Association was approved by the Office of the Comptroller of the Currency ("OCC") during the second quarter and the transaction closed on May 1, 2026.

Credit assets increased 29% to a record $6.16 billion, driven primarily by strong growth in each of the US and Canadian SRP portfolios, which, combined, increased 40%;

Total revenue increased 23% to a record $38.8 million, composed of record net interest income of $36.8 million and non-interest income of $2.0 million;

Net interest margin (“NIM”) on credit assets was 2.44%, a decrease of 11 bps. NIM was 2.19%, a decrease of 6 bps. The decrease in NIM reflected higher than typical GIC (term deposit) rates relative to Government of Canada bond yields, the replacement of retail deposits with brokered deposits resulting from the sale of the Bank's only physical branch in the US, as well as the Bank's decision to maintain greater liquidity amidst a challenging Canadian economy. The decrease in NIM also reflected lower credit asset yields in Canada due to the shift in credit asset mix resulting from the continued growth in the SRP portfolio, as well as growth in lower-risk, lower regulatory risk-weighted insured Multi-Family Residential Loans (“MROL”) credit assets from higher-yielding, higher regulatory risk-weighted uninsured MROL credit assets. The Bank’s NIM remains amongst the highest of the publicly traded Canadian Schedule I banks;

Recovery of credit loss provisions was $229,000 compared with a provision for credit losses (“PCL”) of $1.2 million, with the recovery being primarily due to the sale of branch assets and updates in the forward-looking information used by VersaBank in its credit risk models;

Recovery of credit loss provisions as a percentage of average credit assets was -0.02% compared with a PCL as a percentage of average credit assets of 0.10%, which remains among the lowest of the publicly traded Canadian Schedule I banks;

Non-interest expense, excluding non-core non-interest expenses in the amount of $3.1 million, was $22.1 million compared with $17.4 million, excluding $4.2 million in project costs associated with the Reorganization, with the increase primarily due to $0.8 million expense related to share-based long-term incentive awards, driven by the Bank's strong share price performance during the quarter, as well as $1.5 million in other transitory costs that the Bank does not expect to recur;

Non-interest expenses, including the $3.1 million non-core costs noted above, were $25.2 million compared with $21.6 million, which included $4.2 million in non-core costs;

Net income (including the $3.1 million in non-core expenses noted above) was $10.1 million compared with $6.6 million (including the $4.2 million in non-core expenses noted above);

Adjusted (core) net income (excluding the $3.1 million charge noted above) was $12.3 million compared with $9.7 million (excluding the $4.2 million charge noted above) (see Non-GAAP and Other Financial Measures), with the increase primarily due to higher revenues driven by growth in the Bank’s SRP portfolio, offset partially by incremental operating costs;

Income or earnings per common share (“EPS”) (including the $3.1 million charge noted above) was $0.31 compared with $0.20 (which includes the $4.2 million in non-core expenses noted above);

Adjusted (core) income or earnings per common share (“Adjusted (core) EPS”) (excluding the $3.1 million in non-core expenses noted above) increased to $0.38 from $0.30 (which excludes the $4.2 million in non-core expenses noted above), with the increase primarily due to higher revenues driven by the growth in the Bank’s SRP portfolio (see Non-GAAP and Other Financial Measures);

Return on average common equity (including the $3.1 million in non-core expenses noted above) was 7.14% compared with 4.94% (which includes the $4.2 million in non-core expenses noted above);

Adjusted (core) return on average common equity (excluding the $3.1 million in non-core expenses noted above) was 8.72% compared with 7.24% (which excludes the $4.2 million in non-core expenses noted above) (see Non-GAAP and Other Financial Measures);

Efficiency ratio (including non-core expenses noted above) was 65% compared with 69% (which includes the $4.2 million in non-core expenses noted above) and reflects the fixed cost structure of the Bank's US operations to support the US SRP program at scale during a period when the US SRP is in its ramp-up phase. The Bank's US operations at scale are expected to be significantly more efficient than its Canadian operations; and,

Adjusted (core) efficiency ratio (excluding the $3.1 million in non-core expenses noted above) was 57% compared with 55% (see Non-GAAP and Other Financial Measures).

Credit assets increased 9% to a record $6.16 billion, driven primarily by strong growth in each of the US and Canadian SRP portfolios, which, combined, increased 11%;

Total revenue increased 1% to a record $38.8 million, composed of a record net interest income of $36.8 million and non-interest income of $2.0 million;

NIM on credit assets was 2.44%, a decrease of 27 bps. NIM was 2.19%, a decrease of 14 bps. The decrease in NIM reflected higher than typical GIC (term deposit) rates relative to Government of Canada bond yields, the replacement of retail deposits with brokered deposits resulting from the sale of the Bank's only physical branch in the US, as well as the Bank's decision to maintain greater liquidity amidst a challenging Canadian economy. The decrease in NIM also reflected lower credit asset yields in Canada due to the shift in credit asset mix resulting from the continued growth in the SRP portfolio, as well as growth in lower-risk, lower regulatory risk-weighted insured MROL credit assets from higher-yielding, higher regulatory risk-weighted uninsured MROL credit assets. The Bank’s NIM remains amongst the highest of the publicly traded Canadian Schedule I banks;

Recovery of credit loss provisions was $229,000 compared with a PCL of $428,000, with the recovery being primarily due to the sale of branch assets and updates in the forward-looking information used by VersaBank in its credit risk models;

Recovery of credit loss provisions as a percentage of average credit assets was -0.02% compared with a PCL as a percentage of average credit assets of 0.03%, which remains among the lowest of the publicly traded Canadian Schedule I banks;

Non-interest expense, excluding non-core expenses in the amount of $3.1 million, composed of $2.5 million related to the project costs associated with the Reorganization and $600,000 related to write-off of capitalized software costs associated with the sale of branch assets and deposits in the quarter, was $22.1 million compared with $20.8 million (which excludes non-core expenses of $6.7 million, composed of $4.5 million related to the project costs associated with the Reorganization and a $2.2 million write-down of an intangible asset related to the customer deposit base of the Bank’s previously sole physical branch), with the increase primarily due to $0.8 million expense related to share-based long-term incentive awards, driven by the Bank's strong share price performance during the quarter, as well as $1.5 million in other transitory costs that the Bank does not expect to recur;

Non-interest expenses, including the $3.1 million in non-core expenses noted above, were $25.2 million compared with $27.5 million (which included non-core expenses of $6.7 million noted above);

Net income (including the $3.1 million in non-core expenses noted above) was $10.1 million compared with $7.5 million (which includes the $6.7 million in non-core expenses noted above), with the increase primarily due to higher revenues driven by the Bank’s expanding SRP portfolio, offset partially by higher non-interest expenses;

Adjusted (core) net income (excluding the $3.1 million in non-core expenses noted above) was $12.3 million compared with $12.4 million (excluding the $6.7 million in non-core expenses noted above) (see Non-GAAP and Other Financial Measures);

EPS (including the $3.1 million project non-core expenses noted above) was $0.31 compared with $0.23 (which includes the $6.7 million in non-core expenses noted above);

Adjusted (core) EPS (excluding the $3.1 million in non-core expenses noted above) was $0.38 compared with $0.39 (which excludes the $6.7 million in non-core expenses noted above) (see Non-GAAP and Other Financial Measures);

Return on average common equity (including the $3.1 million in non-core expenses noted above) was 7.14% compared with 5.64% (which includes the $6.7 million in non-core expenses noted above);

Adjusted (core) return on average common equity (excluding the $3.1 million non-core expenses noted above) was 8.72% compared with 9.23% (which excludes the $6.7 million in non-core expenses noted above) (see Non-GAAP and Other Financial Measures);

Efficiency ratio (including non-core expenses noted above) was 65% compared with 72% (which includes the $6.7 million in non-core expenses noted above); and,

Adjusted (core) efficiency ratio (excluding the $3.1 million in non-core expenses noted above) was 57% compared with 54% (which excludes the $6.7 million in non-core expenses noted above) (see Non-GAAP and Other Financial Measures).

Credit assets increased 29% to a record $6.16 billion, driven primarily by strong growth in each of the US and Canadian SRP portfolios, which, combined, increased 40%;

Total revenue increased 27% to a record $113.6 million, composed of a record net interest income of $106.3 million and non-interest income of $7.3 million;

NIM on credit assets was 2.53%, an increase of 3 bps. NIM was 2.24%, an increase of 7 bps. The increase in NIM was primarily due to lower cost of funds resulting from lower interest rates on renewals of maturing deposits throughout fiscal 2025 and the normalization of the yield curve from the atypically inverted yield curve that existed in the early part of fiscal 2025, offset partially by lower yield stemming from the continued growth in the SRP portfolio, which is composed of lower regulatory risk-weighted, lower yielding assets compared with higher yielding, higher regulatory risk-weighted MROL. The Bank’s NIM remains amongst the highest of the publicly traded Canadian Schedule I banks;

PCL was $899,000 compared with $3.1 million, with the decrease being primarily due to the sale of branch assets and updates in the forward-looking information used by VersaBank in its credit risk models;

PCL as a percentage of average credit assets was 0.02% compared with 0.09%, which remains among the lowest of the publicly traded Canadian Schedule I banks;

Non-interest expense, excluding $11.3 million of non-core expenses composed of $8.5 million in costs associated with the Reorganization, a $2.2 million intangible asset write-off and a $600,000 write-off of capitalized software costs resulting from the sale of the Bank’s sole physical branch in the quarter, was $61.9 million compared with $50.6 million (which excludes $4.2 million in non-core expenses associated with the Reorganization), with the increase primarily due to expense related to share-based long-term incentive awards, driven by the Bank's strong share price performance during the quarter, as well as other transitory costs that the Bank does not expect to recur;

Non-interest expenses, including the $11.3 million in non-core expenses noted above, were $73.2 million compared with $54.9 million, which includes $4.2 million in non-core expenses noted above;

Net income (including the $11.3 million in non-core expenses noted above) increased to $28.7 million compared with $23.3 million;

Adjusted (core) net income (excluding the $11.3 million in non-core expenses noted above) increased to $36.8 million from $26.3 million (which excludes $4.2 million in non-core expenses noted above) (see Non-GAAP and Other Financial Measures), primarily due to higher revenues driven by growth in the Bank’s SRP portfolio, offset partially by higher non-interest expenses;

EPS (including the $11.3 million in non-core expenses noted above) increased to $0.89 from $0.74 (which includes $4.2 million in non-core expenses noted above);

Adjusted (core) EPS (excluding the $11.3 million in non-core expenses noted above) increased to $1.15 from $0.84 (which excludes $4.2 million in non-core expenses noted above), with the increase primarily due to higher revenues driven by the Bank’s expanding SRP portfolio with the growth of VersaBank USA operations (see Non-GAAP and Other Financial Measures);

Return on average common equity (including the $11.3 million non-core expenses noted above) was 6.98% compared with 6.71% (which includes $4.2 million in non-core expenses noted above);

Adjusted (core) return on average common equity (excluding the $11.3 million in non-core expenses noted above) was 8.90% compared with 7.57% (which excludes $4.2 million in non-core expenses noted above) (see Non-GAAP and Other Financial Measures)

Efficiency ratio (including the $11.3 million non-core expenses noted above) was 64% compared with 61% (which includes $4.2 million in non-core expenses noted above); and,

Adjusted (core) efficiency ratio (excluding the $11.3 million in non-core expenses noted above) was 54% compared with 57% (which excludes $4.2 million in non-core expenses noted above) (see Non-GAAP and Other Financial Measures).