Is VersaBank stock a buy?

In a June 2 earnings preview, Roth Capital Markets analyst Craig Irwin maintained a “Neutral” rating and $10.40 price target on VersaBank (VersaBank Stock Quote, Chart, News, Analysts, Financials NASDAQ:VBNK), saying he expects fiscal Q2 results to be in line with consensus.

He said investors will likely weigh the positive momentum in net interest margins (NIMs), particularly in the U.S., where they were over 130 basis points higher than in Canada last quarter, against the potential for higher non-interest expenses as the board considers converting VersaBank to a U.S.-domiciled bank.

Irwin added that U.S. loan growth will be a key focus and said he may revisit his rating if confidence in the bank’s profit outlook improves.

“We expect F2Q25 (Apr) to confirm positive momentum driving US growth,” he said. “We model F2Q25 Net Revenue/EPS of US$21.3m/$0.22 vs. the US$21.2m/ $0.19 consensus. Our NIM estimate of 2.15% [vs. the 2.22% consensus] compares to 2.08% reported in F1Q25 and 2.45% in F2Q24.”

VersaBank is a Canadian chartered bank that offers commercial lending and banking services in Canada and the U.S. It also provides cybersecurity and financial technology services through its subsidiary, DRT Cyber Inc.

Irwin said VersaBank’s plan to realign as a U.S.-domiciled bank could raise near-term non-interest expenses. On May 29, the bank announced a proposal to exchange its current shares for shares in a new parent company, VersaHoldings US Corp., which is expected to be listed on both the Nasdaq and the Toronto Stock Exchange (TSX). A new board would also be formed to meet SEC requirements. Management expects the realignment to cost about C$8-million.

“We expect additional details to be given at the time of the F2Q25 call,” Irwin said. “Notably, the press release explicitly stated that the VBNK board of directors has not made a final determination to proceed or confirmed any potential timeline.”

Irwin expects VersaBank to generate $1.01-million in Adjusted EBITDA on $91.8-million in revenue for fiscal 2025. Estimates for fiscal 2026 were not provided.

He said Roth is leaving its forecast unchanged at this time.

“We view management’s recent discussion of rebounding NIMs as a material positive and will look to understand the details on the potential for higher non-interest expenses,” he said. “VBNK reported NIM expansion through the first two months of F2Q25, benefiting from 1) the normalization of the Canadian yield curve, 2) deposit rollover to a lower cost of funds, 3) growth in insolvency deposits, and 4) growth in the higher-yielding US RPP portfolio. The company also announced the addition of Bank of Montreal to its authorized deposit broker network, which management believes could serve as a tailwind to NIM.”

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