For Aggressive Investors Only: 1 Under-the-Radar Stock That Just Started Drawing a Whole Lot of Attention

In Monday’s trading, both the S&P 500 and Nasdaq Composite slipped, down 0.24% and 0.26%, respectively. The decline reflects growing concern that the two-week ceasefire with Iran, set to expire at 8 p.m. ET tonight, will lapse without a deal, potentially reigniting hostilities.

Prediction markets will likely see a surge in activity. While they can be entertaining, they’re not particularly useful for investors—roughly 70% of participants reportedly lose money. Better to focus on fundamentals.

Speaking of which, here’s a data point worth noting: just 85 of Barchart’s top 200 bullish price surprises yesterday were profitable over the trailing 12 months. Of those, only 19 had market caps above $10 billion. The remaining 66 ranged from SiriusXM (SIRI) at $9.16 billion down to Jerash Holdings (JRSH) at just $42 million.

Buried in that group is a lesser-known name I’ve followed for years: VersaBank (VBNK).

The London, Ontario–based digital bank saw its shares jump nearly 10% Monday on volume of 233,400—about 2.8 times its 30-day average. The only apparent catalyst was a press release confirming it had begun receiving deposits tied to Stablecorp’s QCAD, Canada’s first compliant Canadian-dollar stablecoin.

On the surface, that might not seem like a major development. But it highlights an important point: VersaBank continues to push the boundaries of digital banking and asset innovation. That alone makes it worth a closer look.

A Long Track Record

I don’t usually revisit past articles, but VersaBank is an exception. I first wrote about it back in May 2016 for Motley Fool Canada, and more recently in January 2024, when I flagged it as a value play—even after a 40% run in the prior six weeks.

At the time, the stock traded at 6.9x 2023 earnings before its rally, and 9.7x afterward. Based on a 2024 EPS estimate of CAD$1.97, it was still only at 7.7x forward earnings—well below larger peers like JPMorgan (JPM) at 10.6x.

Since then, a steady stream of developments has helped drive a 61% gain over the past 27 months. Even so, there’s a reasonable argument that the stock still hasn’t fully caught up to the strength of the underlying business.

Take revenue: for the trailing 12 months ending Q1 2026, VersaBank generated CAD$129.2 million, up 15.8% from CAD$111.5 million a year earlier. That’s solid, if not spectacular, growth—especially given that the bank has been expanding into the highly competitive U.S. market.

And “competitive” is putting it mildly. The U.S. banking sector is unforgiving, where even minor compliance missteps can lead to massive penalties—as Toronto-Dominion Bank (TD) discovered when it paid a $3.09 billion fine in 2024.

At first glance, the decline in net income over the past two years, while revenue has increased, might raise concerns. But that interpretation misses the bigger picture.

Understanding the Model

VersaBank operates a business-to-business, branchless digital banking model, with charters in both Canada and the U.S. It gathers deposits and originates loans through third-party financial partners, focusing on underserved niches.

This approach offers two key advantages: higher margins and lower risk. Without the overhead of a traditional branch network, the bank can operate more efficiently while maintaining a conservative credit profile.

Its target net interest margin is 2.5% to 3.0%. As of January 31, 2026, it was 2.64% on $3.89 billion in credit assets, up 23% year over year.

On the funding side, 98% of deposits are brokered and insured, providing a stable base for lending. In Q1 2026, about 83% of deposits came from brokers and 17% from licensed insolvency trustees.

Credit quality is another standout. Over the 12 quarters ending October 31, 2025, the bank’s average provision for credit losses was just 0.03% of loans. It hasn’t recorded any material credit losses in more than 30 years.

Much of its lending flows through its Structured Receivable Program (SRP), which finances point-of-sale loans. If a loan becomes 90 days delinquent, VersaBank is repaid and the exposure shifts back to its partner—effectively limiting downside risk.

The bank’s Receivable Purchase Program (RPP), launched in Canada in 2010 and expanded into the U.S. in 2022, is also gaining traction. In fiscal 2025, U.S. RPP funding reached $310 million, exceeding its $290 million target. Momentum appears to be building, with management expecting U.S. assets to expand several-fold in 2026.

Barring a severe recession, the runway for growth here looks substantial.

Why It Matters

One upcoming catalyst is the creation of a U.S.-domiciled holding company, which will align VersaBank with the standard industry structure. This move could increase analyst coverage and potentially qualify the stock for inclusion in the Russell 2000—both meaningful visibility drivers.

Regulatory approval is still pending, but there’s little reason to expect major hurdles.

Another underappreciated asset is its DRT Cybersecurity division. With roughly 400 clients across North America, VersaBank is exploring a sale of this business. Proceeds would provide additional capital to reinvest in its core digital banking operations—effectively unlocking value that isn’t currently reflected in the stock.

As for valuation, the long-term potential becomes clearer when you look at operating leverage. At the end of 2025, the bank’s efficiency ratio was 55%, and return on capital employed (ROCE) was 8%.

If it scales credit assets beyond CAD$10 billion, management expects the efficiency ratio to drop below 25% and ROCE to exceed 35%. Even partial progress toward those targets would justify a market cap well above today’s $566 million.

Final Take

VersaBank isn’t for conservative investors. It’s a small-cap name with a specialized business model and exposure to niche lending markets. But for those with a reasonable risk tolerance and a long-term horizon, the upside could be substantial.

No risk, no reward.