Note 16 - Operating Segmentation

6 Months Ended

Apr. 30, 2022

Statement Line Items [Line Items]

Disclosure of entity's operating segments [text block]

16. Operating Segmentation:

The Bank has established two reportable operating segments, those being Digital Banking and DRTC (cybersecurity services). The two operating segments are strategic business operations providing distinct products and services to different markets and are separately managed as a function of the distinction in the nature of the business of the two operating segments. The following summarizes the operations of each of the reportable segments:

Digital Banking – The Bank employs a business-to-business model using its proprietary financial technology to address underserved segments of the Canadian banking market. VersaBank obtains its deposits and provides the majority of its loans and leases electronically, with innovative deposit and lending solutions for financial intermediaries that allow them to excel in their core businesses.

DRTC (cybersecurity services) - Leveraging its internally developed IT security software and capabilities, VersaBank established a wholly-owned subsidiary, DRT Cyber Inc. (“DRTC”), to pursue significant large-market opportunities in cybersecurity and develop innovative solutions to address the rapidly growing volume of cyber threats challenging financial institutions, multi-national corporations and government entities.

The basis for the determination of the reportable segments is a function primarily of the systematic, consistent process employed by our chief operating decision maker, the Chief Executive Officer, and the Chief Financial Officer in reviewing and interpreting the operations and performance of each segment. The accounting policies applied to these segments are consistent with those employed in the preparation of our consolidated financial statements, as disclosed in Note 3 of the Bank’s 2021 audited Consolidated Financial Statements.

Performance is measured based on segment net income, as included in the Bank’s internal management reporting. Management has determined that this measure is the most relevant in evaluating segment results and in the allocation of resources.

Following is information regarding the results of each reportable operating segment as at and three and six months ended April 30, 2022 and 2021:

(thousands of Canadian dollars)
for the three months ended	April 30, 2022										April 30, 2021
	Digital		DRTC			Eliminations/			Consolidated		Digital			DRTC			Eliminations/			Consolidated
	Banking					Adjustments					Banking						Adjustments
Net interest income	$	17,242	$	-		$	-		$	17,242	$	15,095		$	-		$	-		$	15,095
Non-interest income		1		1,434			(42	)		1,393		1			915			(41	)		875
Total revenue		17,243		1,434			(42	)		18,635		15,096			915			(41	)		15,970
Provision for (recovery of) credit losses		78		-			-			78		(312	)		-			-			(312	)
		17,165		1,434			(42	)		18,557		15,408			915			(41	)		16,282
Non-interest expenses:
Salaries and benefits		5,586		1,140			-			6,726		4,525			428			-			4,953
General and administrative		3,761		300			(42	)		4,019		2,237			187			(41	)		2,383
Premises and equipment		659		363			-			1,022		598			408			-			1,006
		10,006		1,803			(42	)		11,767		7,360			1,023			(41	)		8,342
Income (loss) before income taxes		7,159		(369	)		-			6,790		8,048			(108	)		-			7,940
Income tax provision		1,744		103			-			1,847		2,153			43			-			2,196
Net income (loss)	$	5,415	$	(472	)	$	-		$	4,943	$	5,895		$	(151	)	$	-		$	5,744
Total assets	$	2,692,510	$	21,386		$	(21,750	)	$	2,692,146	$	2,139,974		$	17,777		$	(17,994	)	$	2,139,757
Total liabilities	$	2,347,610	$	23,727		$	(20,605	)	$	2,350,732	$	1,888,732		$	20,508		$	(16,849	)	$	1,892,391

(thousands of Canadian dollars)
for the six months ended	April 30, 2022										April 30, 2021
	Digital		DRTC			Eliminations/			Consolidated		Digital			DRTC		Eliminations/			Consolidated
	Banking					Adjustments					Banking					Adjustments
Net interest income	$	34,127	$	-		$	-		$	34,127	$	29,469		$	-	$	-		$	29,469
Non-interest income		2		2,855			(83	)		2,774		(16	)		2,008		(69	)		1,923
Total revenue		34,129		2,855			(83	)		36,901		29,453			2,008		(69	)		31,392
Provision for (recovery of) credit losses		80		-			-			80		(255	)		-		-			(255	)
		34,049		2,855			(83	)		36,821		29,708			2,008		(69	)		31,647
Non-interest expenses:
Salaries and benefits		11,025		1,784			-			12,809		9,223			760		-			9,983
General and administrative		7,243		483			(83	)		7,643		4,299			492		(69	)		4,722
Premises and equipment		1,241		710			-			1,951		1,168			556		-			1,724
		19,509		2,977			(83	)		22,403		14,690			1,808		(69	)		16,429
Income (loss) before income taxes		14,540		(122	)		-			14,418		15,018			200		-			15,218
Income tax provision		3,706		203			-			3,909		4,006			178		-			4,184
Net income (loss)	$	10,834	$	(325	)	$	-		$	10,509	$	11,012		$	22	$	-		$	11,034
Total assets	$	2,692,510	$	21,386		$	(21,750	)	$	2,692,146	$	2,139,974		$	17,777	$	(17,994	)	$	2,139,757
Total liabilities	$	2,347,610	$	23,727		$	(20,605	)	$	2,350,732	$	1,888,732		$	20,508	$	(16,849	)	$	1,892,391

While the Bank has operations in the US, primarily through its DRTC operations, as at April 30, 2022 substantially all of the Bank’s current earnings and assets are based in Canada.