Note 17 - Operating Segmentation

9 Months Ended

Jul. 31, 2022

Statement Line Items [Line Items]

Disclosure of entity's operating segments [text block]

17. 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 each business. 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 in the Canadian and U.S. banking markets. VersaBank obtains its deposits and provides the majority of its loans and leases electronically via innovative deposit and lending solutions for financial intermediaries.

DRTC (cybersecurity services and banking and financial technology development) - Leveraging its internally developed IT security software and capabilities, VersaBank established a wholly-owned subsidiary, DRT Cyber Inc. 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 for the three and nine months ended July 31, 2022 and 2021:

(thousands of Canadian dollars)
for the three months ended	July 31, 2022										July 31, 2021
	Digital		DRTC			Eliminations/			Consolidated		Digital		DRTC		Eliminations/			Consolidated
	Banking					Adjustments					Banking				Adjustments
Net interest income	$	20,062	$	-		$	-		$	20,062	$	14,542	$	-	$	-		$	14,542
Non-interest income		12		1,206			(41	)		1,177		2		1,226		(41	)		1,187
Total revenue		20,074		1,206			(41	)		21,239		14,544		1,226		(41	)		15,729
Provision for (recovery of) credit losses		166		-			-			166		96		-		-			96
		19,908		1,206			(41	)		21,073		14,448		1,226		(41	)		15,633
Non-interest expenses:
Salaries and benefits		5,600		1,168			-			6,768		4,411		442		-			4,853
General and administrative		5,217		343			(41	)		5,519		2,286		169		(41	)		2,414
Premises and equipment		610		319			-			929		607		326		-			933
		11,427		1,830			(41	)		13,216		7,304		937		(41	)		8,200
Income (loss) before income taxes		8,481		(624	)		-			7,857		7,144		289		-			7,433
Income tax provision		2,099		38			-			2,137		1,904		93		-			1,997
Net income (loss)	$	6,382	$	(662	)	$	-		$	5,720	$	5,240	$	196	$	-		$	5,436
Total assets	$	3,076,611	$	21,796		$	(23,064	)	$	3,075,343	$	2,285,882	$	18,323	$	(18,434	)	$	2,285,771
Total liabilities	$	2,725,820	$	24,794		$	(21,919	)	$	2,728,695	$	2,030,180	$	20,848	$	(17,289	)	$	2,033,739

(thousands of Canadian dollars)
for the nine months ended	July 31, 2022										July 31, 2021
	Digital		DRTC			Eliminations/			Consolidated		Digital			DRTC		Eliminations/			Consolidated
	Banking					Adjustments					Banking					Adjustments
Net interest income	$	54,189	$	-		$	-		$	54,189	$	44,011		$	-	$	-		$	44,011
Non-interest income		14		4,061			(124	)		3,951		(14	)		3,234		(110	)		3,110
Total revenue		54,203		4,061			(124	)		58,140		43,997			3,234		(110	)		47,121
Provision for (recovery of) credit losses		246		-			-			246		(159	)		-		-			(159	)
		53,957		4,061			(124	)		57,894		44,156			3,234		(110	)		47,280
Non-interest expenses:
Salaries and benefits		16,625		2,952			-			19,577		13,634			1,202		-			14,836
General and administrative		12,460		826			(124	)		13,162		6,585			661		(110	)		7,136
Premises and equipment		1,851		1,029			-			2,880		1,775			882		-			2,657
		30,936		4,807			(124	)		35,619		21,994			2,745		(110	)		24,629
Income (loss) before income taxes		23,021		(746	)		-			22,275		22,162			489		-			22,651
Income tax provision		5,805		241			-			6,046		5,910			271		-			6,181
Net income (loss)	$	17,216	$	(987	)	$	-		$	16,229	$	16,252		$	218	$	-		$	16,470
Total assets	$	3,076,611	$	21,796		$	(23,064	)	$	3,075,343	$	2,285,882		$	18,323	$	(18,434	)	$	2,285,771
Total liabilities	$	2,725,820	$	24,794		$	(21,919	)	$	2,728,695	$	2,030,180		$	20,848	$	(17,289	)	$	2,033,739

The Bank has operations in the US, through both its Digital Banking and DRTC businesses, however as at July 31, 2022 substantially all of the Bank’s earnings and assets are based in Canada.