Note 18 - Operating Segmentation

3 Months Ended

Jan. 31, 2023

Statement Line Items [Line Items]

Disclosure of entity's operating segments [text block]

18. 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 branchless business-to-business model using its proprietary financial technology to address underserved segments in the Canadian and US 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 the Bank’s 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 the Bank’s Consolidated Financial Statements, as disclosed in note 3 of the Bank’s 2022 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.

The following table sets out the results of each reportable operating segment as at and for the three months ended January 31, 2023 and 2022:

(thousands of Canadian dollars)
for the three months ended	January 31, 2023										January 31, 2022
	Digital		DRTC			Eliminations/			Consolidated		Digital		DRTC		Eliminations/			Consolidated
	Banking					Adjustments					Banking				Adjustments
Net interest income	$	24,274	$	-		$	-		$	24,274	$	16,885	$	-	$	-		$	16,885
Non-interest income		2		1,833			(191	)		1,644		-		1,422		(41	)		1,381
Total revenue		24,276		1,833			(191	)		25,918		16,885		1,422		(41	)		18,266
Provision for credit losses		385		-			-			385		2		-		-			2
		23,891		1,833			(191	)		25,533		16,883		1,422		(41	)		18,264
Non-interest expenses:
Salaries and benefits		6,684		1,573			-			8,257		5,440		643		-			6,083
General and administrative		2,862		455			(191	)		3,126		3,482		183		(41	)		3,624
Premises and equipment		623		329			-			952		582		347		-			929
		10,169		2,357			(191	)		12,335		9,504		1,173		(41	)		10,636
Income (loss) before income taxes		13,722		(524	)		-			13,198		7,379		249		-			7,628
Income tax provision		3,789		(8	)		-			3,781		1,961		101		-			2,062
Net income (loss)	$	9,933	$	(516	)	$	-		$	9,417	$	5,418	$	148	$	-		$	5,566
Total assets	$	3,522,279	$	23,797		$	(14,386	)	$	3,531,690	$	2,412,167	$	23,767	$	(20,588	)	$	2,415,346
Total liabilities	$	3,174,197	$	27,751		$	(21,435	)	$	3,180,513	$	2,072,691	$	25,147	$	(19,443	)	$	2,078,395

The Bank has operations in the US, through both its Digital Banking and DRTC businesses; however as at January 31, 2023, substantially all of the Bank’s earnings and assets are based in Canada.