Note 18 - Operating Segmentation

6 Months Ended

Apr. 30, 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 and six months ended April 30, 2023 and 2022:

(thousands of Canadian dollars)

for the three months ended	April 30, 2023										April 30, 2022
	Digital		DRTC			Eliminations/			Consolidated		Digital		DRTC			Eliminations/			Consolidated
	Banking					Adjustments					Banking					Adjustments
Net interest income	$	24,609	$	-		$	-		$	24,609	$	17,242	$	-		$	-		$	17,242
Non-interest income		122		2,146			(192	)		2,076		1		1,434			(42	)		1,393
Total revenue		24,731		2,146			(192	)		26,685		17,243		1,434			(42	)		18,635
Provision for credit losses		237		-			-			237		78		-			-			78
		24,494		2,146			(192	)		26,448		17,165		1,434			(42	)		18,557
Non-interest expenses:
Salaries and benefits		6,930		1,499			-			8,429		5,586		1,140			-			6,726
General and administrative		3,131		377			(192	)		3,316		3,761		300			(42	)		4,019
Premises and equipment		612		369			-			981		659		363			-			1,022
		10,673		2,245			(192	)		12,726		10,006		1,803			(42	)		11,767
Income (loss) before income taxes		13,821		(99	)		-			13,722		7,159		(369	)		-			6,790
Income tax provision		3,991		(532	)		-			3,459		1,744		103			-			1,847
Net income (loss)	$	9,830	$	433		$	-		$	10,263	$	5,415	$	(472	)	$	-		$	4,943
Total assets	$	3,719,592	$	25,559		$	(15,758	)	$	3,729,393	$	2,692,510	$	21,386		$	(21,750	)	$	2,692,146
Total liabilities	$	3,366,614	$	29,057		$	(22,797	)	$	3,372,874	$	2,347,610	$	23,727		$	(20,605	)	$	2,350,732

(thousands of Canadian dollars)

for the six months ended	April 30, 2023										April 30, 2022
	Digital		DRTC			Eliminations/			Consolidated		Digital		DRTC			Eliminations/			Consolidated
	Banking					Adjustments					Banking					Adjustments
Net interest income	$	48,883	$	-		$	-		$	48,883	$	34,127	$	-		$	-		$	34,127
Non-interest income		124		3,979			(383	)		3,720		2		2,855			(83	)		2,774
Total revenue		49,007		3,979			(383	)		52,603		34,129		2,855			(83	)		36,901
Provision for (recovery of) credit losses		622		-			-			622		80		-			-			80
		48,385		3,979			(383	)		51,981		34,049		2,855			(83	)		36,821
Non-interest expenses:
Salaries and benefits		13,614		3,072			-			16,686		11,025		1,784			-			12,809
General and administrative		5,993		832			(383	)		6,442		7,243		483			(83	)		7,643
Premises and equipment		1,235		698			-			1,933		1,241		710			-			1,951
		20,842		4,602			(383	)		25,061		19,509		2,977			(83	)		22,403
Income (loss) before income taxes		27,543		(623	)		-			26,920		14,540		(122	)		-			14,418
Income tax provision		7,780		(540	)		-			7,240		3,706		203			-			3,909
Net income (loss)	$	19,763	$	(83	)	$	-		$	19,680	$	10,834	$	(325	)	$	-		$	10,509
Total assets	$	3,719,592	$	25,559		$	(15,758	)	$	3,729,393	$	2,692,510	$	21,386		$	(21,750	)	$	2,692,146
Total liabilities	$	3,366,614	$	29,057		$	(22,797	)	$	3,372,874	$	2,347,610	$	23,727		$	(20,605	)	$	2,350,732

The Bank has operations in the US, through both its Digital Banking and DRTC businesses; however as at April 30, 2023, substantially all of the Bank’s earnings and assets are based in Canada.