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Note 18 - Operating Segmentation

6 Months Ended

Apr. 30, 2024

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 2023 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, 2024 and 2023:

(thousands of Canadian dollars)
for the three months ended	April 30, 2024										April 30, 2023
	Digital		DRTC			Eliminations/			Consolidated		Digital		DRTC			Eliminations/			Consolidated
	Banking					Adjustments					Banking					Adjustments
Net interest income	$	26,242	$	-		$	-		$	26,242	$	24,609	$	-		$	-		$	24,609
Non-interest income		262		2,336			(339	)		2,259		122		2,146			(192	)		2,076
Total revenue		26,504		2,336			(339	)		28,501		24,731		2,146			(192	)		26,685

Provision for (recovery of) credit losses		16		-			-			16		237		-			-			237
		26,488		2,336			(339	)		28,485		24,494		2,146			(192	)		26,448

Non-interest expenses:
Salaries and benefits		5,724		1,685			-			7,409		6,930		1,499			-			8,429
General and administrative		3,445		451			(339	)		3,557		3,131		377			(192	)		3,316
Premises and equipment		845		374			-			1,219		612		369			-			981
		10,014		2,510			(339	)		12,185		10,673		2,245			(192	)		12,726

Income (loss) before income taxes		16,474		(174	)		-			16,300		13,821		(99	)		-			13,722

Income tax provision		4,484		(12	)		-			4,472		3,991		(532	)		-			3,459

Net income (loss)	$	11,990	$	(162	)	$	-		$	11,828	$	9,830	$	433		$	-		$	10,263

Total assets	$	4,378,863	$	26,980		$	(17,523	)	$	4,388,320	$	3,719,592	$	25,559		$	(15,758	)	$	3,729,393

Total liabilities	$	3,982,924	$	29,069		$	(23,776	)	$	3,988,217	$	3,366,614	$	29,057		$	(22,797	)	$	3,372,874

(thousands of Canadian dollars)
for the six months ended	April 30, 2024											April 30, 2023
	Digital			DRTC		Eliminations/			Consolidated			Digital		DRTC			Eliminations/			Consolidated
	Banking					Adjustments						Banking					Adjustments
Net interest income	$	52,810		$	-	$	-		$	52,810		$	48,883	$	-		$	-		$	48,883
Non-interest income		382			4,836		(676	)		4,542			124		3,979			(383	)		3,720
Total revenue		53,192			4,836		(676	)		57,352			49,007		3,979			(383	)		52,603

Provision for (recovery of) credit losses		(111	)		-		-			(111	)		622		-			-			622
		53,303			4,836		(676	)		57,463			48,385		3,979			(383	)		51,981

Non-interest expenses:
Salaries and benefits		11,095			2,852		-			13,947			13,614		3,072			-			16,686
General and administrative		7,721			845		(676	)		7,890			5,993		832			(383	)		6,442
Premises and equipment		1,613			759		-			2,372			1,235		698			-			1,933
		20,429			4,456		(676	)		24,209			20,842		4,602			(383	)		25,061

Income (loss) before income taxes		32,874			380		-			33,254			27,543		(623	)		-			26,920

Income tax provision		8,620			107		-			8,727			7,780		(540	)		-			7,240

Net income (loss)	$	24,254		$	273	$	-		$	24,527		$	19,763	$	(83	)	$	-		$	19,680

Total assets	$	4,378,863		$	26,980	$	(17,523	)	$	4,388,320		$	3,719,592	$	25,559		$	(15,758	)	$	3,729,393

Total liabilities	$	3,982,924		$	29,069	$	(23,776	)	$	3,988,217		$	3,366,614	$	29,057		$	(22,797	)	$	3,372,874

The Bank has operations in the US, through both its Digital Banking and DRTC businesses, however as at April 30, 2024, substantially all of the Bank’s earnings and assets are based in Canada.