Note 18 - Operating Segmentation

9 Months Ended

Jul. 31, 2024

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 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 nine months ended July 31, 2024 and 2023:

(thousands of Canadian dollars)
for the three months ended	July 31, 2024												July 31, 2023
	Digital			DRTC			Eliminations/			Consolidated			Digital		DRTC			Eliminations/			Consolidated
	Banking						Adjustments						Banking					Adjustments
Net interest income	$	24,944		$	-		$	-		$	24,944		$	24,929	$	-		$	-		$	24,929
Non-interest income		175			2,219			(342	)		2,052			101		2,020			(191	)		1,930
Total revenue		25,119			2,219			(342	)		26,996			25,030		2,020			(191	)		26,859
Provision for (recovery of) credit losses		(1	)		-			-			(1	)		171		-			-			171
		25,120			2,219			(342	)		26,997			24,859		2,020			(191	)		26,688
Non-interest expenses:
Salaries and benefits		5,945			1,562			-			7,507			5,891		1,562			-			7,453
General and administrative		4,729			446			(342	)		4,833			4,257		380			(191	)		4,446
Premises and equipment		824			370			-			1,194			610		370			-			980
		11,498			2,378			(342	)		13,534			10,758		2,312			(191	)		12,879
Income (loss) before income taxes		13,622			(159	)		-			13,463			14,101		(292	)		-			13,809
Income tax provision		3,811			(53	)		-			3,758			3,999		(193	)		-			3,806
Net income (loss)	$	9,811		$	(106	)	$	-		$	9,705		$	10,102	$	(99	)	$	-		$	10,003
Total assets	$	4,507,158		$	27,285		$	(18,007	)	$	4,516,436		$	3,971,781	$	25,485		$	(16,421	)	$	3,980,845
Total liabilities	$	4,102,239		$	29,471		$	(24,259	)	$	4,107,451		$	3,609,832	$	29,123		$	(23,153	)	$	3,615,802

(thousands of Canadian dollars)
for the nine months ended	July 31, 2024											July 31, 2023
	Digital			DRTC		Eliminations/			Consolidated			Digital		DRTC			Eliminations/			Consolidated
	Banking					Adjustments						Banking					Adjustments
Net interest income	$	77,754		$	-	$	-		$	77,754		$	73,812	$	-		$	-		$	73,812
Non-interest income		557			7,055		(1,018	)		6,594			225		5,999			(574	)		5,650
Total revenue		78,311			7,055		(1,018	)		84,348			74,037		5,999			(574	)		79,462
Provision for (recovery of) credit losses		(112	)		-		-			(112	)		793		-			-			793
		78,423			7,055		(1,018	)		84,460			73,244		5,999			(574	)		78,669
Non-interest expenses:
Salaries and benefits		17,040			4,414		-			21,454			19,505		4,634			-			24,139
General and administrative		12,450			1,291		(1,018	)		12,723			10,250		1,212			(574	)		10,888
Premises and equipment		2,437			1,129		-			3,566			1,845		1,068			-			2,913
		31,927			6,834		(1,018	)		37,743			31,600		6,914			(574	)		37,940
Income (loss) before income taxes		46,496			221		-			46,717			41,644		(915	)		-			40,729
Income tax provision		12,431			54		-			12,485			11,779		(733	)		-			11,046
Net income (loss)	$	34,065		$	167	$	-		$	34,232		$	29,865	$	(182	)	$	-		$	29,683
Total assets	$	4,507,158		$	27,285	$	(18,007	)	$	4,516,436		$	3,971,781	$	25,485		$	(16,421	)	$	3,980,845
Total liabilities	$	4,102,239		$	29,471	$	(24,259	)	$	4,107,451		$	3,609,832	$	29,123		$	(23,153	)	$	3,615,802

The Bank has operations in the US, through both its Digital Banking and DRTC businesses, however as at July 31, 2024, substantially all of the Bank’s earnings and assets are based in Canada.