All amounts are unaudited and in Canadian dollars and are based on financial statements prepared in compliance with International Accounting Standard 34 Interim Financial Reporting, unless otherwise noted. Our first quarter 2024 ("Q1 2024") unaudited Interim Consolidated Financial Statements for the period ended |
Consolidated and Segmented Financial Summary
(unaudited) | As at or for the three months ended | ||||||||
(thousands of Canadian dollars except per share amounts) | 2024 | 2023 | Change | 2023 | Change | ||||
Financial results | |||||||||
Total revenue | $ 28,851 | $ 29,173 | (1 %) | $ 25,918 | 11 % | ||||
Cost of funds* | 3.99 % | 3.86 % | 3 % | 2.95 % | 35 % | ||||
Net interest margin* | 2.48 % | 2.54 % | (2 %) | 2.83 % | (12 %) | ||||
Net interest margin on loans* | 2.63 % | 2.69 % | (2 %) | 3.03 % | (13 %) | ||||
Return on average common equity* | 13.41 % | 13.58 % | (1 %) | 10.79 % | 24 % | ||||
Net income | 12,699 | 12,479 | 2 % | 9,417 | 35 % | ||||
Net income per common share basic and diluted | 0.48 | 0.47 | 2 % | 0.34 | 41 % | ||||
Balance sheet and capital ratios | |||||||||
Total assets | $ 4,309,635 | $ 4,201,610 | 3 % | $ 3,531,690 | 22 % | ||||
Book value per common share* | 14.46 | 14.00 | 3 % | 12.77 | 13 % | ||||
Common Equity Tier 1 (CET1) capital ratio | 11.39 % | 11.33 % | 1 % | 11.19 % | 2 % | ||||
Total capital ratio | 15.19 % | 15.38 % | (1 %) | 15.34 % | (1 %) | ||||
Leverage ratio | 8.44 % | 8.30 % | 2 % | 9.21 % | (8 %) | ||||
* See definitions under 'Non-GAAP and Other Financial Measures' in the Q1 2024 Management's Discussion and Analysis. |
(1) In the first quarter of 2017 the Bank recognized an |
(thousands of Canadian dollars) | |||||||||||||||
for the three months ended | |||||||||||||||
Digital | DRTC | Eliminations/ | Consolidated | Digital | DRTC | Eliminations/ | Consolidated | Digital | DRTC | Eliminations/ | Consolidated | ||||
Banking | Adjustments | Banking | Adjustments | Banking | Adjustments | ||||||||||
Net interest income | $ 26,568 | $ - | $ - | $ 26,568 | $ 26,239 | $ - | $ - | $ 26,239 | $ 24,274 | $ - | $ - | $ 24,274 | |||
Non-interest income | 120 | 2,500 | (337) | 2,283 | 315 | 3,699 | (1,080) | 2,934 | 2 | 1,833 | (191) | 1,644 | |||
Total revenue | 26,688 | 2,500 | (337) | 28,851 | 26,554 | 3,699 | (1,080) | 29,173 | 24,276 | 1,833 | (191) | 25,918 | |||
Provision for (recovery of) credit losses | (127) | - | - | (127) | (184) | - | - | (184) | 385 | - | - | 385 | |||
26,815 | 2,500 | (337) | 28,978 | 26,738 | 3,699 | (1,080) | 29,357 | 23,891 | 1,833 | (191) | 25,533 | ||||
Non-interest expenses: | |||||||||||||||
Salaries and benefits | 5,371 | 1,167 | - | 6,538 | 5,878 | 1,411 | - | 7,289 | 6,684 | 1,573 | - | 8,257 | |||
General and administrative | 4,276 | 394 | (337) | 4,333 | 4,889 | 354 | (1,080) | 4,163 | 2,862 | 455 | (191) | 3,126 | |||
Premises and equipment | 768 | 385 | - | 1,153 | 617 | 372 | - | 989 | 623 | 329 | - | 952 | |||
10,415 | 1,946 | (337) | 12,024 | 11,384 | 2,137 | (1,080) | 12,441 | 10,169 | 2,357 | (191) | 12,335 | ||||
Income (loss) before income taxes | 16,400 | 554 | - | 16,954 | 15,354 | 1,562 | - | 16,916 | 13,722 | (524) | - | 13,198 | |||
Income tax provision | 4,136 | 119 | - | 4,255 | 4,088 | 349 | - | 4,437 | 3,789 | (8) | - | 3,781 | |||
Net income (loss) | $ 12,264 | $ 435 | $ - | $ 12,699 | $ 11,266 | $ 1,213 | $ - | $ 12,479 | $ 9,933 | $ (516) | $ - | $ 9,417 | |||
Total assets | $ 4,299,625 | $ 26,645 | $ (16,635) | $ 4,309,635 | $ 26,443 | $ (15,709) | $ 4,201,610 | $ 23,797 | $ (14,386) | $ 3,531,690 | |||||
Total liabilities | $ 3,914,863 | $ 28,625 | $ (22,887) | $ 3,920,601 | $ 28,788 | $ (22,748) | $ 3,824,452 | $ 27,751 | $ (21,435) | $ 3,180,513 |
MANAGEMENT COMMENTARY
"The first quarter of fiscal 2024 was highlighted by continued robust growth in our Point-of-Sale Receivable Purchase Program portfolio, which expanded 28% year-over-year and 7% sequentially, and, in turn, drove total assets to another record high of
"As per our stated objective to maximize long-term profitability and return on common equity, during the first quarter the Bank began its planned strategic transition from higher yielding, higher risk-weighted loans to lower yielding, lower risk-weighted (CMHC) loans in its non-core CRE portfolio as we pursue new CRE opportunities. While this had a slight dampening effect on first quarter results, we expect that this strategic adjustment will enhance ROE and contribute to stronger growth in subsequent quarters throughout the year."
"2024 is unfolding slightly ahead of expectations for our Point-of-Sale Receivable Purchase Program, providing continued confidence in our ability to surpass our next total asset milestone of
HIGHLIGHTS FOR THE FIRST QUARTER OF FISCAL 2024
Consolidated
- Total assets increased 22% year-over-year and 3% sequentially to a record
$4.3 billion , with the increase driven primarily by 7% growth inDigital Banking Operations' Point of Sale Receivable Purchase Program (POS/RPP) portfolio. The quarter-over-quarter increase was dampened by a transitory contraction in the non-coreCommercial Real Estate (CRE) portfolio under the Bank's strategy to transition a portion of its CRE portfolio to higher return, lower risk lending opportunities; - Consolidated total revenue increased 11% year-over-year and decreased 1% sequentially to
$28.9 million . The year-over-year and sequential trends reflect higher net interest from income from the Digital Banking Operations due primarily to continued strong loan growth, with the sequential trend reflecting lower contribution fromDRT Cyber Inc. ("DRTC") due to lower seasonal sales volume; - Consolidated net income increased 35% year-over-year and 2% sequentially to
$12.7 million . The year-over-year and quarter-over-quarter increases were primarily due to higher revenue, which was driven primarily by strong loan growth (23%) from the Digital Banking Operations, as well as a higher contribution from DRTC and lower non-interest expenses. The sequential increase was dampened slightly by the transitory contraction in the non-core CRE portfolio under the Bank's strategy to transition a portion of its CRE portfolio to higher return, lower risk lending opportunities; - Consolidated earnings per share increased 41% year-over-year and 2% sequentially to
$0.48 , with the year-over-year increase benefitting from the impact of a lower number of common shares outstanding from the purchase and cancellation of common shares under the Bank's Normal Course Issuer Bid ("NCIB") over the course of fiscal 2023; - Return on common equity increased to 13.41% from 10.79% year-over-year and decreased 1% from 13.58% sequentially; and,
- The Bank continues to advance the process seeking approval of its proposed acquisition of OCC-chartered US bank,
Stearns Bank Holdingford N.A. , and expects a decision from US regulators during the second calendar quarter of 2024. If favourable, the Bank will proceed toward completion of the acquisition as soon as possible, subject to Canadian regulatory (OSFI) approval.
Digital Banking Operations
- Loans increased 23% year-over-year and 3% sequentially to a record
$3.98 billion , driven primarily by continued robust growth in the Bank's POS/RPP portfolio, which increased 28% year-over-year and 7% sequentially. The sequential increase was dampened slightly by a transitory contraction in the non-coreCommercial Real Estate (CRE) portfolio under the Bank's strategy to transition a portion of its CRE portfolio to higher return, lower risk lending opportunities; - Total revenue increased 10% year-over-year and increased 1% sequentially to
$26.7 million , driven primarily by higher net interest income attributable substantially to loan growth; - Net interest margin on loans decreased 40 bps, or 13%, year-over-year and 6 bps, or 2%, sequentially at 2.63%. The decreases were due primarily to the strong growth of the POS Financing portfolio (which is composed of lower-risk weighted, lower yielding but higher Return on Common Equity ("ROCE") assets than the CRE portfolio, the impact of the planned transition of some higher yielding, higher risk-weighted CRE loans to lower yielding, lower risk-weighted CRE loans as part of the Bank's strategy to capitalize on opportunities for lower-risk loans with a higher return on capital deployed, as well as higher rates on term deposits experienced during the quarter. This was offset partially by higher yields earned on the Bank's lending assets;
- Net interest margin decreased 35 bps, or 12%, year-over-year and decreased 6 bps, or 2%, sequentially to 2.48%;
- Provision for credit losses as a percentage of average loans remained negligible at -0.01%, compared with a 12-quarter average of 0.00%, which remains among the lowest of the publicly traded Canadian Schedule I (federally licensed) Banks; and,
- Efficiency ratio (excluding DRTC) improved both year-over-year and sequentially to 40% from 42% and 45%, respectively.
DRTC's Cybersecurity Services Operations (
- Revenue for the Cybersecurity Services component of DRTC (
Digital Boundary Group , or DBG) increased 24% year-over-year to$2.9 million , driven by higher service engagements, while gross profit increased 31% to$2.1 million due to improved operational efficiency. Sequentially, revenue and gross profit for DBG decreased 17% and 18%, respectively, due primarily to seasonally lower service engagements. DBG's gross profit amounts are included in DRTC's consolidated revenue which is reflected in non-interest income inVersaBank's consolidated statements of income and comprehensive income. DBG remained profitable on a standalone basis within DRTC.
FINANCIAL SUMMARY
(unaudited) | For the three months ended | ||||||
(thousands of Canadian dollars except per share amounts) | 2024 | 2023 | 2023 | ||||
Results of operations | |||||||
Interest income | $ 69,292 | $ 66,089 | $ 49,561 | ||||
Net interest income | 26,568 | 26,239 | 24,274 | ||||
Non-interest income | 2,283 | 2,934 | 1,644 | ||||
Total revenue | 28,851 | 29,173 | 25,918 | ||||
Provision (recovery) for credit losses | (127) | (184) | 385 | ||||
Non-interest expenses | 12,024 | 12,441 | 12,335 | ||||
Digital Banking | 10,415 | 11,384 | 10,169 | ||||
DRTC | 1,946 | 2,137 | 2,357 | ||||
Net income | 12,699 | 12,479 | 9,417 | ||||
Income per common share: | |||||||
Basic | $ 0.48 | $ 0.47 | $ 0.34 | ||||
Diluted | $ 0.48 | $ 0.47 | $ 0.34 | ||||
Dividends paid on preferred shares | $ 247 | $ 247 | $ 247 | ||||
Dividends paid on common shares | $ 650 | $ 650 | $ 663 | ||||
Yield* | 6.47 % | 6.40 % | 5.78 % | ||||
Cost of funds* | 3.99 % | 3.86 % | 2.95 % | ||||
Net interest margin* | 2.48 % | 2.54 % | 2.83 % | ||||
Net interest margin on loans* | 2.63 % | 2.69 % | 3.03 % | ||||
Return on average common equity* | 13.41 % | 13.58 % | 10.79 % | ||||
Book value per common share* | $ 14.46 | $ 14.00 | $ 12.77 | ||||
Efficiency ratio* | 42 % | 43 % | 48 % | ||||
Efficiency ratio - Digital banking* | 40 % | 45 % | 42 % | ||||
Return on average total assets* | 1.16 % | 1.19 % | 1.07 % | ||||
Provision (recovery) for credit losses as a % of average loans* | (0.01 %) | (0.02 %) | 0.05 % | ||||
As at | |||||||
Balance Sheet Summary | |||||||
Cash | $ 127,509 | $ 132,242 | $ 201,372 | ||||
Securities | 133,005 | 167,940 | 49,847 | ||||
Loans, net of allowance for credit losses | 3,984,281 | 3,850,404 | 3,235,083 | ||||
Average loans | 3,917,343 | 3,756,038 | 3,113,881 | ||||
Total assets | 4,309,635 | 4,201,610 | 3,531,690 | ||||
Deposits | 3,638,656 | 3,533,366 | 2,925,452 | ||||
Subordinated notes payable | 103,355 | 106,850 | 102,765 | ||||
Shareholders' equity | 389,034 | 377,158 | 351,177 | ||||
Capital ratios** | |||||||
Risk-weighted assets | $ 3,194,696 | $ 3,095,092 | $ 2,917,048 | ||||
Common Equity Tier 1 capital | 363,798 | 350,812 | 326,411 | ||||
Total regulatory capital | 485,309 | 476,005 | 447,472 | ||||
Common Equity Tier 1 (CET1) capital ratio | 11.39 % | 11.33 % | 11.19 % | ||||
Tier 1 capital ratio | 11.81 % | 11.78 % | 11.66 % | ||||
Total capital ratio | 15.19 % | 15.38 % | 15.34 % | ||||
Leverage ratio | 8.44 % | 8.30 % | 9.21 % | ||||
* See definition under 'Non-GAAP and Other Financial Measures' in the Q1 2024 Management's Discussion | |||||||
and Analysis. | |||||||
** Capital management and leverage measures are in accordance with OSFI's Capital Adequacy Requirements | |||||||
and Basel III Accord. |
This news release is intended to be read in conjunction with the Bank's Consolidated Financial Statements and Management's Discussion & Analysis (MD&A) for the three months ended
About
Forward-Looking Statements
The foregoing list of important factors is not exhaustive. When relying on forward-looking statements to make decisions, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. The forward-looking information contained in the management's discussion and analysis is presented to assist
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