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 second quarter 2024 ("Q2 2024") unaudited Interim Consolidated Financial Statements for the period ended |
Consolidated and Segmented Financial Summary
(unaudited) | As at or for the three months ended | As at or for the six months ended | |||||||||||
(thousands of Canadian dollars, except per share amounts) | 2024 | 2024 | Change | 2023 | Change | 2024 | 2023 | Change | |||||
Financial results | |||||||||||||
Total revenue | $ 28,501 | $ 28,851 | (1 %) | $ 26,685 | 7 % | $ 57,352 | $ 52,603 | 9 % | |||||
Cost of funds* | 4.21 % | 3.99 % | 6 % | 3.27 % | 29 % | 4.11 % | 3.13 % | 31 % | |||||
Net interest margin* | 2.45 % | 2.48 % | (1 %) | 2.78 % | (12 %) | 2.47 % | 2.82 % | (12 %) | |||||
Net interest margin on loans* | 2.52 % | 2.63 % | (4 %) | 2.99 % | (16 %) | 2.61 % | 3.02 % | (14 %) | |||||
Return on average common equity* | 12.36 % | 13.41 % | (8 %) | 12.07 % | 2 % | 12.89 % | 11.38 % | 13 % | |||||
Net income | 11,828 | 12,699 | (7 %) | 10,263 | 15 % | 24,527 | 19,680 | 25 % | |||||
Net income per common share basic and diluted | 0.45 | 0.48 | (6 %) | 0.38 | 18 % | 0.93 | 0.72 | 29 % | |||||
Balance sheet and capital ratios | |||||||||||||
Total assets | $ 4,388,320 | $ 4,309,635 | 2 % | $ 3,729,393 | 18 % | $ 4,388,320 | $ 3,729,393 | 18 % | |||||
Book value per common share* | 14.88 | 14.46 | 3 % | 13.19 | 13 % | 14.88 | 13.19 | 13 % | |||||
Common Equity Tier 1 (CET1) capital ratio | 11.63 % | 11.39 % | 2 % | 11.21 % | 4 % | 11.63 % | 11.21 % | 4 % | |||||
Total capital ratio | 15.33 % | 15.19 % | 1 % | 15.37 % | 0 % | 15.33 % | 15.37 % | 0 % | |||||
Leverage ratio | 8.55 % | 8.44 % | 1 % | 8.83 % | (3 %) | 8.55 % | 8.83 % | (3 %) | |||||
* See definitions under 'Non-GAAP and Other Financial Measures' in the Q2 2024 Management's Discussion and Analysis. |
(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 | $ 26,242 | $ - | $ - | $ 26,242 | $ 26,568 | $ - | $ - | $ 26,568 | $ 24,609 | $ - | $ - | $ 24,609 | |||
Non-interest income | 262 | 2,336 | (339) | 2,259 | 120 | 2,500 | (337) | 2,283 | 122 | 2,146 | (192) | 2,076 | |||
Total revenue | 26,504 | 2,336 | (339) | 28,501 | 26,688 | 2,500 | (337) | 28,851 | 24,731 | 2,146 | (192) | 26,685 | |||
Provision for (recovery of) credit losses | 16 | - | - | 16 | (127) | - | - | (127) | 237 | - | - | 237 | |||
26,488 | 2,336 | (339) | 28,485 | 26,815 | 2,500 | (337) | 28,978 | 24,494 | 2,146 | (192) | 26,448 | ||||
Non-interest expenses: | |||||||||||||||
Salaries and benefits | 5,724 | 1,685 | - | 7,409 | 5,371 | 1,167 | - | 6,538 | 6,930 | 1,499 | - | 8,429 | |||
General and administrative | 3,445 | 451 | (339) | 3,557 | 4,276 | 394 | (337) | 4,333 | 3,131 | 377 | (192) | 3,316 | |||
Premises and equipment | 845 | 374 | - | 1,219 | 768 | 385 | - | 1,153 | 612 | 369 | - | 981 | |||
10,014 | 2,510 | (339) | 12,185 | 10,415 | 1,946 | (337) | 12,024 | 10,673 | 2,245 | (192) | 12,726 | ||||
Income (loss) before income taxes | 16,474 | (174) | - | 16,300 | 16,400 | 554 | - | 16,954 | 13,821 | (99) | - | 13,722 | |||
Income tax provision | 4,484 | (12) | - | 4,472 | 4,136 | 119 | - | 4,255 | 3,991 | (532) | - | 3,459 | |||
Net income (loss) | $ 11,990 | $ (162) | $ - | $ 11,828 | $ 12,264 | $ 435 | $ - | $ 12,699 | $ 9,830 | $ 433 | $ - | $ 10,263 | |||
Total assets | $ 4,378,863 | $ 26,980 | $ (17,523) | $ 4,388,320 | $ 26,645 | $ (16,635) | $ 4,309,635 | $ 25,559 | $ (15,758) | $ 3,729,393 | |||||
Total liabilities | $ 3,982,924 | $ 29,069 | $ (23,776) | $ 3,988,217 | $ 28,625 | $ (22,887) | $ 3,920,601 | $ 29,057 | $ (22,797) | $ 3,372,874 | |||||
Management Commentary
"Our financial results for the second quarter of fiscal 2024 continue to demonstrate the power of the operating leverage in our branchless, business-to-business Digital Banking model, as well as the benefits of our focus on risk mitigation throughout our Digital Banking operations," said
"We achieved another record level for both our total assets and our loan portfolio, with sequential growth in the Point-of-Sale Financing reflecting seasonality in that business, as well as some impact of the elevated interest rate environment and softness in certain parts of the economy. Sequential performance of the Real Estate portfolio reflects the planned strategic transition from higher yielding, higher risk-weighted loans to lower yielding, lower risk-weighted
"The second quarter contributed to a strong first half of fiscal 2024, highlighted by year-over-year asset growth of 18%, net income growth of 25% and earnings per share growth of 29%. We expect improved growth in both the Point-of-Sale Financing portfolio, as well as a ramp up in loan originations in the
Highlights for the SECOND Quarter of Fiscal 2024
Consolidated
- Total assets increased 18% year-over-year and 2% sequentially to a record
$4.4 billion , with the increase driven primarily by growth inDigital Banking Operations' Point of Sale Receivable Purchase Program (POS/RPP) portfolio; - Consolidated total revenue increased 7% year-over-year and decreased 1% sequentially to
$28.5 million . The year-over-year and sequential trends reflect higher net interest from income from the Digital Banking Operations due primarily to continued loan growth and higher contribution fromDRT Cyber Inc. ("DRTC"), with the sequential trend reflecting lower than planned interest income growth due to timing of expected loan origination and higher cost of funds; - Consolidated net income increased 15% year-over-year and decreased 7% sequentially to
$11.8 million . The year-over-year increase was primarily due to higher revenue, which was driven primarily by strong loan growth (18%) from the Digital Banking Operations and lower non-interest expenses. The sequential decrease was primarily due to lower revenue, higher provision for credit losses, higher provision for taxes, and a modest increase in non-interest expenses, primarily due to lower than typical expenses in the first quarter of fiscal 2024 at DRT Cyber. Net income before taxes for the Digital Banking Operations increased slightly on sequential basis; - Consolidated earnings per share increased 18% year-over-year and decreased 6% sequentially to
$0.45 , 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 12.36% from 12.07% year-over-year and decreased 8% from 13.41% 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 18% year-over-year and 1% sequentially to a record
$4.02 billion , driven primarily by continued growth in the Bank's POS/RPP portfolio, which increased 23% year-over-year and 1% sequentially; - Total revenue increased 7% year-over-year and decreased 1% sequentially to
$26.5 million . The year-over year increase was driven primarily by higher net interest income attributable substantially to loan growth. The quarter-over-quarter decrease was due to higher interest expense attributable to higher deposit balances and higher cost of funds consistent with the elevated interest rate environment and the interest income increase dampened by timing of loan origination in the POS portfolio; - Net interest margin on loans decreased 47 bps, or 16%, year-over-year and 11 bps, or 4%, sequentially at 2.52%. 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 33 bps, or 12%, year-over-year and decreased 3 bps, or 1%, sequentially to 2.45%;
- Provision for credit losses as a percentage of average loans remained negligible at 0.00%, compared with a 12-quarter average of 0.01%, 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 38% from 43% and 40%, respectively.
DRTC's Cybersecurity Services Operations (
- Revenue for the Cybersecurity Services component of DRTC (
Digital Boundary Group , or DBG) increased 8% year-over-year to$2.8 million , driven by higher service engagements, while gross profit increased 5% to$2.0 million due to improved operational efficiency. Sequentially, revenue and gross profit for DBG decreased 3% and 6%, 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 | for the six months ended | |||||||
(thousands of Canadian dollars, except per share amounts) | 2024 | 2023 | 2024 | 2023 | |||||
Results of operations | |||||||||
Interest income | $ 71,243 | $ 53,595 | $ 140,535 | $ 103,156 | |||||
Net interest income | 26,242 | 24,609 | 52,810 | 48,883 | |||||
Non-interest income | 2,259 | 2,076 | 4,542 | 3,720 | |||||
Total revenue | 28,501 | 26,685 | 57,352 | 52,603 | |||||
Provision for (recovery of) credit losses | 16 | 237 | (111) | 622 | |||||
Non-interest expenses | 12,185 | 12,726 | 24,209 | 25,061 | |||||
Digital Banking | 10,014 | 10,673 | 20,429 | 20,842 | |||||
DRTC | 2,510 | 2,245 | 4,456 | 4,602 | |||||
Net income | 11,828 | 10,263 | 24,527 | 19,680 | |||||
Income per common share: | |||||||||
Basic | $ 0.45 | $ 0.38 | $ 0.93 | $ 0.72 | |||||
Diluted | $ 0.45 | $ 0.38 | $ 0.93 | $ 0.72 | |||||
Dividends paid on preferred shares | $ 247 | $ 247 | $ 494 | $ 494 | |||||
Dividends paid on common shares | $ 650 | $ 651 | $ 1,300 | $ 1,314 | |||||
Yield* | 6.66 % | 6.05 % | 6.58 % | 5.95 % | |||||
Cost of funds* | 4.21 % | 3.27 % | 4.11 % | 3.13 % | |||||
Net interest margin* | 2.45 % | 2.78 % | 2.47 % | 2.82 % | |||||
Net interest margin on loans* | 2.52 % | 2.99 % | 2.61 % | 3.02 % | |||||
Return on average common equity* | 12.36 % | 12.07 % | 12.89 % | 11.38 % | |||||
Book value per common share* | $ 14.88 | $ 13.19 | $ 14.88 | $ 13.19 | |||||
Efficiency ratio* | 43 % | 48 % | 42 % | 48 % | |||||
Efficiency ratio - Digital Banking* | 38 % | 43 % | 39 % | 43 % | |||||
Return on average total assets* | 1.08 % | 1.13 % | 1.13 % | 1.11 % | |||||
Provision (recovery) for credit losses as a % of average loans* | 0.00 % | 0.03 % | (0.01 %) | 0.04 % | |||||
as at | |||||||||
Balance Sheet Summary | |||||||||
Cash | $ 198,808 | $ 223,661 | $ 198,808 | $ 223,661 | |||||
Securities | 103,769 | 39,652 | 103,769 | 39,652 | |||||
Loans, net of allowance for credit losses | 4,018,458 | 3,419,455 | 4,018,458 | 3,419,455 | |||||
Average loans | 4,001,370 | 3,327,269 | 3,934,431 | 3,206,067 | |||||
Total assets | 4,388,320 | 3,729,393 | 4,388,320 | 3,729,393 | |||||
Deposits | 3,693,495 | 3,108,218 | 3,693,495 | 3,108,218 | |||||
Subordinated notes payable | 101,108 | 104,532 | 101,108 | 104,532 | |||||
Shareholders' equity | 400,103 | 356,519 | 400,103 | 356,519 | |||||
Capital ratios** | |||||||||
Risk-weighted assets | $ 3,224,822 | $ 2,957,933 | $ 3,224,822 | $ 2,957,933 | |||||
Common Equity Tier 1 capital | 375,153 | 331,614 | 375,153 | 331,614 | |||||
Total regulatory capital | 494,297 | 454,622 | 494,297 | 454,622 | |||||
Common Equity Tier 1 (CET1) ratio | 11.63 % | 11.21 % | 11.63 % | 11.21 % | |||||
Tier 1 capital ratio | 12.06 % | 11.67 % | 12.06 % | 11.67 % | |||||
Total capital ratio | 15.33 % | 15.37 % | 15.33 % | 15.37 % | |||||
Leverage ratio | 8.55 % | 8.83 % | 8.55 % | 8.83 % | |||||
* See definitions under 'Non-GAAP and Other Financial Measures' in the Q2 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 & six months ended
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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