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LONDON, Ontario–(BUSINESS WIRE)–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
Our second quarter 2019 (“Q2 2019”) unaudited Interim
Consolidated Financial Statements for the period ended April 30, 2019
and Management’s Discussion and Analysis, are available online at
and at
Supplementary Financial Information will also be available on our
website at

Q2 Core Cash Earnings(1)       Q2 Core Cash EPS(1)       Q2 Core Cash ROCE(1)       Q2 Net Income
$6.7 million $0.32 12.68% $4.9 million

+14% yoy

+$0.04 yoy

+75 bps yoy

+15% yoy

VersaBank (“VB” or the “Bank”) (TSX:VB) today reported its results for
the second quarter ended April 30, 2019. Net income for the quarter was
up 15% to $4.9 million from $4.3 million a year ago.

Core cash earnings (“CCE”) for the quarter was up 14% to $6.7 million
from $5.9 million a year ago. CCE reflects VB’s core operational
performance and earnings capacity (see CCE reconciliation below) (2).

Additionally, the Bank announced today a 33% increase to its quarterly
common share dividend to $0.02 per share for the quarter ended July 31,

David Taylor, President and CEO stated, “I am pleased with our Bank’s
second quarter results. Despite the cautious, measured approach we have
taken in originating new Commercial Banking loans over the first half of
this fiscal year, lending assets this quarter of $1.63 billion were up
4.0% from last year. Additionally, non-interest expenses were down 3.1%
from last year, resulting in our efficiency ratio improving to 50% from
53% last year and CCE of $6.7 million improving significantly by 14%
from last year. We are looking forward to further growth over the second
half of 2019, as typically Commercial Banking’s construction loans draw
down in the latter part of our fiscal year and eCommerce will purchase a
higher volume of electronic receivables as a result of increased
consumer purchases and small business investment activity over the same

Q2 2019 Highlights:

Q2 2019 compared to Q2 2018(1)


  • Core cash earnings(2) of $6.7 million (up 14% from
    $5.9 million)
  • Core cash earnings per share of $0.32 (up $0.04 from $0.28)
  • Net income of $4.9 million (up 15% from $4.3 million)
  • NIM of 2.95% (unchanged from 2.95%)
  • Basic and diluted EPS of $0.21 (up $0.03 from $0.18)
  • Common share book value of $9.58 (up 9% from $8.80)
  • ROCE of 8.89% (up from 8.25%)
  • CET1 ratio of 12.17% (up from 11.07%)
  • Leverage ratio of 11.43% (up from 10.41%)
  YTD Q2 2019 compared to YTD Q2 2018(1)


  • Core cash earnings(2) of $13.5 million (up 15% from
    $11.8 million)
  • Core cash earnings per share of $0.64 (up $0.08 from $0.56)
  • Net income of $9.8 million (up 19% from $8.2 million)
  • NIM of 2.93% (up from 2.88%)
  • Basic and diluted EPS of $0.41 (up $0.07 from $0.34)
  • Common share book value of $9.58 (up 9% from $8.80)
  • ROCE of 8.88% (up from 7.88%)
  • CET1 ratio of 12.17% (up from 11.07%)
  • Leverage ratio of 11.43% (up from 10.41%)

(1) Certain highlights include non-GAAP measures. See definitions
under ‘Basis of Presentation’ in the Q2 2019 Management’s Discussion and

(2) Core cash earnings is calculated as:

(thousands of Canadian dollars)                        
                    for the three months ended   for the six months ended    
              April 30   April 30     April 30   April 30
                    2019   2018       2019   2018
Net income $ 4,896 $ 4,256 $ 9,828 $ 8,232
Adjusted for:
Income taxes 1,851 1,646 3,713 3,122
Other non-core general
and administrative expense items                 453
1,851 1,646 3,713 3,575
Core cash earnings           $ 6,747   $ 5,902       $ 13,541   $ 11,807

Q2 2019 Business Performance

VersaBank adopted an electronic branchless model in 1993, becoming the
world’s first branchless financial institution. It holds a Canadian
Schedule I chartered bank licence and obtains its deposits, and the
majority of its loans and leases, electronically. VersaBank’s Common
Shares trade on the Toronto Stock Exchange under the symbol VB and its
Series 1 Preferred Shares and Series 3 Preferred Shares trade under the
symbols VB.PR.A and VB.PR.B, respectively.

Commercial Banking – Loans are originated through direct contact
with VB’s clients and through a well-established network of mortgage
brokers and syndication partners. Loans are well secured by real estate
primarily in Ontario and occasionally other areas of Canada. Loans at
April 30, 2019 were $681 million, down 2.95% from a year ago.

eCommerce – Small loan and lease receivables are electronically
purchased from VB’s network of origination partners who make point of
sale loans and leases in various markets throughout Canada. Lending
assets at April 30, 2019 were $929 million, up 9.99% from a year ago.

Funding – VB has established three core funding channels, those
being personal deposits, commercial deposits, and holdbacks retained
from VB’s receivable purchase program origination partners that are
classified as other liabilities. Personal deposits, consisting
principally of guaranteed investment certificates, are sourced primarily
through a well-established and well-diversified deposit broker network
that the Bank continues to grow and expand across Canada. Commercial
deposits are sourced primarily via specialized chequing accounts made
available to insolvency professionals (“Trustees”) in the Canadian
insolvency industry. The Bank developed customized banking software for
use by Trustees that integrates banking services with the market-leading
software platform used in the administration of consumer bankruptcy and
proposal restructuring proceedings. VB’s cost of funds for the quarter
was 1.94%, up 30 bps from a year ago.

Capital – As at April 30, 2019, VB’s CET1 ratio was 12.17%, up
110 bps from a year ago. VB, like most small banks, uses the
Standardized Approach to calculate its risk weighted assets. Due to the
fact that VB focuses on commercial and consumer loans with lower than
average risk (as demonstrated by its long history of low provision for
credit losses), it believes that the Standardized Approach does not
properly reflect the intrinsic risk in its lending portfolio. As a
consequence, VB’s leverage ratio is very conservative, being more than
twice the average leverage ratio of the major Canadian banks, which use
the Advanced Internal Ratings Based (“AIRB”) approach to calculate their
risk weighted assets.

Credit Quality – For the quarter ended April 30, 2019, the Bank
recorded a recovery of credit losses in the amount of $411,000 compared
to a recovery of credit losses in the amount of $50,000 for the same
period a year ago. The year over year trend was a result of lower
expected credit loss allowances that were a function, primarily, of
lower real estate lending asset balances and the impact of
remeasurements of expected credit loss amounts using the expected credit
loss methodology under IFRS 9. The Bank’s PCL ratio continues to be one
of the lowest in the industry, reflecting the very low risk profile of
the Bank’s lending portfolio. VB’s business strategy involves taking
lower credit risk, but achieving higher NIM by lending in niche markets
that are not well served by the larger financial institutions.

VersaVault Inc. – VersaVault Inc. (“VV”) is a wholly owned
subsidiary of the Bank and was formed to develop and provide
cyber-security services to commercial entities. VV has entered into an
exclusive licence agreement with Chairmans Financial B.V. (“Chairmans”),
a company registered in the Netherlands operating in the financial
services space. The agreement permits Chairmans to use the VersaVault
name and brand, and to offer global clients secure storage of digital
assets, encryption, authentication and related services. VersaVault will
operate from the United States and Europe and will service clients
globally. The licenced technology and services are to be used by
Chairmans in connection with a digital asset security business, which
will be carried on exclusively by, and in the name of, Chairmans.
Neither VV nor VB will be party to any of the customer or other
contracts (other than the licence and certain contracts with third party
service providers) related to the business.

(unaudited)       for the three months ended     for the six months ended
    April 30 April 30 April 30 April 30
($CDN thousands except per share amounts)   2019 2018     2019   2018
Results of operations
Interest income $ 21,125 $ 19,363 $ 43,084 $ 38,432
Net interest income 12,743 12,432 26,183 24,827
Non-interest income 4 37 23 49
Total revenue 12,747 12,469 26,206 24,876
Provision (recovery) for credit losses (411) (50) (700) 15
Non-interest expenses 6,411 6,617 13,365 13,507
Core cash earnings* 6,747 5,902 13,541 11,807
Core cash earnings per common share* $ 0.32 $ 0.28 $ 0.64 $ 0.56
Net income 4,896 4,256 9,828 8,232
Income per common share:
Basic $ 0.21 $ 0.18 $ 0.41 $ 0.34
    Diluted       $ 0.21 $ 0.18     $ 0.41   $ 0.34
Yield* 4.89% 4.59% 4.82% 4.46%
Cost of funds* 1.94% 1.64% 1.89% 1.58%
Net interest margin* 2.95% 2.95% 2.93% 2.88%
Return on average common equity* 8.89% 8.25% 8.88% 7.88%
Core cash return on average common equity* 12.68% 11.93% 12.65% 11.83%
Book value per common share* $ 9.58 $ 8.80 $ 9.58 $ 8.80
Efficiency ratio* 50.29% 53.07% 51.00% 54.30%
Return on average total assets* 1.01% 0.88% 0.98% 0.83%
Gross impaired loans to total loans* 1.57% 0.04% 1.57% 0.04%
  Provision (recovery) for credit losses as a % of average loans*   (0.03%) 0.00%     (0.04%)   0.00%


as at

Balance Sheet Summary
Cash and securities $ 132,129 $ 144,220 $ 132,129 $ 144,220
Loans, net of allowance for credit losses 1,628,116 1,564,424 1,628,116 1,564,424
Average loans* 1,615,651 1,571,050 1,629,571 1,553,439
Total assets 1,796,192 1,750,697 1,796,192 1,750,697
Average assets* 1,771,235 1,728,656 1,802,661 1,696,626
Deposits 1,425,057 1,393,916 1,425,057 1,393,916
Subordinated notes payable 4,876 9,814 4,876 9,814
Shareholders’ equity 231,739 215,247 231,739 215,247
Capital ratios*
Risk-weighted assets $ 1,524,228 $ 1,465,303 $ 1,524,228 $ 1,465,303
Total regulatory capital 219,867 195,610 219,867 195,610
Common Equity Tier 1 (CET1) ratio 12.17% 11.07% 12.17% 11.07%
Tier 1 capital ratio 14.10% 13.08% 14.10% 13.08%
Total capital ratio 14.42% 13.35% 14.42% 13.35%
  Leverage ratio     11.43% 10.41%     11.43%   10.41%
* This is a non-GAAP measure. See definition under ‘Basis of
Presentation’ in the Q2 2019 Management’s
Discussion and Analysis.

Forward-Looking Statements

The statements in this press release that relate to the future are
forward-looking statements. By their very nature, forward-looking
statements involve inherent risks and uncertainties, both general and
specific, many of which are out of our control. Risks exist that
predictions, forecasts, projections and other forward-looking statements
will not be achieved. Readers are cautioned not to place undue reliance
on these forward-looking statements as a number of important factors
could cause actual results to differ materially from the plans,
objectives, expectations, estimates and intentions expressed in such
forward-looking statements. These factors include, but are not limited
to, the strength of the Canadian economy in general and the strength of
the local economies within Canada in which we conduct operations; the
effects of changes in monetary and fiscal policy, including changes in
interest rate policies of the Bank of Canada; changing global commodity
prices; the effects of competition in the markets in which we operate;
inflation; capital market fluctuations; the timely development and
introduction of new products in receptive markets; the impact of changes
in the laws and regulations pertaining to financial services; changes in
tax laws; technological changes; unexpected judicial or regulatory
proceedings; unexpected changes in consumer spending and savings habits;
and our anticipation of and success in managing the risks implicated by
the foregoing. For a detailed discussion of certain key factors that may
affect our future results, please see our annual Management’s Discussion
and Analysis for the year ended October 31, 2018.

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 this
document and the related management’s discussion and analysis is
presented to assist our shareholders in understanding our financial
position and may not be appropriate for any other purposes. Except as
required by securities law, we do not undertake to update any
forward-looking statement that is contained in this document and related
management’s discussion and analysis or made from time to time by the
Bank or on its behalf.

Conference Call and Presentation

VersaBank will be hosting a conference call on Wednesday, May 29, 2019,
at 9:00 a.m. EST to discuss the results for VB’s second quarter. The
toll-free-dial-in number is 1-800-289-0459 or local call dial-in number
is 647-484-0473, with participant passcode 333012#.


Investor Relations: Wade MacBain (800) 244-1509, [email protected]
our website at: