VersaBank Reports Continued Strong Financial Results for the Fourth Quarter and Year End 2021, Highlighted by Record Net Income for Each Period and a Record Loan Portfolio
VersaBank (NASDAQ: VBNK) reported significant financial growth for Q4 and the entire year 2021, highlighting a 33% increase in total revenue to $18.2 million and a 21% increase to $65.4 million year-over-year. Net income rose 25% to $5.9 million in Q4 and 15% to $22.4 million for the year, with earnings per share up by 17% to $0.96. The cost of funds decreased by 13% to 1.31%, while total loans surged 27% year-over-year to a record $2.1 billion. The bank is also advancing its Digital Deposit Receipt initiative, aiming for further growth in 2022.
- Total revenue rose 33% year-over-year to $18.2 million in Q4 and 21% to $65.4 million for the year.
- Net income increased 25% in Q4 to $5.9 million and 15% for the year to $22.4 million.
- Total loans grew 27% year-over-year to a record $2.1 billion.
- Cost of funds decreased 13% year-over-year to 1.31%.
- Net interest margin decreased 3% year-over-year to 2.73%.
- Non-interest expenses increased to $10.4 million in Q4, reflecting higher administrative costs.
Core Digital Banking Operations Deliver Strong Year-over-Year and Sequential Growth and Continued Decrease in Cost of Funds
VersaBank's 2021 annual audited Consolidated Financial Statements and Management's Discussion and Analysis ("MD&A") will be available today online at www.versabank.com/investor-relations and at www.sedar.com. Supplementary Financial Information will also be available on our website at www.versabank.com/investor-relations. All interim financial information within this earnings release is unaudited and based on interim Consolidated Financial Statements prepared in compliance with International Accounting Standard 34 Interim Financial Reporting, unless otherwise noted. All annual financial information herein was derived from VersaBank's 2021 annual audited Consolidated Financial Statements.
LONDON, ON, Dec. 1, 2021 /PRNewswire/ - VersaBank ("VersaBank" or the "Bank") (TSX: VB) (NASDAQ: VBNK), a North American leader in business-to-business digital banking, as well as technology solutions for cybersecurity today reported its results for the fourth quarter and year ended October 31, 2021. All figures are in Canadian dollars unless otherwise stated.
Financial Summary:
(unaudited) | As at or for the three months ended | As at or for the year ended | |||||||||||
October 31 | July 31 | October 31 | October 31 | October 31 | |||||||||
(thousands of Canadian dollars except per share amounts) | 2021 | 2021 | Change | 2020 | Change | 2021 | 2020 | Change | |||||
Financial results | |||||||||||||
Total revenue | $ | 18,236 | $ | 15,729 | $ | 13,726 | $ | 65,357 | $ | 54,185 | |||
Cost of funds | ( | ( | ( | ||||||||||
Net interest margin | ( | ( | |||||||||||
Core cash earnings(1)(2) | 8,138 | 7,433 | 6,545 | 30,789 | 26,752 | ||||||||
Net income | 5,910 | 5,436 | 4,746 | 22,380 | 19,405 | ||||||||
Net income per common share basic and diluted | 0.24 | 0.25 | ( | 0.20 | 0.96 | 0.82 | |||||||
Balance sheet and capital ratios | |||||||||||||
Total assets | $ | 2,415,086 | $ | 2,285,771 | $ | 1,943,885 | $ | 2,415,086 | $ | 1,943,885 | |||
Book value per common share(1) | 11.61 | 11.29 | 10.70 | 11.61 | 10.70 | ||||||||
Common Equity Tier 1 (CET1) capital ratio | |||||||||||||
Total capital ratio | |||||||||||||
Leverage ratio | |||||||||||||
(1) See definition under 'Non-GAAP and Other Financial Measures' in the Annual 2021 Management's Discussion and Analysis. | |||||||||||||
(2) Core Cash Earnings is calculated as pre-tax earnings less non-core operating income and expenses. | |||||||||||||
Highlights for the Fourth Quarter of 2021
- Continuing positive year-over-year and sequential trends across substantially all key financial metrics:
- Total loans increased
27% year-over-year and increased8% sequentially to a record$2.1 billion , driven by strong growth in the Bank's Point-of-Sale ("POS") Loan and Lease Receivable and Commercial Real Estate ("CRE") portfolios; - Total revenue increased
33% year-over-year and increased16% sequentially to a record$18.2 million ; - Net income increased
25% year-over-year and increased9% sequentially to a record$5.9 million ; - Cost of funds decreased 20 bps, or
13% , year-over-year and decreased 10 bps, or7% , sequentially to1.31% ; - Net interest margin ("NIM") decreased 9 bps, or
3% , year-over-year and increased 12 bps, or5% , sequentially, to2.73% ; - Recorded a recovery of credit losses in the amount of
$279,000 compared to a recovery of credit losses in the amount of$582,000 for the fourth quarter of 2020 and a provision for credit losses ("PCL") of$96,000 for the third quarter of 2021. PCLs as a percentage of average loans was (0.05)%, compared with a 12-quarter average of (0.01)%, which remains amongst the lowest of the publicly traded Canadian Schedule I Banks; - Initiated closed ecosystem testing on the Bank's revolutionary Digital Deposit Receipts (DDRs) and subsequent to quarter end expanded the scope and functionality of the testing, adding US dollar-denominated DDRs ("VUSD") (in addition to Canadian dollar-denominated DDRs ("VCAD") as previously announced), the Algorand and Ethereum blockchains (in addition to the Stellar blockchain as previously announced), as well as testing with a Receipt Distributor;
- Continued progress on the execution of wholly owned subsidiary DRT Cyber's growth strategy, including entering into reciprocal reseller agreements with UK-based Syrenis, under which DRT Cyber will sell Syrenis' subscription-based, flagship product, Cassie, a world leading Consent and Preference Management solution for organizations globally. In addition, DRT Cyber will add Cassie to its suite of innovative solutions for data protection, cyber security and compliance and Syrenis will act as a reseller of DRT Cyber's anti-spam legislation solution, RAVEN, which integrates seamlessly with Syrenis' Cassie;
- Completed a treasury offering of 6,325,000 common shares at a price of US
$10.00 per share, or C$12.78 per share on a weighted average basis, which included exercise of the full over-allotment option, for total net cash proceeds of C$73.2 million ; and, - Listed on Nasdaq under the symbol VBNK.
Highlights for the Full Year 2021
- Positive year-over-year and trends across substantially all key financial metrics:
- Total loans increased
27% to a record$2.1 billion , driven by strong growth in both the POS and CRE portfolios; - Total revenue increased
21% to$65.4 million , which was composed of net interest income of$60.2 million , up11% , and non-interest income (derived primarily from wholly owned subsidiary DRT Cyber) of$5.2 million ; - Net income increased
15% to a record$22.4 million , or$0.96 per share; - Cost of funds decreased 36 bps, or
21% , to1.35% ; - NIM decreased 14 bps to
2.76% ; - Recorded a recovery of credit losses in the amount of
$438,000 ; - Total Regulatory Capital increased
64% to$418.7 million as a function primarily of the Common Share Offering and the issuance of NVCC compliant fixed to floating rate subordinated notes in the principal amount of US$75.0 million , equivalent to C$92.1 million on April 30, 2021, ("the Notes"), and retained earnings growth, offset partially by the redemption of the Bank's outstanding, Non-cumulative Series 3 Preferred Shares.
Management Commentary
"VersaBank's fourth quarter and 2021 fiscal year each saw record financial performance as our core Digital Banking operations continued to deliver strong sequential and year-over-year growth," said David Taylor, President and Chief Executive Officer, VersaBank. "Our steady deployment of capital to the significant loan growth opportunities across our business drove our loan portfolio to a record
"Importantly, our low cost of funds, a core tenet of our risk-mitigation model, fell to
"As proud as we are of our strong financial performance, 2021 was also a year in which we took a number of important steps that we believe will not only continue our growth trajectory but accelerate it. Our successful US-dollar Note and Common Share offerings, made predominantly to US investors, provide significant additional capital as we continue to pursue the significant growth opportunities before us as a branchless, business-to-business bank that uses our own, internally developed technology to provide unique, high value add solutions that address unmet needs in deposit taking and lending. In particular, we look forward to the continued expansion of our Point-of-Sale business in Canada, as well as the launch of this unique solution, based on our proprietary software, in the US, where we believe we can replicate the tremendous success in Canada by providing US consumer-facing lenders with an innovative and attractive alternative to their current financing options."
Q4 2021 Financial Discussion
Net income – Net income for the fourth quarter of 2021 was
Net interest margin – Net interest margin (or spread) for the quarter was
Net interest income – Net interest income for the quarter was
Non-interest expenses – Non-interest expenses of the Bank for the quarter were
Provision for/Recovery of Credit Losses - The Bank recorded a recovery of credit losses for the quarter in the amount of
Capital – At October 31, 2021, VersaBank's Total regulatory capital was
Credit Quality -- Gross impaired loans at October 31, 2021, at the end of the third quarter of 2021, and at October 31, 2020 were $nil. The Bank's allowance for expected credit losses, or ECL at October 31, 2021 was
Q4 2021 Business Performance
Lending Operations
Commercial Lending – Commercial loans are originated through a well-established network of mortgage brokers and syndication partners, as well as through direct contact with VersaBank's staff. Most of these loans are secured by real estate assets located in Ontario and certain other Canadian provinces. Over the course of the fourth quarter the Bank continued to enjoy strong deal flow in the commercial mortgage space, specifically related to multi-unit residential properties resulting in the Bank's commercial lending portfolio growing
Point-of-Sale Loan Finance Lending (Previously Referred to as e-Commerce) – Leveraging its proprietary technology, VersaBank electronically purchases small loan and lease receivables from its network of origination partners who make point of sale loans and leases, primarily for big ticket consumer purchases, throughout Canada. For the fourth quarter of 2021, the Bank's POS loan and lease financing portfolio was up
Deposit Funding
VersaBank continues to increase its proportion of lower-cost commercial deposits by growing its well diversified Trustee in Bankruptcy, ("TIB") program deposit base which continues to operate with an interest rate of
Commercial deposits at October 31, 2021 were
FINANCIAL HIGHLIGHTS
(unaudited) | for the three months ended | for the year ended | |||||||
October 31 | October 31 | October 31 | October 31 | ||||||
($CDN thousands except per share amounts) | 2021 | 2020 | 2021 | 2020 | |||||
Results of operations | |||||||||
Interest income | $ | 23,924 | $ | 21,068 | $ | 89,488 | $ | 86,094 | |
Net interest income | 16,146 | 13,708 | 60,157 | 54,125 | |||||
Non-interest income | 2,090 | 18 | 5,200 | 60 | |||||
Total revenue | 18,236 | 13,726 | 65,357 | 54,185 | |||||
Provision for (recovery of) credit losses | (279) | (582) | (438) | (344) | |||||
Non-interest expenses | 10,377 | 7,763 | 35,006 | 27,777 | |||||
Core cash earnings* | 8,138 | 6,545 | 30,789 | 26,752 | |||||
Net income | 5,910 | 4,746 | 22,380 | 19,405 | |||||
Income per common share: | 0 | ||||||||
Basic | $ | 0.24 | $ | 0.20 | $ | 0.96 | $ | 0.82 | |
Diluted | $ | 0.24 | $ | 0.20 | $ | 0.96 | $ | 0.82 | |
Dividends paid on preferred shares | $ | 247 | $ | 542 | $ | 1,578 | $ | 2,168 | |
Dividends paid on common shares | $ | 684 | $ | 528 | $ | 2,268 | $ | 2,112 | |
Yield* | |||||||||
Cost of funds* | |||||||||
Net interest margin* | |||||||||
Return on common equity* | |||||||||
Book value per common share* | $ | 11.61 | $ | 10.70 | $ | 11.61 | $ | 10.70 | |
Efficiency ratio* | |||||||||
Full time employees | 145 | 98 | 145 | 98 | |||||
Return on total assets* | |||||||||
Gross impaired loans to total loans* | |||||||||
Provision for (recovery of) credit losses as a % of average loans* | ( | ( | ( | ( | |||||
as at | |||||||||
Balance Sheet Summary | |||||||||
Cash | $ | 271,523 | $ | 257,644 | $ | 271,523 | $ | 257,644 | |
Loans, net of allowance for credit losses | 2,103,050 | 1,654,910 | 2,103,050 | 1,654,910 | |||||
Average loans* | 2,027,602 | 1,601,336 | 1,878,980 | 1,624,599 | |||||
Total assets | 2,415,086 | 1,943,885 | 2,415,086 | 1,943,885 | |||||
Deposits | 1,853,204 | 1,567,570 | 1,853,204 | 1,567,570 | |||||
Subordinated notes payable | 95,272 | 4,889 | 95,272 | 4,889 | |||||
Shareholders' equity | 332,106 | 255,288 | 332,106 | 255,288 | |||||
Capital ratios** | |||||||||
Risk-weighted assets | $ | 2,013,544 | $ | 1,580,939 | $ | 2,013,544 | $ | 1,580,939 | |
Common Equity Tier 1 capital | 305,708 | 219,359 | 305,708 | 219,359 | |||||
Total regulatory capital | 418,718 | 255,471 | 418,718 | 255,471 | |||||
Common Equity Tier 1 (CET1) capital ratio | |||||||||
Tier 1 capital ratio | |||||||||
Total capital ratio | |||||||||
Leverage ratio | |||||||||
* See definition under 'Non-GAAP and Other Financial Measures' in the Annual 2021 Management's Discussion and Analysis. | |||||||||
** Capital management and leverage measures are in accordance with OSFI's Capital Adequacy Requirements and Basel III Accord. | |||||||||
COVID-19 UPDATE
The impact of COVID-19 on communities, businesses and the Canadian economy has abated over the last half of the calendar year with the rapid distribution and adoption of the vaccines allowing for a progressive reopening of the Canadian economy as well as stimulating improved consumer and business confidence. As a digital bank with a low-risk business-to-business, partner-based model, VersaBank has remained relatively insulated from many of the negative influences of COVID-19. Our staff continues to work remotely, leveraging our fully functional Work-From-Home solution which was a natural and seamless evolution of the Bank's branchless, technology-driven model. Notwithstanding the above, management has developed a return-to-work strategy, which is scheduled to be initiated in the first quarter of fiscal 2022.
We continue to have no loans on our balance sheet that are subject to payment deferrals, no impaired loans and no loans in arrears, however, at the same time, we continue to operate at a heightened level of awareness to ensure that our origination and underwriting practices remain highly disciplined and focused.
The rate of vaccine distribution and the continued effectiveness of the vaccines at minimizing hospitalizations precipitated by the new variants will be, in our view, key drivers of the continued recovery of the Canadian economy in the short to medium term.
As we navigate past the business and operational challenges imposed by the continued impact of COVID-19, the Bank continues to focus on increasing earnings by concentrating on niche markets that support modestly better pricing for its products and by leveraging its diverse deposit gathering network that provides efficient access to a range of low-cost deposit sources in order to maintain a lower cost of funds.
ABOUT VERSABANK
VersaBank is a Canadian Schedule I chartered bank with a difference. VersaBank became the world's first fully digital financial institution when it adopted its highly efficient business-to-business model using its proprietary state-of-the-art financial technology to profitably address underserved segments of the Canadian banking market in the pursuit of superior net interest margins while mitigating risk. VersaBank obtains all of its deposits and provides the majority of its loans and leases electronically, with innovative deposit and lending solutions for financial intermediaries that allow them to excel in their core businesses. In addition, leveraging its internally developed IT security software and capabilities, VersaBank established wholly owned, Washington, DC-based subsidiary, DRT Cyber Inc. to pursue significant large-market opportunities in cyber security and develop innovative solutions to address the rapidly growing volume of cyber threats challenging financial institutions, multi-national corporations and government entities on a daily basis.
VersaBank's Common Shares trade on the Toronto Stock Exchange (TSX) under the symbol VB and on Nasdaq under the symbol VBNK. Its Series 1 Preferred Shares trade on the TSX under the symbol VB.PR.A.
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 several 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 ability of the Bank to grow its business and execute its strategy in the US market; 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; the impact of COVID-19 pandemic 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 MD&A for the year ended October 31, 2021.
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.
VersaBank will be hosting a conference call and webcast today, Wednesday, December 1, 2021, at 9:00 a.m. (EDT) to discuss its fourth quarter results, featuring a presentation by David Taylor, President & CEO, and other VersaBank executives, followed by a question and answer period.
Dial-in Details:
Toll-free dial-in number: | 1 (888) 664-6392 (Canada/US) |
Local dial-in number: | (416) 764-8659 |
Participant passcode: | 45311522 |
Please call between 8:45 a.m. and 8:55 a.m. (EDT).
Webcast Access: For those preferring to listen to the conference call via the Internet, a webcast of Mr. Taylor's presentation will be available via the internet, accessible here https://bit.ly/3nvA1CE or from the Bank's web site.
Instant Replay:
Toll-free dial-in number: | 1 (888) 390-0541 (Canada/US) |
Local dial-in number: | (416) 764-8677 |
Passcode: | 311522# |
Expiry Date: | January 1st, 2022, at 11:59 p.m. (EDT) |
The archived webcast presentation will also be available via the Internet for 90 days following the live event at https://bit.ly/3nvA1CE and on the Bank's web site.
Visit our website at: www.versabank.com
View original content to download multimedia:https://www.prnewswire.com/news-releases/versabank-reports-continued-strong-financial-results-for-the-fourth-quarter-and-year-end-2021-highlighted-by-record-net-income-for-each-period-and-a-record-loan-portfolio-301434666.html
SOURCE VersaBank
FAQ
What were VersaBank's earnings results for Q4 2021?
How did VersaBank's total revenue perform in 2021?
What was the cost of funds for VersaBank in Q4 2021?
What is VersaBank's future outlook in terms of growth initiatives?
