Via https://newsapi.org online business online marketing online business opportunities VersaBank Reports First Quarter 2019 Results with a 24% Increase in Earnings from a Year Ago

Via https://newsapi.org  online business  online marketing  online business opportunities VersaBank Reports First Quarter 2019 Results with a 24% Increase in Earnings from a Year Ago


Via https://newsapi.org online business online marketing online business opportunities

LONDON, Ontario–()–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 2019 (“Q1 2019”) unaudited Interim
Consolidated Financial Statements for the period ended January 31, 2019
and Management’s Discussion and Analysis, are available 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.

Q1 Core Cash Earnings(1)

     

Q1 Core Cash EPS(1)

     

Q1 Core Cash ROCE(1)

     

Q1 Net Income

$6.8 million

$0.32

12.62%

$4.9 million

+ 15% yoy

+ $0.04 yoy

+ 87 bps yoy

+ 24% yoy

 

VersaBank (“VB” or the “Bank”) (TSX:VB) today reported its results for
the first quarter ended January 31, 2019. Net income for the quarter was
up 24% to $4.9 million from $4.0 million a year ago.

Core cash earnings (“CCE”) for the quarter was up 15% to $6.8 million
from $5.9 million a year ago. CCE reflects the VB’s core operational
performance and earnings capacity, (see CCE reconciliation below)
(2)
.

David Taylor, President and CEO stated, “Our Bank started the new fiscal
year on a positive note with CCE of $6.8 million and NIM of 3.00% for
the quarter, up 15% and 13 bps from last year respectively. Our
eCommerce business continued to generate volume growth in its structured
finance products resulting in our purchased receivable portfolio growing
3.5% over the previous quarter. Concurrently we are taking an
increasingly cautious approach to lending in our Commercial Banking
business, which resulted in this portfolio decreasing 8.1% compared to
last quarter. Additionally, the Bank adopted IFRS 9 this year, which
fundamentally changed our collective allowance and provisioning
methodology, now referred to as expected credit loss (ECL) methodology.
The impact of the adoption of IFRS 9 on our opening balance sheet was a
modest increase in shareholder’s equity resulting from a similar
reduction in allowance for credit losses on an after-tax basis. This
modest change to our allowance for credit losses under the new
methodology reflects VB’s low risk lending strategy.”

Q1 2019 Highlights:

Q1 2019 compared to Q1 2018(1)

  • Core cash earnings(2)of $6.8 million (up 15% 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 24% from $4.0 million)
  • NIM of 3.00% (up 13 bps from 2.87%)
  • Basic and diluted EPS of $0.21 (up $0.05 from $0.16)
  • Common share book value of $9.39 (up 9% from $8.64)
  • ROCE of 8.86% (up from 7.50%)
  • CET1 ratio of 12.26% (up from 10.68%)
  • Leverage ratio of 11.56% (up from 10.34%)
    Q1 2019 compared to Q4 2018(1)

  • Core cash earnings(2)of $6.8 million (down 4% from
    $7.1 million)
  • Core cash earnings per share of $0.32 (down $0.01 from $0.33)
  • Net income of $4.9 million (down 4% from $5.2 million)
  • NIM of 3.00% (unchanged from 3.00%)
  • Basic and diluted EPS of $0.21 (unchanged from $0.21)
  • Common share book value of $9.39 (up 2% from $9.19)
  • ROCE of 8.86% (down from 9.53%)
  • CET1 ratio of 12.26% (up from 11.58%)
  • Leverage ratio of 11.56% (up from 10.84%)

(1) Certain highlights include non-GAAP measures. See definition
under ‘Basis of Presentation’ in the Q1 2019 Management’s Discussion and
Analysis.

(2) Core cash earnings is calculated as:

(thousands of Canadian dollars)     for the three months ended
    January 31 January 31
          2019     2018
 
Net income $ 4,932 $ 3,976
 
Adjusted for:
Income taxes 1,862 1,476
Other non-core general
and administrative expense items       453
1,862 1,929
                 
Core cash earnings       $ 6,794     $ 5,905

Q1 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 license 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
January 31, 2019 were $678 million, down 8.08% from last quarter and
down 8.54% 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 January 31, 2019 were $921 million, up 3.54% from last quarter
and up 10.55% from a year ago, reflecting VB’s increased emphasis on its
structured finance products.

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 1.90%, up 8 bps from last quarter and up 36 bps from a year ago.

Capital– As at January 31, 2019, VB’s CET1 ratio was 12.26%, up
68 bps from last quarter and up 158 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 January 31, 2019, the Bank
recorded a recovery of credit losses in the amount of $289,000 compared
to a provision for credit losses in the amount of $191,000 last quarter
and a provision for credit losses in the amount of $65,000 for the same
period a year ago. The quarter over quarter and year over year trends
were a function primarily of lower real estate loan balances combined
with 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 completed its
technology Beta-Testing and has commenced investigating
commercialization opportunities for the developed service offering.

FINANCIAL HIGHLIGHTS
               
(unaudited)     for the three months ended
    January 31 October 31 January 31
($CDN thousands except per share amounts)   2019     2018     2018  
Results of operations
Interest income $ 21,959 $ 22,036 $ 19,069
Net interest income 13,440 13,707 12,395
Non-interest income 19 120 12
Total revenue 13,459 13,827 12,407
Provision (recovery) for credit losses (289 ) 191 65
Non-interest expenses 6,954 6,423 6,890
Core cash earnings* 6,794 7,108 5,905
Core cash earnings per common share* $ 0.32 $ 0.33 $ 0.28
Net income 4,932 5,164 3,976
Income per common share:
Basic $ 0.21 $ 0.21 $ 0.16
    Diluted     $ 0.21   $ 0.21   $ 0.16  
Yield* 4.90 % 4.82 % 4.41 %
Cost of funds* 1.90 % 1.82 % 1.54 %
Net interest margin* 3.00 % 3.00 % 2.87 %
Return on average common equity* 8.86 % 9.53 % 7.50 %
Core cash return on average common equity* 12.62 % 13.55 % 11.75 %
Book value per common share* $ 9.39 $ 9.19 $ 8.64
Efficiency ratio* 52 % 46 % 56 %
Return on average total assets* 0.98 % 1.01 % 0.81 %
Gross impaired loans to total loans* 1.22 % 0.04 % 0.04 %
  Provision (recovery) for credit losses as a % of average loans*   (0.02 %)   0.01 %   0.02 %
          as at    
Balance Sheet Summary
Cash and securities $ 105,193 $ 139,798 $ 84,658
Loans, net of allowance for credit losses 1,603,185 1,631,026 1,577,675
Average loans* 1,617,106 1,640,176 1,549,266
Total assets 1,746,278 1,809,130 1,706,613
Average assets* 1,777,704 1,812,182 1,715,832
Deposits 1,371,123 1,437,431 1,353,142
Subordinated notes payable 9,859 9,844 9,799
Shareholders’ equity 227,710 223,567 211,752
Capital ratios*
Risk-weighted assets $ 1,466,154 $ 1,502,549 $ 1,473,420
Total regulatory capital 213,148 207,392 192,639
Common Equity Tier 1 (CET1) ratio 12.26 % 11.58 % 10.68 %
Tier 1 capital ratio 14.27 % 13.54 % 12.67 %
Total capital ratio 14.54 % 13.80 % 13.07 %
  Leverage ratio     11.56 %   10.84 %   10.34 %
* This is a non-GAAP measure. See definition under ‘Basis of
Presentation’ in the Q1 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, February 27,
2019, at 9:00 a.m. EST to discuss the results for VB’s first quarter.
The toll-free-dial-in number is 1-888-205-6786 or local call dial-in
number is 647-484-0473, with participant passcode 788842#.

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