6-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of March 2022

Commission File Number: 001-40805

VersaBank

(Exact name of registrant as specified in its charter)

140 Fullarton Street, Suite 2002

London, Ontario N6A 5P2

Canada

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F ☐ Form 40-F ☒

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐

On March 2, 2022, VersaBank issued Interim Consolidated Financial Statements for the three months ended January 31, 2022 and 2021, Management’s Discussion and Analysis of Operations and Financial Condition for the three months ended January 31, 2022, a press release, dated March 2, 2022, titled VersaBank Reports Continued Strong Results For First Quarter 2022, a press release, dated March 2, 2022, titled VersaBank Declares Dividends, Form 52-109F2 certificate of interim filings by CEO and Form 52-109F2 certificate of interim filings by CFO, copies of which are furnished as Exhibit 99.1, Exhibit 99.2, Exhibit 99.3, Exhibit 99.4, Exhibit 99.5 and Exhibit 99.6, respectively, to this Report of Foreign Private Issuer on Form 6-K

The information in this Form 6-K (including Exhibit 99.1, Exhibit 99.2, Exhibit 99.3, Exhibit 99.4, Exhibit 99.5 and Exhibit 99.6) shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	VERSABANK
Date: March 2, 2022	By:	/s/ Shawn Clarke
		Name: Shawn Clarke
		Title: Chief Financial Officer

EXHIBIT INDEX

Exhibit No.	Description
99.1	Interim Consolidated Financial Statements for the three months ended January 31, 2022 and 2021.
99.2	Management’s Discussion and Analysis of Operations and Financial Condition for the three months ended January 31, 2022.
99.3	Press Release, dated March 2, 2022, titled VersaBank Reports Continued Strong Results For First Quarter 2022.
99.4	Press Release, dated March 2, 2022, titled VersaBank Declares Dividends.
99.5	VersaBank—Form 52-109F2 certificate of interim filings by CEO.
99.6	VersaBank—Form 52-109F2 certificate of interim filings by CFO.

EX-99.1

Exhibit 99.1

Interim Consolidated Financial Statements

January 31, 2022

(Unaudited)

1

VERSABANK

Consolidated Balance Sheets

(Unaudited)

(thousands of Canadian dollars)
	January 31		October 31			January 31
As at	2022		2021			2021
Assets
Cash	$	155,239	$	271,523		$	212,016
Loans, net of allowance for credit losses (note 4)		2,215,638		2,103,050			1,793,724
Other assets (note 5)		44,469		40,513			39,236
	$	2,415,346	$	2,415,086		$	2,044,976
Liabilities and Shareholders' Equity
Deposits	$	1,847,003	$	1,853,204		$	1,664,694
Subordinated notes payable (note 6)		97,726		95,272			4,891
Other liabilities (note 7)		133,666		134,504			115,883
		2,078,395		2,082,980			1,785,468
Shareholders' equity:
Share capital (note 8)		241,662		241,466			182,094
Retained earnings		95,276		90,644			77,414
Accumulated other comprehensive income (loss)		13		(4	)		-
		336,951		332,106			259,508
	$	2,415,346	$	2,415,086		$	2,044,976

The accompanying notes are an integral part of these interim Consolidated Financial Statements.

2

VERSABANK

Consolidated Statements of Income and Comprehensive Income

(Unaudited)

(thousands of Canadian dollars, except per share amounts)

	for the three months ended
	January 31		January 31
	2022		2021
Interest income:
Loans	$	24,514	$	21,086
Other		206		429
		24,720		21,515
Interest expense:
Deposits and other		6,469		7,014
Subordinated notes		1,366		127
		7,835		7,141
Net interest income		16,885		14,374
Non-interest income		1,381		1,048
Total revenue		18,266		15,422
Provision for credit losses (note 4)		2		57
		18,264		15,365
Non-interest expenses:
Salaries and benefits		6,083		5,030
General and administrative		3,624		2,339
Premises and equipment		929		718
		10,636		8,087
Income before income taxes		7,628		7,278
Income tax provision (note 9)		2,062		1,988
Net income		5,566		5,290
Other comprehensive income:
Items that may subsequently be reclassified to net income:
Foreign exchange gain on translation of foreign operations		17		-
Comprehensive income	$	5,583	$	5,290
Basic and diluted income per common share (note 10)	$	0.19	$	0.22
Weighted average number of common shares outstanding		27,441,082		21,123,559

The accompanying notes are an integral part of these interim Consolidated Financial Statements.

3

VERSABANK

Consolidated Statements of Changes in Shareholders’ Equity

(Unaudited)

(thousands of Canadian dollars)

	for the three months ended
	January 31			January 31
	2022			2021
Common shares (note 8):
Balance, beginning and end of the period	$	227,674		$	152,612
Preferred shares (note 8):
Series 1 preferred shares
Balance, beginning and end of the period	$	13,647		$	13,647
Series 3 preferred shares
Balance, beginning and end of the period	$	-		$	15,690
Contributed surplus:
Balance, beginning of the period	$	145		$	145
Fair value of stock-based compensation (note 8)		196			-
Balance, end of the period	$	341		$	145
Total share capital	$	241,662		$	182,094
Retained earnings:
Balance, beginning of the period	$	90,644		$	73,194
Net income		5,566			5,290
Dividends paid on common and preferred shares		(934	)		(1,070	)
Balance, end of the period	$	95,276		$	77,414
Accumulated other comprehensive income (loss):
Balance, beginning of the period	$	(4	)	$	-
Other comprehensive income		17			-
Balance, end of the period	$	13		$	-
Total shareholders' equity	$	336,951		$	259,508

The accompanying notes are an integral part of these interim Consolidated Financial Statements.

4

VERSABANK

Consolidated Statements of Cash Flows

(Unaudited)         

(thousands of Canadian dollars)
	for the three months ended
	January 31			January 31
	2022			2021
Cash provided by (used in):
Operations:
Net income	$	5,566		$	5,290
Adjustments to determine net cash flows:
Items not involving cash:
Provision for credit losses		2			57
Stock-based compensation		196			-
Income tax provision		2,062			1,988
Interest income		(24,720	)		(21,515	)
Interest expense		7,835			7,141
Amortization		490			449
Foreign exchange rate changes on debt		2,430			-
Interest received		23,594			20,572
Interest paid		(9,406	)		(10,487	)
Income taxes paid		(2,820	)		-
Change in operating assets and liabilities:
Loans		(111,400	)		(137,908	)
Deposits		(3,385	)		100,357
Change in other assets and liabilities		(3,308	)		7,577
		(112,864	)		(26,479	)
Purchase of investment:
Acquisition of DBG, net of cash acquired		-			(7,473	)
Purchase of property and equipment		(32	)		(67	)
		(32	)		(7,540	)
Financing:
Repayment of loan assumed from DBG		-			(1,410	)
Redemption of securitization liability		-			(8,631	)
Dividends paid		(934	)		(1,070	)
Repayment of lease obligations		(169	)		(136	)
Income taxes paid		-			(362	)
		(1,103	)		(11,609	)
Change in cash		(113,999	)		(45,628	)
Effect of exchange rate changes on cash		(2,285	)		-
Cash, beginning of the period		271,523			257,644
Cash, end of the period	$	155,239		$	212,016

The accompanying notes are an integral part of these interim Consolidated Financial Statements.

5

VERSABANK

Notes to Interim Consolidated Financial Statements

(Unaudited)

Three month periods ended January 31, 2022 and 2021

1.         Reporting entity:

VersaBank (the “Bank”) operates as a Schedule I bank under the Bank Act (Canada) and is regulated by the Office of the Superintendent of Financial Institutions (“OSFI”). The Bank, whose shares trade on the Toronto Stock Exchange and NASDAQ Stock Exchange, provides commercial lending and banking services to select niche markets in Canada as well as cybersecurity services through the operations of its wholly owned subsidiary DRT Cyber Inc.

The Bank is incorporated in Canada, and maintains its registered head office at Suite 2002, 140 Fullarton Street, London, Ontario, Canada, N6A 5P2.

2.         Basis of preparation:

a) Statement of compliance:

These interim Consolidated Financial Statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and have been prepared in accordance with International Accounting Standard (“IAS”) 34 – Interim Financial Reporting and do not include all of the information required for full annual financial statements. These interim Consolidated Financial Statements should be read in conjunction with the Bank’s audited Consolidated Financial Statements for the year ended October 31, 2021.

The interim Consolidated Financial Statements for the three months ended January 31, 2022 and 2021 were approved by the Audit Committee of the Board of Directors on February 28, 2022.

b) Basis of measurement:

These interim Consolidated Financial Statements have been prepared on the historical cost basis except for the investment in Canada Stablecorp Inc. which is measured at fair value through other comprehensive income (see note 5).

c) Functional and presentation currency:

These interim Consolidated Financial Statements are presented in Canadian dollars, which is the Bank’s functional currency. Functional currency is also determined for each of the Bank’s subsidiaries and items included in the interim financial statements of the subsidiaries are measured using their functional currency.

d) Use of estimates and judgements:

In preparing these interim Consolidated Financial Statements, management has exercised judgement and developed estimates in applying accounting policies and generating reported amounts of assets and liabilities at the date of the financial statements and income and expenses during the reporting periods. Significant judgement was applied in assessing significant changes in credit risk on financial assets and in the selection of relevant forward-looking information in assessing the Bank’s allowance for expected credit losses on its financial assets as described in note 4 – Loans. Estimates are applied in the determination of the allowance for expected credit losses on financial assets and the measurement of deferred income taxes. It is reasonably possible, on the basis of existing knowledge, that actual results may vary from that expected in the development of these estimates. This could result in material adjustments to the carrying amounts of assets and/or liabilities affected in the future.

6

VERSABANK

Notes to Interim Consolidated Financial Statements

(Unaudited)

Three month periods ended January 31, 2022 and 2021

Estimates were applied by management in determining the fair value of stock options granted in the current quarter as described in note 8.

Available forward-looking information, including forecast macroeconomic indicator and industry performance trend data continue to be influenced by COVID-19 and remain broadly dynamic, including, but not limited to, the scope and timing of the removal or relaxation of public health restrictions which were imposed as a function of the emergence and rapid spread of the Omicron variant, the timing, velocity and impact of monetary policy tightening, the potential implementation of new federal government stimulus programs, and the magnitude and directionality of inflation trends. The current, dynamic nature of the trends exhibited by the available forward looking information continues to infuse uncertainty into the assumptions, judgements and estimates made by management in the preparation of these interim Consolidated Financial Statements.

Estimates and their underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are applied prospectively once they are known.

3.         Significant accounting policies and future accounting changes:

The accounting policies applied by the Bank in these interim Consolidated Financial Statements are the same as those applied by the Bank as at and for the year ended October 31, 2021 and are detailed in note 3 of the Bank’s 2021 audited Consolidated Financial Statements. During the current year the Bank updated or incorporated the following significant accounting policies:

Segment reporting:

Effective the quarter ending January 31, 2022, the Bank has opted to adopt presenting segmented information in its Consolidated Financial Statements in accordance with IFRS 8 Segment Reporting. The Bank’s management has established two reportable operating segments, those being Banking and Cybersecurity Services. Details of the Bank’s segment reporting is described in note 16.

4.         Loans:

The Bank organizes its lending portfolio into the following four broad asset categories: Commercial Real Estate Mortgages, Commercial Real Estate Loans, Point of Sale Loans and Leases, and Public Sector and Other Financing. These categories have been established in the Bank’s proprietary, internally developed asset management system and have been designed to catalogue individual lending assets as a function primarily of their key risk drivers, the nature of the underlying collateral, and the applicable market segment.

7

VERSABANK

Notes to Interim Consolidated Financial Statements

(Unaudited)

Three month periods ended January 31, 2022 and 2021

The Commercial Real Estate Mortgages (“CRE Mortgages”) asset category is comprised of Commercial and Residential Construction Mortgages, Commercial Term Mortgages, Commercial Insured Mortgages and Land Mortgages. While all of these loans would be considered commercial loans or business-to-business loans, the underlying credit risk exposure is diversified across both the commercial and retail market segments, and further, the portfolio benefits from diversity in its underlying security in the form of a broad range of collateral properties.

The Commercial Real Estate Loans (“CRE Loans”) asset category is comprised primarily of Condominium Corporation Financing loans.

The Point of Sale Loans and Leases (“POS Financing”) asset category is comprised of Point of Sale Loan and Lease Receivables acquired from the Bank’s broad network of origination and servicing partners as well as Warehouse Loans that provide bridge financing to the Bank’s origination and servicing partners for the purpose of accumulating and seasoning practical volumes of individual loans and leases prior to the Bank purchasing the cashflow receivables derived from same.

The Public Sector and Other Financing (“PSOF”) asset category is comprised primarily of Public Sector Loans and Leases, a small balance of Corporate Loans and Leases and Single Family Residential Conventional and Insured Mortgages.

a) Summary of loans and allowance for credit losses:

(thousands of Canadian dollars)
	January 31			October 31			January 31
	2022			2021			2021
Commercial real estate mortgages	$	722,829		$	757,576		$	712,256
Commercial real estate loans		14,600			26,569			31,663
Point of sale loans and leases		1,439,781			1,279,576			1,008,029
Public sector and other financing		31,247			32,587			36,612
		2,208,457			2,096,308			1,788,560
Allowance for credit losses		(1,455	)		(1,453	)		(1,832	)
Accrued interest		8,636			8,195			6,996
Total loans, net of allowance for credit losses	$	2,215,638		$	2,103,050		$	1,793,724

8

VERSABANK

Notes to Interim Consolidated Financial Statements

(Unaudited)

Three month periods ended January 31, 2022 and 2021

The following table provides a summary of loan amounts, expected credit loss allowance amounts, and expected loss rates by lending asset category:

	As at January 31, 2022												As at October 31, 2021
(thousands of Canadian dollars)	Stage 1			Stage 2			Stage 3			Total			Stage 1			Stage 2			Stage 3			Total
Commercial real estate mortgages	$	667,949		$	54,880		$	-		$	722,829		$	694,869		$	62,707		$	-		$	757,576
ECL allowance		949			96			-			1,045			980			134			-			1,114
EL %		0.14	%		0.17	%		0.00	%		0.14	%		0.14	%		0.21	%		0.00	%		0.15	%
Commercial real estate loans	$	14,600		$	-		$	-		$	14,600		$	26,569		$	-		$	-		$	26,569
ECL allowance		36			-			-			36			45			-			-			45
EL %		0.25	%		0.00	%		0.00	%		0.25	%		0.17	%		0.00	%		0.00	%		0.17	%
Point of sale loans and leases	$	1,437,391		$	2,390		$	-		$	1,439,781		$	1,277,011		$	2,565		$	-		$	1,279,576
ECL allowance		370			-			-			370			275			-			-			275
EL %		0.03	%		0.00	%		0.00	%		0.03	%		0.02	%		0.00	%		0.00	%		0.02	%
Public sector and other financing	$	31,168		$	79		$	-		$	31,247		$	32,507		$	80		$	-		$	32,587
ECL allowance		4			-			-			4			16			3			-			19
EL %		0.01	%		0.00	%		0.00	%		0.01	%		0.05	%		3.75	%		0.00	%		0.06	%
Loans	$	2,151,108		$	57,349		$	-		$	2,208,457		$	2,030,956		$	65,352		$	-		$	2,096,308
Total ECL allowance		1,359			96			-			1,455			1,316			137			-			1,453
Total EL %		0.06	%		0.17	%		0.00	%		0.07	%		0.06	%		0.21	%		0.00	%		0.07	%

The Bank’s maximum exposure to credit risk is the carrying value of its financial assets. The Bank holds security against the majority of its loans in the form of mortgage interests over property, other registered securities over assets, guarantees or cash reserves on loan and lease receivables included in the POS Financing portfolio (see note 7).

Allowance for Credit Losses

The Bank must maintain an allowance for expected credit losses (“ECL”) that is adequate, in management’s opinion, to absorb all credit related losses in the Bank’s lending and treasury portfolios. Under IFRS 9 the Bank’s ECL is estimated using the expected credit loss methodology and is comprised of expected credit losses recognized on both performing loans, and non-performing, or impaired loans even if no actual loss event has occurred.

Assessment of significant increase in credit risk (“SICR”)

At each reporting date, the Bank assesses whether or not there has been a SICR for loans since initial recognition by comparing, at the reporting date, the risk of default occurring over the remaining expected life against the risk of default at initial recognition.

SICR is a function of the loan’s internal risk rating assignment, internal watchlist status, loan review status and delinquency status which are updated as necessary in response to changes including, but not limited to, changes in macroeconomic and/or market conditions, changes in a borrower’s credit risk profile, and changes in the strength of the underlying security, including guarantor status, if a guarantor exists.

Quantitative models may not always be able to capture all reasonable and supportable information that may indicate a SICR. As a result, qualitative factors may be considered to supplement such a gap.

9

VERSABANK

Notes to Interim Consolidated Financial Statements

(Unaudited)

Three month periods ended January 31, 2022 and 2021

Examples include changes in adjudication criteria for a particular group of borrowers or asset categories or changes in portfolio composition, and more specifically changes attributable to the continued impact of COVID-19 on the Canadian economy and the Bank’s business.

Expected credit loss model - Estimation of expected credit losses

Expected credit losses are an estimate of a loan’s expected cash shortfalls discounted at the effective interest rate, where a cash shortfall is the difference between the contractual cash flows that are due to the Bank and the cash flows that the Bank actually expects to receive.

Forward-Looking Information

The Bank incorporates the impact of future economic conditions, or more specifically forward-looking information into the estimation of expected credit losses at the credit risk parameter level. This is accomplished via the credit risk parameter models and proxy datasets that the Bank utilizes to develop probability of default, (“PD”) and loss given default, (“LGD”) term structure forecasts for its loans. The Bank has sourced credit risk modeling systems and forecast macroeconomic scenario data from Moody’s Analytics, a third party service provider for the purpose of computing forward-looking credit risk parameters under multiple macroeconomic scenarios that consider both market-wide and idiosyncratic factors and influences. These systems are used in conjunction with the Bank’s internally developed ECL models. Given that the Bank has experienced very limited historical losses and, therefore, does not have available statistically significant loss data inventory for use in developing internal, forward looking expected credit loss trends, the use of unbiased, third party forward-looking credit risk parameter modeling systems is particularly important for the Bank in the context of the estimation of expected credit losses.

The Bank utilizes macroeconomic indicator data derived from multiple macroeconomic scenarios in order to mitigate volatility in the estimation of expected credit losses, as well as to satisfy the IFRS 9 requirement that future economic conditions are to be based on an unbiased, probability-weighted assessment of possible future outcomes. More specifically, the macroeconomic indicators set out in the macroeconomic scenarios are used as inputs for the credit risk parameter models utilized by the Bank to sensitize the individual PD and LGD term structure forecasts to the respective macroeconomic trajectory set out in each of the scenarios (see Expected Credit Loss Sensitivity below). Currently the Bank utilizes upside, downside and baseline forecast macroeconomic scenarios, and assigns discrete weights to each for use in the estimation of its reported ECL. The Bank has also applied expert credit judgement, where appropriate, to reflect, amongst other items, uncertainty in the Canadian macroeconomic environment attributable to the continued impact of COVID-19.

The macroeconomic indicator data utilized by the Bank for the purpose of sensitizing PD and LGD term structure data to forward economic conditions include, but are not limited to: real GDP, the national unemployment rate, long term interest rates, the consumer price index, the S&P/TSX Index and the price of oil. These specific macroeconomic indicators were selected in an attempt to ensure that the spectrum of fundamental macroeconomic influences on the key drivers of the credit risk profile of the Bank’s balance sheet, including: corporate, consumer and real estate market dynamics; corporate, consumer and SME borrower performance; geography; as well as collateral value volatility, are appropriately captured and incorporated into the Bank’s forward macroeconomic sensitivity analysis.

10

VERSABANK

Notes to Interim Consolidated Financial Statements

(Unaudited)

Three month periods ended January 31, 2022 and 2021

Key assumptions driving the macroeconomic forecast trends this quarter include: the rate of decline of new case counts of the Omicron variant and the relaxation of public health restrictions as a function of same, the timing and magnitude of the Bank of Canada’s (“BoC”) first overnight rate increase as well as the number and magnitude of additional, anticipated increases over the course of 2022 and beyond, the resiliency of consumer spending in a rising rate environment, the mitigation of the current high rate of inflation as a function of the resolution of existing supply-chain bottlenecks, the trajectory of oil and gasoline prices, tighter monetary policy and a shrinking BoC balance sheet, the continued rate of job growth, the impact of more specific eligibility requirements associated with the federal government’s remaining stimulus programs, and the level and duration of historically high housing prices.

Management developed ECL estimates using credit risk parameter term structure forecasts sensitized to individual baseline, upside and downside forecast macroeconomic scenarios, each weighted at 100%, and subsequently computed the variance of each to the Bank’s reported ECL as at January 31, 2022 in order to assess the alignment of the Bank’s reported ECL with the Bank’s credit risk profile, and further, to assess the scope, depth and ultimate effectiveness of the credit risk mitigation strategies that the Bank has applied to its lending portfolios (see Expected Credit Loss Sensitivity below).

Expected Credit Loss Sensitivity:

The following table presents the sensitivity of the Bank’s estimated ECL to a range of individual macroeconomic scenarios, that in isolation may not reflect the Bank’s actual expected ECL exposure, as well as the variance of each to the Bank’s” reported ECL as at January 31, 2022:

(thousands of Canadian dollars)
	Reported			100	%		100	%		100	%
	ECL			Upside			Baseline			Downside
Allowance for expected credit losses	$	1,455	$	898		$	1,193		$	1,675
Variance from reported ECL				(557	)		(262	)		220
Variance from reported ECL (%)				(38	%)		(18	%)		15	%

11

 

The following table provides a reconciliation of the Bank’s ECL allowance by lending asset category for the three months ended January 31, 2022:

(thousands of Canadian dollars)	Stage 1			Stage 2			Stage 3		Total
Commercial real estate mortgages
Balance at beginning of period	$	980		$	134		$	-	$	1,114
Transfer in (out) to Stage 1		14			(14	)		-		-
Transfer in (out) to Stage 2		(4	)		4			-		-
Transfer in (out) to Stage 3		-			-			-		-
Net remeasurement of loss allowance		(28	)		(24	)		-		(52	)
Loan originations		80			-			-		80
Derecognitions and maturities		(93	)		(4	)		-		(97	)
Provision for (recovery of) credit losses		(31	)		(38	)		-		(69	)
Write-offs		-			-			-		-
Recoveries		-			-			-		-
Balance at end of period	$	949		$	96		$	-	$	1,045
Commercial real estate loans
Balance at beginning of period	$	45		$	-		$	-	$	45
Transfer in (out) to Stage 1		-			-			-		-
Transfer in (out) to Stage 2		-			-			-		-
Transfer in (out) to Stage 3		-			-			-		-
Net remeasurement of loss allowance		(9	)		-			-		(9	)
Loan originations		-			-			-		-
Derecognitions and maturities		-			-			-		-
Provision for (recovery of) credit losses		(9	)		-			-		(9	)
Write-offs		-			-			-		-
Recoveries		-			-			-		-
Balance at end of period	$	36		$	-		$	-	$	36
Point of sale loans and leases
Balance at beginning of period	$	275		$	-		$	-	$	275
Transfer in (out) to Stage 1		38			(38	)		-		-
Transfer in (out) to Stage 2		(58	)		58			-		-
Transfer in (out) to Stage 3		-			-			-		-
Net remeasurement of loss allowance		115			(20	)		-		95
Loan originations		-			-			-		-
Derecognitions and maturities		-			-			-		-
Provision for (recovery of) credit losses		95			-			-		95
Write-offs		-			-			-		-
Recoveries		-			-			-		-
Balance at end of period	$	370		$	-		$	-	$	370
Public sector and other financing
Balance at beginning of period	$	16		$	3		$	-	$	19
Transfer in (out) to Stage 1		-			-			-		-
Transfer in (out) to Stage 2		-			-			-		-
Transfer in (out) to Stage 3		-			-			-		-
Net remeasurement of loss allowance		(11	)		(3	)		-		(14	)
Loan originations		-			-			-		-
Derecognitions and maturities		(1	)		-			-		(1	)
Provision for (recovery of) credit losses		(12	)		(3	)		-		(15	)
Write-offs		-			-			-		-
Recoveries		-			-			-		-
Balance at end of period	$	4		$	-		$	-	$	4
Total balance at end of period	$	1,359		$	96		$	-	$	1,455

12

VERSABANK

Notes to Interim Consolidated Financial Statements

(Unaudited)

Three month periods ended January 31, 2022 and 2021

The following table provides a reconciliation of the Bank’s ECL allowance by lending asset category for the three months ended January 31, 2021:

(thousands of Canadian dollars)	Stage 1			Stage 2			Stage 3		Total
Commercial real estate mortgages
Balance at beginning of period	$	1,174		$	192		$	-	$	1,366
Transfer in (out) to Stage 1		-			-			-		-
Transfer in (out) to Stage 2		(2	)		2			-		-
Transfer in (out) to Stage 3		-			-			-		-
Net remeasurement of loss allowance		67			10			-		77
Loan originations		146			-			-		146
Derecognitions and maturities		(39	)		(37	)		-		(76	)
Provision for (recovery of) credit losses		172			(25	)		-		147
Write-offs		-			-			-		-
Recoveries		-			-			-		-
Balance at end of period	$	1,346		$	167		$	-	$	1,513
Commercial real estate loans
Balance at beginning of period	$	137		$	-		$	-	$	137
Transfer in (out) to Stage 1		-			-			-		-
Transfer in (out) to Stage 2		-			-			-		-
Transfer in (out) to Stage 3		-			-			-		-
Net remeasurement of loss allowance		(65	)		-			-		(65	)
Loan originations		-			-			-		-
Derecognitions and maturities		-			-			-		-
Provision for (recovery of) credit losses		(65	)		-			-		(65	)
Write-offs		-			-			-		-
Recoveries		-			-			-		-
Balance at end of period	$	72		$	-		$	-	$	72
Point of sale loans and leases
Balance at beginning of period	$	215		$	-		$	-	$	215
Transfer in (out) to Stage 1		20			(20	)		-		-
Transfer in (out) to Stage 2		(44	)		44			-		-
Transfer in (out) to Stage 3		-			-			-		-
Net remeasurement of loss allowance		16			(24	)		-		(8	)
Loan originations		-			-			-		-
Derecognitions and maturities		-			-			-		-
Provision for (recovery of) credit losses		(8	)		-			-		(8	)
Write-offs		-			-			-		-
Recoveries		-			-			-		-
Balance at end of period	$	207		$	-		$	-	$	207
Public sector and other financing
Balance at beginning of period	$	57		$	-		$	-	$	57
Transfer in (out) to Stage 1		-			-			-		-
Transfer in (out) to Stage 2		-			-			-		-
Transfer in (out) to Stage 3		-			-			-		-
Net remeasurement of loss allowance		(17	)		-			-		(17	)
Loan originations		-			-			-		-
Derecognitions and maturities		-			-			-		-
Provision for (recovery of) credit losses		(17	)		-			-		(17	)
Write-offs		-			-			-		-
Recoveries		-			-			-		-
Balance at end of period	$	40		$	-		$	-	$	40
Total balance at end of period	$	1,665		$	167		$	-	$	1,832

13

VERSABANK

Notes to Interim Consolidated Financial Statements

(Unaudited)

Three month periods ended January 31, 2022 and 2021

b) Impaired loans:

At January 31, 2022, impaired loans were $nil ( October 31, 2021 - $nil).

5.         Other assets:

(thousands of Canadian dollars)
	January 31		October 31		January 31
	2022		2021		2021
Accounts receivable	$	2,938	$	2,643	$	2,604
Prepaid expenses and other		16,881		12,699		9,726
Property and equipment		6,905		7,075		7,643
Right-of-use assets		4,643		4,817		5,337
Deferred income tax asset		2,868		2,931		4,286
Investment		953		953		-
Goodwill		5,754		5,754		5,754
Intangible assets		3,527		3,641		3,886
Total other assets	$	44,469	$	40,513	$	39,236

In February 2021, the Bank acquired an 11% investment in Canada Stablecorp Inc. (“Stablecorp”) for cash consideration of $953,000. The Bank made a strategic investment to bring together the necessary financial and technology expertise that will facilitate the development and future issuance of a new, highly encrypted digital deposit receipt which the Bank will brand as VCAD.

6.         Subordinated notes payable:

(thousands of Canadian dollars)
	January 31		October 31		January 31
	2022		2021		2021
Ten year term, unsecured, non-viability contingent capital compliant, subordinated notes payable, principal amount of $5.0 million, $500,000 is held by related party (note 12), effective interest rate of 10.41%, maturing March 2029.	$	4,901	$	4,898	$	4,891
Ten year term, unsecured, non-viability contingent capital compliant, subordinated notes payable, principal amount of USD $75.0 million, effective interest rate of 5.38%, maturing May 2031.		92,825		90,374		-
	$	97,726	$	95,272	$	4,891

14

VERSABANK

Notes to Interim Consolidated Financial Statements

(Unaudited)

Three month periods ended January 31, 2022 and 2021

7.         Other liabilities:

(thousands of Canadian dollars)
	January 31		October 31		January 31
	2022		2021		2021
Accounts payable and other	$	6,155	$	6,893	$	5,359
Current income tax liability		1,975		2,949		1,052
Deferred income tax liability		855		898		898
Lease obligations		4,944		5,113		5,598
Cash collateral and amounts held in escrow		5,252		7,887		3,379
Cash reserves on loan and lease receivables		114,485		110,764		99,597
	$	133,666	$	134,504	$	115,883

8.         Share capital:

a) Common shares:

At January 31, 2022, there were 27,441,082 ( October 31, 2021 – 27,441,082) common shares outstanding.

b) Preferred shares:

At January 31, 2022, there were 1,461,460 ( October 31, 2021 – 1,461,460) Series 1 preferred shares outstanding. These shares are Basel III compliant, non-cumulative rate reset preferred shares which include NVCC provisions. As a result, these shares qualify as Additional Tier 1 Capital (see note 13).

On April 30, 2021, the Bank redeemed all of its 1,681,320 ( October 31, 2021 – $nil) outstanding Non-Cumulative Series 3 preferred shares (NVCC) using cash on hand. The amount paid on redemption for each share was $10.00, and in aggregate $16.8 million. Transaction costs, incurred at issuance in the amount of $1.1 million were applied against retained earnings.

c) Stock options

Under the Bank’s stock option plan, the Bank will grant, to eligible participants options for the Bank’s common shares on a periodic basis. As per the Bank’s current stock option plan all options issued have a five year term and vest over a three year period. At January 31, 2022, the Bank was authorized to issue 1,240,000 common share stock options through its stock option plan of which 953,730 common share stock options were issued and outstanding ( October 31, 2021 – 40,000).

15

VERSABANK

Notes to Interim Consolidated Financial Statements

(Unaudited)

Three month periods ended January 31, 2022 and 2021

Stock option transactions during the three month periods ended January 31, 2022 and 2021:

	for the three months ended
	January 31, 2022				January 31, 2021
			Weighted				Weighted
	Number of		average		Number of		average
	options		exercise price		options		exercise price
Outstanding, beginning of period		40,000	$	7.00		42,017	$	10.73
Granted		913,730		15.90		-		-
Exercised		-		-		-		-
Forfeired/cancelled		-		-		-		-
Expired		-		-		-		-
Outstanding, end of period		953,730	$	15.53		42,017	$	10.73

For the three month period ended January 31, 2022, the Bank recognized $196,000 ( January 31, 2021 - $nil) in compensation expense related to the estimated fair value of options granted. The fair value of the 913,730 stock options granted during the period ended January 31, 2022, was estimated at the grant date using the Black-Scholes valuation model and the following input assumptions: risk-free rate of 1.26%, expected option life of 3.5 years, expected volatility of 29.5%, expected annual dividends of 0.64% and a forfeiture rate of 2.0%. The fair value of each stock option granted was estimated at $3.10 per share.

As at January 31, 2022, 40,000 common share stock options were fully vested and exercisable at $7.00 per share and expire in October 2023.

9.         Income tax provision:

Income tax provision for the three months ended January 31, 2022 was $2.1 million ( January 31, 2021 - $2.0 million). The Bank’s combined statutory federal and provincial income tax rate is approximately 27% (2021 – 27%). The effective rate is affected by certain items not being taxable or deductible for income tax purposes.

16

VERSABANK

Notes to Interim Consolidated Financial Statements

(Unaudited)

Three month periods ended January 31, 2022 and 2021

10.         Income per common share:   

(thousands of Canadian dollars)
	for the three months ended
	January 31			January 31
	2022			2021
Net income	$	5,566		$	5,290
Less: dividends on preferred shares		(247	)		(542	)
		5,319			4,748
Average number of common shares outstanding		27,441,082			21,123,559
Income per common share:	$	0.19		$	0.22

The Series 1 NVCC preferred shares are contingently issuable shares and would only have a dilutive impact upon issuance.

11.         Commitments and contingencies: 

The amount of credit related commitments represents the maximum amount of additional credit that the Bank could be obligated to extend.

(thousands of Canadian dollars)
	January 31		October 31		January 31
	2022		2021		2021
Loan commitments	$	315,764	$	296,248	$	270,687
Letters of credit		51,131		46,462		48,290
	$	366,895	$	342,710	$	318,977

12.         Related party transactions:  

The Bank’s Board of Directors and Senior Executive Officers represent key management personnel and are related parties. At January 31, 2022, amounts due from these related parties totalled $1.4 million ( January 31, 2021 - $1.4 million) and an amount due from a corporation controlled by key management personnel totalled $2.4 million ( January 31, 2021 - $2.4 million). The interest rates charged on loans and advances to related parties are based on mutually agreed upon terms. Interest income earned on the above loans for the three months ended January 31, 2022 was $24,000 ( January 31, 2021 - $17,000). There were no specific provisions for credit losses associated with loans issued to key management personnel ( January 31, 2021 - $nil), and all loans issued to key management personnel were current as at January 31, 2022.

$500,000 of the Bank’s $5.0 million subordinated notes payable, issued in March 2019, are held by a related party (note 6).

17

VERSABANK

Notes to Interim Consolidated Financial Statements

(Unaudited)

Three month periods ended January 31, 2022 and 2021

13.         Capital management:

a) Overview:

The Bank’s policy is to maintain a strong capital base so as to retain investor, creditor and market confidence as well as to support the future growth and development of the business. The impact of the level of capital held on shareholders’ return is an important consideration and the Bank recognizes the need to maintain a balance between the higher returns that may be possible with greater leverage and the advantages and security that may be afforded by a more robust capital position.

OSFI sets and monitors capital requirements for the Bank. Capital is managed in accordance with policies and plans that are regularly reviewed and approved by the Board of Directors and that take into account, amongst other items, forecasted capital requirements and current and anticipated financial market conditions.

The goal is to maintain adequate regulatory capital for the Bank to be considered well capitalized, protect consumer deposits and provide capacity to support organic growth as well as to capitalize on strategic opportunities that do not otherwise require accessing the public capital markets, all the while providing a satisfactory return to shareholders. The Bank’s regulatory capital is comprised of share capital, retained earnings and unrealized gains and losses on fair value through other comprehensive income securities (Common Equity Tier 1 capital), preferred shares (Additional Tier 1 capital) and subordinated notes (Tier 2 capital).

The Bank monitors its capital adequacy and related capital ratios on a daily basis and has policies setting internal targets and thresholds for its capital ratios. These capital ratios consist of the leverage ratio and the risk-based capital ratios.

The Bank makes use of the Standardized Approach for credit risk as prescribed by OSFI, and therefore, may include eligible ECL allowance amounts in its Tier 2 capital, up to a maximum of 1.25% of its credit risk-weighted assets calculated under the Standardized Approach. Further to this, and as a result of the onset of COVID-19 and the economic uncertainty precipitated by same, OSFI introduced guidance over the course of the second quarter of fiscal 2020 that set out transitional arrangements pertaining to the capital treatment of expected credit loss provisioning which allows for a portion of eligible ECL allowance amounts to be included in CET1 capital, on a transitional basis, over the course of the period ranging between 2020 and 2022 inclusive. The portion of the Bank’s ECL allowance that is eligible for inclusion in CET1 capital is calculated as the increase in the sum of Stage 1 and Stage 2 ECL allowance amounts estimated in the current period relative to the sum of Stage 1 and Stage 2 ECL allowance amounts estimated for the baseline period, which has been designated by OSFI to be the three months ended January 31, 2020, adjusted for tax effects and multiplied by a scaling factor. The scaling factor was set by OSFI at 70% for fiscal 2020, 50% for fiscal 2021 and 25% for fiscal 2022. The impact of the capital treatment of expected credit loss provisioning on the Bank’s capital levels and associated capital ratios is presented in the table below.

During the period ended January 31, 2022, there were no material changes in the Bank’s management of capital.

18

VERSABANK

Notes to Interim Consolidated Financial Statements

(Unaudited)

Three month periods ended January 31, 2022 and 2021

b) Risk-Based Capital Ratios:

The Basel Committee on Banking Supervision has published the Basel III rules on capital adequacy and liquidity (“Basel III”). OSFI requires that all Canadian banks must comply with the Basel III standards on an “all-in” basis for the purpose of determining their risk-based capital ratios. Required minimum regulatory capital ratios are a 7.0% Common Equity Tier 1 capital ratio (“CET1”), an 8.5% Tier 1 capital ratio and a 10.5% total capital ratio, all of which include a 2.50% capital conservation buffer.

OSFI also requires banks to measure capital adequacy in accordance with guidelines for determining risk adjusted capital and risk-weighted assets including off-balance sheet credit instruments as specified in the Basel III regulations. Based on the deemed credit risk for each type of asset, both on and off balance sheet assets of the Bank are assigned a weighting ranging between 0% to 150% to determine the Bank’s risk weighted equivalent assets and its risk-based capital ratios.

The Bank’s risk-based capital ratios are calculated as follows:

(thousands of Canadian dollars)
	January 31			October 31
	2022			2021
	"Transitional"
	& "All in"			"All in"
Common Equity Tier 1 (CET1) capital
Directly issued qualifying common share capital	$	228,015		$	227,819
Retained earnings		95,276			90,644
Accumulated other comprehensive income		13			(4	)
CET1 before regulatory adjustments		323,304			318,459
Regulatory adjustments applied to CET1		(12,479	)		(12,751	)
Common Equity Tier 1 capital	$	310,825		$	305,708
Additional Tier 1 capital
Directly issued qualifying Additional Tier 1 instruments	$	13,647		$	13,647
Total Tier 1 capital	$	324,472		$	319,355
Tier 2 capital
Directly issued Tier 2 capital instruments	$	100,310		$	97,910
Tier 2 capital before regulatory adjustments		100,310			97,910
Eligible stage 1 and stage 2 allowance		1,455			1,453
Total Tier 2 capital	$	101,765		$	99,363
Total regulatory capital	$	426,237		$	418,718
Total risk-weighted assets	$	2,095,335		$	2,013,544
Capital ratios
CET1 capital ratio		14.83	%		15.18	%
Tier 1 capital ratio		15.49	%		15.86	%
Total capital ratio		20.34	%		20.80	%

As at January 31, 2022 and October 31, 2021, the Bank exceeded all of the minimum Basel III regulatory capital requirements prescribed by OSFI.

19

VERSABANK

Notes to Interim Consolidated Financial Statements

(Unaudited)

Three month periods ended January 31, 2022 and 2021

c)  Leverage Ratio:

The leverage ratio, which is prescribed under the Basel III Accord, is a supplementary measure to the risk-based capital requirements and is defined as the ratio of Tier 1 capital to the Bank’s total exposures. The Basel III minimum leverage ratio is 3.0%. The Bank’s leverage ratio is calculated as follows:

(thousands of Canadian dollars)
	January 31			October 31
	2022			2021
	"Transitional"
	& "All in"			"All in"
On-balance sheet assets	$	2,415,346		$	2,415,086
Assets amounts adjusted in determining the Basel III
Tier 1 capital		(12,479	)		(12,751	)
Total on-balance sheet exposures		2,402,867			2,402,335
Total off-balance sheet exposure at gross notional amount	$	366,895		$	342,710
Adjustments for conversion to credit equivalent amount		(212,919	)		(210,065	)
Total off-balance sheet exposures		153,976			132,645
Tier 1 capital		324,472			319,355
Total exposures		2,556,843			2,534,980
Leverage ratio		12.69	%		12.60	%

As at January 31, 2022 and October 31, 2021, the Bank was in compliance with the leverage ratio prescribed by OSFI.

14.         Interest rate risk position:

The Bank is subject to interest rate risk which is the risk that a movement in interest rates could negatively impact net interest margin, net interest income and the economic value of assets, liabilities and shareholders’ equity. The following table provides the duration difference between the Bank’s assets and liabilities and the potential after-tax impact of a 100 basis point shift in interest rates on the Bank’s earnings during a 12 month period as well as the potential after-tax impact of a 100 basis point shift in interest rates on the Bank’s shareholders’ equity over a 60 month period if no remedial actions are taken.          

(thousands of Canadian dollars)
	January 31, 2022					October 31, 2021
	Increase 100 bps		Decrease 100 bps			Increase 100 bps		Decrease 100 bps
Increase (decrease):
Impact on projected net interest income during a 12 month period	$	3,951	$	(3,951	)	$	4,147	$	(3,220	)
Impact on reported equity during a 60 month period	$	717	$	(1,196	)	$	1,603	$	(1,586	)
Duration difference between assets and liabilities (months)		2.0					2.3

20

VERSABANK

Notes to Interim Consolidated Financial Statements

(Unaudited)

Three month periods ended January 31, 2022 and 2021

15.         Fair Value of Financial Instruments:

Fair values are based on management’s best estimates of market conditions and valuation policies at a certain point in time. The estimates are subjective and involve particular assumptions and matters of judgement and as such, may not be reflective of future fair values. The Bank’s loans and deposits lack an available market as they are not typically exchanged and, therefore, the book value of these instruments are not necessarily representative of amounts realizable upon immediate settlement. See note 19 of the October 31, 2021 audited Consolidated Financial Statements for more information on fair values.

(thousands of Canadian dollars)
As at	January 31, 2022				October 31, 2021
	Book		Fair		Book		Fair
(thousands of Canadian dollars)	Value		Value		Value		Value
Assets
Cash and cash equivalents	$	155,239	$	155,239	$	271,523	$	271,523
Loans		2,215,638		2,231,040		2,103,050		2,118,636
Other financial assets		3,891		3,891		3,596		3,596
Liabilities
Deposits	$	1,847,003	$	1,830,923	$	1,853,204	$	1,860,332
Subordinated notes payable		97,726		100,310		95,272		97,910
Other financial liabilities		130,836		130,836		130,657		130,657

16.         Operating Segmentation:

The Bank has established two reportable operating segments, those being Banking and Cybersecurity Services. The two operating segments are strategic business operations providing distinct products and services to different markets and are separately managed as a function of the distinction in the nature of the business of the two operating segments. The following summarizes the operations of each of the reportable segments:

Banking – The Bank employs a business-to-business model using its proprietary financial technology to address underserved segments of the Canadian banking market. VersaBank obtains 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.

Cybersecurity Services - Leveraging its internally developed IT security software and capabilities, VersaBank established a wholly-owned subsidiary, DRT Cyber Inc. (“DRTC”), to pursue significant large-market opportunities in cybersecurity and develop innovative solutions to address the rapidly growing volume of cyber threats challenging financial institutions, multi-national corporations and government entities.

The basis for the determination of the reportable segments is a function primarily of the systematic, consistent process employed by our chief operating decision maker, the Chief Executive Officer, and the Chief Financial Officer in reviewing and interpreting the operations and performance of each segment. The accounting policies applied to these segments are consistent with those employed in the preparation of our consolidated financial statements, as disclosed in Note 3 of the Bank’s 2021 audited Consolidated Financial Statements.

21

VERSABANK

Notes to Interim Consolidated Financial Statements

(Unaudited)

Three month periods ended January 31, 2022 and 2021

Performance is measured based on segment net income, as included in the Bank’s internal management reporting. Management has determined that this measure is the most relevant in evaluating segment results and in the allocation of resources. Information regarding the results of each reportable operating segment is as follows:

(thousands of Canadian dollars)
for the three months ended	January 31, 2022									January 31, 2021
	Banking		Cybersecurity		Eliminations			Consolidated		Banking			Cybersecurity		Eliminations			Consolidated
					and Adjustments										and Adjustments
Net interest income	$	16,885	$	-	$	-		$	16,885	$	14,374		$	-	$	-		$	14,374
Non-interest income		-		1,422		(41	)		1,381		(17	)		1,093		(28	)		1,048
Total revenue		16,885		1,422		(41	)		18,266		14,357			1,093		(28	)		15,422
Provision for (recovery of) credit losses		2		-		-			2		57			-		-			57
		16,883		1,422		(41	)		18,264		14,300			1,093		(28	)		15,365
Non-interest expenses:
Salaries and benefits		5,440		643		-			6,083		4,698			332		-			5,030
General and administrative		3,482		183		(41	)		3,624		2,062			305		(28	)		2,339
Premises and equipment		582		347		-			929		570			148		-			718
		9,504		1,173		(41	)		10,636		7,330			785		(28	)		8,087
Income before income taxes		7,379		249		-			7,628		6,970			308		-			7,278
Income tax provision		1,961		101		-			2,062		1,853			135		-			1,988
Net income	$	5,418	$	148	$	-		$	5,566	$	5,117		$	173	$	-		$	5,290
Total assets	$	2,412,167	$	23,767	$	(20,588	)	$	2,415,346	$	2,041,784		$	20,612	$	(17,420	)	$	2,044,976
Total liabilities	$	2,072,691	$	25,147	$	(19,443	)	$	2,078,395	$	1,781,121		$	20,622	$	(16,275	)	$	1,785,468

While the Bank has operations in the US, primarily through its DRTC operations, substantially all of the Bank’s earnings and assets are based in Canada.

22

17.         Comparative balances:

Certain comparative balances have been reclassified to conform with the financial statement presentation adopted in the current period. 

EX-99.2

Exhibit 99.2

Management’s Discussion and Analysis

This management’s discussion and analysis (“MD&A”) of operations and financial condition for the first quarter of Fiscal 2022, dated February 28, 2022, should be read in conjunction with the unaudited interim consolidated financial statements for the period ended January 31, 2022, which have been prepared in accordance with International Financial Reporting Standards (“IFRS”). This MD&A should also be read in conjunction with VersaBank’s MD&A and Audited Consolidated Financial Statements for the year ended October 31, 2021, which are available on VersaBank’s website at www.versabank.com, SEDAR at www.sedar.com and EDGAR at https://www.sec.gov/edgar.shtml. Except as discussed below, all other factors discussed and referred to in the MD&A for the year ended October 31, 2021, remain substantially unchanged. All currency amounts in this document are in Canadian dollars unless otherwise indicated.

Cautionary Note Regarding Forward-Looking Statements	2
Overview	3
Update on Impact of COVID-19	3
Overview of Performance	4
Selected Financial Highlights	6
Business Outlook	7
Financial Review - Earnings	10
Financial Review - Balance Sheet	14
Off-Balance Sheet Arrangements	26
Related Party Transactions	26
Capital Management and Capital Resources	27
Results of Operating Segments	29
Summary of Quarterly Results	31
Non-GAAP and Other Financial Measures	32
Significant Accounting Policies and Use of Estimates and Judgments	34
Controls and Procedures	34

1

Cautionary Note Regarding Forward-Looking Statements

The statements in this management’s discussion and analysis 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 the Bank’s 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 the Bank conducts operations; the effects of changes in monetary and fiscal policy, including changes in interest rate policies of the Bank of Canada; global commodity prices; the effects of competition in the markets in which the Bank operates; inflation; capital market fluctuations; the timely development and introduction of new products in receptive markets; the impact of changes in the laws and regulations regulating financial services; changes in tax laws; technological changes; unexpected judicial or regulatory proceedings; unexpected changes in consumer spending and savings habits; the impact of wars or conflicts including the crisis in Russia-Ukraine; the impact of COVID-19 and the Bank’s 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 the management’s discussion and analysis is presented to assist our shareholders and others 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 management’s discussion and analysis or made from time to time by the Bank or on its behalf.

2

Overview

VersaBank (the “Bank”) adopted an electronic branchless model in 1993, becoming the world’s first branchless financial institution. It holds a Canadian Schedule 1 chartered bank licence and obtains its deposits, and the majority of its loans and leases, electronically. In addition to its core banking operations, the Bank has also established a cybersecurity services operation through its wholly owned subsidiary, DRT Cyber Inc. VersaBank’s Common Shares trade on the Toronto Stock Exchange and Nasdaq under the symbol VBNK. Its Series 1 Preferred Shares trade on the Toronto Stock Exchange under the symbol VBNK.PR.A.

Update on Impact of COVID-19

COVID-19 continues to impact communities, businesses and the Canadian economy with the emergence of the Omicron variant and the reinstatement of public health restrictions over the course of the current quarter. As a digital bank with a low-risk business-to-business, partner-based model, VersaBank continues to remain relatively insulated from many of the negative influences of COVID-19 as a function primarily of our staff working remotely, enabled by our branchless, technology-driven model. However, with public health restrictions being relaxed somewhat on January 31^st, 2022 and expected to abate further in the short term, management will begin to execute on its return-to-work strategy, which will see staff transition from working remotely to working in a traditional office setting over the course of the timeframe spanning February 14^th, 2022, to March 14^th, 2022.

Notwithstanding the above, we continue to operate at a heightened level of awareness to ensure that our origination and underwriting practices remain highly disciplined and focused, and further, have no loans on our balance sheet that are subject to payment deferrals, no impaired loans and no loans in arrears.

As we navigate past the business and operational challenges imposed by the continued impact of COVID-19, the Bank remains highly focused 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.

The underlying drivers of the Bank’s performance trends for the current and comparative periods are set out in the following sections of this MD&A.

3

Overview of Performance

* See definition in the "Non-GAAP and Other Financial Measures" section below.

Q1 2022 vs Q4 2021

► Loans were up 5% to $2.22 billion attributable to strong growth in the Bank’s point of sale loan and lease receivable (“POS Financing”) portfolio offset partially by lower commercial real estate (“CRE”) portfolio balances;

► Total revenue was up modestly to $18.3 million, comprised of net interest income in the amount of $16.9 million and non-interest income in the amount of $1.4 million, the latter derived primarily from the Bank’s cybersecurity services operation;  

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► Net interest margin (NIM) was up 4 bps to 2.77% as a function primarily of higher yields earned on lending assets and lower cost of funds attributable primarily to the Bank re-deploying cash into higher yielding lending assets;

► Provision for credit losses was $2,000 compared to a recovery of credit loss provisions in the amount of $279,000;

► Net income and EPS were down 6% and 21% to $5.6 million and $0.19 per share respectively, with the magnitude of the EPS trend being affected notably by the impact of dilution attributable to the issuance of 6.3 million common shares concurrent with the Bank’s listing on the Nasdaq in September, 2021;

► Efficiency ratio was up 2% as a function primarily of higher non-interest expense attributable to general, annual compensation adjustments and higher insurance premiums resulting from the Bank’s listing on the Nasdaq in September, 2021.

Q1 2022 vs Q1 2021

► Loans were up 24% as a function of strong growth in the Bank’s POS Financing portfolio, offset partially by lower CRE portfolio balances;

► Total revenue was up 18% as a function of higher net interest income and higher non-interest income, the latter being a function of the Bank’s cybersecurity services operation;  

► NIM was down 9 bps attributable to lower yields earned on lending assets offset partially by lower cost of funds;

► Provision for credit losses was $2,000 compared to a provision for credit losses in the amount of $57,000;

► Net income and EPS were up 5% and down 14% respectively, with the magnitude and direction of the EPS trend being affected notably by the impact of dilution attributable to the issuance of 6.3 million common shares concurrent with the Bank’s listing on the Nasdaq in September, 2021;

► Efficiency ratio was up 11% as a function primarily of higher non-interest expense attributable to general annual compensation adjustments and higher insurance premiums resulting from the Bank’s listing on the Nasdaq in September, 2021.

Items of note

Q1 2022

► There were no material items of note in the current quarter.

Q4 2021

► On September 21, 2021 the Bank completed a treasury offering of 5,500,000 common shares at a price of USD $10.00 per share, the equivalent of CAD $12.80 per share, for gross proceeds of USD $55.0 million and on September 29, 2021 the underwriters of the aforementioned offering exercised their full over-allotment option to purchase an additional 825,000 shares (15% of the 5,500,000 common shares issued via the base offering referenced above) at a price of USD $10.00 per share, or CAD $12.68 per share, for gross proceeds of USD $8.3 million, (collectively, “the Common Share Offering”). Total net cash proceeds from the Common Share Offering was CAD $73.2 million. However, the Bank’s share capital increased by CAD $75.1 million as a function of the Common Share Offering and tax effected issue costs in the amount of $5.4 million. The Bank listed on the Nasdaq under the symbol VBNK concurrent with the Common Share Offering on September 21, 2021.

Q1 2021

► On November 30, 2020, the Bank’s wholly owned subsidiary DRT Cyber Inc. (“DRTC”) acquired 100% of the shares of 2021945 Ontario Inc., operating as Digital Boundary Group (“DBG”), in exchange for $8.5 million in cash and a deferred payment obligation of $1.4 million, for total consideration of $9.9 million.

5

Selected Financial Highlights

(unaudited)	For the three months ended
	January 31			October 31			January 31
(thousands of Canadian dollars except per share amounts)	2022			2021			2021
Results of operations
Interest income	$	24,720		$	23,924		$	21,515
Net interest income		16,885			16,146			14,374
Non-interest income		1,381			2,090			1,048
Total revenue		18,266			18,236			15,422
Provision (recovery) for credit losses		2			(279	)		57
Non-interest expenses		10,636			10,377			8,087
Net income		5,566			5,910			5,290
Income per common share:
Basic	$	0.19		$	0.24		$	0.22
Diluted	$	0.19		$	0.24		$	0.22
Dividends paid on preferred shares	$	247		$	247		$	542
Dividends paid on common shares	$	687		$	684		$	528
Yield*		4.06	%		4.04	%		4.28	%
Cost of funds*		1.29	%		1.31	%		1.42	%
Net interest margin*		2.77	%		2.73	%		2.86	%
Return on common equity*		6.58	%		8.07	%		8.26	%
Book value per common share*	$	11.78		$	11.61		$	10.90
Efficiency ratio*		58	%		57	%		52	%
Return on total assets*		0.87	%		0.96	%		0.94	%
Gross impaired loans to total loans*		0.00	%		0.00	%		0.00	%
Provision (recovery) for credit losses as a % of average loans*		0.00	%		(0.05%	)		0.01	%
	As at
Balance Sheet Summary
Cash	$	155,239		$	271,523		$	212,016
Loans, net of allowance for credit losses		2,215,638			2,103,050			1,793,724
Average loans*		2,159,344			2,027,602			1,724,317
Total assets		2,415,346			2,415,086			2,044,976
Deposits		1,847,003			1,853,204			1,664,694
Subordinated notes payable		97,726			95,272			4,891
Shareholders' equity		336,951			332,106			259,508
Capital ratios**
Risk-weighted assets	$	2,095,335		$	2,013,544		$	1,721,935
Common Equity Tier 1 capital		310,825			305,708			214,851
Total regulatory capital		426,237			418,718			251,020
Common Equity Tier 1 (CET1) capital ratio		14.83	%		15.18	%		12.48	%
Tier 1 capital ratio		15.49	%		15.86	%		14.18	%
Total capital ratio		20.34	%		20.80	%		14.58	%
Leverage ratio		12.69	%		12.60	%		11.40	%

*  See definition in "Non-GAAP and Other Financial Measures" section below.

**Capital management and leverage measures are in accordance with OSFI's Capital Adequacy Requirements and Basel III Accord.

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Business Outlook

The Bank is active in niche markets that support more attractive pricing for its lending products, and further, continues to develop and expand its diverse deposit gathering network that provides efficient access to a range of low-cost deposit sources. In addition, the Bank remains highly committed to, and focused on further developing and enhancing its technology advantage, a key component of its value proposition that not only provides efficient access to the Bank’s chosen niche lending and deposit markets, but also delivers superior financial products and better customer service to its clients.

Management is closely monitoring the current situation in Ukraine and the potential, derivative impact of same on the Bank’s business. At this time, management has not identified any material direct or indirect risk exposure to the Bank as a function of the conflict, however we will continue to examine the available information and further evaluate the situation as it evolves.

While the Bank does not provide guidance on specific performance metrics, we provide commentary below related to aspects of our business and certain expected trends related to same that, in management’s view could potentially impact future performance.

Lending Assets

► The Bank anticipates that fiscal 2022 will bring continued growth in the commercial mortgage space, particularly with respect to financing for residential housing properties. Management expects that the demand for residential housing will be a function primarily of continued development in communities on the periphery of the major city centres as a result of consumers continuing to seek more affordable housing outside of the city centres and the federal government’s efforts to revitalize immigration programs. Management is of the view that the multi-unit residential rental sector, within the Bank’s target markets remains one of the most stable and low-risk sectors in the real estate market. Further, as COVID-19 restrictions continue to abate, management anticipates higher origination volumes related to commercial asset classes such as student housing and commercial and retail property types as the risk profile associated with this asset class realigns with the Bank’s risk appetite. Finally, management continues to pursue opportunities to develop more meaningful balance sheet exposure to the B-20 compliant conventional, uninsured mortgage financing space; and,

► Consumer spending is expected to remain strong into at least the second half of fiscal 2022 as COVID-19 restrictions continue to abate, and in many cases are removed altogether and as consumers exhaust excess savings built up over the course of the pandemic. Management anticipates that consumers will continue to deploy their savings into a range of durable goods, including assets related to home improvements as well as home purchases for which the Bank’s POS loan and lease origination partners provide financing. This, along with the anticipated addition of new origination partners and the Bank’s planned entrance into the US market represent key drivers of POS Financing balance sheet growth over the course of fiscal 2022.

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Credit Quality

► The Bank lends to niche markets that support more attractive pricing for its lending products but typically exhibit a lower than average risk profile generally as a function of the lower inherent risk associated with the underlying collateral assets and/or the structure of the Bank’s offered financing arrangements;

► We have no loans on our balance sheet that are subject to payment deferrals, no impaired loans and no loans in arrears, however, we continue to monitor our lending portfolio and the underlying borrowers as well as our origination partners closely to ensure that management has good visibility on credit trends that could provide an early warning indication of the emergence of any elevated risk in our lending portfolio;

► Forward-looking macroeconomic and industry data remains broadly dynamic and as a result, management anticipates that estimated expected credit loss (“ECL”) amounts may continue to exhibit modest volatility over the course of fiscal 2022, most specifically as a function of the scope and timing of the removal or relaxation of public health restrictions which were imposed as a function of the emergence and rapid spread of the Omicron variant, the timing, velocity and impact of monetary policy tightening, the potential implementation of new federal government stimulus programs, and the magnitude and directionality of inflation trends. Notwithstanding the above, management also expects that the lower risk profile of the Bank’s lending portfolio, which is a function of the Bank’s prudent underwriting practices, and its focus on niche financing markets within which it has a wealth of experience will contribute to mitigating potential volatility in its forward ECL amounts; and,

► The Bank has sourced credit risk modeling systems and forecast macroeconomic scenario data from Moody’s Analytics, a third party service provider, for the purpose of computing forward-looking credit risk parameters under multiple macroeconomic scenarios that consider both market-wide and idiosyncratic factors and influences. These credit risk modeling systems are used in conjunction with the Bank’s internally developed ECL models. We continue to see dynamic, modestly improving trends in the macroeconomic data used as forward-looking information in our credit risk models and depending on the growth trajectory and composition of our lending portfolio, these improving trends could result in the Bank recognizing lower provisions for credit losses, or potentially even recognizing further recoveries in the coming quarters. However, if the performance of the Canadian economy is not aligned with the current forecast macroeconomic trends, and further, begins to deteriorate, our borrowers could be exposed to credit risk that could result in loan deferrals and/or loan defaults and have an unfavourable impact on our estimated ECL.

Funding and Liquidity

► Management anticipates that commercial deposit volumes raised via the Bank’s Trustee Integrated Banking (“TIB”) program will continue to grow over the course of fiscal 2022 as a function of an increase in the volume of consumer bankruptcy and proposal restructuring proceedings over the same timeframe. This perspective is attributable primarily to the anticipated effect of changes to federal government support programs as the impact of COVID-19 moderates, and higher interest rates as a result of the Bank of Canada tightening monetary policy over the course of the year. Further, the Bank continues to grow and expand its well-established, diverse deposit broker network through which it sources personal deposits, consisting primarily of guaranteed investment certificates. Management expects the combination of the operational trends set out above will allow the Bank to continue to effectively mitigate its cost of funds, even in a rising interest rate environment; and,

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► Management anticipates that liquidity levels will remain reasonably consistent over the course of fiscal 2022 as the Bank continues to fund anticipated, additional balance sheet growth across each of its lines of business.

Earnings and Capital

► Earnings growth in fiscal 2022 will be realized as a function primarily of anticipated organic balance sheet growth and incremental earnings contributions from the Bank’s cybersecurity services operation;

►  Net interest income growth is expected to be a function primarily of the expansion of each of our core business lines across key lending asset categories, disciplined liquidity management and the expectation that the Bank will be able to continue to maintain, and potentially further moderate its cost of funds over the course of the year;

► Non-interest income growth will be a function primarily of the Bank’s cybersecurity services business DRT Cyber Inc. deploying its suite of cybersecurity solutions into the market which includes financial institutions, multi-national corporations and government entities;

► The Bank’s capital ratios are currently well in excess of regulatory minimums. Management is of the view that the Bank’s current capital levels are sufficient to accommodate anticipated, medium term balance sheet growth, however; management will continue to closely monitor the capital markets to identify opportunities for the Bank to raise additional regulatory capital on attractive terms in order to position the Bank to support a potentially more robust growth profile; and,

►  Management does not anticipate increasing the Bank’s dividend rate over the course of fiscal 2022 in order to ensure that it continues to have adequate regulatory capital available to support the balance sheet growth currently contemplated over the same period and remain in compliance with its established regulatory capital ratio targets and thresholds.

There is potential that the Bank may not realize or achieve the anticipated performance trends set out above as a function of a number of factors and variables including, but not limited to, the strength of the Canadian economy in general and the strength of the local economies within Canada in which the Bank conducts operations; the effects of changes in monetary and fiscal policy, including changes in the interest rate policies of the Bank of Canada; global commodity prices; the effects of competition in the markets in which the Bank operates; 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 regulating financial services; the impact of wars or conflicts including the crisis in Russia-Ukraine; and the impact of COVID-19 on the Canadian economy. Please see “Cautionary Note Regarding Forward-Looking Statements” on page 2 of this MD&A.

9

Financial Review - Earnings

Total Revenue

Total revenue, which consists of net interest income and non-interest income was up modestly to $18.3 million compared to last quarter and was up 18% compared to the same period a year ago.

Net Interest Income

(thousands of Canadian dollars)
	January 31		October 31					January 31
For the three months ended:	2022		2021		Change			2021		Change
Interest income
Commercial real estate mortgages	$	9,753	$	9,935		(2	%)	$	9,110		7	%
Commercial real estate loans		192		328		(41	%)		342		(44	%)
Point of sale loans and leases		14,455		13,208		9	%		11,501		26	%
Public sector and other financing		114		119		(4	%)		133		(14	%)
Other		206		334		(38	%)		429		(52	%)
Interest income	$	24,720	$	23,924		3	%	$	21,515		15	%
Interest expense
Deposit and other	$	6,469	$	6,479		0	%	$	7,014		(8	%)
Subordinated notes		1,366		1,299		5	%		127		976	%
Interest expense	$	7,835	$	7,778		1	%	$	7,141		10	%
Net interest income	$	16,885	$	16,146		5	%	$	14,374		17	%
Non-interest income	$	1,381	$	2,090		(34	%)	$	1,048		32	%
Total revenue	$	18,266	$	18,236		0	%	$	15,422		18	%

Q1 2022 vs Q4 2021

Net interest income was up 5% to $16.9 million as a function primarily of:

► Higher interest income earned on lending assets attributable to growth in the Bank’s POS Financing portfolio; and,

► Redeployment of cash into higher yielding lending assets.

Offset partially by:

► Lower interest income earned on the Bank’s CRE Mortgage and Loan portfolios attributable to lower asset balances; and,

► Higher interest expense attributable to the Bank’s USD subordinated notes payable (the “Notes”) resulting from changes in the USD/CAD foreign exchange spot rate over the course of the period.

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Q1 2022 vs Q1 2021

Net interest income was up 17% as a function primarily of:

► Higher interest income earned on the Bank’s POS Financing and CRE Mortgage portfolios attributable primarily to lending asset growth; and,

► Redeployment of cash into higher yielding lending assets.

Offset partially by:

► Higher interest expense attributable to the Notes.

Net Interest Margin

(thousands of Canadian dollars)
	January 31			October 31						January 31
For the three months ended:	2022			2021			Change			2021			Change
Interest income	$	24,720		$	23,924			3	%	$	21,515			15	%
Interest expense		7,835			7,778			1	%		7,141			10	%
Net interest income		16,885			16,146			5	%		14,374			17	%
Average assets	$	2,415,216		$	2,350,429			3	%	$	1,994,431			21	%
Yield		4.06	%		4.04	%		0	%		4.28	%		(5	%)
Cost of funds		1.29	%		1.31	%		(2	%)		1.42	%		(9	%)
Net interest margin		2.77	%		2.73	%		1	%		2.86	%		(3	%)

Q1 2022 vs Q4 2021

Net interest margin was up 4 bps as a function primarily of:

► Redeployment of cash into higher yielding lending assets.

Q1 2022 vs Q1 2021

Net interest margin was down 9 bps as a function primarily of:

► Changes in the Bank’s lending portfolio mix; and,

►  Higher interest expense attributable to the Notes.

Offset partially by:

► Lower cost of funds attributable primarily to growth in operating accounts that the Bank makes available to Canadian insolvency professionals.

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Non-Interest Income

Non-interest income reflects the consolidation of the gross profit generated through the Bank’s cybersecurity services business and income derived from miscellaneous transaction fees not directly attributable to lending assets.

Non-interest income for the quarter was $1.4 million compared to $2.1 million last quarter and $1.0 million for the same period a year ago. The quarter over quarter trend was a function primarily of strong performance in the comparative quarter attributable to engagements that were deferred in early 2021, due to COVID-19, being realized last quarter and normal course seasonality. The year over year trend was a function primarily of higher service work volume in the current quarter attributable partially to the comparative period including only two months of operations due to the timing of the Bank’s acquisition of DBG on November 30, 2020.

Provision for Credit Losses

(thousands of Canadian dollars)
	January 31			October 31			January 31
For the three months ended:	2022			2021			2021
Provision for (recovery of) credit losses by lending asset:
Commercial real estate mortgages	$	(69	)	$	(287	)	$	147
Commercial real estate loans		(9	)		(7	)		(65	)
Point of sale loans and leases		95			16			(8	)
Public sector and other financing		(15	)		(1	)		(17	)
Total provision for (recovery of) credit losses	$	2		$	(279	)	$	57

Q1 2022 vs Q4 2021

The Bank recorded a provision for credit losses in the amount of $2,000 compared to a recovery of credit loss provisions in the amount of $279,000 as a function primarily of:

► Higher lending asset balances.

Offset partially by:

► Changes in the Bank’s lending asset portfolio mix; and,

► Changes in the forward-looking information used by the Bank in its credit risk models in the current quarter.

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Q1 2022 vs Q1 2021

The Bank recorded a provision for credit losses in the amount of $2,000 compared to a provision for credit losses in the amount of $57,000 as a function primarily of:

► Changes in the Bank’s lending asset portfolio mix; and,

► Changes in the forward-looking information used by the Bank in its credit risk models in the current quarter.

Offset partially by:

► Higher lending asset balances.

Non-Interest Expenses

(thousands of Canadian dollars)
	January 31			October 31						January 31
For the three months ended:	2022			2021			Change			2021			Change
Salaries and benefits	$	6,083		$	5,407			13	%	$	5,030			21	%
General and administrative		3,624			3,974			(9	%)		2,339			55	%
Premises and equipment		929			996			(7	%)		718			29	%
Total non-interest expenses	$	10,636		$	10,377			2	%	$	8,087			32	%
Efficiency Ratio		58.23	%		56.90	%		2	%		52.44	%		11	%

Q1 2022 vs Q4 2021

Non-interest expenses were up 2% to $10.6 million as a function primarily of:

► Higher salary and benefits expense attributable to general, annual compensation adjustments and increased staffing levels to support expanded business activity across the Bank; and,

► Higher insurance premiums attributable to the Bank’s listing on the Nasdaq.

Offset partially by:

► Timing of general operating expense items.

Q1 2022 vs Q1 2021

Non-interest expenses were up 32% as a function primarily of:

► Higher salary and benefits expense attributable to general annual compensation adjustments and increased staff levels to support expanded business activity across the Bank;

►  Higher insurance premiums attributable to the Bank’s listing on the Nasdaq;

► Investments in the Bank’s business development initiatives; and,

► Current quarter including three months of operating expenses of DBG compared to two months of operating expenses included in the comparative period due to the timing of the Bank’s acquisition of DBG on November 30, 2020.

Income Tax Provision

The Bank’s tax rate is approximately 27%, similar to that of previous periods. The tax rate is impacted by certain items not being taxable or deductible for income tax purposes. Provision for income taxes for the current quarter was $2.1 million compared to $2.2 million last quarter and $2.0 million for the same period a year ago.

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Financial Review - Balance Sheet

(thousands of Canadian dollars)
	January 31		October 31					January 31
	2022		2021		Change			2021		Change
Total assets	$	2,415,346	$	2,415,086		0	%	$	2,044,976		18	%
Cash		155,239		271,523		(43	%)		212,016		(27	%)
Loans, net of allowance for credit losses		2,215,638		2,103,050		5	%		1,793,724		24	%
Deposits		1,847,003		1,853,204		0	%		1,664,694		11	%

Total Assets

Total assets at January 31, 2022, were $2.42 billion compared to $2.42 billion last quarter and $2.04 billion a year ago. The year over year trend was a function primarily of growth in the Bank’s POS Financing portfolio offset partially by lower cash balances.

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Cash

Cash, which is held primarily for liquidity purposes, was $155.2 million or 6% of total assets at January 31, 2022, compared to $271.5 million or 11% of total assets last quarter and $212.0 million or 10% of total assets a year ago. The quarter over quarter and year over year trends were a function primarily of the Bank deploying cash into higher yielding lending assets over the respective periods.

Loans

(thousands of Canadian dollars)
	January 31		October 31					January 31
	2022		2021		Change			2021		Change
Commercial real estate mortgages	$	722,829	$	757,576		(5	%)	$	712,256		1	%
Commercial real estate loans		14,600		26,569		(45	%)		31,663		(54	%)
Point of sale loans and leases		1,439,781		1,279,576		13	%		1,008,029		43	%
Public sector and other financing		31,247		32,587		(4	%)		36,612		(15	%)
	$	2,208,457	$	2,096,308		5	%	$	1,788,560		23	%

The Bank organizes its lending portfolio into the following four broad asset categories: Commercial Real Estate Mortgages, Commercial Real Estate Loans, Point of Sale Loans & Leases, and Public Sector and Other Financing. These categories have been established in the Bank’s proprietary, internally developed asset management system and have been designed to catalogue individual lending assets as a function primarily of their key risk drivers, the nature of the underlying collateral, and the applicable market segment.

The Commercial Real Estate Mortgages (“CRE Mortgages”) asset category is comprised of Commercial and Residential Construction Mortgages, Commercial Term Mortgages, Commercial Insured Mortgages and Land Mortgages. While all of these loans would be considered commercial loans or business-to-business loans, the underlying credit risk exposure is diversified across both the commercial and retail market segments, and further, the portfolio benefits from diversity in its underlying security in the form of a broad range of collateral properties.

The Commercial Real Estate Loans (“CRE Loans”) asset category is comprised primarily of Condominium Corporation Financing loans.

The Point of Sale Loans and Leases (“POS Financing”) asset category is comprised of Point of Sale Loan and Lease Receivables acquired from the Bank’s broad network of origination and servicing partners as well as Warehouse Loans that provide bridge financing to the Bank’s origination and servicing partners for the purpose of accumulating and seasoning practical volumes of individual loans and leases prior to the Bank purchasing the cashflow receivables derived from same.

The Public Sector and Other Financing (“PSOF”) asset category is comprised primarily of Public Sector Loans and Leases, a small balance of Corporate Loans and Leases and Single Family Residential Conventional and Insured Mortgages. The Bank has de-emphasized Corporate lending and continues to monitor the public sector space in anticipation of more robust demand for Federal, Provincial and Municipal infrastructure and other project financings.

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Q1 2022 vs Q4 2021

Loans were up 5% to $2.22 billion as a function primarily of:

► Higher POS Financing portfolio balances attributable primarily to continued strong demand for home finance, auto and home improvement/HVAC receivable financing.

Offset partially by:

► Lower CRE Mortgage and Loan portfolio balances.

Q1 2022 vs Q1 2021

Loans were up 24% as a function primarily of:

► Higher POS Financing portfolio balances attributable primarily to continued strong demand for home finance, auto and home improvement/HVAC receivable financing and higher CRE Mortgage portfolio balances.

Offset partially by:

► Lower CRE Loan portfolio balances.

Residential Mortgage Exposures

In accordance with the Office of the Superintendent of Financial Institutions (“OSFI”) Guideline B-20 – Residential Mortgage Underwriting Practices and Procedures, additional information is provided regarding the Bank’s residential mortgage exposure. For the purposes of the Guideline, a residential mortgage is defined as a loan to an individual that is secured by residential property (one to four unit dwellings) and includes home equity lines of credit (HELOCs). This differs from the classification of residential mortgages used by the Bank which also includes multi-family residential mortgages.

Under OSFI’s definition, the Bank’s exposure to residential mortgages at January 31, 2022, was $2.4 million compared to $2.7 million last quarter and $4.1 million a year ago. The Bank did not have any HELOC’s outstanding at January 31, 2022, last quarter or a year ago.

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Credit Quality and Allowance for Credit Losses

As discussed previously, we currently have no loans on our balance sheet that are subject to payment deferrals, no impaired loans and no loans in arrears, but we continue to monitor our lending portfolio, as well as the underlying borrowers and our origination partners closely to ensure that we have good visibility on any credit trends that could provide an early warning indication of the emergence of any elevated risk in our lending portfolio.

Allowance for Credit Losses

The Bank must maintain an allowance for expected credit losses or ECL allowance that is adequate, in management’s opinion, to absorb all credit related losses in the Bank’s lending and treasury portfolios. Under IFRS 9 the Bank’s ECL allowance is estimated using the expected credit loss methodology and is comprised of expected credit losses recognized on both performing loans, and non-performing, or impaired loans even if no actual loss event has occurred.

(thousands of Canadian dollars)
	January 31		October 31					January 31
	2022		2021		Change			2021		Change
ECL allowance by lending asset:
Commercial real estate mortgages	$	1,045	$	1,114		(6	%)	$	1,513		(31	%)
Commercial real estate loans		36		45		(20	%)		72		(50	%)
Point of sale loans and leases		370		275		35	%		207		79	%
Public sector and other financing		4		19		(79	%)		40		(90	%)
Total ECL allowance	$	1,455	$	1,453		0	%	$	1,832		(21	%)

(thousands of Canadian dollars)
	January 31		October 31					January 31
	2022		2021		Change			2021		Change
ECL allowance by stage:
ECL allowance stage 1	$	1,359	$	1,316		3	%	$	1,665		(18	%)
ECL allowance stage 2		96		137		(30	%)		167		(43	%)
ECL allowance stage 3		-		-					-
Total ECL allowance	$	1,455	$	1,453		0	%	$	1,832		(21	%)

Q1 2022 vs Q4 2021

The Bank’s ECL allowance at January 31, 2022 was $1.5 million compared to $1.5 million last quarter as a function primarily of:

► Higher lending asset balances.

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Offset by:

► Changes in the Bank’s lending asset portfolio mix; and,

► Changes in the forward-looking information used by the Bank in its credit risk models.

Q1 2022 vs Q1 2021

The Bank’s ECL allowance at January 31, 2022 was $1.5 million compared to $1.8 million a year ago as a function primarily of:

► Changes in the Bank’s lending asset portfolio mix; and,

► Changes in the forward-looking information used by the Bank in its credit risk models.

Offset partially by:

►  Higher lending asset balances.

The Bank’s gross impaired loans at January 31, 2022 were $nil compared to $nil last quarter and $nil a year ago.

Assessment of significant increase in credit risk (“SICR”)

At each reporting date, the Bank assesses whether or not there has been a SICR for loans since initial recognition by comparing, at the reporting date, the risk of default occurring over the remaining expected life against the risk of default at initial recognition.

SICR is a function of the loan’s internal risk rating assignment, internal watchlist status, loan review status and delinquency status which are updated as necessary in response to changes including, but not limited to, changes in macroeconomic and/or market conditions, changes in a borrower’s credit risk profile, and changes in the strength of the underlying security, including guarantor status, if a guarantor exists.

Quantitative models may not always be able to capture all reasonable and supportable information that may indicate a SICR. As a result, qualitative factors may be considered to supplement such a gap.

Examples include changes in adjudication criteria for a particular group of borrowers or asset categories or changes in portfolio composition, and more specifically changes attributable to the continued impact of COVID-19 on the Canadian economy and the Bank’s business.

Forward-Looking Information

The Bank incorporates the impact of future economic conditions, or more specifically forward-looking information into the estimation of expected credit losses at the credit risk parameter level. This is accomplished via the credit risk parameter models and proxy datasets that the Bank utilizes to develop probability of default, (“PD”) and loss given default, (“LGD”) term structure forecasts for its loans. The Bank has sourced credit risk modeling systems and forecast macroeconomic scenario data from Moody’s Analytics, a third party service provider for the purpose of computing forward-looking credit risk parameters under multiple macroeconomic scenarios that consider both market-wide and idiosyncratic factors and influences. These systems are used in conjunction with the Bank’s internally developed ECL models. Given that the Bank has experienced very limited historical losses and, therefore, does not have available statistically significant loss data inventory for use in developing internal, forward looking expected credit loss trends, the use of unbiased, third party forward-looking credit risk parameter modeling systems is particularly important for the Bank in the context of the estimation of expected credit losses.

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The Bank utilizes macroeconomic indicator data derived from multiple macroeconomic scenarios in order to mitigate volatility in the estimation of expected credit losses, as well as to satisfy the IFRS 9 requirement that future economic conditions are to be based on an unbiased, probability-weighted assessment of possible future outcomes. More specifically, the macroeconomic indicators set out in the macroeconomic scenarios are used as inputs for the credit risk parameter models utilized by the Bank to sensitize the individual PD and LGD term structure forecasts to the respective macroeconomic trajectory set out in each of the scenarios (see Expected Credit Loss Sensitivity below). Currently the Bank utilizes upside, downside and baseline forecast macroeconomic scenarios, and assigns discrete weights to each for use in the estimation of its reported ECL. The Bank has also applied expert credit judgment, where appropriate, to reflect, amongst other items, uncertainty in the Canadian macroeconomic environment attributable to the continued impact of COVID-19.

The macroeconomic indicator data utilized by the Bank for the purpose of sensitizing PD and LGD term structure data to forward economic conditions include, but are not limited to: real GDP, the national unemployment rate, long term interest rates, the consumer price index, the S&P/TSX Index and the price of oil. These specific macroeconomic indicators were selected in an attempt to ensure that the spectrum of fundamental macroeconomic influences on the key drivers of the credit risk profile of the Bank’s balance sheet, including: corporate, consumer and real estate market dynamics; corporate, consumer and SME borrower performance; geography; as well as collateral value volatility, are appropriately captured and incorporated into the Bank’s forward macroeconomic sensitivity analysis.

Key assumptions driving the macroeconomic forecast trends this quarter include: the rate of decline of new case counts of the Omicron variant and the relaxation of public health restrictions as a function of same, the timing and magnitude of the Bank of Canada’s (“BoC”) first overnight rate increase as well as the number and magnitude of additional, anticipated increases over the course of 2022 and beyond, the resiliency of consumer spending in a rising rate environment, the mitigation of the current high rate of inflation as a function of the resolution of existing supply-chain bottlenecks, the trajectory of oil and gasoline prices, tighter monetary policy and a shrinking BoC balance sheet, the continued rate of job growth, the impact of more specific eligibility requirements associated with the federal government’s remaining stimulus programs, and the level and duration of historically high housing prices.

Management developed ECL estimates using credit risk parameter term structure forecasts sensitized to individual baseline, upside and downside forecast macroeconomic scenarios, each weighted at 100%, and subsequently computed the variance of each to the Bank’s reported ECL as at January 31, 2022 in order to assess the alignment of the Bank’s reported ECL with the Bank’s credit risk profile, and further, to assess the scope, depth and ultimate effectiveness of the credit risk mitigation strategies that the Bank has applied to its lending portfolios (see Expected Credit Loss Sensitivity below).

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A summary of the key forecast macroeconomic indicator data trends utilized by the Bank for the purpose of sensitizing lending asset credit risk parameter term structure forecasts to forward looking information, which in turn are used in the estimation of the Bank’s reported ECL, as well as in the assessment of same are presented in the charts below.

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Expected Credit Loss Sensitivity:

The following table presents the sensitivity of the Bank’s estimated ECL to a range of individual forecast macroeconomic scenarios, that in isolation may not reflect the Bank’s actual expected ECL exposure, as well as the variance of each to the Bank’s reported ECL as at January 31, 2022:

(thousands of Canadian dollars)
	Reported			100	%		100	%		100	%
	ECL			Upside			Baseline			Downside
Allowance for expected credit losses	$	1,455	$	898		$	1,193		$	1,675
Variance from reported ECL				(557	)		(262	)		220
Variance from reported ECL (%)				(38	%)		(18	%)		15	%

Management is of the view that forward-looking macroeconomic and industry data will remain somewhat dynamic, specifically related to the economy’s anticipated recovery from the impact of the re-imposed public health restrictions attributable to the emergence and spread of the Omicron variant as well as the interpretation of the economy’s forward response to tighter monetary policy and prolonged, historically high rates of inflation. As a result, management anticipates that the Bank’s estimated ECL amounts will continue to exhibit some volatility over the course of fiscal 2022.

Considering the analysis set out above and based on management’s review of the loan and credit data comprising the Bank’s lending portfolio, combined with our interpretation of the available forecast macroeconomic and industry data, management is of the view that its reported ECL allowance represents a reasonable proxy for potential, future losses.

Deposits

The Bank has established three core funding channels, those being personal deposits, commercial deposits, and cash reserves retained from the Bank’s POS Financing origination partners that are classified as other liabilities, which are discussed in the Other Assets and Liabilities section below.

(thousands of Canadian dollars)
	January 31		October 31					January 31
	2022		2021		Change			2021		Change
Commercial deposits	$	596,211	$	606,143		(2	%)	$	523,471		14	%
Personal deposits		1,250,792		1,247,061		0	%		1,141,223		10	%
Total deposits	$	1,847,003	$	1,853,204		0	%	$	1,664,694		11	%

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 operating 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.

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Q1 2022 vs Q4 2021

Deposits were unchanged at $1.8 billion as a function primarily of:

► Modestly higher personal deposits attributable to the Bank increasing activity in its broker market network to fund balance sheet growth.

Offset by:

► Lower commercial deposits attributable to withdrawals made by Trustees to fund normal course disbursements associated with consumer bankruptcy and proposal restructuring proceedings.

Q1 2022 vs Q1 2021

Deposits were up 11% as a function primarily of:

►  Higher personal deposits attributable to the Bank increasing activity in its broker market network to fund balance sheet growth; and,

► Higher commercial deposits attributable to continued growth in the Bank’s TIB program.

Subordinated Notes Payable

(thousands of Canadian dollars)
	January 31		October 31		January 31
	2022		2021		2021
Ten year term, unsecured, non-viability contingent capital compliant, subordinated notes payable, principal amount of $5.0 million, effective interest rate of 10.41%, maturing March 2029.	$	4,901	$	4,898	$	4,891
Ten year term, unsecured, non-viability contingent capital compliant, subordinated notes payable, principal amount of USD $75.0 million, effective interest rate of 5.38%, maturing May 2031.		92,825		90,374		-
	$	97,726	$	95,272	$	4,891

Subordinated notes payable, net of issue costs, were $97.7 million at January 31, 2022, compared to $95.3 million last quarter and $4.9 million a year ago. The quarter over quarter trend was a function primarily of changes in the USD/CAD foreign exchange spot rate. The year over year trends was a function of the April 30, 2021 private placement of the Notes in the principal amount of USD $75.0 million.

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Other Assets and Liabilities

Other Assets

(thousands of Canadian dollars)
	January 31		October 31					January 31
	2022		2021		Change			2021		Change
Accounts receivable	$	2,938	$	2,643		11	%	$	2,604		13	%
Prepaid expenses and other		16,881		12,699		33	%		9,726		74	%
Property and equipment		6,905		7,075		(2	%)		7,643		(10	%)
Right-of-use assets		4,643		4,817		(4	%)		5,337		(13	%)
Deferred income tax asset		2,868		2,931		(2	%)		4,286		(33	%)
Investment		953		953		0	%		-
Goodwill		5,754		5,754		0	%		5,754		0	%
Intangible assets		3,527		3,641		(3	%)		3,886		(9	%)
Total other assets	$	44,469	$	40,513		10	%	$	39,236		13	%

Q1 2022 vs Q4 2021

Other assets were up 10% to $44.5 million as a function primarily of:

► Higher prepaid expenses and other attributable primarily to the capitalization of compensation costs and various development costs; and,

► Higher accounts receivable attributable primarily to the normal course timing of general corporate receivables.

Offset partially by:

► Lower capitalized assets due to amortization; and,

► Draw downs on the deferred income tax asset derived from taxable income generated by the Bank.

Q1 2022 vs Q1 2021

Other assets were up 13% as a function primarily of:

► Higher prepaid expenses and other attributable primarily the prepayment of higher insurance premiums resulting from the Bank’s listing on the Nasdaq as well as capitalization of compensation costs and various development costs;

► Higher accounts receivable attributable primarily to the normal course timing of general corporate receivables; and,

► The Bank’s 11% investment in Canada Stablecorp Inc. (“Stablecorp”) for cash consideration of $953,000 in February 2021. This was a strategic investment made by the Bank to bring together the necessary financial and technology expertise that will facilitate the development and future issuance of a new, highly encrypted digital deposit receipt which the Bank will brand as VCAD.

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Offset partially by:

► Lower capitalized assets due to amortization; and,

► Draw downs on the deferred income tax asset derived from taxable income generated by the Bank.

Other Liabilities

(thousands of Canadian dollars)
	January 31		October 31					January 31
	2022		2021		Change			2021		Change
Accounts payable and other	$	6,155	$	6,893		(11	%)	$	5,359		15	%
Current income tax liability		1,975		2,949		(33	%)		1,052		88	%
Deferred income tax liability		855		898		(5	%)		898		(5	%)
Lease obligations		4,944		5,113		(3	%)		5,598		(12	%)
Cash collateral and amounts held in escrow		5,252		7,887		(33	%)		3,379		55	%
Cash reserves on loan and lease receivables		114,485		110,764		3	%		99,597		15	%
Total other liabilities	$	133,666	$	134,504		(1	%)	$	115,883		15	%

Q1 2022 vs Q4 2021

Other liabilities were down 1% to $133.7 million as a function primarily of:

► Lower cash collateral and amounts held in escrow; and,

► General decrease in accounts payable and income tax payable amounts attributable to the timing of cash payments.

Offset partially by:

►  Higher cash reserve balances attributable to higher POS Financing portfolio balances.

Q1 2022 vs Q1 2021

Other liabilities were up 15% attributable primarily to:

►	Higher cash reserves balances attributable to higher POS Financing portfolio balances;
►	The Bank recognizing higher income taxes payable after utilizing the significant income tax loss carryforwards in the prior fiscal year;
►	Higher cash collateral and amounts held in escrow; and,
►	General increase in accounts payable amount attributable to increased earning activity.

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Shareholders’ Equity

Shareholders’ equity was $337.0 million at January 31, 2022 compared to $332.1 million last quarter and $259.5 million a year ago.

Q1 2022 vs Q4 2021

Shareholders’ equity was up 1% attributable primarily to:

► Higher retained earnings attributable to net income earned.

Offset partially by:

► Payment of dividends.

Q1 2022 vs Q1 2021

Shareholders’ equity was up 30% attributable primarily to:

► The Common Share Offering; and,

► Higher retained earnings attributable to net income earned.

Offset partially by:

► The Bank’s redemption of its outstanding Non-Cumulative Series 3 preferred shares (NVCC) in April 2021; and,

► Payment of dividends.

The Bank’s book value per common share at January 31, 2022 was $11.78 compared to $11.61 last quarter and $10.90 a year ago. The quarter over quarter and year over year trends were a function primarily of higher retained earnings attributable to net income earned in each of the periods offset partially by the payment of dividends over the respective periods.

See note 8 to the unaudited interim consolidated financial statements for additional information relating to share capital.

Stock-Based Compensation

Stock options are accounted for using the fair value method which recognizes the fair value of the stock option over the applicable vesting period as an increase in salaries and benefits expense with the same amount being recorded in share capital. The Bank recognized compensation expense for the quarter totalling $196,000 compared to $nil last quarter and $nil for the same period a year ago, relating to the estimated fair value of stock options granted. The fair value of the 913,730 stock options granted during the period ended January 31, 2022, was estimated at the grant date using the Black-Scholes valuation model and the following input assumptions: risk-free rate of 1.26%, expected option life of 3.5 years, expected volatility of 29.5%, expected annual dividends of 0.64% and a forfeiture rate of 2.0%. The fair value of each stock option granted was estimated at $3.10 per share.

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As at January 31, 2022, 40,000 common share stock options were fully vested and exercisable at $7.00 per share and expire in October 2023. See note 8 to the unaudited interim consolidated financial statements for additional information relating to stock options.

Updated Share Information

As at February 28, 2022, there were no changes since January 31, 2022 in the number of common shares, Series 1 preferred shares, and common share options outstanding.

Off-Balance Sheet Arrangements

As at January 31, 2022, the Bank did not have any significant off-balance sheet arrangements other than loan commitments and letters of credit resulting from normal course business activities. See note 11 to the unaudited interim consolidated financial statements for more information.

Related Party Transactions

The Bank’s Board of Directors and senior executive officers represent key management personnel. See note 12 to the unaudited interim consolidated financial statements for additional information on related party transactions and balances.

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Capital Management and Capital Resources

The table below presents the Bank’s regulatory capital position, risk-weighted assets and regulatory capital and leverage ratios for the current and comparative periods.

(thousands of Canadian dollars)
	January 31			October 31						January 31
	2022			2021			Change			2021			Change
Common Equity Tier 1 capital	$	310,825		$	305,708			2	%	$	214,851			45	%
Total Tier 1 capital	$	324,472		$	319,355			2	%	$	244,188			33	%
Total Tier 2 capital	$	101,765		$	99,363			2	%	$	6,832			1390	%
Total regulatory capital	$	426,237		$	418,718			2	%	$	251,020			70	%
Total risk-weighted assets	$	2,095,335		$	2,013,544			4	%	$	1,721,935			22	%
Capital ratios
CET1 capital ratio		14.83	%		15.18	%		(2	%)		12.48	%		19	%
Tier 1 capital ratio		15.49	%		15.86	%		(2	%)		14.18	%		9	%
Total capital ratio		20.34	%		20.80	%		(2	%)		14.58	%		40	%
Leverage ratio		12.69	%		12.60	%		1	%		11.40	%		11	%

The Bank reports its regulatory capital ratios using the Standardized approach for calculating risk-weighted assets, as defined under Basel III, which may require the Bank to carry more capital for certain credit exposures compared to requirements under the Advanced Internal Ratings Based (“AIRB”) methodology. As a result, regulatory capital ratios of banks that utilize the Standardized approach are not directly comparable with the large Canadian banks that employ the AIRB methodology.

OSFI requires that all Canadian banks must comply with the Basel III standards on an “all-in” basis for purposes of determining their risk-based capital ratios. Required minimum regulatory capital ratios are a 7.0% Common Equity Tier 1 (“CET1”) capital ratio, an 8.5% Tier 1 capital ratio and a 10.5% total capital ratio, all of which include a 2.5% capital conservation buffer.

The quarter over quarter trends exhibited by the Bank’s reported regulatory capital levels, regulatory capital ratios and leverage ratios were a function primarily of retained earnings growth and changes to the Bank’s risk-weighted asset balances and composition.

The year over year trends exhibited by the Bank’s reported regulatory capital levels, regulatory capital ratios and leverage ratios were a function primarily of: the redemption of the Bank’s outstanding Non-cumulative Series 3 Preferred Shares on April 30, 2021, the private placement of the Notes on April 30, 2021, The Common Share Offering in September 2021, retained earnings growth, tax provision recoveries related to the Bank’s deferred tax asset, and changes to the Bank’s risk-weighted asset balances and composition.

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For more information regarding capital management, please see note 13 to the Bank’s January 31, 2022, interim Consolidated Financial Statements as well as the Capital Management and Capital Resources section of the Bank’s MD&A for the year ended October 31, 2021.

Liquidity

The unaudited Consolidated Statement of Cash Flows for the three months ended January 31, 2022, shows cash used in operations in the amount of $112.9 million compared to cash used by operations in the amount of $26.5 million for the same period last year. The current period trend was a function primarily of the Bank using existing liquidity to fund loans. The comparative period trend was a function primarily of cash outflows to fund loans exceeding cash inflows from deposits raised and the use of existing liquidity to fund loans. Based on factors such as liquidity requirements and opportunities for investment in loans and securities, the Bank may manage the amount of deposits it raises and loans it funds in ways that result in the balances of these items giving rise to either negative or positive cash flow from operations. The Bank will continue to fund its operations and meet contractual obligations as they become due using cash on hand and by closely managing its flow of deposits.

Interest Rate Sensitivity

The table below presents the duration difference between the Bank’s assets and liabilities and the potential after-tax impact of a 100 basis point shift in interest rates on the Bank’s earnings during a 12 month period and the potential after-tax impact of a 100 basis point shift in interest rates on the Bank’s shareholders’ equity over a 60 month period if no remedial actions are taken. At January 31, 2022, the duration difference between assets and liabilities was 2.0 months compared to 2.3 months at October 31, 2021, which indicates that the Bank’s assets would reprice faster than liabilities in the event of a future change in interest rates.

(thousands of Canadian dollars)
	January 31, 2022					October 31, 2021
	Increase 100 bps		Decrease 100 bps			Increase 100 bps		Decrease 100 bps
Increase (decrease):
Impact on projected net interest income during a 12 month period	$	3,951	$	(3,951	)	$	4,147	$	(3,220	)
Impact on reported equity during a 60 month period	$	717	$	(1,196	)	$	1,603	$	(1,586	)
Duration difference between assets and liabilities (months)		2.0					2.3

Contractual Obligations

Contractual obligations as disclosed in the Bank’s MD&A and Audited Consolidated Financial Statements for the year ended October 31, 2021, have not changed significantly as at January 31, 2022.

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Results of Operating Segments

(thousands of Canadian dollars)

for the three months ended	January 31, 2022
	Banking		Cybersecurity		Eliminations			Consolidated
					and Adjustments
Net interest income	$	16,885	$	-	$	-		$	16,885
Non-interest income		-		1,422		(41	)		1,381
Total revenue		16,885		1,422		(41	)		18,266
Provision for (recovery of) credit losses		2		-		-			2
		16,883		1,422		(41	)		18,264
Non-interest expenses:
Salaries and benefits		5,440		643		-			6,083
General and administrative		3,482		183		(41	)		3,624
Premises and equipment		582		347		-			929
		9,504		1,173		(41	)		10,636
Income before income taxes		7,379		249		-			7,628
Income tax provision		1,961		101		-			2,062
Net income	$	5,418	$	148	$	-		$	5,566
Total assets	$	2,412,167	$	23,767	$	(20,588	)	$	2,415,346
Total liabilities	$	2,072,691	$	25,147	$	(19,443	)	$	2,078,395

for the three months ended	October 31, 2021
	Banking			Cybersecurity		Eliminations			Consolidated
						and Adjustments
Net interest income	$	16,146		$	-	$	-		$	16,146
Non-interest income		(46	)		2,177		(41	)		2,090
Total revenue		16,100			2,177		(41	)		18,236
Provision for (recovery of) credit losses		(279	)		-		-			(279	)
		16,379			2,177		(41	)		18,515
Non-interest expenses:
Salaries and benefits		4,720			687		-			5,407
General and administrative		3,704			311		(41	)		3,974
Premises and equipment		628			368		-			996
		9,052			1,366		(41	)		10,377
Income before income taxes		7,327			811		-			8,138
Income tax provision		1,907			321		-			2,228
Net income	$	5,420		$	490	$	-		$	5,910
Total assets	$	2,411,790		$	22,309	$	(19,012	)	$	2,415,086
Total liabilities	$	2,077,643		$	23,205	$	(17,868	)	$	2,082,980

for the three months ended	January 31, 2021
	Banking			Cybersecurity		Eliminations			Consolidated
						and Adjustments
Net interest income	$	14,374		$	-	$	-		$	14,374
Non-interest income		(17	)		1,093		(28	)		1,048
Total revenue		14,357			1,093		(28	)		15,422
Provision for (recovery of) credit losses		57			-		-			57
		14,300			1,093		(28	)		15,365
Non-interest expenses:
Salaries and benefits		4,698			332		-			5,030
General and administrative		2,062			305		(28	)		2,339
Premises and equipment		570			148		-			718
		7,330			785		(28	)		8,087
Income before income taxes		6,970			308		-			7,278
Income tax provision		1,853			135		-			1,988
Net income	$	5,117		$	173	$	-		$	5,290
Total assets	$	2,041,784		$	20,612	$	(17,420	)	$	2,044,976
Total liabilities	$	1,781,121		$	20,622	$	(16,275	)	$	1,785,468

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Banking

Q1 2022 vs Q4 2021

Banking net income was down marginally as a function primarily of higher non-interest expense attributable to general annual compensation adjustments and higher insurance premiums resulting from the Bank’s listing on the Nasdaq as well as higher provision for credit losses, the latter being relative to a recovery of credit loss provisions in the amount of $279,000 in the comparative quarter, offset partially by higher net interest income attributable primarily to loan growth.

Q1 2022 vs Q1 2021

Net income was up 6% as a function primarily of higher net interest income attributable substantially to loan growth, offset partially by higher non-interest expense attributable to general annual compensation adjustments and higher insurance premiums resulting from the Bank’s listing on the Nasdaq.

Cybersecurity Services

Q1 2022 vs Q4 2021

Cybersecurity Services net income was down 70% to $148,000 as a function primarily of strong performance in the comparative quarter attributable to engagements that were deferred in early 2021, due to COVID-19, being realized in the comparative quarter and lower seasonal activity in the current quarter. Cybersecurity services revenue and gross profit were down 24% and 35% to $2.4 million and $1.4 million respectively as a function of the items set out above. Cybersecurity Services gross profit amounts are included in non-interest income in the Bank’s consolidated statements of income and comprehensive income.

Q1 2022 vs Q1 2021

Cybersecurity Services net income was down 14% as a function primarily of higher non-interest expense partially offset by higher service work volume in the current quarter attributable partially to the comparative period including only two months of operations due to the timing of the Bank’s acquisition of DBG on November 30, 2020. Cybersecurity Services revenue and gross profit were up 36% and 30% respectively as a function of the items set out above. Cybersecurity Services gross profit amounts are included in non-interest income in the Bank’s consolidated statements of income and comprehensive income.

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Summary of Quarterly Results

(thousands of Canadian dollars
except per share amounts)	2022			2021												2020
	Q1			Q4			Q3			Q2			Q1			Q4			Q3			Q2
Results of operations:
Interest income	$	24,720		$	23,924		$	22,400		$	21,649		$	21,515		$	21,068		$	20,172		$	22,688
Yield on assets (%)		4.06	%		4.04	%		4.02	%		4.24	%		4.28	%		4.33	%		4.12	%		4.83	%
Interest expense		7,835			7,778			7,858			6,554			7,141			7,360			7,788			8,212
Cost of funds (%)		1.29	%		1.31	%		1.41	%		1.28	%		1.42	%		1.51	%		1.59	%		1.75	%
Net interest income		16,885			16,146			14,542			15,095			14,374			13,708			12,384			14,476
Net interest margin (%)		2.77	%		2.73	%		2.61	%		2.96	%		2.86	%		2.82	%		2.53	%		3.08	%
Non-interest income		1,381			2,090			1,187			875			1,048			18			8			9
Total revenue		18,266			18,236			15,729			15,970			15,422			13,726			12,392			14,485
Provision for (recovery of) credit losses		2			(279	)		96			(312	)		57			(582	)		(44	)		490
Non-interest expenses		10,636			10,377			8,200			8,342			8,087			7,763			6,410			6,899
Efficiency ratio		58	%		57	%		52	%		52	%		52	%		57	%		52	%		48	%
Income before income taxes		7,628			8,138			7,433			7,940			7,278			6,545			6,026			7,096
Tax provision		2,062			2,228			1,997			2,196			1,988			1,799			1,657			1,947
Net income	$	5,566		$	5,910		$	5,436		$	5,744		$	5,290		$	4,746		$	4,369		$	5,149
Income per share
Basic	$	0.19		$	0.24		$	0.25		$	0.25		$	0.22		$	0.20		$	0.18		$	0.22
Diluted	$	0.19		$	0.24		$	0.25		$	0.25		$	0.22		$	0.20		$	0.18		$	0.22
Return on common equity		6.58	%		8.07	%		8.72	%		9.20	%		8.26	%		7.46	%		6.90	%		8.64	%
Return on total assets		0.87	%		0.96	%		0.93	%		1.02	%		0.94	%		0.86	%		0.78	%		0.98	%
Gross impaired loans to total loans		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		0.43	%		0.41	%

The financial results for each of the last eight quarters are summarized above. Key drivers of the Bank’s quarter over quarter performance trends for the current reporting period were:

►	Lending asset growth attributable to strong growth in the POS Financing portfolio;
►	Higher NIM as a function of higher yields and lower cost of funds attributable primarily to the Bank re-deploying cash into higher yielding lending assets;
►	Lower non-interest income as a function of strong Cybersecurity Services business performance achieved in the comparative quarter attributable to engagements that were deferred in early 2021, due to COVID-19, being realized last quarter and normal course seasonality;
►	Higher provisions for credit losses attributable primarily to lending asset growth; and,
►	Higher non-interest expense as a function of higher salary and benefits expense attributable to increased staffing levels to support expanded business activity across the Bank and higher insurance premiums attributable to the Bank’s listing on the Nasdaq.

31

Non-GAAP and Other Financial Measures

Non-GAAP and other financial measures are not standardized financial measures under financial reporting framework used to prepare the financial statements of the Banks to which these measures relate. These measures may not be comparable to similar financial measures disclosed by other issuers. The Bank uses these financial measures to assess its performance and as such believes these financial measures are useful in providing readers with a better understanding of how management assesses the Bank’s performance.

Non-GAAP Measures

Return on Average Common Equity is defined as annualized net income less amounts relating to preferred share dividends, divided by average common shareholders’ equity which is average shareholders’ equity less amounts relating to preferred shares recorded in equity.

	January 31			October 31			January 31
(thousands of Canadian dollars)	2022			2021			2021
Return on average common equity
Net income	$	5,566		$	5,910		$	5,290
Preferred share dividends		(247	)		(247	)		(542	)
Adjusted net income		5,319			5,663			4,748
Annualized adjusted net income		21,103			22,467			18,837
Average common equity	$	320,882		$	278,423		$	228,060
Return on average common equity		6.58	%		8.07	%		8.26	%

Book Value per Common Share is defined as Shareholders’ Equity less amounts relating to preferred shares recorded in equity, divided by the number of common shares outstanding.

	January 31		October 31		January 31
(thousands of Canadian dollars)	2022		2021		2021
Book value per common share
Common equity	$	323,304	$	318,459	$	230,170
Shares outstanding		27,441,082		27,441,082		21,123,559
Book value per common share	$	11.78	$	11.61	$	10.90

Return on Average Total Assets is defined as annualized net income less amounts relating to preferred share dividends, divided by average total assets.

	January 31			October 31			January 31
(thousands of Canadian dollars)	2022			2021			2021
Return on average total assets
Net income	$	5,566		$	5,910		$	5,290
Preferred share dividends		(247	)		(247	)		(542	)
Adjusted net income		5,319			5,663			4,748
Annualized adjusted net income		21,103			22,467			18,837
Average Assets	$	2,415,216		$	2,350,429		$	1,994,431
Return on average total assets		0.87	%		0.96	%		0.94	%

32

Other Financial Measures

Yield is calculated as interest income (as presented in the Consolidated Statements of Comprehensive Income) divided by average total assets. Yield does not have a standardized meaning prescribed by IFRS and, therefore, may not be comparable to similar measures presented by other financial institutions.

Cost of Funds is calculated as interest expense (as presented in the Consolidated Statements of Comprehensive Income) divided by average total assets. Cost of funds does not have a standardized meaning prescribed by IFRS and, therefore, may not be comparable to similar measures presented by other financial institutions.

Net Interest Income and Net Interest Margin or Spread is calculated as net interest income divided by average total assets. Net interest margin or spread does not have a standardized meaning prescribed by IFRS and, therefore, may not be comparable to similar measures presented by other financial institutions.

Efficiency Ratio is calculated as non-interest expenses as a percentage of total revenue (as presented in the interim Consolidated Statements of Comprehensive Income). This ratio does not have a standardized meaning prescribed by IFRS and, therefore, may not be comparable to similar measures presented by other financial institutions.

Gross Impaired Loans to Total Loans captures gross impaired loan balances as a percentage of the Bank’s loans, net of allowance for credit losses. This percentage does not have a standardized meaning prescribed by IFRS and, therefore, may not be comparable to similar measures presented by other financial institutions.

Provision for (Recovery of) Credit Losses as a Percentage of Average Total Loans captures the provision for (recovery of) credit losses (as presented in the interim Consolidated Statements of Comprehensive Income) as a percentage of the Bank’s average loans, net of allowance for credit losses. This percentage does not have a standardized meaning prescribed by IFRS and, therefore, may not be comparable to similar measures presented by other financial institutions.

Basel III Common Equity Tier 1, Tier 1, Total Capital Adequacy and Leverage Ratios are determined in accordance with guidelines issued by the Office of the Superintendent of Financial Institutions (Canada) (OSFI).

33

Significant Accounting Policies and Use of Estimates and Judgements

Significant accounting policies and use of estimates and judgements are detailed in note 2 and note 3 of the Bank’s 2021 Audited Consolidated Financial Statements. There have been no material changes in accounting policies since October 31, 2021, except as noted below.

During the current quarter the Bank updated or incorporated the following significant accounting policies:

Segment reporting

Commencing in fiscal 2022, the Bank has opted to adopt presenting segmented information in its Consolidated Financial Statements in accordance with IFRS 8 Segment Reporting. The Bank’s management has established two reportable operating segments, those being Banking and Cybersecurity Services.

Controls and Procedures

During the quarter ended January 31, 2022, there were no changes in the Bank’s internal controls over financial reporting, that have materially affected, or are reasonably likely to materially affect, the Bank’s internal controls over financial reporting.

FOR FURTHER INFORMATION PLEASE CONTACT:

LodeRock Advisors: Lawrence Chamberlain (416) 519-4196,

lawrence.chamberlain@loderockadvisors.com

Visit our website at: www.versabank.com

34

CORPORATE INFORMATION

DIRECTORS   The Honourable Thomas A. Hockin, P.C., B.A, M.P.A., Ph.D., ICD.D Chairman of the Board Retired, former Executive Director of the International Monetary Fund   Gabrielle Bochynek, B.A. CHRL Principal, Human Resources and Labour Relations, The Osborne Group   Robbert-Jan Brabander, M.Sc. and B.Sc. (Economics) Managing Director of Bells & Whistles Communications, Inc.   David A. Bratton, B.A.(Hons), M.B.A., CHRL, FCMC Retired, former President of Bratton Consulting Inc.   R.W. (Dick) Carter, FCPA, FCA, C. Dir (Recused until January 31, 2022) Retired, former Chief Executive Officer of the Crown Investments Corporation of Saskatchewan   Peter M. Irwin, B.A. (Hons.) Retired, former Managing Director, CIBC Worlds Markets Inc.   Art Linton, JD Barrister & Solicitor   Susan T. McGovern, B.Sc. Vice-President, External Relations and Advancement Ontario Tech University   Paul G. Oliver, FCPA, FCA, ICD.D. Retired, former partner of PricewaterhouseCoopers LLP   David R. Taylor, B.Sc. (Hons), M.B.A., F.I.C.B. President & Chief Executive Officer, VersaBank     OFFICERS AND SENIOR MANAGEMENT   David R. Taylor, B.Sc. (Hons), M.B.A., F.I.C.B. President & Chief Executive Officer   Shawn Clarke, M.Eng., P.Eng., M.B.A. Chief Financial Officer & Treasurer   Michael Dixon, B.Comm., M.B.A. Senior Vice President, e-Commerce   Ross P. Duggan Senior Vice President, Commercial Lending   Aly Lalani, B.A., M.B.A., CPA, CA Senior Vice President   Nick Kristo, B.Comm., M.B.A. Chief Credit Officer   Tammie Ashton, B.A., LL.B Chief Risk Officer   Steve Creery, B.A. (Economics) Vice President, Credit   Barbara Hale, LL.B. Chief Anti-Money Laundering Officer   Brent T. Hodge, HBA, JD, CIPP/C Vice President, General Counsel & Corporate Secretary, Chief Compliance Officer          Saad Inam, B.Comm., M.B.A. Vice President, Credit   Joanne Johnston, B.Comm., CPA, CA, CIA Chief Internal Auditor   Wooi Koay, B.Comm., B.Sc. Chief Information Officer   Tel Matrundola, Hons. B.A., M.A., Ph,D. Chief Strategist, Cybersecurity   Nancy McCutcheon, HBA, MA, CPA, CGA Vice President, TIB Business Development   Andy Min, B.A., CPA, CA Vice President, Finance & Corporate Accounting   Scott A. Mizzen, B.A., LL.B. Vice President, Commercial Lending   Gurpreet Sahota, CISSP, CCSP. Chief Architect, Cybersecurity   Jonathan F.P. Taylor, B.B.A., CHRL Chief Human Resources Executive   David Thoms, B.A., M.B.A. Vice President, Structured Finance   Barbara Todres, B.Comm Hons. Vice President, Deposit Services   Terri Wilson        Vice President, Investment & Risk Control

35

SOLICITORS Stikeman Elliott LLP 5300 Commerce Court West 199 Bay Street Toronto, Ontario M5L 1B9 AUDITORS KPMG LLP 333 Bay Street, Suite 3300 Toronto, Ontario M5H 2S5

TRANSFER AGENT	BANK
Computershare Investor Services Inc.	Royal Bank of Canada
100 University Avenue	Main Branch, 154 1st Avenue South
Toronto, Ontario M5J 2Y1	Saskatoon, Saskatchewan S7K 1K2

STOCK EXCHANGE LISTINGS

Toronto Stock Exchange	NASDAQ
Trading Symbol: VBNK, VBNK.PR.A	Trading Symbol: VBNK

CORPORATE OFFICES

Head Office

Suite 2002 - 140 Fullarton Street

London, Ontario N6A 5P2

Telephone: (519) 645-1919

Toll-free: (866) 979-1919

Fax: (519) 645-2060

VersaBank Innovation Centre of Excellence	Saskatoon Office
1979 Otter Place	410 - 121 Research Drive
London, Ontario N5V 0A3	Saskatoon, Saskatchewan S7N 1K2
Telephone: (519) 645-1919	Telephone: (306) 244-1868
Toll-free: (866) 979-1919	Toll-free: (800) 213-4282
Fax: (519) 645-2060	Fax: (306) 244-4649

INVESTOR RELATIONS

Toll Free Telephone: (800) 244-1509

Email: InvestorRelations@versabank.com

Web site: www.versabank.com

LodeRock Advisors

Telephone: (416) 519-4196

lawrence.chamberlain@loderockadvisors.com

36

EX-99.3

Exhibit 99.3

For Immediate Release: March 2, 2022

Attention: Business Editors

VERSABANK REPORTS CONTINUED STRONG RESULTS FOR FIRST QUARTER 2022

– Quarter Highlighted by Continued Strong Year-over-Year Growth as Bank Achieves Another Loan Portfolio Record –

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 2022 (“Q1 2022”) unaudited Interim Consolidated Financial Statements for the period ended January 31, 2022 and Management’s Discussion and Analysis (“MD&A”), are available online at www.versabank.com/investor-relations, SEDAR at www.sedar.com and EDGAR at https://www.sec.gov/edgar.shtml. Supplementary Financial Information will also be available on our website at www.versabank.com/investor-relations.

LONDON, ON/CNW – VersaBank (“VersaBank” or the “Bank”) (TSX: VBNK; 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 first quarter of 2022 ended January 31, 2022. All figures are in Canadian dollars unless otherwise stated.

Financial Summary

(unaudited)	As at or for the three months ended
(thousands of Canadian dollars except per share amounts)	January 31 2022			October 31 2021			Change			January 31 2021			Change
Financial results
Revenue	$	18,266		$	18,236			0	%	$	15,422			18	%
Cost of funds		1.29	%		1.31	%		(2	%)		1.42	%		(9	%)
Net interest margin		2.77	%		2.73	%		2	%		2.86	%		(3	%)
Net income		5,566			5,910			(6	%)		5,290			5	%
Net income per common share basic and diluted		0.19			0.24			(21	%)		0.22			(14	%)
Balance sheet and capital ratios
Total assets		2,415,346			2,415,086			0	%		2,044,976			18	%
Book value per common share(1)	$	11.78		$	11.61			1	%	$	10.90			8	%
Common Equity Tier 1 (CET1) capital ratio		14.83	%		15.18	%		(2	%)		12.48	%		19	%
Total capital ratio		20.34	%		20.80	%		(2	%)		14.58	%		40	%
Leverage ratio		12.69	%		12.60	%		1	%		11.40	%		11	%

(1) Certain highlights include non-GAAP measures. See definitions under ‘Non-GAAP and Other Financial Measures' in the Q1 2022 Management’s Discussion and Analysis.

Highlights for the First Quarter of 2022

● Loans increased 24% year-over-year and 5% sequentially to a record $2.22 billion, as a function of strong growth in the Bank’s Point-of-Sale Loan and Lease Receivable (“POS Financing”) portfolios;

● Total revenue increased 18% year-over-year and increased modestly sequentially, to $18.3 million;

● Net income increased 5% year-over-year and decreased 6% sequentially to $5.6 million;

1

● EPS was $0.19, a decrease of 14% year-over-year and 21% sequentially, primarily due to a higher number of shares outstanding following the issuance of 6.3 million common shares via the Bank’s US IPO on the Nasdaq in September, 2021 (the "Common Share Offering”) in advance of deploying the capital raised to interest generating loans;

● Cost of funds decreased 13 bps, or 9%, year-over-year and decreased 2 bps, or 2%, sequentially to 1.29%; 

● Net interest margin decreased 9 bps, or 3%, year-over-year and increased 4 bps, or 2%, sequentially, to 2.77%;

● Provision for Credit Losses (PCLs) as a percentage of average loans was 0.00%, compared with a 12-quarter average of -0.01%, which remains amongst the lowest of the publicly traded Canadian Schedule I (federally licensed) Banks;

● Completed closed ecosystem testing of VCAD, the Bank’s Canadian-dollar version of its revolutionary highly-encrypted Digital Deposit Receipt (DDR) offering, with each VCAD unit representing a one-dollar deposit with the Bank. VersaBank’s DDRs have been successfully deployed on the Ethereum, Algorand and Stellar blockchains. The DDR process is currently undergoing a SOC2 compliance audit;

● Cybersecurity Services (wholly owned subsidiary DRT Cyber, Inc.) revenue and gross profit were up 36% and 30%, respectively, year-over-year.

Management Commentary

“The first quarter of fiscal 2022 saw continued momentum in our core Digital Banking operations, highlighted by another record loan portfolio at quarter end of $2.22 billion and strong year-over-year growth in revenue, net income and earnings per share,” said David Taylor, President and Chief Executive Officer. “Loan portfolio growth was driven by the continued expansion of our Canadian Point-of-Sale Financing business as our unique, value-added model continues to resonate with consumer financing businesses and consumer demand for the types of goods and services they are financing remains strong.”

“We expect the strong momentum in our existing Digital Banking operations to continue throughout fiscal 2022, especially as we continue to deploy capital generated by our US IPO, in particular to support continued high demand for Point-of-Sale financing in Canada. In addition, we have significant additional growth potential from the planned launch of our Point-of-Sale offering in the United States, as well as the positive impact of any increase in interest rates.”

“Having successfully completed our closed ecosystem testing for our first Digital Deposit Receipt (DDR), the Canadian-dollar based VCAD, we are preparing for commercial launch, which we expect upon the independent SOC2 auditors’ completion of the compliance audit. While this is taking longer than anticipated, we recognize the critical importance of such third-party evaluation in the rapidly evolving regulatory landscape. Our DDRs were developed to be a significantly better stablecoin – one-for-one fiat currency on deposit with our federally licensed, investment-grade rated Bank, and the highest level of security based on our own VersaVault technology. We are very encouraged by recent regulatory trends in North America and around the world, which we believe will very firmly position our DDRs as not only a compelling digital currency for the market but also one that meets future regulatory requirements.”

2

Financial Review

Net Income – Net income for the quarter was $5.6 million, or $0.19 per common share (basic and diluted), compared to $5.9 million, or $0.24 per common share (basic and diluted) last quarter and $5.3 million, or $0.22 per common share (basic and diluted), for the same period a year ago. The quarter-over-quarter trend was a function primarily of higher non-interest expense attributable to general, annual compensation adjustments and increased staffing levels to support expanded business activity across the Bank, higher insurance premiums attributable to the Bank’s listing on the Nasdaq, higher provision for credit losses, and lower non-interest income, offset partially by higher net interest income attributable primarily to loan growth. The year-over-year trend was a function primarily of higher net interest income attributable substantially to loan growth, offset partially by higher non-interest expense attributable to general, annual compensation adjustments and increased staffing levels to support expanded business activity across the Bank and higher insurance premiums attributable to the Bank’s listing on the Nasdaq. 

Net Interest Margin – Net interest margin (or spread) for the quarter was 2.77% compared to 2.73% last quarter and 2.86% for the same period a year ago. The quarter-over-quarter trend was a function primarily of redeployment of cash into higher yielding lending assets. The year-over-year trend was a function primarily of changes in the Bank’s lending portfolio mix.

Net Interest Income – Net interest income for the quarter was $16.9 million compared to $16.1 million last quarter and $14.4 million for the same period a year ago. The quarter-over-quarter trend was a function primarily of higher interest income earned on lending assets attributable to growth in the Bank’s POS Financing portfolio and redeployment of cash into higher yielding lending assets, offset partially by lower interest income earned on the Bank’s CRE Mortgage and Loan portfolios attributable to lower asset balances and higher interest expense attributable to the Bank’s USD subordinated notes payable (the “Notes”) resulting from changes in the USD/CAD foreign exchange spot rate over the course of the period. The year-over-year trend was a function of higher interest income earned on the Bank’s POS Financing and CRE Mortgage portfolios attributable primarily to lending asset growth and the redeployment of cash into higher yielding lending assets, offset partially by higher interest expense attributable to the Notes.

Non-Interest Expenses – Non-interest expenses for the quarter were $10.6 million compared to $10.4 million last quarter and $8.1 million for the same period a year ago. The quarter over quarter trend was a function primarily of higher salary and benefits expense attributable to general, annual compensation adjustments and increased staffing levels to support expanded business activity across the Bank and higher insurance premiums attributable to the Bank’s listing on the Nasdaq. The year over year trend was a function primarily of higher salary and benefits expense attributable to general, annual compensation adjustments and increased staff levels, higher insurance premiums attributable to the Bank’s listing on the Nasdaq, investments in the Bank’s business development initiatives and the current quarter including three months of operating expenses of Digital Boundary Group (“DBG”) compared to only two months of operating expenses included in the comparative period due to the timing of the Bank’s acquisition of DBG on November 30, 2020.

Provision for/Recovery of Credit Losses – The Bank recognized a provision for credit losses in the current quarter in the amount of $2,000 compared to a recovery of credit loss provisions in the amount of $279,000 last quarter and a provision for credit losses in the amount of $57,000 for the same period a year ago. The quarter-over-quarter trend was a function primarily of higher lending asset balances, offset partially by changes in the Bank’s lending asset portfolio mix and changes in the forward-looking information used by the Bank in its credit risk models in the current quarter. The year-over-year trend was a function primarily of changes in the Bank’s lending asset portfolio mix and changes in the forward-looking information used by the Bank in its credit risk models in the current quarter, offset partially by higher lending asset balances.

Capital – At January 31, 2022, VersaBank’s Total regulatory capital was $426 million compared to $419 million last quarter and $251 million a year ago and the Bank’s CET1 capital ratio was 14.83%, compared 15.18% last quarter and 12.48% a year ago. The quarter-over-quarter capital ratio trends were a function primarily of retained earnings growth, tax provision recoveries related to the Bank’s deferred tax asset, and changes to the Bank’s risk-weighted asset balances and composition. The year-over-year trends were a function primarily of the redemption of the Bank’s outstanding Non-cumulative Series 3 Preferred Shares on April 30, 2021, the issuance of the Notes on April 30, 2021, the Common Share Offering in September 2021, retained earnings growth, tax provision recoveries related to the Bank’s deferred tax asset, and changes to the Bank’s risk-weighted asset balances and composition.

3

Credit Quality -- Gross impaired loans at January 31, 2022 were $nil, compared to $nil a year ago. The Bank’s allowance for expected credit losses, or ECL at January 31, 2022 was $1.5 million compared to $1.5 million last quarter and $1.8 million a year ago. The quarter-over-quarter and year-over-year ECL trends were a function primarily of the factors set out in the Provision for/Recovery of Credit Losses section above. VersaBank’s Provision for Credit Losses ratio continues to be one of the lowest in the industry, reflecting the very low risk profile of the Bank’s lending portfolio, enabling it to generate superior net interest margins by offering innovative, high-value deposit and lending solutions that address unmet needs in the banking industry through a highly efficient partner model.

Q1 2022 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. The portfolio decreased 2% year-over-year and 6% sequentially to $769 million, as a function primarily of timing of scheduled repayments over the course of the current quarter. The Bank anticipates that fiscal 2022 will bring continued growth in the commercial mortgage space, particularly with respect to financing for residential housing properties. Management expects that the demand for residential housing will be a function primarily of continued development in communities on the periphery of the major city centres as a result of consumers continuing to seek more affordable housing outside of the city centres and the federal government’s efforts to revitalize immigration programs. Management is of the view that the multi-unit residential rental sector, within the Bank’s target markets remains one of the most stable and low-risk sectors in the real estate market. Further, as COVID-19 restrictions continue to abate, management anticipates higher origination volumes related to commercial asset classes such as student housing and commercial and retail property types as the risk profile associated with this asset class realigns with the Bank’s risk appetite. Finally, management continues to pursue opportunities to develop more meaningful balance sheet exposure to the B-20 compliant conventional, uninsured mortgage financing space.

POS Financing – 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 first quarter of 2022, the Bank’s POS Financing portfolio was up 43% year-over-year and 13% sequentially to $1.4 billion as a function primarily of continued strong demand for home finance, auto and home improvement/HVAC receivable financing. Consumer spending is expected to remain strong into at least the second half of fiscal 2022 as COVID-19 restrictions continue to abate, and in many cases are removed altogether and as consumers exhaust excess savings built up over the course of the pandemic. Management anticipates that consumers will continue to deploy their savings into a range of durable goods, including assets related to home improvements as well as home purchases for which the Bank’s POS loan and lease origination partners provide financing. This, along with the anticipated addition of new origination partners and the Bank’s planned entrance into the US market represent key drivers of POS Financing balance sheet growth over the course of fiscal 2022.

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 currently attracts a nominal interest rate. This low-cost diversified deposit channel provides VersaBank with a significant cost of funds advantage, enabling it to generate superior net interest margins while maintaining its conservative risk profile. VersaBank’s cost of funds for the first quarter of 2022 was 1.29%, down 2 bps sequentially and 13 bps year-over-year.  Management anticipates that commercial deposit volumes raised via the Bank’s TIB program will continue to grow over the course of fiscal 2022 as a function of an increase in the volume of consumer bankruptcy and proposal restructuring proceedings over the same timeframe. This perspective is attributable primarily to the anticipated effect of changes to federal government support programs as the impact of COVID-19 moderates, and higher interest rates as a result of the Bank of Canada tightening monetary policy over the course of the year. Further, the Bank continues to grow and expand its well-established, diverse deposit broker network through which it sources personal deposits, consisting primarily of guaranteed investment certificates. Management expects the combination of the operational trends set out above will allow the Bank to continue to effectively mitigate its cost of funds, even in a rising interest rate environment.

4

Commercial deposits at January 31, 2022 were $596 million, up 14% year-over-year and down 2% sequentially. The year-over-year trend was attributable primarily to continued growth in the Bank’s TIB program. The quarter-over-quarter trend was attributable primarily to withdrawals made by Trustees to fund normal course disbursements associated with consumer bankruptcy and proposal restructuring proceedings.

Cybersecurity Services

Leveraging its internally developed IT security software and capabilities, VersaBank established wholly-owned subsidiary, DRT Cyber, Inc., to pursue significant large-market opportunities in cybersecurity and develop innovative solutions to address the rapidly growing volume of cyber threats challenging financial institutions, multi-national corporations and government entities. For the first quarter of 2022, cybersecurity net income of $148,000 was down 14% year-over-year and down 70% sequentially.  The year-over-year trend was as a function primarily of of higher non-interest expense partially offset by higher service work volume in the current quarter attributable partially to the comparative period including only two months of operations due to the timing of the Bank’s acquisition of Digital Boundary Group on November 30, 2020. The quarter-over-quarter trend was a function primarily of strong performance in the comparative quarter attributable to engagements that were deferred in early 2021, due to COVID 19, being realized in the comparative quarter and lower seasonal activity in the current quarter.

5

FINANCIAL HIGHLIGHTS

(unaudited)	For the three months ended
	January 31			October 31			January 31
(thousands of Canadian dollars except per share amounts)	2022			2021			2021
Results of operations
Interest income	$	24,720		$	23,924		$	21,515
Net interest income		16,885			16,146			14,374
Non-interest income		1,381			2,090			1,048
Total revenue		18,266			18,236			15,422
Provision (recovery) for credit losses		2			(279	)		57
Non-interest expenses		10,636			10,377			8,087
Net income		5,566			5,910			5,290
Income per common share:
Basic	$	0.19		$	0.24		$	0.22
Diluted	$	0.19		$	0.24		$	0.22
Dividends paid on preferred shares	$	247		$	247		$	542
Dividends paid on common shares	$	687		$	684		$	528
Yield*		4.06	%		4.04	%		4.28	%
Cost of funds*		1.29	%		1.31	%		1.42	%
Net interest margin*		2.77	%		2.73	%		2.86	%
Return on common equity*		6.58	%		8.07	%		8.26	%
Book value per common share*	$	11.78		$	11.61		$	10.90
Efficiency ratio*		58	%		57	%		52	%
Return on total assets*		0.87	%		0.96	%		0.94	%
Gross impaired loans to total loans*		0.00	%		0.00	%		0.00	%
Provision (recovery) for credit losses as a % of average loans*		0.00	%		(0.05%	)		0.01	%

	As at
Balance Sheet Summary
Cash	$	155,239		$	271,523		$	212,016
Loans, net of allowance for credit losses		2,215,638			2,103,050			1,793,724
Average loans*		2,159,344			2,027,602			1,724,317
Total assets		2,415,346			2,415,086			2,044,976
Deposits		1,847,003			1,853,204			1,664,694
Subordinated notes payable		97,726			95,272			4,891
Shareholders' equity		336,951			332,106			259,508
Capital ratios**
Risk-weighted assets	$	2,095,335		$	2,013,544		$	1,721,935
Common Equity Tier 1 capital		310,825			305,708			214,851
Total regulatory capital		426,237			418,718			251,020
Common Equity Tier 1 (CET1) capital ratio		14.83	%		15.18	%		12.48	%
Tier 1 capital ratio		15.49	%		15.86	%		14.18	%
Total capital ratio		20.34	%		20.80	%		14.58	%
Leverage ratio		12.69	%		12.60	%		11.40	%

* This is a non-GAAP measure. See definition under 'Non-GAAP and Other Financial Measures' in the Q1 2022 Management's Discussion and Analysis.

** Capital management and leverage measures are in accordance with OSFI's Capital Adequacy Requirements and Basel III Accord.

6

COVID-19 Update

As a digital bank with a low-risk business-to-business, partner-based model, VersaBank continues to remain relatively insulated from many of the negative influences of COVID-19 as a function primarily of our staff working remotely, enabled by our branchless, technology-driven model. However, with public health restrictions being relaxed somewhat on January 31^st, 2022 and expected to abate further in the short term, management will begin to execute on its return-to-work strategy, which will see staff transition from working remotely to working in a traditional office setting over the course of the timeframe spanning February 14^th, 2022, to March 14^th, 2022.

Notwithstanding the above, we continue to operate at a heightened level of awareness to ensure that our origination and underwriting practices remain highly disciplined and focused, and further, have no loans on our balance sheet that are subject to payment deferrals, no impaired loans and no loans in arrears.

As we navigate past the business and operational challenges imposed by the continued impact of COVID-19, the Bank remains highly focused 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 (federally licensed) 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) and Nasdaq under the symbol VBNK. Its Series 1 Preferred Shares trade on the TSX under the symbol VBNK.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 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 wars or conflicts including the crisis in Russia-Ukraine; the impact of the 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.

7

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 and others 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 the related management’s discussion and analysis or made from time to time by the Bank or on its behalf.

Conference Call

VersaBank will be hosting a conference call and webcast today, Wednesday, March 2, 2022, at 9:00 a.m. (EDT) to discuss its first 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:	43448798

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/362GAGz 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:	448798#
Expiry Date:	April 2nd, 2021, 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/362GAGz and on the Bank’s web site.

FOR FURTHER INFORMATION, PLEASE CONTACT:

LodeRock Advisors

Lawrence Chamberlain

(416) 519-4196

lawrence.chamberlain@loderockadvisors.com

Visit our website at: www.versabank.com

Follow VersaBank on Facebook, Instagram, LinkedIn and Twitter

8

EX-99.4

Exhibit 99.4

For Immediate Release: March 2, 2022

Attention: Business Editors

VERSABANK DECLARES DIVIDENDS

LONDON, ON/CNW - VersaBank (the “Bank”) (TSX: VBNK; NASDAQ: VBNK) today announced that cash dividends in the amount of CAD $0.025 per Common Share of the Bank and CAD $0.1693 per Series 1 Preferred Share of the Bank, have been declared for the quarter ending April 30, 2022, payable as of April 30, 2022, to shareholders of record at the close of business on April 8, 2022.

The dividends to which this notice relates are eligible dividends for tax purposes.

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”) and Nasdaq under the symbol VBNK. Its Series 1 Preferred Shares trade on the TSX under the symbol VBNK.PR.A.

FOR FURTHER INFORMATION, PLEASE CONTACT:

LodeRock Advisors

Lawrence Chamberlain

(416) 519-4196

lawrence.chamberlain@loderockadvisors.com

Visit our website at: www.versabank.com

Follow VersaBank on Facebook, Instagram, LinkedIn and Twitter.

EX-99.5

Exhibit 99.5

FORM 52-109F2

CERTIFICATION OF INTERIM FILINGS

FULL CERTIFICATE

I, David R. Taylor, President & Chief Executive Officer of VersaBank, certify the following:

1. Review:  I have reviewed the interim financial statements and interim MD&A (together, the “interim filings”) of VersaBank (the “issuer”) for the interim period ended January 31, 2022.

2. No misrepresentations:  Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.

3. Fair presentation:  Based on my knowledge, having exercised reasonable diligence, the interim financial statements together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.

4. Responsibility:  The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, for the issuer.

5. Design:  Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer(s) and I have, as at the end of the period covered by the interim filings

(a) designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that

(i) material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and

(ii) information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and

(b) designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP.

5.1 Control framework:  The control framework the issuer’s other certifying officer(s) and I used to design the issuer’s ICFR is Internal Control – Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission.

5.2 N/A

5.3 N/A

6. Reporting changes in ICFR:  The issuer has disclosed in its interim MD&A any change in the issuer’s ICFR that occurred during the period beginning on November 1, 2021 and ended on January 31, 2022 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.

Date: March 2, 2022

/s/ David R. Taylor

___________________

David R. Taylor

President &

Chief Executive Officer

EX-99.6

Exhibit 99.6

FORM 52-109F2

CERTIFICATION OF INTERIM FILINGS

FULL CERTIFICATE

I, Shawn Clarke, Chief Financial Officer of VersaBank, certify the following:

1. Review:  I have reviewed the interim financial statements and interim MD&A (together, the “interim filings”) of VersaBank (the “issuer”) for the interim period ended January 31, 2022.

2. No misrepresentations:  Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.

3. Fair presentation:  Based on my knowledge, having exercised reasonable diligence, the interim financial statements together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.

4. Responsibility:  The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, for the issuer.

5. Design:  Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer(s) and I have, as at the end of the period covered by the interim filings

(a) designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that

(i) material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and

(ii) information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and

(b) designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP.

5.1 Control framework:  The control framework the issuer’s other certifying officer(s) and I used to design the issuer’s ICFR is Internal Control – Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission.

5.2 N/A

5.3 N/A

6. Reporting changes in ICFR:  The issuer has disclosed in its interim MD&A any change in the issuer’s ICFR that occurred during the period beginning on November 1, 2021 and ended on January 31, 2022 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.

Date: March 2, 2022

/s/ Shawn Clarke

____________________

Shawn Clarke

Chief Financial Officer

XML

Document And Entity Information	Jan. 31, 2022
Document Information [Line Items]
Entity Registrant Name	VersaBank
Document, Type	6-K
Document, Period End Date	Jan. 31, 2022
Current Fiscal Year End Date	--10-31
Entity, File Number	001-40805
Entity, Address, Address Line One	140 Fullarton Street, Suite 2002
Entity, Address, City or Town	London
Entity, Address, State or Province	ON
Entity, Address, Postal Zip Code	N6A 5P2
Entity, Address, Country	CA
Amendment Flag	false
Entity Central Index Key	0001690639

XML

Consolidated Balance Sheets (Current Period Unaudited) - CAD ($) $ in Thousands	Jan. 31, 2022	Oct. 31, 2021	Jan. 31, 2021
Assets
Cash	$ 155,239	$ 271,523	$ 212,016
Loans, net of allowance for credit losses (note 4)	2,215,638	2,103,050	1,793,724
Other assets (note 5)	44,469	40,513	39,236
Total assets	2,415,346	2,415,086	2,044,976
Liabilities and Shareholders' Equity
Deposits	1,847,003	1,853,204	1,664,694
Subordinated notes payable (note 6)	97,726	95,272	4,891
Other liabilities (note 7)	133,666	134,504	115,883
Total liabilities	2,078,395	2,082,980	1,785,468
Shareholders' equity:
Share capital (note 8)	241,662	241,466	182,094
Retained earnings	95,276	90,644	77,414
Accumulated other comprehensive income (loss)	13	(4)	0
Total equity	336,951	332,106	259,508
Total equity and liabilities	$ 2,415,346	$ 2,415,086	$ 2,044,976

XML

Consolidated Statements of Income and Comprehensive Income (Unaudited) - CAD ($) $ in Thousands	3 Months Ended
	Jan. 31, 2022	Jan. 31, 2021
Interest income:
Loans	$ 24,514	$ 21,086
Other	206	429
Interest income	24,720	21,515
Interest expense:
Deposits and other	6,469	7,014
Subordinated notes	1,366	127
Interest expense	7,835	7,141
Net interest income	16,885	14,374
Non-interest income	1,381	1,048
Total revenue	18,266	15,422
Provision for credit losses (note 4)	2	57
Revenue less provision for credit loss	18,264	15,365
Non-interest expenses:
Salaries and benefits	6,083	5,030
General and administrative	3,624	2,339
Premises and equipment	929	718
Noninterest expense	10,636	8,087
Income before income taxes	7,628	7,278
Income tax provision (note 9)	2,062	1,988
Net income	5,566	5,290
Other comprehensive income:
Foreign exchange gain on translation of foreign operations	17	0
Comprehensive income	$ 5,583	$ 5,290
Basic and diluted income per common share (note 10) (in CAD per share)	$ 0.19	$ 0.22
Weighted average number of common shares outstanding (in shares)	27,441,082	21,123,559

XML

Consolidated Statements of Changes in Shareholders' Equity (Unaudited) - CAD ($) $ in Thousands	Total	Issued capital [member]	Issued capital [member] Ordinary shares [member]	Issued capital [member] Series 1 preferred shares [member]	Issued capital [member] Series 3 preferred shares [member]	Additional paid-in capital [member]	Retained earnings [member]	Accumulated other comprehensive income [member]
Balance at Oct. 31, 2020						$ 145	$ 73,194	$ 0
Statement Line Items [Line Items]
Fair value of stock-based compensation (note 8)						0
Net income	$ 5,290						5,290
Dividends paid on common and preferred shares							(1,070)
Other comprehensive income								0
Balance at Jan. 31, 2021	259,508	$ 182,094	$ 152,612	$ 13,647	$ 15,690	145	77,414	0
Balance at Oct. 31, 2021	332,106					145	90,644	(4)
Statement Line Items [Line Items]
Fair value of stock-based compensation (note 8)						196
Net income	5,566						5,566
Dividends paid on common and preferred shares							(934)
Other comprehensive income								17
Balance at Jan. 31, 2022	$ 336,951	$ 241,662	$ 227,674	$ 13,647	$ 0	$ 341	$ 95,276	$ 13

XML

Consolidated Statements of Cash Flows (Unaudited) - CAD ($) $ in Thousands	3 Months Ended
	Jan. 31, 2022	Jan. 31, 2021
Cash provided by (used in):
Net income	$ 5,566	$ 5,290
Adjustments to determine net cash flows:
Provision for credit losses	2	57
Stock-based compensation	196	0
Income tax provision	2,062	1,988
Interest income	(24,720)	(21,515)
Interest expense	7,835	7,141
Amortization	490	449
Foreign exchange rate changes on debt	2,430	0
Interest received	23,594	20,572
Interest paid	(9,406)	(10,487)
Income taxes paid	(2,820)	0
Loans	(111,400)	(137,908)
Deposits	(3,385)	100,357
Change in other assets and liabilities	(3,308)	7,577
Net cash flows from (used in) operating activities	(112,864)	(26,479)
Acquisition of DBG, net of cash acquired	0	(7,473)
Purchase of property and equipment	(32)	(67)
Net cash flows from (used in) investing activities	(32)	(7,540)
Financing:
Repayment of loan assumed from DBG	0	(1,410)
Redemption of securitization liability	0	(8,631)
Dividends paid	(934)	(1,070)
Repayment of lease obligations	(169)	(136)
Income taxes paid	0	(362)
Net cash flows from (used in) financing activities	(1,103)	(11,609)
Change in cash	(113,999)	(45,628)
Effect of exchange rate changes on cash	(2,285)	0
Cash, beginning of the period	271,523	257,644
Cash, end of the period	$ 155,239	$ 212,016

XML

Note 1 - Reporting Entity

3 Months Ended

Jan. 31, 2022

Statement Line Items [Line Items]

Disclosure of notes and other explanatory information [text block]

1.         Reporting entity:

VersaBank (the “Bank”) operates as a Schedule I bank under the Bank Act (Canada) and is regulated by the Office of the Superintendent of Financial Institutions (“OSFI”). The Bank, whose shares trade on the Toronto Stock Exchange and NASDAQ Stock Exchange, provides commercial lending and banking services to select niche markets in Canada as well as cybersecurity services through the operations of its wholly owned subsidiary DRT Cyber Inc.

The Bank is incorporated in Canada, and maintains its registered head office at Suite 2002, 140 Fullarton Street, London, Ontario, Canada, N6A 5P2.

XML

Note 2 - Basis of Preparation

3 Months Ended

Jan. 31, 2022

Statement Line Items [Line Items]

Disclosure of basis of preparation of financial statements [text block]

2.         Basis of preparation:

a) Statement of compliance:

These interim Consolidated Financial Statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and have been prepared in accordance with International Accounting Standard (“IAS”) 34 – Interim Financial Reporting and do not include all of the information required for full annual financial statements. These interim Consolidated Financial Statements should be read in conjunction with the Bank’s audited Consolidated Financial Statements for the year ended October 31, 2021.

The interim Consolidated Financial Statements for the three months ended January 31, 2022 and 2021 were approved by the Audit Committee of the Board of Directors on February 28, 2022.

b) Basis of measurement:

These interim Consolidated Financial Statements have been prepared on the historical cost basis except for the investment in Canada Stablecorp Inc. which is measured at fair value through other comprehensive income (see note 5).

c) Functional and presentation currency:

These interim Consolidated Financial Statements are presented in Canadian dollars, which is the Bank’s functional currency. Functional currency is also determined for each of the Bank’s subsidiaries and items included in the interim financial statements of the subsidiaries are measured using their functional currency.

d) Use of estimates and judgements:

In preparing these interim Consolidated Financial Statements, management has exercised judgement and developed estimates in applying accounting policies and generating reported amounts of assets and liabilities at the date of the financial statements and income and expenses during the reporting periods. Significant judgement was applied in assessing significant changes in credit risk on financial assets and in the selection of relevant forward-looking information in assessing the Bank’s allowance for expected credit losses on its financial assets as described in note 4 – Loans. Estimates are applied in the determination of the allowance for expected credit losses on financial assets and the measurement of deferred income taxes. It is reasonably possible, on the basis of existing knowledge, that actual results may vary from that expected in the development of these estimates. This could result in material adjustments to the carrying amounts of assets and/or liabilities affected in the future.

Estimates were applied by management in determining the fair value of stock options granted in the current quarter as described in note 8.

Available forward-looking information, including forecast macroeconomic indicator and industry performance trend data continue to be influenced by COVID-19 and remain broadly dynamic, including, but not limited to, the scope and timing of the removal or relaxation of public health restrictions which were imposed as a function of the emergence and rapid spread of the Omicron variant, the timing, velocity and impact of monetary policy tightening, the potential implementation of new federal government stimulus programs, and the magnitude and directionality of inflation trends. The current, dynamic nature of the trends exhibited by the available forward looking information continues to infuse uncertainty into the assumptions, judgements and estimates made by management in the preparation of these interim Consolidated Financial Statements.

Estimates and their underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are applied prospectively once they are known.

XML

Note 3 - Significant Accounting Policies and Future Accounting Changes

3 Months Ended

Jan. 31, 2022

Statement Line Items [Line Items]

Disclosure of significant accounting policies [text block]

3.         Significant accounting policies and future accounting changes:

The accounting policies applied by the Bank in these interim Consolidated Financial Statements are the same as those applied by the Bank as at and for the year ended October 31, 2021 and are detailed in note 3 of the Bank’s 2021 audited Consolidated Financial Statements. During the current year the Bank updated or incorporated the following significant accounting policies:

Segment reporting:

Effective the quarter ending January 31, 2022, the Bank has opted to adopt presenting segmented information in its Consolidated Financial Statements in accordance with IFRS 8 Segment Reporting. The Bank’s management has established two reportable operating segments, those being Banking and Cybersecurity Services. Details of the Bank’s segment reporting is described in note 16.

XML

Note 4 - Loans

3 Months Ended

Jan. 31, 2022

Statement Line Items [Line Items]

Disclosure of loans and advances to customers [text block]

4.         Loans:

The Bank organizes its lending portfolio into the following four broad asset categories: Commercial Real Estate Mortgages, Commercial Real Estate Loans, Point of Sale Loans and Leases, and Public Sector and Other Financing. These categories have been established in the Bank’s proprietary, internally developed asset management system and have been designed to catalogue individual lending assets as a function primarily of their key risk drivers, the nature of the underlying collateral, and the applicable market segment.

The Commercial Real Estate Mortgages (“CRE Mortgages”) asset category is comprised of Commercial and Residential Construction Mortgages, Commercial Term Mortgages, Commercial Insured Mortgages and Land Mortgages. While all of these loans would be considered commercial loans or business-to-business loans, the underlying credit risk exposure is diversified across both the commercial and retail market segments, and further, the portfolio benefits from diversity in its underlying security in the form of a broad range of collateral properties.

The Commercial Real Estate Loans (“CRE Loans”) asset category is comprised primarily of Condominium Corporation Financing loans.

The Point of Sale Loans and Leases (“POS Financing”) asset category is comprised of Point of Sale Loan and Lease Receivables acquired from the Bank’s broad network of origination and servicing partners as well as Warehouse Loans that provide bridge financing to the Bank’s origination and servicing partners for the purpose of accumulating and seasoning practical volumes of individual loans and leases prior to the Bank purchasing the cashflow receivables derived from same.

The Public Sector and Other Financing (“PSOF”) asset category is comprised primarily of Public Sector Loans and Leases, a small balance of Corporate Loans and Leases and Single Family Residential Conventional and Insured Mortgages.

a) Summary of loans and allowance for credit losses:

(thousands of Canadian dollars)
	January 31			October 31			January 31
	2022			2021			2021
Commercial real estate mortgages	$	722,829		$	757,576		$	712,256
Commercial real estate loans		14,600			26,569			31,663
Point of sale loans and leases		1,439,781			1,279,576			1,008,029
Public sector and other financing		31,247			32,587			36,612
		2,208,457			2,096,308			1,788,560
Allowance for credit losses		(1,455	)		(1,453	)		(1,832	)
Accrued interest		8,636			8,195			6,996
Total loans, net of allowance for credit losses	$	2,215,638		$	2,103,050		$	1,793,724

The following table provides a summary of loan amounts, expected credit loss allowance amounts, and expected loss rates by lending asset category:

	As at January 31, 2022												As at October 31, 2021
(thousands of Canadian dollars)	Stage 1			Stage 2			Stage 3			Total			Stage 1			Stage 2			Stage 3			Total
Commercial real estate mortgages	$	667,949		$	54,880		$	-		$	722,829		$	694,869		$	62,707		$	-		$	757,576
ECL allowance		949			96			-			1,045			980			134			-			1,114
EL %		0.14	%		0.17	%		0.00	%		0.14	%		0.14	%		0.21	%		0.00	%		0.15	%
Commercial real estate loans	$	14,600		$	-		$	-		$	14,600		$	26,569		$	-		$	-		$	26,569
ECL allowance		36			-			-			36			45			-			-			45
EL %		0.25	%		0.00	%		0.00	%		0.25	%		0.17	%		0.00	%		0.00	%		0.17	%
Point of sale loans and leases	$	1,437,391		$	2,390		$	-		$	1,439,781		$	1,277,011		$	2,565		$	-		$	1,279,576
ECL allowance		370			-			-			370			275			-			-			275
EL %		0.03	%		0.00	%		0.00	%		0.03	%		0.02	%		0.00	%		0.00	%		0.02	%
Public sector and other financing	$	31,168		$	79		$	-		$	31,247		$	32,507		$	80		$	-		$	32,587
ECL allowance		4			-			-			4			16			3			-			19
EL %		0.01	%		0.00	%		0.00	%		0.01	%		0.05	%		3.75	%		0.00	%		0.06	%
Loans	$	2,151,108		$	57,349		$	-		$	2,208,457		$	2,030,956		$	65,352		$	-		$	2,096,308
Total ECL allowance		1,359			96			-			1,455			1,316			137			-			1,453
Total EL %		0.06	%		0.17	%		0.00	%		0.07	%		0.06	%		0.21	%		0.00	%		0.07	%

The Bank’s maximum exposure to credit risk is the carrying value of its financial assets. The Bank holds security against the majority of its loans in the form of mortgage interests over property, other registered securities over assets, guarantees or cash reserves on loan and lease receivables included in the POS Financing portfolio (see note 7).

Allowance for Credit Losses

The Bank must maintain an allowance for expected credit losses (“ECL”) that is adequate, in management’s opinion, to absorb all credit related losses in the Bank’s lending and treasury portfolios. Under IFRS 9 the Bank’s ECL is estimated using the expected credit loss methodology and is comprised of expected credit losses recognized on both performing loans, and non-performing, or impaired loans even if no actual loss event has occurred.

Assessment of significant increase in credit risk (“SICR”)

At each reporting date, the Bank assesses whether or not there has been a SICR for loans since initial recognition by comparing, at the reporting date, the risk of default occurring over the remaining expected life against the risk of default at initial recognition.

SICR is a function of the loan’s internal risk rating assignment, internal watchlist status, loan review status and delinquency status which are updated as necessary in response to changes including, but not limited to, changes in macroeconomic and/or market conditions, changes in a borrower’s credit risk profile, and changes in the strength of the underlying security, including guarantor status, if a guarantor exists.

Quantitative models may not always be able to capture all reasonable and supportable information that may indicate a SICR. As a result, qualitative factors may be considered to supplement such a gap.

Examples include changes in adjudication criteria for a particular group of borrowers or asset categories or changes in portfolio composition, and more specifically changes attributable to the continued impact of COVID-19 on the Canadian economy and the Bank’s business.

Expected credit loss model - Estimation of expected credit losses

Expected credit losses are an estimate of a loan’s expected cash shortfalls discounted at the effective interest rate, where a cash shortfall is the difference between the contractual cash flows that are due to the Bank and the cash flows that the Bank actually expects to receive.

Forward-Looking Information

The Bank incorporates the impact of future economic conditions, or more specifically forward-looking information into the estimation of expected credit losses at the credit risk parameter level. This is accomplished via the credit risk parameter models and proxy datasets that the Bank utilizes to develop probability of default, (“PD”) and loss given default, (“LGD”) term structure forecasts for its loans. The Bank has sourced credit risk modeling systems and forecast macroeconomic scenario data from Moody’s Analytics, a third party service provider for the purpose of computing forward-looking credit risk parameters under multiple macroeconomic scenarios that consider both market-wide and idiosyncratic factors and influences. These systems are used in conjunction with the Bank’s internally developed ECL models. Given that the Bank has experienced very limited historical losses and, therefore, does not have available statistically significant loss data inventory for use in developing internal, forward looking expected credit loss trends, the use of unbiased, third party forward-looking credit risk parameter modeling systems is particularly important for the Bank in the context of the estimation of expected credit losses.

The Bank utilizes macroeconomic indicator data derived from multiple macroeconomic scenarios in order to mitigate volatility in the estimation of expected credit losses, as well as to satisfy the IFRS 9 requirement that future economic conditions are to be based on an unbiased, probability-weighted assessment of possible future outcomes. More specifically, the macroeconomic indicators set out in the macroeconomic scenarios are used as inputs for the credit risk parameter models utilized by the Bank to sensitize the individual PD and LGD term structure forecasts to the respective macroeconomic trajectory set out in each of the scenarios (see Expected Credit Loss Sensitivity below). Currently the Bank utilizes upside, downside and baseline forecast macroeconomic scenarios, and assigns discrete weights to each for use in the estimation of its reported ECL. The Bank has also applied expert credit judgement, where appropriate, to reflect, amongst other items, uncertainty in the Canadian macroeconomic environment attributable to the continued impact of COVID-19.

The macroeconomic indicator data utilized by the Bank for the purpose of sensitizing PD and LGD term structure data to forward economic conditions include, but are not limited to: real GDP, the national unemployment rate, long term interest rates, the consumer price index, the S&P/TSX Index and the price of oil. These specific macroeconomic indicators were selected in an attempt to ensure that the spectrum of fundamental macroeconomic influences on the key drivers of the credit risk profile of the Bank’s balance sheet, including: corporate, consumer and real estate market dynamics; corporate, consumer and SME borrower performance; geography; as well as collateral value volatility, are appropriately captured and incorporated into the Bank’s forward macroeconomic sensitivity analysis.

Key assumptions driving the macroeconomic forecast trends this quarter include: the rate of decline of new case counts of the Omicron variant and the relaxation of public health restrictions as a function of same, the timing and magnitude of the Bank of Canada’s (“BoC”) first overnight rate increase as well as the number and magnitude of additional, anticipated increases over the course of 2022 and beyond, the resiliency of consumer spending in a rising rate environment, the mitigation of the current high rate of inflation as a function of the resolution of existing supply-chain bottlenecks, the trajectory of oil and gasoline prices, tighter monetary policy and a shrinking BoC balance sheet, the continued rate of job growth, the impact of more specific eligibility requirements associated with the federal government’s remaining stimulus programs, and the level and duration of historically high housing prices.

Management developed ECL estimates using credit risk parameter term structure forecasts sensitized to individual baseline, upside and downside forecast macroeconomic scenarios, each weighted at 100%, and subsequently computed the variance of each to the Bank’s reported ECL as at January 31, 2022 in order to assess the alignment of the Bank’s reported ECL with the Bank’s credit risk profile, and further, to assess the scope, depth and ultimate effectiveness of the credit risk mitigation strategies that the Bank has applied to its lending portfolios (see Expected Credit Loss Sensitivity below).

Expected Credit Loss Sensitivity:

The following table presents the sensitivity of the Bank’s estimated ECL to a range of individual macroeconomic scenarios, that in isolation may not reflect the Bank’s actual expected ECL exposure, as well as the variance of each to the Bank’s” reported ECL as at January 31, 2022:

(thousands of Canadian dollars)
	Reported			100	%		100	%		100	%
	ECL			Upside			Baseline			Downside
Allowance for expected credit losses	$	1,455	$	898		$	1,193		$	1,675
Variance from reported ECL				(557	)		(262	)		220
Variance from reported ECL (%)				(38	%)		(18	%)		15	%

The following table provides a reconciliation of the Bank’s ECL allowance by lending asset category for the three months ended January 31, 2022:

(thousands of Canadian dollars)	Stage 1			Stage 2			Stage 3		Total
Commercial real estate mortgages
Balance at beginning of period	$	980		$	134		$	-	$	1,114
Transfer in (out) to Stage 1		14			(14	)		-		-
Transfer in (out) to Stage 2		(4	)		4			-		-
Transfer in (out) to Stage 3		-			-			-		-
Net remeasurement of loss allowance		(28	)		(24	)		-		(52	)
Loan originations		80			-			-		80
Derecognitions and maturities		(93	)		(4	)		-		(97	)
Provision for (recovery of) credit losses		(31	)		(38	)		-		(69	)
Write-offs		-			-			-		-
Recoveries		-			-			-		-
Balance at end of period	$	949		$	96		$	-	$	1,045
Commercial real estate loans
Balance at beginning of period	$	45		$	-		$	-	$	45
Transfer in (out) to Stage 1		-			-			-		-
Transfer in (out) to Stage 2		-			-			-		-
Transfer in (out) to Stage 3		-			-			-		-
Net remeasurement of loss allowance		(9	)		-			-		(9	)
Loan originations		-			-			-		-
Derecognitions and maturities		-			-			-		-
Provision for (recovery of) credit losses		(9	)		-			-		(9	)
Write-offs		-			-			-		-
Recoveries		-			-			-		-
Balance at end of period	$	36		$	-		$	-	$	36
Point of sale loans and leases
Balance at beginning of period	$	275		$	-		$	-	$	275
Transfer in (out) to Stage 1		38			(38	)		-		-
Transfer in (out) to Stage 2		(58	)		58			-		-
Transfer in (out) to Stage 3		-			-			-		-
Net remeasurement of loss allowance		115			(20	)		-		95
Loan originations		-			-			-		-
Derecognitions and maturities		-			-			-		-
Provision for (recovery of) credit losses		95			-			-		95
Write-offs		-			-			-		-
Recoveries		-			-			-		-
Balance at end of period	$	370		$	-		$	-	$	370
Public sector and other financing
Balance at beginning of period	$	16		$	3		$	-	$	19
Transfer in (out) to Stage 1		-			-			-		-
Transfer in (out) to Stage 2		-			-			-		-
Transfer in (out) to Stage 3		-			-			-		-
Net remeasurement of loss allowance		(11	)		(3	)		-		(14	)
Loan originations		-			-			-		-
Derecognitions and maturities		(1	)		-			-		(1	)
Provision for (recovery of) credit losses		(12	)		(3	)		-		(15	)
Write-offs		-			-			-		-
Recoveries		-			-			-		-
Balance at end of period	$	4		$	-		$	-	$	4
Total balance at end of period	$	1,359		$	96		$	-	$	1,455

The following table provides a reconciliation of the Bank’s ECL allowance by lending asset category for the three months ended January 31, 2021:

(thousands of Canadian dollars)	Stage 1			Stage 2			Stage 3		Total
Commercial real estate mortgages
Balance at beginning of period	$	1,174		$	192		$	-	$	1,366
Transfer in (out) to Stage 1		-			-			-		-
Transfer in (out) to Stage 2		(2	)		2			-		-
Transfer in (out) to Stage 3		-			-			-		-
Net remeasurement of loss allowance		67			10			-		77
Loan originations		146			-			-		146
Derecognitions and maturities		(39	)		(37	)		-		(76	)
Provision for (recovery of) credit losses		172			(25	)		-		147
Write-offs		-			-			-		-
Recoveries		-			-			-		-
Balance at end of period	$	1,346		$	167		$	-	$	1,513
Commercial real estate loans
Balance at beginning of period	$	137		$	-		$	-	$	137
Transfer in (out) to Stage 1		-			-			-		-
Transfer in (out) to Stage 2		-			-			-		-
Transfer in (out) to Stage 3		-			-			-		-
Net remeasurement of loss allowance		(65	)		-			-		(65	)
Loan originations		-			-			-		-
Derecognitions and maturities		-			-			-		-
Provision for (recovery of) credit losses		(65	)		-			-		(65	)
Write-offs		-			-			-		-
Recoveries		-			-			-		-
Balance at end of period	$	72		$	-		$	-	$	72
Point of sale loans and leases
Balance at beginning of period	$	215		$	-		$	-	$	215
Transfer in (out) to Stage 1		20			(20	)		-		-
Transfer in (out) to Stage 2		(44	)		44			-		-
Transfer in (out) to Stage 3		-			-			-		-
Net remeasurement of loss allowance		16			(24	)		-		(8	)
Loan originations		-			-			-		-
Derecognitions and maturities		-			-			-		-
Provision for (recovery of) credit losses		(8	)		-			-		(8	)
Write-offs		-			-			-		-
Recoveries		-			-			-		-
Balance at end of period	$	207		$	-		$	-	$	207
Public sector and other financing
Balance at beginning of period	$	57		$	-		$	-	$	57
Transfer in (out) to Stage 1		-			-			-		-
Transfer in (out) to Stage 2		-			-			-		-
Transfer in (out) to Stage 3		-			-			-		-
Net remeasurement of loss allowance		(17	)		-			-		(17	)
Loan originations		-			-			-		-
Derecognitions and maturities		-			-			-		-
Provision for (recovery of) credit losses		(17	)		-			-		(17	)
Write-offs		-			-			-		-
Recoveries		-			-			-		-
Balance at end of period	$	40		$	-		$	-	$	40
Total balance at end of period	$	1,665		$	167		$	-	$	1,832

b) Impaired loans:

At January 31, 2022, impaired loans were $nil ( October 31, 2021 - $nil).

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Note 5 - Other Assets

3 Months Ended

Jan. 31, 2022

Statement Line Items [Line Items]

Disclosure of other assets [text block]

5.         Other assets:

(thousands of Canadian dollars)
	January 31		October 31		January 31
	2022		2021		2021
Accounts receivable	$	2,938	$	2,643	$	2,604
Prepaid expenses and other		16,881		12,699		9,726
Property and equipment		6,905		7,075		7,643
Right-of-use assets		4,643		4,817		5,337
Deferred income tax asset		2,868		2,931		4,286
Investment		953		953		-
Goodwill		5,754		5,754		5,754
Intangible assets		3,527		3,641		3,886
Total other assets	$	44,469	$	40,513	$	39,236

In February 2021, the Bank acquired an 11% investment in Canada Stablecorp Inc. (“Stablecorp”) for cash consideration of $953,000. The Bank made a strategic investment to bring together the necessary financial and technology expertise that will facilitate the development and future issuance of a new, highly encrypted digital deposit receipt which the Bank will brand as VCAD.

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Note 6 - Subordinated Notes Payable

3 Months Ended

Jan. 31, 2022

Statement Line Items [Line Items]

Disclosure of borrowings [text block]

6.         Subordinated notes payable:

(thousands of Canadian dollars)
	January 31		October 31		January 31
	2022		2021		2021
Ten year term, unsecured, non-viability contingent capital compliant, subordinated notes payable, principal amount of $5.0 million, $500,000 is held by related party (note 12), effective interest rate of 10.41%, maturing March 2029.	$	4,901	$	4,898	$	4,891
Ten year term, unsecured, non-viability contingent capital compliant, subordinated notes payable, principal amount of USD $75.0 million, effective interest rate of 5.38%, maturing May 2031.		92,825		90,374		-
	$	97,726	$	95,272	$	4,891

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Note 7 - Other Liabilities

3 Months Ended

Jan. 31, 2022

Statement Line Items [Line Items]

Disclosure of other liabilities [text block]

7.         Other liabilities:

(thousands of Canadian dollars)
	January 31		October 31		January 31
	2022		2021		2021
Accounts payable and other	$	6,155	$	6,893	$	5,359
Current income tax liability		1,975		2,949		1,052
Deferred income tax liability		855		898		898
Lease obligations		4,944		5,113		5,598
Cash collateral and amounts held in escrow		5,252		7,887		3,379
Cash reserves on loan and lease receivables		114,485		110,764		99,597
	$	133,666	$	134,504	$	115,883

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Note 8 - Share Capital

3 Months Ended

Jan. 31, 2022

Statement Line Items [Line Items]

Disclosure of classes of share capital [text block]

8.         Share capital:

a) Common shares:

At January 31, 2022, there were 27,441,082 ( October 31, 2021 – 27,441,082) common shares outstanding.

b) Preferred shares:

At January 31, 2022, there were 1,461,460 ( October 31, 2021 – 1,461,460) Series 1 preferred shares outstanding. These shares are Basel III compliant, non-cumulative rate reset preferred shares which include NVCC provisions. As a result, these shares qualify as Additional Tier 1 Capital (see note 13).

On April 30, 2021, the Bank redeemed all of its 1,681,320 ( October 31, 2021 – $nil) outstanding Non-Cumulative Series 3 preferred shares (NVCC) using cash on hand. The amount paid on redemption for each share was $10.00, and in aggregate $16.8 million. Transaction costs, incurred at issuance in the amount of $1.1 million were applied against retained earnings.

c) Stock options

Under the Bank’s stock option plan, the Bank will grant, to eligible participants options for the Bank’s common shares on a periodic basis. As per the Bank’s current stock option plan all options issued have a five year term and vest over a three year period. At January 31, 2022, the Bank was authorized to issue 1,240,000 common share stock options through its stock option plan of which 953,730 common share stock options were issued and outstanding ( October 31, 2021 – 40,000).

Stock option transactions during the three month periods ended January 31, 2022 and 2021:

	for the three months ended
	January 31, 2022				January 31, 2021
			Weighted				Weighted
	Number of		average		Number of		average
	options		exercise price		options		exercise price
Outstanding, beginning of period		40,000	$	7.00		42,017	$	10.73
Granted		913,730		15.90		-		-
Exercised		-		-		-		-
Forfeired/cancelled		-		-		-		-
Expired		-		-		-		-
Outstanding, end of period		953,730	$	15.53		42,017	$	10.73

For the three month period ended January 31, 2022, the Bank recognized $196,000 ( January 31, 2021 - $nil) in compensation expense related to the estimated fair value of options granted. The fair value of the 913,730 stock options granted during the period ended January 31, 2022, was estimated at the grant date using the Black-Scholes valuation model and the following input assumptions: risk-free rate of 1.26%, expected option life of 3.5 years, expected volatility of 29.5%, expected annual dividends of 0.64% and a forfeiture rate of 2.0%. The fair value of each stock option granted was estimated at $3.10 per share.

As at January 31, 2022, 40,000 common share stock options were fully vested and exercisable at $7.00 per share and expire in October 2023.

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Note 9 - Income Tax Provision

3 Months Ended

Jan. 31, 2022

Statement Line Items [Line Items]

Disclosure of income tax [text block]

9.         Income tax provision:

Income tax provision for the three months ended January 31, 2022 was $2.1 million ( January 31, 2021 - $2.0 million). The Bank’s combined statutory federal and provincial income tax rate is approximately 27% (2021 – 27%). The effective rate is affected by certain items not being taxable or deductible for income tax purposes.

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Note 10 - Income Per Common Share

3 Months Ended

Jan. 31, 2022

Statement Line Items [Line Items]

Disclosure of earnings per share [text block]

10.         Income per common share:   

(thousands of Canadian dollars)
	for the three months ended
	January 31			January 31
	2022			2021
Net income	$	5,566		$	5,290
Less: dividends on preferred shares		(247	)		(542	)
		5,319			4,748
Average number of common shares outstanding		27,441,082			21,123,559
Income per common share:	$	0.19		$	0.22

The Series 1 NVCC preferred shares are contingently issuable shares and would only have a dilutive impact upon issuance.

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Note 11 - Commitments and Contingencies

3 Months Ended

Jan. 31, 2022

Statement Line Items [Line Items]

Disclosure of commitments and contingent liabilities [text block]

11.         Commitments and contingencies: 

The amount of credit related commitments represents the maximum amount of additional credit that the Bank could be obligated to extend.

(thousands of Canadian dollars)
	January 31		October 31		January 31
	2022		2021		2021
Loan commitments	$	315,764	$	296,248	$	270,687
Letters of credit		51,131		46,462		48,290
	$	366,895	$	342,710	$	318,977

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Note 12 - Related Party Transactions

3 Months Ended

Jan. 31, 2022

Statement Line Items [Line Items]

Disclosure of related party [text block]

12.         Related party transactions:  

The Bank’s Board of Directors and Senior Executive Officers represent key management personnel and are related parties. At January 31, 2022, amounts due from these related parties totalled $1.4 million ( January 31, 2021 - $1.4 million) and an amount due from a corporation controlled by key management personnel totalled $2.4 million ( January 31, 2021 - $2.4 million). The interest rates charged on loans and advances to related parties are based on mutually agreed upon terms. Interest income earned on the above loans for the three months ended January 31, 2022 was $24,000 ( January 31, 2021 - $17,000). There were no specific provisions for credit losses associated with loans issued to key management personnel ( January 31, 2021 - $nil), and all loans issued to key management personnel were current as at January 31, 2022.

$500,000 of the Bank’s $5.0 million subordinated notes payable, issued in March 2019, are held by a related party (note 6).

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Note 13 - Capital Management

3 Months Ended

Jan. 31, 2022

Statement Line Items [Line Items]

Disclosure of objectives, policies and processes for managing capital [text block]

13.         Capital management:

a) Overview:

The Bank’s policy is to maintain a strong capital base so as to retain investor, creditor and market confidence as well as to support the future growth and development of the business. The impact of the level of capital held on shareholders’ return is an important consideration and the Bank recognizes the need to maintain a balance between the higher returns that may be possible with greater leverage and the advantages and security that may be afforded by a more robust capital position.

OSFI sets and monitors capital requirements for the Bank. Capital is managed in accordance with policies and plans that are regularly reviewed and approved by the Board of Directors and that take into account, amongst other items, forecasted capital requirements and current and anticipated financial market conditions.

The goal is to maintain adequate regulatory capital for the Bank to be considered well capitalized, protect consumer deposits and provide capacity to support organic growth as well as to capitalize on strategic opportunities that do not otherwise require accessing the public capital markets, all the while providing a satisfactory return to shareholders. The Bank’s regulatory capital is comprised of share capital, retained earnings and unrealized gains and losses on fair value through other comprehensive income securities (Common Equity Tier 1 capital), preferred shares (Additional Tier 1 capital) and subordinated notes (Tier 2 capital).

The Bank monitors its capital adequacy and related capital ratios on a daily basis and has policies setting internal targets and thresholds for its capital ratios. These capital ratios consist of the leverage ratio and the risk-based capital ratios.

The Bank makes use of the Standardized Approach for credit risk as prescribed by OSFI, and therefore, may include eligible ECL allowance amounts in its Tier 2 capital, up to a maximum of 1.25% of its credit risk-weighted assets calculated under the Standardized Approach. Further to this, and as a result of the onset of COVID-19 and the economic uncertainty precipitated by same, OSFI introduced guidance over the course of the second quarter of fiscal 2020 that set out transitional arrangements pertaining to the capital treatment of expected credit loss provisioning which allows for a portion of eligible ECL allowance amounts to be included in CET1 capital, on a transitional basis, over the course of the period ranging between 2020 and 2022 inclusive. The portion of the Bank’s ECL allowance that is eligible for inclusion in CET1 capital is calculated as the increase in the sum of Stage 1 and Stage 2 ECL allowance amounts estimated in the current period relative to the sum of Stage 1 and Stage 2 ECL allowance amounts estimated for the baseline period, which has been designated by OSFI to be the three months ended January 31, 2020, adjusted for tax effects and multiplied by a scaling factor. The scaling factor was set by OSFI at 70% for fiscal 2020, 50% for fiscal 2021 and 25% for fiscal 2022. The impact of the capital treatment of expected credit loss provisioning on the Bank’s capital levels and associated capital ratios is presented in the table below.

During the period ended January 31, 2022, there were no material changes in the Bank’s management of capital.

b) Risk-Based Capital Ratios:

The Basel Committee on Banking Supervision has published the Basel III rules on capital adequacy and liquidity (“Basel III”). OSFI requires that all Canadian banks must comply with the Basel III standards on an “all-in” basis for the purpose of determining their risk-based capital ratios. Required minimum regulatory capital ratios are a 7.0% Common Equity Tier 1 capital ratio (“CET1”), an 8.5% Tier 1 capital ratio and a 10.5% total capital ratio, all of which include a 2.50% capital conservation buffer.

OSFI also requires banks to measure capital adequacy in accordance with guidelines for determining risk adjusted capital and risk-weighted assets including off-balance sheet credit instruments as specified in the Basel III regulations. Based on the deemed credit risk for each type of asset, both on and off balance sheet assets of the Bank are assigned a weighting ranging between 0% to 150% to determine the Bank’s risk weighted equivalent assets and its risk-based capital ratios.

The Bank’s risk-based capital ratios are calculated as follows:

(thousands of Canadian dollars)
	January 31			October 31
	2022			2021
	"Transitional"
	& "All in"			"All in"
Common Equity Tier 1 (CET1) capital
Directly issued qualifying common share capital	$	228,015		$	227,819
Retained earnings		95,276			90,644
Accumulated other comprehensive income		13			(4	)
CET1 before regulatory adjustments		323,304			318,459
Regulatory adjustments applied to CET1		(12,479	)		(12,751	)
Common Equity Tier 1 capital	$	310,825		$	305,708
Additional Tier 1 capital
Directly issued qualifying Additional Tier 1 instruments	$	13,647		$	13,647
Total Tier 1 capital	$	324,472		$	319,355
Tier 2 capital
Directly issued Tier 2 capital instruments	$	100,310		$	97,910
Tier 2 capital before regulatory adjustments		100,310			97,910
Eligible stage 1 and stage 2 allowance		1,455			1,453
Total Tier 2 capital	$	101,765		$	99,363
Total regulatory capital	$	426,237		$	418,718
Total risk-weighted assets	$	2,095,335		$	2,013,544
Capital ratios
CET1 capital ratio		14.83	%		15.18	%
Tier 1 capital ratio		15.49	%		15.86	%
Total capital ratio		20.34	%		20.80	%

As at January 31, 2022 and October 31, 2021, the Bank exceeded all of the minimum Basel III regulatory capital requirements prescribed by OSFI.

c)  Leverage Ratio:

The leverage ratio, which is prescribed under the Basel III Accord, is a supplementary measure to the risk-based capital requirements and is defined as the ratio of Tier 1 capital to the Bank’s total exposures. The Basel III minimum leverage ratio is 3.0%. The Bank’s leverage ratio is calculated as follows:

(thousands of Canadian dollars)
	January 31			October 31
	2022			2021
	"Transitional"
	& "All in"			"All in"
On-balance sheet assets	$	2,415,346		$	2,415,086
Assets amounts adjusted in determining the Basel III
Tier 1 capital		(12,479	)		(12,751	)
Total on-balance sheet exposures		2,402,867			2,402,335
Total off-balance sheet exposure at gross notional amount	$	366,895		$	342,710
Adjustments for conversion to credit equivalent amount		(212,919	)		(210,065	)
Total off-balance sheet exposures		153,976			132,645
Tier 1 capital		324,472			319,355
Total exposures		2,556,843			2,534,980
Leverage ratio		12.69	%		12.60	%

As at January 31, 2022 and October 31, 2021, the Bank was in compliance with the leverage ratio prescribed by OSFI.

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Note 14 - Interest Rate Risk Position

3 Months Ended

Jan. 31, 2022

Statement Line Items [Line Items]

Disclosure of how entity manages liquidity risk [text block]

14.         Interest rate risk position:

The Bank is subject to interest rate risk which is the risk that a movement in interest rates could negatively impact net interest margin, net interest income and the economic value of assets, liabilities and shareholders’ equity. The following table provides the duration difference between the Bank’s assets and liabilities and the potential after-tax impact of a 100 basis point shift in interest rates on the Bank’s earnings during a 12 month period as well as the potential after-tax impact of a 100 basis point shift in interest rates on the Bank’s shareholders’ equity over a 60 month period if no remedial actions are taken.          

(thousands of Canadian dollars)
	January 31, 2022					October 31, 2021
	Increase 100 bps		Decrease 100 bps			Increase 100 bps		Decrease 100 bps
Increase (decrease):
Impact on projected net interest income during a 12 month period	$	3,951	$	(3,951	)	$	4,147	$	(3,220	)
Impact on reported equity during a 60 month period	$	717	$	(1,196	)	$	1,603	$	(1,586	)
Duration difference between assets and liabilities (months)		2.0					2.3

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Note 15 - Fair Value of Financial Instruments

3 Months Ended

Jan. 31, 2022

Statement Line Items [Line Items]

Disclosure of fair value of financial instruments [text block]

15.         Fair Value of Financial Instruments:

Fair values are based on management’s best estimates of market conditions and valuation policies at a certain point in time. The estimates are subjective and involve particular assumptions and matters of judgement and as such, may not be reflective of future fair values. The Bank’s loans and deposits lack an available market as they are not typically exchanged and, therefore, the book value of these instruments are not necessarily representative of amounts realizable upon immediate settlement. See note 19 of the October 31, 2021 audited Consolidated Financial Statements for more information on fair values.

(thousands of Canadian dollars)
As at	January 31, 2022				October 31, 2021
	Book		Fair		Book		Fair
(thousands of Canadian dollars)	Value		Value		Value		Value
Assets
Cash and cash equivalents	$	155,239	$	155,239	$	271,523	$	271,523
Loans		2,215,638		2,231,040		2,103,050		2,118,636
Other financial assets		3,891		3,891		3,596		3,596
Liabilities
Deposits	$	1,847,003	$	1,830,923	$	1,853,204	$	1,860,332
Subordinated notes payable		97,726		100,310		95,272		97,910
Other financial liabilities		130,836		130,836		130,657		130,657

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Note 16 - Operating Segmentation

3 Months Ended

Jan. 31, 2022

Statement Line Items [Line Items]

Disclosure of entity's operating segments [text block]

16.         Operating Segmentation:

The Bank has established two reportable operating segments, those being Banking and Cybersecurity Services. The two operating segments are strategic business operations providing distinct products and services to different markets and are separately managed as a function of the distinction in the nature of the business of the two operating segments. The following summarizes the operations of each of the reportable segments:

Banking – The Bank employs a business-to-business model using its proprietary financial technology to address underserved segments of the Canadian banking market. VersaBank obtains 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.

Cybersecurity Services - Leveraging its internally developed IT security software and capabilities, VersaBank established a wholly-owned subsidiary, DRT Cyber Inc. (“DRTC”), to pursue significant large-market opportunities in cybersecurity and develop innovative solutions to address the rapidly growing volume of cyber threats challenging financial institutions, multi-national corporations and government entities.

The basis for the determination of the reportable segments is a function primarily of the systematic, consistent process employed by our chief operating decision maker, the Chief Executive Officer, and the Chief Financial Officer in reviewing and interpreting the operations and performance of each segment. The accounting policies applied to these segments are consistent with those employed in the preparation of our consolidated financial statements, as disclosed in Note 3 of the Bank’s 2021 audited Consolidated Financial Statements.

Performance is measured based on segment net income, as included in the Bank’s internal management reporting. Management has determined that this measure is the most relevant in evaluating segment results and in the allocation of resources. Information regarding the results of each reportable operating segment is as follows:

(thousands of Canadian dollars)
for the three months ended	January 31, 2022									January 31, 2021
	Banking		Cybersecurity		Eliminations			Consolidated		Banking			Cybersecurity		Eliminations			Consolidated
					and Adjustments										and Adjustments
Net interest income	$	16,885	$	-	$	-		$	16,885	$	14,374		$	-	$	-		$	14,374
Non-interest income		-		1,422		(41	)		1,381		(17	)		1,093		(28	)		1,048
Total revenue		16,885		1,422		(41	)		18,266		14,357			1,093		(28	)		15,422
Provision for (recovery of) credit losses		2		-		-			2		57			-		-			57
		16,883		1,422		(41	)		18,264		14,300			1,093		(28	)		15,365
Non-interest expenses:
Salaries and benefits		5,440		643		-			6,083		4,698			332		-			5,030
General and administrative		3,482		183		(41	)		3,624		2,062			305		(28	)		2,339
Premises and equipment		582		347		-			929		570			148		-			718
		9,504		1,173		(41	)		10,636		7,330			785		(28	)		8,087
Income before income taxes		7,379		249		-			7,628		6,970			308		-			7,278
Income tax provision		1,961		101		-			2,062		1,853			135		-			1,988
Net income	$	5,418	$	148	$	-		$	5,566	$	5,117		$	173	$	-		$	5,290
Total assets	$	2,412,167	$	23,767	$	(20,588	)	$	2,415,346	$	2,041,784		$	20,612	$	(17,420	)	$	2,044,976
Total liabilities	$	2,072,691	$	25,147	$	(19,443	)	$	2,078,395	$	1,781,121		$	20,622	$	(16,275	)	$	1,785,468

While the Bank has operations in the US, primarily through its DRTC operations, substantially all of the Bank’s earnings and assets are based in Canada.

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Note 17 - Comparative Balances

3 Months Ended

Jan. 31, 2022

Statement Line Items [Line Items]

Disclosure of reclassifications or changes in presentation [text block]

17.         Comparative balances:

Certain comparative balances have been reclassified to conform with the financial statement presentation adopted in the current period. 

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Significant Accounting Policies (Policies)

3 Months Ended

Jan. 31, 2022

Discloure of Significant Accounting Policies

Description of accounting policy for segment reporting [text block]

Segment reporting:

Effective the quarter ending January 31, 2022, the Bank has opted to adopt presenting segmented information in its Consolidated Financial Statements in accordance with IFRS 8 Segment Reporting. The Bank’s management has established two reportable operating segments, those being Banking and Cybersecurity Services. Details of the Bank’s segment reporting is described in note 16.

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Note 4 - Loans (Tables)

3 Months Ended

Jan. 31, 2022

Statement Line Items [Line Items]

Discosure of loans, net [text block]

(thousands of Canadian dollars)
	January 31			October 31			January 31
	2022			2021			2021
Commercial real estate mortgages	$	722,829		$	757,576		$	712,256
Commercial real estate loans		14,600			26,569			31,663
Point of sale loans and leases		1,439,781			1,279,576			1,008,029
Public sector and other financing		31,247			32,587			36,612
		2,208,457			2,096,308			1,788,560
Allowance for credit losses		(1,455	)		(1,453	)		(1,832	)
Accrued interest		8,636			8,195			6,996
Total loans, net of allowance for credit losses	$	2,215,638		$	2,103,050		$	1,793,724

Disclosure of loans by lending asset category [text block]

	As at January 31, 2022												As at October 31, 2021
(thousands of Canadian dollars)	Stage 1			Stage 2			Stage 3			Total			Stage 1			Stage 2			Stage 3			Total
Commercial real estate mortgages	$	667,949		$	54,880		$	-		$	722,829		$	694,869		$	62,707		$	-		$	757,576
ECL allowance		949			96			-			1,045			980			134			-			1,114
EL %		0.14	%		0.17	%		0.00	%		0.14	%		0.14	%		0.21	%		0.00	%		0.15	%
Commercial real estate loans	$	14,600		$	-		$	-		$	14,600		$	26,569		$	-		$	-		$	26,569
ECL allowance		36			-			-			36			45			-			-			45
EL %		0.25	%		0.00	%		0.00	%		0.25	%		0.17	%		0.00	%		0.00	%		0.17	%
Point of sale loans and leases	$	1,437,391		$	2,390		$	-		$	1,439,781		$	1,277,011		$	2,565		$	-		$	1,279,576
ECL allowance		370			-			-			370			275			-			-			275
EL %		0.03	%		0.00	%		0.00	%		0.03	%		0.02	%		0.00	%		0.00	%		0.02	%
Public sector and other financing	$	31,168		$	79		$	-		$	31,247		$	32,507		$	80		$	-		$	32,587
ECL allowance		4			-			-			4			16			3			-			19
EL %		0.01	%		0.00	%		0.00	%		0.01	%		0.05	%		3.75	%		0.00	%		0.06	%
Loans	$	2,151,108		$	57,349		$	-		$	2,208,457		$	2,030,956		$	65,352		$	-		$	2,096,308
Total ECL allowance		1,359			96			-			1,455			1,316			137			-			1,453
Total EL %		0.06	%		0.17	%		0.00	%		0.07	%		0.06	%		0.21	%		0.00	%		0.07	%

Disclosure of sensitivity analysis of fair value measurement to changes in unobservable inputs, assets [text block]

(thousands of Canadian dollars)
	Reported			100	%		100	%		100	%
	ECL			Upside			Baseline			Downside
Allowance for expected credit losses	$	1,455	$	898		$	1,193		$	1,675
Variance from reported ECL				(557	)		(262	)		220
Variance from reported ECL (%)				(38	%)		(18	%)		15	%

Disclosure of Reconciliation of changes in allowance account for credit losses of financial assets [text block]

(thousands of Canadian dollars)	Stage 1			Stage 2			Stage 3		Total
Commercial real estate mortgages
Balance at beginning of period	$	980		$	134		$	-	$	1,114
Transfer in (out) to Stage 1		14			(14	)		-		-
Transfer in (out) to Stage 2		(4	)		4			-		-
Transfer in (out) to Stage 3		-			-			-		-
Net remeasurement of loss allowance		(28	)		(24	)		-		(52	)
Loan originations		80			-			-		80
Derecognitions and maturities		(93	)		(4	)		-		(97	)
Provision for (recovery of) credit losses		(31	)		(38	)		-		(69	)
Write-offs		-			-			-		-
Recoveries		-			-			-		-
Balance at end of period	$	949		$	96		$	-	$	1,045
Commercial real estate loans
Balance at beginning of period	$	45		$	-		$	-	$	45
Transfer in (out) to Stage 1		-			-			-		-
Transfer in (out) to Stage 2		-			-			-		-
Transfer in (out) to Stage 3		-			-			-		-
Net remeasurement of loss allowance		(9	)		-			-		(9	)
Loan originations		-			-			-		-
Derecognitions and maturities		-			-			-		-
Provision for (recovery of) credit losses		(9	)		-			-		(9	)
Write-offs		-			-			-		-
Recoveries		-			-			-		-
Balance at end of period	$	36		$	-		$	-	$	36
Point of sale loans and leases
Balance at beginning of period	$	275		$	-		$	-	$	275
Transfer in (out) to Stage 1		38			(38	)		-		-
Transfer in (out) to Stage 2		(58	)		58			-		-
Transfer in (out) to Stage 3		-			-			-		-
Net remeasurement of loss allowance		115			(20	)		-		95
Loan originations		-			-			-		-
Derecognitions and maturities		-			-			-		-
Provision for (recovery of) credit losses		95			-			-		95
Write-offs		-			-			-		-
Recoveries		-			-			-		-
Balance at end of period	$	370		$	-		$	-	$	370
Public sector and other financing
Balance at beginning of period	$	16		$	3		$	-	$	19
Transfer in (out) to Stage 1		-			-			-		-
Transfer in (out) to Stage 2		-			-			-		-
Transfer in (out) to Stage 3		-			-			-		-
Net remeasurement of loss allowance		(11	)		(3	)		-		(14	)
Loan originations		-			-			-		-
Derecognitions and maturities		(1	)		-			-		(1	)
Provision for (recovery of) credit losses		(12	)		(3	)		-		(15	)
Write-offs		-			-			-		-
Recoveries		-			-			-		-
Balance at end of period	$	4		$	-		$	-	$	4
Total balance at end of period	$	1,359		$	96		$	-	$	1,455

(thousands of Canadian dollars)	Stage 1			Stage 2			Stage 3		Total
Commercial real estate mortgages
Balance at beginning of period	$	1,174		$	192		$	-	$	1,366
Transfer in (out) to Stage 1		-			-			-		-
Transfer in (out) to Stage 2		(2	)		2			-		-
Transfer in (out) to Stage 3		-			-			-		-
Net remeasurement of loss allowance		67			10			-		77
Loan originations		146			-			-		146
Derecognitions and maturities		(39	)		(37	)		-		(76	)
Provision for (recovery of) credit losses		172			(25	)		-		147
Write-offs		-			-			-		-
Recoveries		-			-			-		-
Balance at end of period	$	1,346		$	167		$	-	$	1,513
Commercial real estate loans
Balance at beginning of period	$	137		$	-		$	-	$	137
Transfer in (out) to Stage 1		-			-			-		-
Transfer in (out) to Stage 2		-			-			-		-
Transfer in (out) to Stage 3		-			-			-		-
Net remeasurement of loss allowance		(65	)		-			-		(65	)
Loan originations		-			-			-		-
Derecognitions and maturities		-			-			-		-
Provision for (recovery of) credit losses		(65	)		-			-		(65	)
Write-offs		-			-			-		-
Recoveries		-			-			-		-
Balance at end of period	$	72		$	-		$	-	$	72
Point of sale loans and leases
Balance at beginning of period	$	215		$	-		$	-	$	215
Transfer in (out) to Stage 1		20			(20	)		-		-
Transfer in (out) to Stage 2		(44	)		44			-		-
Transfer in (out) to Stage 3		-			-			-		-
Net remeasurement of loss allowance		16			(24	)		-		(8	)
Loan originations		-			-			-		-
Derecognitions and maturities		-			-			-		-
Provision for (recovery of) credit losses		(8	)		-			-		(8	)
Write-offs		-			-			-		-
Recoveries		-			-			-		-
Balance at end of period	$	207		$	-		$	-	$	207
Public sector and other financing
Balance at beginning of period	$	57		$	-		$	-	$	57
Transfer in (out) to Stage 1		-			-			-		-
Transfer in (out) to Stage 2		-			-			-		-
Transfer in (out) to Stage 3		-			-			-		-
Net remeasurement of loss allowance		(17	)		-			-		(17	)
Loan originations		-			-			-		-
Derecognitions and maturities		-			-			-		-
Provision for (recovery of) credit losses		(17	)		-			-		(17	)
Write-offs		-			-			-		-
Recoveries		-			-			-		-
Balance at end of period	$	40		$	-		$	-	$	40
Total balance at end of period	$	1,665		$	167		$	-	$	1,832

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Note 5 - Other Assets (Tables)

3 Months Ended

Jan. 31, 2022

Statement Line Items [Line Items]

Disclosure of detailed information about other assets [text block]

(thousands of Canadian dollars)
	January 31		October 31		January 31
	2022		2021		2021
Accounts receivable	$	2,938	$	2,643	$	2,604
Prepaid expenses and other		16,881		12,699		9,726
Property and equipment		6,905		7,075		7,643
Right-of-use assets		4,643		4,817		5,337
Deferred income tax asset		2,868		2,931		4,286
Investment		953		953		-
Goodwill		5,754		5,754		5,754
Intangible assets		3,527		3,641		3,886
Total other assets	$	44,469	$	40,513	$	39,236

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Note 6 - Subordinated Notes Payable (Tables)

3 Months Ended

Jan. 31, 2022

Statement Line Items [Line Items]

Disclosure of detailed information about borrowings [text block]

(thousands of Canadian dollars)
	January 31		October 31		January 31
	2022		2021		2021
Ten year term, unsecured, non-viability contingent capital compliant, subordinated notes payable, principal amount of $5.0 million, $500,000 is held by related party (note 12), effective interest rate of 10.41%, maturing March 2029.	$	4,901	$	4,898	$	4,891
Ten year term, unsecured, non-viability contingent capital compliant, subordinated notes payable, principal amount of USD $75.0 million, effective interest rate of 5.38%, maturing May 2031.		92,825		90,374		-
	$	97,726	$	95,272	$	4,891

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Note 7 - Other Liabilities (Tables)

3 Months Ended

Jan. 31, 2022

Statement Line Items [Line Items]

Disclosure of detailed information about other liabilities [text block]

(thousands of Canadian dollars)
	January 31		October 31		January 31
	2022		2021		2021
Accounts payable and other	$	6,155	$	6,893	$	5,359
Current income tax liability		1,975		2,949		1,052
Deferred income tax liability		855		898		898
Lease obligations		4,944		5,113		5,598
Cash collateral and amounts held in escrow		5,252		7,887		3,379
Cash reserves on loan and lease receivables		114,485		110,764		99,597
	$	133,666	$	134,504	$	115,883

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Note 8 - Share Capital (Tables)

3 Months Ended

Jan. 31, 2022

Statement Line Items [Line Items]

Disclosure of number and weighted average exercise prices of share options [text block]

	for the three months ended
	January 31, 2022				January 31, 2021
			Weighted				Weighted
	Number of		average		Number of		average
	options		exercise price		options		exercise price
Outstanding, beginning of period		40,000	$	7.00		42,017	$	10.73
Granted		913,730		15.90		-		-
Exercised		-		-		-		-
Forfeired/cancelled		-		-		-		-
Expired		-		-		-		-
Outstanding, end of period		953,730	$	15.53		42,017	$	10.73

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Note 10 - Income Per Common Share (Tables)

3 Months Ended

Jan. 31, 2022

Statement Line Items [Line Items]

Earnings per share [text block]

(thousands of Canadian dollars)
	for the three months ended
	January 31			January 31
	2022			2021
Net income	$	5,566		$	5,290
Less: dividends on preferred shares		(247	)		(542	)
		5,319			4,748
Average number of common shares outstanding		27,441,082			21,123,559
Income per common share:	$	0.19		$	0.22

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Note 11 - Commitments and Contingencies (Tables)

3 Months Ended

Jan. 31, 2022

Statement Line Items [Line Items]

Disclosure of commitments [text block]

(thousands of Canadian dollars)
	January 31		October 31		January 31
	2022		2021		2021
Loan commitments	$	315,764	$	296,248	$	270,687
Letters of credit		51,131		46,462		48,290
	$	366,895	$	342,710	$	318,977

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Note 13 - Capital Management (Tables)

3 Months Ended

Jan. 31, 2022

Statement Line Items [Line Items]

Disclosure of regulatory capital and capital ratios [text block]

(thousands of Canadian dollars)
	January 31			October 31
	2022			2021
	"Transitional"
	& "All in"			"All in"
Common Equity Tier 1 (CET1) capital
Directly issued qualifying common share capital	$	228,015		$	227,819
Retained earnings		95,276			90,644
Accumulated other comprehensive income		13			(4	)
CET1 before regulatory adjustments		323,304			318,459
Regulatory adjustments applied to CET1		(12,479	)		(12,751	)
Common Equity Tier 1 capital	$	310,825		$	305,708
Additional Tier 1 capital
Directly issued qualifying Additional Tier 1 instruments	$	13,647		$	13,647
Total Tier 1 capital	$	324,472		$	319,355
Tier 2 capital
Directly issued Tier 2 capital instruments	$	100,310		$	97,910
Tier 2 capital before regulatory adjustments		100,310			97,910
Eligible stage 1 and stage 2 allowance		1,455			1,453
Total Tier 2 capital	$	101,765		$	99,363
Total regulatory capital	$	426,237		$	418,718
Total risk-weighted assets	$	2,095,335		$	2,013,544
Capital ratios
CET1 capital ratio		14.83	%		15.18	%
Tier 1 capital ratio		15.49	%		15.86	%
Total capital ratio		20.34	%		20.80	%

(thousands of Canadian dollars)
	January 31			October 31
	2022			2021
	"Transitional"
	& "All in"			"All in"
On-balance sheet assets	$	2,415,346		$	2,415,086
Assets amounts adjusted in determining the Basel III
Tier 1 capital		(12,479	)		(12,751	)
Total on-balance sheet exposures		2,402,867			2,402,335
Total off-balance sheet exposure at gross notional amount	$	366,895		$	342,710
Adjustments for conversion to credit equivalent amount		(212,919	)		(210,065	)
Total off-balance sheet exposures		153,976			132,645
Tier 1 capital		324,472			319,355
Total exposures		2,556,843			2,534,980
Leverage ratio		12.69	%		12.60	%

XML

Note 14 - Interest Rate Risk Position (Tables)

3 Months Ended

Jan. 31, 2022

Statement Line Items [Line Items]

Sensitivity analysis for types of market risk [text block]

(thousands of Canadian dollars)
	January 31, 2022					October 31, 2021
	Increase 100 bps		Decrease 100 bps			Increase 100 bps		Decrease 100 bps
Increase (decrease):
Impact on projected net interest income during a 12 month period	$	3,951	$	(3,951	)	$	4,147	$	(3,220	)
Impact on reported equity during a 60 month period	$	717	$	(1,196	)	$	1,603	$	(1,586	)
Duration difference between assets and liabilities (months)		2.0					2.3

XML

Note 15 - Fair Value of Financial Instruments (Tables)

3 Months Ended

Jan. 31, 2022

Statement Line Items [Line Items]

Disclosure of detailed information about financial instruments [text block]

(thousands of Canadian dollars)
As at	January 31, 2022				October 31, 2021
	Book		Fair		Book		Fair
(thousands of Canadian dollars)	Value		Value		Value		Value
Assets
Cash and cash equivalents	$	155,239	$	155,239	$	271,523	$	271,523
Loans		2,215,638		2,231,040		2,103,050		2,118,636
Other financial assets		3,891		3,891		3,596		3,596
Liabilities
Deposits	$	1,847,003	$	1,830,923	$	1,853,204	$	1,860,332
Subordinated notes payable		97,726		100,310		95,272		97,910
Other financial liabilities		130,836		130,836		130,657		130,657

XML

Note 16 - Operating Segmentation (Tables)

3 Months Ended

Jan. 31, 2022

Statement Line Items [Line Items]

Disclosure of operating segments [text block]

(thousands of Canadian dollars)
for the three months ended	January 31, 2022									January 31, 2021
	Banking		Cybersecurity		Eliminations			Consolidated		Banking			Cybersecurity		Eliminations			Consolidated
					and Adjustments										and Adjustments
Net interest income	$	16,885	$	-	$	-		$	16,885	$	14,374		$	-	$	-		$	14,374
Non-interest income		-		1,422		(41	)		1,381		(17	)		1,093		(28	)		1,048
Total revenue		16,885		1,422		(41	)		18,266		14,357			1,093		(28	)		15,422
Provision for (recovery of) credit losses		2		-		-			2		57			-		-			57
		16,883		1,422		(41	)		18,264		14,300			1,093		(28	)		15,365
Non-interest expenses:
Salaries and benefits		5,440		643		-			6,083		4,698			332		-			5,030
General and administrative		3,482		183		(41	)		3,624		2,062			305		(28	)		2,339
Premises and equipment		582		347		-			929		570			148		-			718
		9,504		1,173		(41	)		10,636		7,330			785		(28	)		8,087
Income before income taxes		7,379		249		-			7,628		6,970			308		-			7,278
Income tax provision		1,961		101		-			2,062		1,853			135		-			1,988
Net income	$	5,418	$	148	$	-		$	5,566	$	5,117		$	173	$	-		$	5,290
Total assets	$	2,412,167	$	23,767	$	(20,588	)	$	2,415,346	$	2,041,784		$	20,612	$	(17,420	)	$	2,044,976
Total liabilities	$	2,072,691	$	25,147	$	(19,443	)	$	2,078,395	$	1,781,121		$	20,622	$	(16,275	)	$	1,785,468

XML

Note 4 - Loans (Details Textual) - Loans [member] - CAD ($) $ in Thousands	Jan. 31, 2022	Oct. 31, 2021	Jan. 31, 2021
Statement Line Items [Line Items]
Total financial assets	$ 2,215,638	$ 2,103,050	$ 1,793,724
Financial assets impaired [member]
Statement Line Items [Line Items]
Total financial assets	$ 0	$ 0

XML

Note 4 - Loans - Portfolio Analysis (Details) - Loans [member] - CAD ($) $ in Thousands	Jan. 31, 2022	Oct. 31, 2021	Jan. 31, 2021	Oct. 31, 2020
Statement Line Items [Line Items]
Principal amount	$ 2,208,457	$ 2,096,308	$ 1,788,560
Allowance for credit losses	(1,455)	(1,453)	(1,832)
Accrued interest	8,636	8,195	6,996
Total loans, net of allowance for credit losses	2,215,638	2,103,050	1,793,724
Commercial real estate mortgages [member]
Statement Line Items [Line Items]
Principal amount	722,829	757,576	712,256
Allowance for credit losses	(1,045)	(1,114)	(1,513)	$ (1,366)
Commercial real estate loans [member]
Statement Line Items [Line Items]
Principal amount	14,600	26,569	31,663
Allowance for credit losses	(36)	(45)	(72)	(137)
Point of sale loans and leases [member]
Statement Line Items [Line Items]
Principal amount	1,439,781	1,279,576	1,008,029
Allowance for credit losses	(370)	(275)	(207)	(215)
Public sector and other financing [member]
Statement Line Items [Line Items]
Principal amount	31,247	32,587	36,612
Allowance for credit losses	$ (4)	$ (19)	$ (40)	$ (57)

XML

Note 4 - Loans - Summary of Loan, ECL, and EL amounts by lending asset category (Details) - Loans [member] - CAD ($) $ in Thousands	Jan. 31, 2022	Oct. 31, 2021	Jan. 31, 2021	Oct. 31, 2020
Statement Line Items [Line Items]
Notional amount	$ 2,208,457	$ 2,096,308	$ 1,788,560
ECL allowance	$ 1,455	$ 1,453	1,832
EL %	0.07%	0.07%
Stage 1 [member]
Statement Line Items [Line Items]
Notional amount	$ 2,151,108	$ 2,030,956
ECL allowance	$ 1,359	$ 1,316	1,665
EL %	0.06%	0.06%
Stage 2 [member]
Statement Line Items [Line Items]
Notional amount	$ 57,349	$ 65,352
ECL allowance	$ 96	$ 137	167
EL %	0.17%	0.21%
Financial instruments credit-impaired [member]
Statement Line Items [Line Items]
Notional amount	$ 0	$ 0
ECL allowance	$ 0	$ 0	0
EL %	0.00%	0.00%
Commercial real estate mortgages [member]
Statement Line Items [Line Items]
Notional amount	$ 722,829	$ 757,576	712,256
ECL allowance	$ 1,045	$ 1,114	1,513	$ 1,366
EL %	0.14%	0.15%
Commercial real estate mortgages [member] | Stage 1 [member]
Statement Line Items [Line Items]
Notional amount	$ 667,949	$ 694,869
ECL allowance	$ 949	$ 980	1,346	1,174
EL %	0.14%	0.14%
Commercial real estate mortgages [member] | Stage 2 [member]
Statement Line Items [Line Items]
Notional amount	$ 54,880	$ 62,707
ECL allowance	$ 96	$ 134	167	192
EL %	0.17%	0.21%
Commercial real estate mortgages [member] | Financial instruments credit-impaired [member]
Statement Line Items [Line Items]
Notional amount	$ 0	$ 0
ECL allowance	$ 0	$ 0	0	0
EL %	0.00%	0.00%
Commercial real estate loans [member]
Statement Line Items [Line Items]
Notional amount	$ 14,600	$ 26,569	31,663
ECL allowance	$ 36	$ 45	72	137
EL %	0.25%	0.17%
Commercial real estate loans [member] | Stage 1 [member]
Statement Line Items [Line Items]
Notional amount	$ 14,600	$ 26,569
ECL allowance	$ 36	$ 45	72	137
EL %	0.25%	0.17%
Commercial real estate loans [member] | Stage 2 [member]
Statement Line Items [Line Items]
Notional amount	$ 0	$ 0
ECL allowance	$ 0	$ 0	0	0
EL %	0.00%	0.00%
Commercial real estate loans [member] | Financial instruments credit-impaired [member]
Statement Line Items [Line Items]
Notional amount	$ 0	$ 0
ECL allowance	$ 0	$ 0	0	0
EL %	0.00%	0.00%
Point of sale loans and leases [member]
Statement Line Items [Line Items]
Notional amount	$ 1,439,781	$ 1,279,576	1,008,029
ECL allowance	$ 370	$ 275	207	215
EL %	0.03%	0.02%
Point of sale loans and leases [member] | Stage 1 [member]
Statement Line Items [Line Items]
Notional amount	$ 1,437,391	$ 1,277,011
ECL allowance	$ 370	$ 275	207	215
EL %	0.03%	0.02%
Point of sale loans and leases [member] | Stage 2 [member]
Statement Line Items [Line Items]
Notional amount	$ 2,390	$ 2,565
ECL allowance	$ 0	$ 0	0	0
EL %	0.00%	0.00%
Point of sale loans and leases [member] | Financial instruments credit-impaired [member]
Statement Line Items [Line Items]
Notional amount	$ 0	$ 0
ECL allowance	$ 0	$ 0	0	0
EL %	0.00%	0.00%
Public sector and other financing [member]
Statement Line Items [Line Items]
Notional amount	$ 31,247	$ 32,587	36,612
ECL allowance	$ 4	$ 19	40	57
EL %	0.01%	0.06%
Public sector and other financing [member] | Stage 1 [member]
Statement Line Items [Line Items]
Notional amount	$ 31,168	$ 32,507
ECL allowance	$ 4	$ 16	40	57
EL %	0.01%	0.05%
Public sector and other financing [member] | Stage 2 [member]
Statement Line Items [Line Items]
Notional amount	$ 79	$ 80
ECL allowance	$ 0	$ 3	0	0
EL %	0.00%	3.75%
Public sector and other financing [member] | Financial instruments credit-impaired [member]
Statement Line Items [Line Items]
Notional amount	$ 0	$ 0
ECL allowance	$ 0	$ 0	$ 0	$ 0
EL %	0.00%	0.00%

XML

Note 4 - Loans - Expected Credit Loss Sensitivity (Details) - Loans [member] - CAD ($) $ in Thousands	Jan. 31, 2022	Oct. 31, 2021	Jan. 31, 2021
Statement Line Items [Line Items]
Allowance for expected credit losses	$ 1,455	$ 1,453	$ 1,832
Upside, 100% [member]
Statement Line Items [Line Items]
Allowance for expected credit losses	898
Variance from reported ECL	$ (557)
Variance from reported ECL (%)	(38.00%)
Baseline, 100% [member]
Statement Line Items [Line Items]
Allowance for expected credit losses	$ 1,193
Variance from reported ECL	$ (262)
Variance from reported ECL (%)	(18.00%)
Downside, 100% [member]
Statement Line Items [Line Items]
Allowance for expected credit losses	$ 1,675
Variance from reported ECL	$ 220
Variance from reported ECL (%)	15.00%

XML

Note 4 - Loans - Reconciliation of ECL Allowance by Lending Asset Category (Details) - CAD ($) $ in Thousands	3 Months Ended
	Jan. 31, 2022	Jan. 31, 2021
Statement Line Items [Line Items]
Provision for (recovery of) credit losses	$ 2	$ 57
Loans [member]
Statement Line Items [Line Items]
Balance at beginning of period	1,453
Balance at end of period	1,455	1,832
Loans [member] | Stage 1 [member]
Statement Line Items [Line Items]
Balance at beginning of period	1,316
Balance at end of period	1,359	1,665
Loans [member] | Stage 2 [member]
Statement Line Items [Line Items]
Balance at beginning of period	137
Balance at end of period	96	167
Loans [member] | Financial instruments credit-impaired [member]
Statement Line Items [Line Items]
Balance at beginning of period	0
Balance at end of period	0	0
Commercial real estate mortgages [member] | Loans [member]
Statement Line Items [Line Items]
Balance at beginning of period	1,114	1,366
Transfer in (out) to Stage 1	0	0
Transfer in (out) to Stage 2	0	0
Transfer in (out) to Stage 3	0	0
Net remeasurement of loss allowance	(52)	77
Loan originations	80	146
Derecognitions and maturities	(97)	(76)
Provision for (recovery of) credit losses	(69)	147
Write-offs	0	0
Recoveries	0	0
Balance at end of period	1,045	1,513
Commercial real estate mortgages [member] | Loans [member] | Stage 1 [member]
Statement Line Items [Line Items]
Balance at beginning of period	980	1,174
Transfer in (out) to Stage 1	14	0
Transfer in (out) to Stage 2	(4)	(2)
Transfer in (out) to Stage 3	0	0
Net remeasurement of loss allowance	(28)	67
Loan originations	80	146
Derecognitions and maturities	(93)	(39)
Provision for (recovery of) credit losses	(31)	172
Write-offs	0	0
Recoveries	0	0
Balance at end of period	949	1,346
Commercial real estate mortgages [member] | Loans [member] | Stage 2 [member]
Statement Line Items [Line Items]
Balance at beginning of period	134	192
Transfer in (out) to Stage 1	(14)	0
Transfer in (out) to Stage 2	4	2
Transfer in (out) to Stage 3	0	0
Net remeasurement of loss allowance	(24)	10
Loan originations	0	0
Derecognitions and maturities	(4)	(37)
Provision for (recovery of) credit losses	(38)	(25)
Write-offs	0	0
Recoveries	0	0
Balance at end of period	96	167
Commercial real estate mortgages [member] | Loans [member] | Financial instruments credit-impaired [member]
Statement Line Items [Line Items]
Balance at beginning of period	0	0
Transfer in (out) to Stage 1	0	0
Transfer in (out) to Stage 2	0	0
Transfer in (out) to Stage 3	0	0
Net remeasurement of loss allowance	0	0
Loan originations	0	0
Derecognitions and maturities	0	0
Provision for (recovery of) credit losses	0	0
Write-offs	0	0
Recoveries	0	0
Balance at end of period	0	0
Commercial real estate loans [member] | Loans [member]
Statement Line Items [Line Items]
Balance at beginning of period	45	137
Transfer in (out) to Stage 1	0	0
Transfer in (out) to Stage 2	0	0
Transfer in (out) to Stage 3	0	0
Net remeasurement of loss allowance	(9)	(65)
Loan originations	0	0
Derecognitions and maturities	0	0
Provision for (recovery of) credit losses	(9)	(65)
Write-offs	0	0
Recoveries	0	0
Balance at end of period	36	72
Commercial real estate loans [member] | Loans [member] | Stage 1 [member]
Statement Line Items [Line Items]
Balance at beginning of period	45	137
Transfer in (out) to Stage 1	0	0
Transfer in (out) to Stage 2	0	0
Transfer in (out) to Stage 3	0	0
Net remeasurement of loss allowance	(9)	(65)
Loan originations	0	0
Derecognitions and maturities	0	0
Provision for (recovery of) credit losses	(9)	(65)
Write-offs	0	0
Recoveries	0	0
Balance at end of period	36	72
Commercial real estate loans [member] | Loans [member] | Stage 2 [member]
Statement Line Items [Line Items]
Balance at beginning of period	0	0
Transfer in (out) to Stage 1	0	0
Transfer in (out) to Stage 2	0	0
Transfer in (out) to Stage 3	0	0
Net remeasurement of loss allowance	0	0
Loan originations	0	0
Derecognitions and maturities	0	0
Provision for (recovery of) credit losses	0	0
Write-offs	0	0
Recoveries	0	0
Balance at end of period	0	0
Commercial real estate loans [member] | Loans [member] | Financial instruments credit-impaired [member]
Statement Line Items [Line Items]
Balance at beginning of period	0	0
Transfer in (out) to Stage 1	0	0
Transfer in (out) to Stage 2	0	0
Transfer in (out) to Stage 3	0	0
Net remeasurement of loss allowance	0	0
Loan originations	0	0
Derecognitions and maturities	0	0
Provision for (recovery of) credit losses	0	0
Write-offs	0	0
Recoveries	0	0
Balance at end of period	0	0
Point of sale loans and leases [member] | Loans [member]
Statement Line Items [Line Items]
Balance at beginning of period	275	215
Transfer in (out) to Stage 1	0	0
Transfer in (out) to Stage 2	0	0
Transfer in (out) to Stage 3	0	0
Net remeasurement of loss allowance	95	(8)
Loan originations	0	0
Derecognitions and maturities	0	0
Provision for (recovery of) credit losses	95	(8)
Write-offs	0	0
Recoveries	0	0
Balance at end of period	370	207
Point of sale loans and leases [member] | Loans [member] | Stage 1 [member]
Statement Line Items [Line Items]
Balance at beginning of period	275	215
Transfer in (out) to Stage 1	38	20
Transfer in (out) to Stage 2	(58)	(44)
Transfer in (out) to Stage 3	0	0
Net remeasurement of loss allowance	115	16
Loan originations	0	0
Derecognitions and maturities	0	0
Provision for (recovery of) credit losses	95	(8)
Write-offs	0	0
Recoveries	0	0
Balance at end of period	370	207
Point of sale loans and leases [member] | Loans [member] | Stage 2 [member]
Statement Line Items [Line Items]
Balance at beginning of period	0	0
Transfer in (out) to Stage 1	(38)	(20)
Transfer in (out) to Stage 2	58	44
Transfer in (out) to Stage 3	0	0
Net remeasurement of loss allowance	(20)	(24)
Loan originations	0	0
Derecognitions and maturities	0	0
Provision for (recovery of) credit losses	0	0
Write-offs	0	0
Recoveries	0	0
Balance at end of period	0	0
Point of sale loans and leases [member] | Loans [member] | Financial instruments credit-impaired [member]
Statement Line Items [Line Items]
Balance at beginning of period	0	0
Transfer in (out) to Stage 1	0	0
Transfer in (out) to Stage 2	0	0
Transfer in (out) to Stage 3	0	0
Net remeasurement of loss allowance	0	0
Loan originations	0	0
Derecognitions and maturities	0	0
Provision for (recovery of) credit losses	0	0
Write-offs	0	0
Recoveries	0	0
Balance at end of period	0	0
Public sector and other financing [member] | Loans [member]
Statement Line Items [Line Items]
Balance at beginning of period	19	57
Transfer in (out) to Stage 1	0	0
Transfer in (out) to Stage 2	0	0
Transfer in (out) to Stage 3	0	0
Net remeasurement of loss allowance	(14)	(17)
Loan originations	0	0
Derecognitions and maturities	(1)	0
Provision for (recovery of) credit losses	(15)	(17)
Write-offs	0	0
Recoveries	0	0
Balance at end of period	4	40
Public sector and other financing [member] | Loans [member] | Stage 1 [member]
Statement Line Items [Line Items]
Balance at beginning of period	16	57
Transfer in (out) to Stage 1	0	0
Transfer in (out) to Stage 2	0	0
Transfer in (out) to Stage 3	0	0
Net remeasurement of loss allowance	(11)	(17)
Loan originations	0	0
Derecognitions and maturities	(1)	0
Provision for (recovery of) credit losses	(12)	(17)
Write-offs	0	0
Recoveries	0	0
Balance at end of period	4	40
Public sector and other financing [member] | Loans [member] | Stage 2 [member]
Statement Line Items [Line Items]
Balance at beginning of period	3	0
Transfer in (out) to Stage 1	0	0
Transfer in (out) to Stage 2	0	0
Transfer in (out) to Stage 3	0	0
Net remeasurement of loss allowance	(3)	0
Loan originations	0	0
Derecognitions and maturities	0	0
Provision for (recovery of) credit losses	(3)	0
Write-offs	0	0
Recoveries	0	0
Balance at end of period	0	0
Public sector and other financing [member] | Loans [member] | Financial instruments credit-impaired [member]
Statement Line Items [Line Items]
Balance at beginning of period	0	0
Transfer in (out) to Stage 1	0	0
Transfer in (out) to Stage 2	0	0
Transfer in (out) to Stage 3	0	0
Net remeasurement of loss allowance	0	0
Loan originations	0	0
Derecognitions and maturities	0	0
Provision for (recovery of) credit losses	0	0
Write-offs	0	0
Recoveries	0	0
Balance at end of period	$ 0	$ 0

XML

Note 5 - Other Assets (Details Textual) - Canada Stablecorp Inc.[member]	1 Months Ended
	Feb. 28, 2021 CAD ($)
Statement Line Items [Line Items]
Proportion of ownership interest in associate	11.00%
Purchase of interests in associates	$ 953,000

XML

Note 5 - Other Assets - Schedule of Other Assets (Details) - CAD ($) $ in Thousands	Jan. 31, 2022	Oct. 31, 2021	Jan. 31, 2021
Statement Line Items [Line Items]
Accounts receivable	$ 2,938	$ 2,643	$ 2,604
Prepaid expenses and other	16,881	12,699	9,726
Property and equipment	6,905	7,075	7,643
Right-of-use assets	4,643	4,817	5,337
Deferred income tax asset	2,868	2,931	4,286
Investment	953	953	0
Goodwill	5,754	5,754	5,754
Intangible assets	3,527	3,641	3,886
Total other assets	$ 44,469	$ 40,513	$ 39,236

XML

Note 6 - Subordinated Notes Payable - Schedule of Subordinated Notes Payable (Details) - CAD ($) $ in Thousands	Jan. 31, 2022	Oct. 31, 2021	Jan. 31, 2021
Subordinated notes payable, maturing March 2029 [member]
Statement Line Items [Line Items]
Ten year term, unsecured, non-viability contingent capital compliant, subordinated notes payable, principal amount of $5.0 million, $500,000 is held by related party (note 12), effective interest rate of 10.41%, maturing March 2029.	$ 4,901	$ 4,898	$ 4,891
Subordinated notes payable, maturing May 2031 [member]
Statement Line Items [Line Items]
Ten year term, unsecured, non-viability contingent capital compliant, subordinated notes payable, principal amount of $5.0 million, $500,000 is held by related party (note 12), effective interest rate of 10.41%, maturing March 2029.	92,825	90,374	0
Subordinated notes payable [member]
Statement Line Items [Line Items]
Ten year term, unsecured, non-viability contingent capital compliant, subordinated notes payable, principal amount of $5.0 million, $500,000 is held by related party (note 12), effective interest rate of 10.41%, maturing March 2029.	$ 97,726	$ 95,272	$ 4,891

XML

Note 6 - Subordinated Notes Payable - Schedule of Subordinated Notes Payable (Details) (Parentheticals) - CAD ($) $ in Millions	3 Months Ended		12 Months Ended
	Jan. 31, 2022	Jan. 31, 2021	Oct. 31, 2021
Subordinated notes payable, maturing March 2029 [member]
Statement Line Items [Line Items]
Term (Year) (Year)	10 years	10 years	10 years
Principal amount	$ 5.0	$ 5.0	$ 5.0
Interest rate	10.41%	10.41%	10.41%
Maturity date	Mar. 31, 2029	Mar. 31, 2029	Mar. 31, 2029
Subordinated notes payable, maturing March 2029 [member] | Key management personnel of entity or parent [member]
Statement Line Items [Line Items]
Principal amount	$ 0.5	$ 0.5	$ 0.5
Subordinated notes payable, maturing May 2031 [member]
Statement Line Items [Line Items]
Term (Year) (Year)	10 years	10 years	10 years
Principal amount	$ 75.0	$ 75.0	$ 75.0
Interest rate	5.38%	5.38%	5.38%
Maturity date	May 31, 2031	May 31, 2031	May 31, 2031

XML

Note 7 - Other Liabilities - Schedule of Other Liabilities (Details) - CAD ($) $ in Thousands	Jan. 31, 2022	Oct. 31, 2021	Jan. 31, 2021
Statement Line Items [Line Items]
Accounts payable and other	$ 6,155	$ 6,893	$ 5,359
Current income tax liability	1,975	2,949	1,052
Deferred income tax liability	855	898	898
Lease obligations	4,944	5,113	5,598
Cash collateral and amounts held in escrow	5,252	7,887	3,379
Cash reserves on loan and lease receivables	114,485	110,764	99,597
Other liabilities	$ 133,666	$ 134,504	$ 115,883

XML

Note 8 - Share Capital (Details Textual)		3 Months Ended
	Apr. 30, 2021 CAD ($) $ / shares shares	Jan. 31, 2022 CAD ($) $ / shares shares	Jan. 31, 2021 CAD ($)	Oct. 31, 2021 shares	Oct. 31, 2020
Statement Line Items [Line Items]
Term of share option for share-based payment arrangement (Year)		5 years
Vesting period of share options for share-based payment arrangement (Year)		3 years
Maximum number of instruments authorized in share-based payment arrangement (in shares)		1,240,000
Number of share options outstanding in share-based payment arrangement at end of period		953,730	42,017	40,000	42,017
Total expense from share-based payment transactions in which goods or services received did not qualify for recognition as assets | $		$ 196,000	$ 0
Number of share options granted in share-based payment arrangement		913,730	0
Risk free interest rate, share options granted		1.26%
Option life, share options granted		3.5
Expected volatility, share options granted		29.50%
Expected dividend as percentage, share options granted		0.64%
Forfeiture rate, share options granted		2.00%
Weighted average share price, share options granted (in CAD per share) | $ / shares		$ 3.10
Number of share options exercisable in share-based payment arrangement		40,000
Weighted average exercise price of share options exercisable in share-based payment arrangement (in CAD per share) | $ / shares		$ 7.00
Ordinary shares [member]
Statement Line Items [Line Items]
Number of shares outstanding at end of period (in shares)		27,441,082		27,441,082
Series 1 preferred shares [member]
Statement Line Items [Line Items]
Number of shares outstanding at end of period (in shares)		1,461,460		1,461,460
Series 3 preferred shares [member]
Statement Line Items [Line Items]
Number of shares outstanding at end of period (in shares)	1,681,320			0
Preference shares, conversion price (in CAD per share) | $ / shares	$ 10.00
Payments for redemption of preference shares | $	$ 16,800,000
Share issue related cost | $	$ 1,100,000

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Note 8 - Share Capital - Stock Option Transactions (Details)	3 Months Ended
	Jan. 31, 2022 $ / shares	Jan. 31, 2021 $ / shares
Statement Line Items [Line Items]
Outstanding, beginning of period	40,000	42,017
Outstanding, beginning of period, weighted average exercise price (in CAD per share)	$ 7.00	$ 10.73
Granted	913,730	0
Granted, weighted average exercise price (in CAD per share)	$ 15.90	$ 0
Exercised	0	0
Exercised, weighted average exercise price (in CAD per share)	$ 0	$ 0
Forfeired/cancelled	0	0
Forfeired/cancelled, weighted average exercise price (in CAD per share)	$ 0	$ 0
Expired	0	0
Expired, weighted average exercise price (in CAD per share)	$ 0	$ 0
Outstanding, end of period	953,730	42,017
Outstanding, end of period, weighted average exercise price (in CAD per share)	$ 15.53	$ 10.73

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Note 9 - Income Tax Provision (Details Textual) - CAD ($) $ in Thousands	3 Months Ended
	Jan. 31, 2022	Jan. 31, 2021
Statement Line Items [Line Items]
Tax income (expense)	$ 2,062	$ 1,988
Applicable tax rate	27.00%	27.00%

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Note 10 - Income Per Common Share - Basic and Diluted Income Per Common Share (Details) - CAD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Jan. 31, 2022	Jan. 31, 2021
Statement Line Items [Line Items]
Net income	$ 5,566	$ 5,290
Less: dividends on preferred shares	(247)	(542)
Profit (loss), attributable to ordinary equity holders of parent entity	$ 5,319	$ 4,748
Weighted average number of common shares outstanding (in shares)	27,441,082	21,123,559
Income per common share: (in CAD per share)	$ 0.19	$ 0.22

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Note 11 - Commitments and Contingencies - Credit Related Commitments (Details) - CAD ($) $ in Thousands	Jan. 31, 2022	Oct. 31, 2021	Jan. 31, 2021
Statement Line Items [Line Items]
Credit commitments	$ 366,895	$ 342,710	$ 318,977
Loan commitments [member]
Statement Line Items [Line Items]
Credit commitments	315,764	296,248	270,687
Letters of credit [member]
Statement Line Items [Line Items]
Credit commitments	$ 51,131	$ 46,462	$ 48,290

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Note 12 - Related Party Transactions (Details Textual) - CAD ($)	3 Months Ended
	Jan. 31, 2022	Jan. 31, 2021	Mar. 31, 2019
Statement Line Items [Line Items]
Revenue from rendering of services, related party transactions	$ 24,000	$ 17,000
Subordinated notes payable [member]
Statement Line Items [Line Items]
Notional amount			$ 5,000,000.0
Key management personnel of entity or parent [member]
Statement Line Items [Line Items]
Amounts receivable, related party transactions	1,400,000	1,400,000
Allowance account for credit losses of financial assets at end of period	0	0
Key management personnel of entity or parent [member] | Subordinated notes payable [member]
Statement Line Items [Line Items]
Notional amount			$ 500,000
Corporation controlled by key management personnel [member]
Statement Line Items [Line Items]
Amounts receivable, related party transactions	$ 2,400,000	$ 2,400,000

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Note 13 - Capital Management (Details Textual)	Jan. 31, 2022
Statement Line Items [Line Items]
Maximum percentage of credit risk-weighted assets for allowance	1.25%
Required minimum capital ratio, common equity tier 1	7.00%
Required minimum capital ratio, tier 1 capital	8.50%
Required minimum capital ratio, total capital	10.50%
Capital conservation buffer	2.50%
Minimum leverage ratio	3.00%

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Note 13 - Capital Management - Risk-based Capital Ratios (Details) - CAD ($) $ in Thousands	Jan. 31, 2022	Oct. 31, 2021	Jan. 31, 2021
Statement Line Items [Line Items]
Directly issued capital instruments	$ 241,662	$ 241,466	$ 182,094
Retained earnings	95,276	90,644	77,414
Accumulated other comprehensive income	13	(4)	0
Regulatory capital		418,718
Total risk-weighted assets		$ 2,013,544
CET1 capital ratio		20.80%
Total assets	2,415,346	$ 2,415,086	$ 2,044,976
Transitional [member]
Statement Line Items [Line Items]
Regulatory capital	426,237
Total risk-weighted assets	$ 2,095,335
CET1 capital ratio	20.34%
Basel III [member]
Statement Line Items [Line Items]
Total assets		2,415,086
Total on-balance sheet exposures		2,402,335
Total off-balance sheet exposure at gross notional amount	$ 366,895	342,710
Adjustments for conversion to credit equivalent amount		210,065
Total off-balance sheet exposures	153,976	132,645
Total exposures		$ 2,534,980
Leverage ratio		12.60%
Basel III [member] | Transitional [member]
Statement Line Items [Line Items]
Total assets	2,415,346
Total on-balance sheet exposures	2,402,867
Adjustments for conversion to credit equivalent amount	212,919
Total exposures	$ 2,556,843
Leverage ratio	12.69%
Common equity tier 1 [member]
Statement Line Items [Line Items]
Directly issued capital instruments		$ 227,819
Retained earnings		90,644
Accumulated other comprehensive income		(4)
Regulatory capital before adjustments		318,459
Adjustments to capital		(12,751)
Regulatory capital		$ 305,708
CET1 capital ratio		15.18%
Common equity tier 1 [member] | Transitional [member]
Statement Line Items [Line Items]
Directly issued capital instruments	$ 228,015
Retained earnings	95,276
Accumulated other comprehensive income	13
Regulatory capital before adjustments	323,304
Adjustments to capital	(12,479)
Regulatory capital	$ 310,825
CET1 capital ratio	14.83%
Capital Tier 1 [member]
Statement Line Items [Line Items]
Directly issued capital instruments		$ 13,647
Regulatory capital		$ 319,355
CET1 capital ratio		15.86%
Capital Tier 1 [member] | Transitional [member]
Statement Line Items [Line Items]
Directly issued capital instruments	$ 13,647
Regulatory capital	$ 324,472
CET1 capital ratio	15.49%
Tier 2 capital [member]
Statement Line Items [Line Items]
Directly issued capital instruments	$ 100,310	$ 97,910
Regulatory capital before adjustments		97,910
Adjustments to capital		1,453
Regulatory capital		$ 99,363
Tier 2 capital [member] | Transitional [member]
Statement Line Items [Line Items]
Regulatory capital before adjustments	100,310
Adjustments to capital	1,455
Regulatory capital	$ 101,765

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Note 14 - Interest Rate Risk Position - Analysis of Sensitivity to Market Interest Rates (Details) - Interest rate risk [member] - CAD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Jan. 31, 2022	Oct. 31, 2021
Increase 100 bps [member]
Statement Line Items [Line Items]
Impact on projected net interest income during a 12 month period	$ 3,951	$ 4,147
Impact on reported equity during a 60 month period	$ 717	$ 1,603
Duration difference between assets and liabilities (months) (Month)	2 months	2 months 9 days
Decrease 100 bps [member]
Statement Line Items [Line Items]
Impact on projected net interest income during a 12 month period	$ (3,951)	$ (3,220)
Impact on reported equity during a 60 month period	$ (1,196)	$ (1,586)

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Note 15 - Fair Value of Financial Instruments - Fair Value of Financial Instruments (Details) - CAD ($) $ in Thousands	Jan. 31, 2022	Oct. 31, 2021
Deposits from banks [member]
Statement Line Items [Line Items]
Liabilities, book value	$ 1,847,003	$ 1,853,204
Liabilities, fair value	1,830,923	1,860,332
Subordinated notes [member]
Statement Line Items [Line Items]
Liabilities, book value	97,726	95,272
Liabilities, fair value	100,310	97,910
Other liabilities [member]
Statement Line Items [Line Items]
Liabilities, book value	130,836	130,657
Liabilities, fair value	130,836	130,657
Cash and cash equivalents [member]
Statement Line Items [Line Items]
Assets, book value	155,239	271,523
Assets, fair value	155,239	271,523
Loans, net [member]
Statement Line Items [Line Items]
Assets, book value	2,215,638	2,103,050
Assets, fair value	2,231,040	2,118,636
Other assets [member]
Statement Line Items [Line Items]
Assets, book value	3,891	3,596
Assets, fair value	$ 3,891	$ 3,596

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Note 16 - Operating Segmentation (Details Textual)	3 Months Ended
	Jan. 31, 2022
Statement Line Items [Line Items]
Number of segments	2

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Note 16 - Operating Segmentation - Results of Reportable Operating Segments (Details) - CAD ($) $ in Thousands	3 Months Ended
	Jan. 31, 2022	Jan. 31, 2021	Oct. 31, 2021
Statement Line Items [Line Items]
Net interest income	$ 16,885	$ 14,374
Non-interest income	1,381	1,048
Total revenue	18,266	15,422
Provision for (recovery of) credit losses	2	57
Revenue less provision for credit loss	18,264	15,365
Non-interest expenses:
Salaries and benefits	6,083	5,030
General and administrative	3,624	2,339
Premises and equipment	929	718
Noninterest expense	10,636	8,087
Income before income taxes	7,628	7,278
Income tax provision	2,062	1,988
Net income	5,566	5,290
Total assets	2,415,346	2,044,976	$ 2,415,086
Total liabilities	2,078,395	1,785,468	$ 2,082,980
Elimination of intersegment amounts [member]
Statement Line Items [Line Items]
Net interest income	0	0
Non-interest income	(41)	(28)
Total revenue	(41)	(28)
Provision for (recovery of) credit losses	0	0
Revenue less provision for credit loss	(41)	(28)
Non-interest expenses:
Salaries and benefits	0	0
General and administrative	(41)	(28)
Premises and equipment	0	0
Noninterest expense	(41)	(28)
Income before income taxes	0	0
Income tax provision	0	0
Net income	0	0
Total assets	(20,588)	(17,420)
Total liabilities	(19,443)	(16,275)
Banking segment [member] | Operating segments [member]
Statement Line Items [Line Items]
Net interest income	16,885	14,374
Non-interest income	0	(17)
Total revenue	16,885	14,357
Provision for (recovery of) credit losses	2	57
Revenue less provision for credit loss	16,883	14,300
Non-interest expenses:
Salaries and benefits	5,440	4,698
General and administrative	3,482	2,062
Premises and equipment	582	570
Noninterest expense	9,504	7,330
Income before income taxes	7,379	6,970
Income tax provision	1,961	1,853
Net income	5,418	5,117
Total assets	2,412,167	2,041,784
Total liabilities	2,072,691	1,781,121
Cybersecurity segment [member] | Operating segments [member]
Statement Line Items [Line Items]
Net interest income	0	0
Non-interest income	1,422	1,093
Total revenue	1,422	1,093
Provision for (recovery of) credit losses	0	0
Revenue less provision for credit loss	1,422	1,093
Non-interest expenses:
Salaries and benefits	643	332
General and administrative	183	305
Premises and equipment	347	148
Noninterest expense	1,173	785
Income before income taxes	249	308
Income tax provision	101	135
Net income	148	173
Total assets	23,767	20,612
Total liabilities	$ 25,147	$ 20,622