EQB delivers ROE ahead of target with record quarterly revenue and pre-provision pre-tax earnings and a 7% q/q and 22% y/y dividend increase

TORONTO, May 29, 2024 /PRNewswire/ – EQB Inc. (TSX: EQB) (TSX: EQB.PR.C)  today reported record revenue and pre-provision, pre-tax earnings for the three and six months ended April 30, 2024 that reflected growth in revenue from margin expansion and higher non-interest revenue including a full quarter of results from ACM Advisors, increasing loans under management and EQ Bank customers and deposits. Equitable Bank reported a net reduction in total Gross Impaired Loans (GILs) from the first quarter driven by a 22% reduction in commercial banking GILs.

EQB changed its fiscal year in 2023 to end October 31, resulting in a one-time 10-month transition year and a four-month final quarter of 2023. As a result, the comparisons below are shown year-over-year from the first quarter ending March 31, 2023, as the most similar and comparable three-month period (“y/y”).

Second quarter 2024 compared to first quarter of 2024 and 2023:

Adjusted ROE1 15.9% (reported 15.1%)
Adjusted diluted EPS1 $2.81, +2% q/q, +7% y/y (reported $2.67, +0.4% q/q, +4% y/y)
Revenue $317 million, +6% q/q, +20% y/y
Net Interest Margin 2.11%, +10 bps q/q, +16 bps y/y
PPPT: $173.5 million, +5% q/q, +20% y/y (reported $166.2 million, +4% q/q, +18% y/y)
Adjusted net income1 $111 million, +2% q/q, +9% y/y (reported $106 million, +1% q/q, +6% y/y)
Total AUM + AUA2 $123.5 billion, +4% q/q, +18% y/y
EQ Bank customer growth +7% q/q and +36% y/y to over 457,000 customers
Book value per share $73.73, +3% q/q, +14% y/y
Common share dividends $0.45 per share, +7% q/q, +22% y/y
Total capital ratio 15.3% with CET1 of 14.1%

Six months ended April 30, 2024 compared to six months ended March 31, 2023:

Adjusted ROE1 15.7% (reported 15.0%)
Adjusted diluted EPS1 $5.57, +9% y/y (reported $5.33, +41% y/y)
Adjusted net income1 $219.4 million, +13% y/y (reported $210.1 million, +45% y/y)

“The execution of our Challenger Bank strategy, guided by our approach to managing risk and allocating capital, is clearly and sustainably delivering exceptional customer and shareholder value,” said Andrew Moor, president and CEO. “With the momentum of our Second Chance campaign, over 31,000 new EQ Bank customers joined us for a discernably better banking experience. Arrears in the commercial loan book improved in the quarter, as expected, and we continue to expect moderation in PCLs in the second half of 2024. Continuing development of our EQ Bank digital banking platform with the launches of an innovative Notice Deposit Savings Account and EQ Bank for small business position us to deliver even more value for more customers and expand the value of the Bank’s franchise.”

1 Adjusted measures and ratios are Non-Generally Accepted Accounting Principles (GAAP) measures and ratios. Adjusted measures and ratios are calculated in the same manner as reported measures and ratios, except that financial information included in the calculation of adjusted measures and ratios is adjusted to exclude the impact of the Concentra Bank and ACM acquisition and integration related costs and other non-recurring items which management determines would have a significant impact on a reader’s assessment of business performance. For additional information and a reconciliation of reported results to adjusted results, see the “Non-GAAP financial measures and ratios” section.

2 These are non-GAAP measures, see the “Non-GAAP financial measures and ratios” section.

EQ Bank added over 31,000 customers in Q2 growing to 457,000, +7% q/q and +36% y/y

The “Second Chance” marketing campaign across English Canada with Eugene and Dan Levy and “Deuxième chance” across Québec with Diane Lavallée et Laurence Leboeuf continued to encourage Canadians to move on from their first-ever bank accounts to EQ Bank / Banque EQ’s Personal Account that combines the best features of high interest chequing with no fees
EQ Bank continues to challenge the status quo with the launch of an innovative Notice Deposit Savings Account, providing Canadians a new way to earn higher rates on their savings
An invite-only launch of EQ Bank’s Small Business banking solution was completed at the end of Q2, that will help Canadians manage day-to-day transactions, save and earn more with an easy, secure and differentiated experience. Later this summer this experience will be available to millions of eligible small business owners across Canada

Strong funding growth and diversification with EQ Bank increasing 4% q/q to $8.7 billion

Equitable Bank total deposits remain more than 95% term or insured and increased +6% q/q and +7% y/y to $33.6 billion, with EQ Bank deposits increasing $325 million in the second quarter
On April 8, Equitable Bank issued a $300 million fixed rate deposit note. This was the bank’s first issuance since 2022. The offer was 4.2 times oversubscribed and attracted a record 47 investors of which one-third were new to the Equitable Bank program. The successful issuance led to significant narrowing of the bank’s credit spread
On April 23, Equitable Bank completed the first-ever European Social Covered Bond issued by a Canadian Bank, raising a benchmark €500 million (CAD $735 million) in an 8 times over-subscribed issuance with 100+ investors of which approximately two-thirds are new to Equitable Bank’s Covered Bond Programme. Social bond issuance is a natural extension of the Bank’s sustainable business practices that enables it to further support lending activities with a social benefit
Equitable Bank holds $4.5 billion in liquid assets for regulatory purposes, which cover 74% of all demand deposits with sufficient contingency funding available to cover the balance

Personal Banking loans under management reach $32.8 billion with strong retention

Single family uninsured portfolio increased to $19.9 billion, +0.5% q/q, as strong customer retention offset the impact of slower housing market activity on new originations
Decumulation lending assets (including reverse mortgages and insurance lending) +10% q/q and +57% y/y to $1.7 billion, with growth accelerating as a result of successful consumer advertising that bolstered public awareness, strong broker service and value to the borrower

Commercial Banking loans under management +$1.5 billion q/q to $32.7 billion

The Bank continues to prioritize multi-unit residential lending in major cities across the country with nearly 77% of its total commercial loans under management (“LUM”) insured through various CMHC programs. Insured multi-unit residential LUM +7% q/q and +35% y/y to $22.6 billion
The Canadian commercial office real estate market continues to experience significant economic challenges; however, as part of the Bank’s risk appetite, only ~1% of the Bank’s loan assets are associated with offices, and those balances declined in the quarter. Equitable Bank’s office lending is mostly restricted to properties located in major urban centres and to smaller buildings

Provisions reflect credit risk at this point in the cycle, expected to moderate

The Bank is appropriately reserved for credit losses with net allowances as a percentage of total loan assets of 23 bps, compared to 22 bps at January 31, 2024, and 19 bps at March 31, 2023
Provision for credit losses (PCL) of $22.2 million in Q2 reflected the impacts of both future expected losses driven by macroeconomic forecasts and loss modelling, Stage 3 provisions of $11.1 million associated with residential and commercial lending, and provisions of $14.0 million associated with the equipment financing business. Realized loan losses excluding equipment financing were $1.8 million for the quarter, representing 0.4bps of lending assets
Net impaired loans decreased by $10.8 million to $441.9 million, representing 92 bps of total loan assets compared to 94 bps at January 31, 2024, and +60 bps from March 31, 2023. Net commercial impaired loans (excl. equipment financing) declined by $68.4 million to 133 bps from 183 bps at January 31, 2024 and up from 57 bps at March 31, 2023 with several commercial loans resolving

EQB increases common share dividend

EQB’s Board of Directors declared a dividend of $0.45 per common share payable on June 28, 2024, to shareholders of record as of June 14, 2024, representing a +7% increase from the dividend paid in March 2024 and 22% above the payment made in June 2023
The Board declared a quarterly dividend of $0.373063 per preferred share, payable on June 28, 2024, to shareholders of record at the close of business June 14, 2024
For the purposes of the Income Tax Act (Canada) and any similar provincial legislation, dividends declared are eligible dividends, unless otherwise indicated

“The first half of 2024 has been trending to our expectations with strong revenue, earnings growth and ROE well-above target at nearly 16% year-to-date. This reflects how the EQB business model is positioned to perform across economic cycles. We have momentum for strong performance in the second half of the year and have high confidence in the quality of our credit book.  We are continuing to invest in growing the long-term value of our Challenger franchise and are pleased to be rewarding our shareholders with another consecutive dividend increase,” said Chadwick Westlake, CFO, EQB.

Analyst conference call and webcast: 10:00 a.m. Eastern May 30, 2024

EQB’s Andrew Moor, president and CEO, Chadwick Westlake, CFO, and Marlene Lenarduzzi, CRO, will host the company’s second quarter conference call and webcast. The listen-only webcast with accompanying slides will be available at: eqb.investorroom.com. To access the conference call with operator assistance, dial 416-764-8609 five minutes prior to the start time.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Consolidated balance sheet (unaudited)

($000s) As at

April 30, 2024

October 31, 2023

March 31, 2023

Assets:

Cash and cash equivalents

657,219

549,474

345,621

Restricted cash

783,148

767,195

666,530

Securities purchased under reverse repurchase agreements

1,399,955

908,833

732,608

Investments

1,817,916

2,120,645

2,483,604

Loans – Personal

32,823,421

32,390,527

32,183,036

Loans – Commercial

15,085,481

14,970,604

14,397,192

Securitization retained interests

663,593

559,271

410,441

Deferred tax assets

14,921

14,230

15,024

Other assets

694,542

652,675

558,962

Total assets

53,940,196

52,933,454

51,793,018

Liabilities and Shareholders’ Equity

Liabilities:

Deposits

34,123,703

31,996,450

31,589,063

Securitization liabilities

15,181,341

14,501,161

15,311,657

Obligations under repurchase agreements

1,128,238

904,658

Deferred tax liabilities

148,549

128,436

92,417

Funding facilities

839,841

1,731,587

768,717

Other liabilities

630,954

602,039

515,871

Total liabilities

50,924,388

50,087,911

49,182,383

Shareholders’ Equity:

Preferred shares

181,411

181,411

181,411

Common shares

495,707

471,014

463,862

Contributed (deficit) surplus

(24,811)

12,795

12,002

Retained earnings

2,359,116

2,185,480

1,954,394

Accumulated other comprehensive loss

(7,804)

(5,157)

(1,034)

3,003,619

2,845,543

2,610,635

Non-controlling interests

12,189

Total equity

3,015,808

2,845,543

2,610,635

Total liabilities and equity

53,940,196

52,933,454

51,793,018

Consolidated statement of income (unaudited)

Three months ended

Six months ended

($000s, except per share amounts)

April 30, 2024

March 31, 2023

April 30, 2024

March 31, 2023

Interest income:

Loans – Personal

482,299

391,816

951,253

719,412

Loans – Commercial

257,842

241,768

520,723

460,196

Investments

16,879

21,893

34,755

32,647

Other

27,209

17,352

49,308

36,650

784,229

672,829

1,556,039

1,248,905

Interest expense:

Deposits

366,002

293,231

724,564

537,644

Securitization liabilities

131,776

118,174

259,029

211,337

Funding facilities

13,521

7,918

28,804

18,942

Other

5,592

12,709

20,294

21,860

516,891

432,032

1,032,691

789,783

Net interest income

267,338

240,797

523,348

459,122

Non-interest revenue:

Fees and other income

20,564

13,898

37,179

24,401

Net gains (losses) on loans and investments

7,129

(3,300)

12,122

(8,514)

Gain on sale and income from retained interests

23,177

14,332

42,586

23,579

Net (losses) gains on securitization activities and

derivatives

(1,548)

2,104

197

3,950

49,322

27,034

92,084

43,416

Revenue

316,660

267,831

615,432

502,538

Provision for credit losses

22,217

6,248

37,752

33,044

Revenue after provision for credit losses

294,443

261,583

577,680

469,494

Non-interest expenses:

Compensation and benefits

66,961

58,362

132,330

123,361

Other

83,459

68,186

157,575

142,367

150,420

126,548

289,905

265,728

Income before income taxes

144,023

135,035

287,775

203,766

Income taxes:

Current

32,734

28,651

71,268

50,805

Deferred

5,573

6,865

6,409

7,623

38,307

35,516

77,677

58,428

Net income

105,716

99,519

210,098

145,338

Dividends on preferred shares

2,346

2,318

4,703

4,623

Net income available to common shareholders and non-

controlling interests

103,370

97,201

205,395

140,715

Net income attributable to:

Common shareholders

103,041

97,201

204,916

140,715

Non-controlling interests

329

479

103,370

97,201

205,395

140,715

Earnings per share:

Basic

2.70

2.58

5.38

3.81

Diluted

2.67

2.56

5.33

3.78

Consolidated statement of comprehensive income (unaudited)

Three months ended

Six months ended

($000s)

April 30, 2024

March 31, 2023

April 30, 2024

March 31, 2023

Net income

105,716

99,519

210,098

145,338

Other comprehensive income – items that will be reclassified subsequently to income:

Debt instruments at Fair Value through Other Comprehensive Income:

Reclassification of losses from AOCI on sale of investments

(30)

(143)

Net unrealized (losses) gains from change in fair value

(16,240)

14,974

25,321

13,186

Reclassification of net losses (gains) to income

17,217

(12,205)

(18,497)

(8,220)

Other comprehensive income – items that will not be reclassified subsequently to income:

Equity instruments designated at Fair Value through Other Comprehensive Income:

Reclassification of gains from AOCI on sale of investments

604

Net unrealized gains (losses) from change in fair value

3,132

(793)

1,552

(2,336)

Reclassification of net (gains) losses to retained earnings

(22)

776

4,079

1,954

8,233

4,010

Income tax expense

(1,090)

(542)

(2,233)

(727)

2,989

1,412

6,000

3,283

Cash flow hedges:

Net unrealized gains (losses) from change in fair value

11,961

(15,802)

(269)

(10,752)

Reclassification of net gains to income

(5,070)

(651)

(11,764)

(2,047)

6,891

(16,453)

(12,033)

(12,799)

Income tax (expense) recovery

(1,879)

4,569

3,282

3,611

5,012

(11,884)

(8,751)

(9,188)

Total other comprehensive income (loss)

8,001

(10,472)

(2,751)

(5,905)

Total comprehensive income

113,717

89,047

207,347

139,433

Total comprehensive income attributable to:

Common shareholders

113,388

89,047

206,868

139,433

Non-controlling interests

329

479

113,717

89,047

207,347

139,433

Consolidated statement of changes in shareholders’ equity (unaudited)

($000s) Three-month period ended

April 30, 2024

Preferred
Shares

Common
Shares

ContributedDeficit

Retained
Earnings

Accumulated other comprehensive
income (loss)

Cash
Flow
Hedges

Financial
Instruments
at FVOCI

Total

Attributable
to equity
holders

Non-controlling
interests

Total

Balance, beginning of period

181,411

489,944

(23,055)

2,272,116

29,855

(45,681)

(15,826)

2,904,590

12,460

2,917,050

Net Income

105,387

105,387

329

105,716

Transfer of AOCI losses to income

21

21

21

21

Other comprehensive loss, net of tax

5,012

2,989

8,001

8,001

8,001

Exercise of stock options

4,881

4,881

4,881

Dividends:

Preferred shares

(2,346)

(2,346)

(2,346)

Common shares

(16,041)

(16,041)

(600)

(16,641)

Share tender rights

(1,974)

(1,974)

(1,974)

Stock-based compensation

1,100

1,100

1,100

Transfer relating to the exercise of stock options

882

(882)

Balance, end of period

181,411

495,707

(24,811)

2,359,116

34,867

(42,671)

(7,804)

3,003,619

12,189

3,015,808

($000s) Three-month period ended

March 31, 2023

Preferred
Shares

Common
Shares

Contributed
Surplus

Retained
Earnings

Accumulated other comprehensive
income (loss)

Cash
Flow
Hedges

Financial
Instruments
at FVOCI

Total

Attributable
to equity
holders

Non-controlling
interests

 

 

Total

Balance, beginning of period

181,411

462,561

11,445

1,870,100

42,016

(32,578)

9,438

2,534,955

2,534,955

Net Income

99,519

99,519

99,519

Realized gain on sale of financial instruments

271

271

271

Other comprehensive loss, net of tax

(11,884)

1,412

(10,472)

(10,472)

(10,472)

Exercise of stock options

3,763

3,763

3,763

Share issuance cost, net of tax

(2,908)

(2,908)

(2,908)

Dividends:

Preferred shares

(2,318)

(2,318)

(2,318)

Common shares

(13,178)

(13,178)

(13,178)

Stock-based compensation

1,003

1,003

1,003

Transfer relating to the exercise of stock options

446

(446)

Balance, end of period

181,411

463,862

12,002

1,954,394

30,132

(31,166)

(1,034)

2,610,635

2,610,635

($000s) Six-month period ended

April 30, 2024

Preferred
Shares

Common
Shares

Contributed Surplus

(Deficit)

Retained
Earnings

Accumulated other comprehensive
income (loss)

Cash
Flow
Hedges

Financial
Instruments
at FVOCI

Total

Attributable
to equity
holders

Non-controlling
interests

Total

Balance, beginning of period

181,411

471,014

12,795

2,185,480

43,618

(48,775)

(5,157)

2,845,543

2,845,543

Non-controlling interests on acquisition

12,310

12,310

Net Income

209,619

209,619

479

210,098

Transfer of AOCI losses to income

104

104

104

104

Other comprehensive loss, net of tax

(8,751)

6,000

(2,751)

(2,751)

(2,751)

Common shares issued

11,000

11,000

11,000

Exercise of stock options

11,839

11,839

11,839

Dividends:

Preferred shares

(4,703)

(4,703)

(4,703)

Common shares

(31,280)

(31,280)

(600)

(31,880)

Share tender rights

(37,865)

(37,865)

(37,865)

Stock-based compensation

2,113

2,113

2,113

Transfer relating to the exercise of stock options

1,854

(1,854)

Balance, end of period

181,411

495,707

(24,811)

2,359,116

34,867

(42,671)

(7,804)

3,003,619

12,189

3,015,808

($000s) Six-month period ended

March 31, 2023

Preferred
Shares

Common
Shares

Contributed
Surplus

Retained
Earnings

Accumulated other comprehensive
income (loss)

Cash
Flow
Hedges

Financial
Instruments
at FVOCI

Total

Attributable
to equity
holders

Non-

controlling
interests

 

 

Total

Balance, beginning of period

70,424

236,368

10,908

1,839,561

39,320

(34,928)

4,392

2,161,653

2,161,653

Net Income

145,338

145,338

145,338

Realized gain on sale of financial instruments

(317)

(317)

(317)

Transfer of AOCI losses to retained earnings

446

446

446

446

Investment elimination on acquisition

33

33

33

33

Other comprehensive loss, net of tax

(9,188)

3,283

(5,905)

(5,905)

(5,905)

Common shares issued

223,112

223,112

223,112

Exercise of stock options

7,196

7,196

7,196

Share issuance cost, net of tax

(2,908)

(2,908)

(2,908)

Dividend payout from principal

(655)

(655)

(655)

Dividends:

Preferred shares

(4,623)

(4,623)

(4,623)

Common shares

(25,565)

(25,565)

(25,565)

Stock-based compensation

1,843

1,843

1,843

Transfer relating to the exercise of stock options

749

(749)

Shares on acquisition

110,987

110,987

110,987

Balance, end of period

181,411

463,862

12,002

1,954,394

30,132

(31,166)

(1,034)

2,610,635

2,610,635

Consolidated statement of cash flows (unaudited)

Three months ended

Six months ended

($000s) 

April 30, 2024

March 31, 2023

April 30, 2024

March 31, 2023

CASH FLOWS FROM OPERATING ACTIVITIES

Net income

105,716

99,519

210,098

145,338

Adjustments for non-cash items in net income:

Financial instruments at fair value through income

(5,177)

(38,426)

11,360

(46,628)

Amortization of premiums/discount on investments

(34,159)

1,784

(31,029)

2,058

Amortization of capital assets and intangible costs

11,679

12,244

23,120

31,374

Provision for credit losses

22,217

6,248

37,752

33,044

Securitization gains

(17,486)

(12,745)

(32,002)

(19,942)

Stock-based compensation

1,100

1,003

2,113

1,843

Income taxes

38,307

35,516

77,677

58,428

Securitization retained interests

30,701

19,857

58,634

35,054

Changes in operating assets and liabilities:

Restricted cash

(120,389)

71,126

(15,953)

(36,822)

Securities purchased under reverse repurchase agreements

(594,342)

(532,176)

(491,122)

17,464

Loans receivable, net of securitizations

(222,907)

(54,117)

(715,022)

(1,192,508)

Other assets

(7,205)

(26,449)

(8,531)

149,593

Deposits

1,887,780

503,951

2,089,142

921,190

Securitization liabilities

(205,820)

284,388

677,411

964,786

Obligations under repurchase agreements

(482,574)

239,351

(1,128,238)

155,777

Funding facilities

(493,062)

(470,987)

(891,746)

(385,673)

Subscription receipts

(232,018)

Other liabilities

47,598

(51,115)

41,636

(187,287)

Income taxes paid

(23,962)

(47,517)

(50,074)

(78,426)

Cash flows (used in) from operating activities

(61,985)

41,455

(134,774)

336,645

CASH FLOWS FROM FINANCING ACTIVITIES

    Proceeds from issuance of common shares

4,881

855

22,839

226,745

    Term loan facility

275,000

    Dividends paid on preferred shares

(2,346)

(2,318)

(4,703)

(4,622)

    Dividends paid on common shares

(16,041)

(13,178)

(31,280)

(25,565)

Cash flows used in financing activities

(13,506)

(14,641)

(13,144)

471,558

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of investments

(8,004)

(547,308)

(344,423)

(1,065,737)

Acquisition of subsidiary

45

(75,483)

(495,369)

Proceeds on sale or redemption of investments

191,245

388,062

656,646

669,824

Net change in Canada Housing Trust re-investment accounts

28,954

(8,817)

46,959

168,640

Purchase of capital assets and system development costs

(23,289)

(8,236)

(28,036)

(38,939)

Cash flows from (used in) investing activities

188,951

(176,299)

255,663

(761,581)

Net increase (decrease) in cash and cash equivalents

113,460

(149,485)

107,745

46,622

Cash and cash equivalents, beginning of period

543,759

495,106

549,474

298,999

Cash and cash equivalents, end of period

657,219

345,621

657,219

345,621

Cash flows from operating activities include:

Interest received

846,075

489,824

1,534,404

1,004,403

Interest paid

(443,052)

(234,912)

(814,672)

(378,241)

Dividends received

564

1,041

1,113

2,086

About EQB Inc.

EQB Inc. (TSX: EQB and EQB.PR.C) is a leading digital financial services company with $123 billion in combined assets under management and administration (as at April 30, 2024). It offers banking services through Equitable Bank, a wholly owned subsidiary and Canada’s seventh largest bank by assets, and wealth management through ACM Advisors, a majority owned subsidiary specializing in alternative assets. As Canada’s Challenger Bank™, Equitable Bank has a clear mission to drive change in Canadian banking to enrich people’s lives. It leverages technology to deliver exceptional personal and commercial banking experiences and services to over 639,000 customers and more than six million credit union members through its businesses. Through its digital EQ Bank platform (eqbank.ca), its customers have named it one of Canada’s top banks on the Forbes World’s Best Banks list since 2021.

Please visit eqb.investorroom.com for more details.

Investor contact:
David Lee
Associate Director, Investor Relations
[email protected] 

Media contact:
Maggie Hall
Director, PR & Communications
[email protected]  

Cautionary Note Regarding Forward-Looking Statements

Statements made by EQB in the sections of this news release, in other filings with Canadian securities regulators and in other communications include forward-looking statements within the meaning of applicable securities laws (forward-looking statements). These statements include, but are not limited to, statements about EQB’s objectives, strategies and initiatives, financial performance expectations and other statements made herein, whether with respect to EQB’s businesses or the Canadian economy. Generally, forward-looking statements can be identified by the use of forward-looking terminology such as “plans”, “expects” or “does not expect”, “is expected”, “budget”, “scheduled”, “planned”, “estimates”, “forecasts”, “intends”, “anticipates” or “does not anticipate”, or “believes”, or variations of such words and phrases which state that certain actions, events or results “may”, “could”, “would”, “might” or “will be taken”, “occur” or “be achieved”, or other similar expressions of future or conditional verbs. Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, closing of transactions, performance or achievements of EQB to be materially different from those expressed or implied by such forward-looking statements, including but not limited to risks related to capital markets and additional funding requirements, fluctuating interest rates and general economic conditions, legislative and regulatory developments, changes in accounting standards, the nature of our customers and rates of default, and competition as well as those factors discussed under the heading “Risk Management” in the MD&A and in EQB’s documents filed on SEDAR at www.sedar.com. All material assumptions used in making forward-looking statements are based on management’s knowledge of current business conditions and expectations of future business conditions and trends, including their knowledge of the current credit, interest rate and liquidity conditions affecting EQB and the Canadian economy. Although EQB believes the assumptions used to make such statements are reasonable at this time and has attempted to identify in its continuous disclosure documents important factors that could cause actual results to differ materially from those contained in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. Certain material assumptions are applied by EQB in making forward-looking statements, including without limitation, assumptions regarding its continued ability to fund its mortgage business, a continuation of the current level of economic uncertainty that affects real estate market conditions, continued acceptance of its products in the marketplace, as well as no material changes in its operating cost structure and the current tax regime. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. EQB does not undertake to update any forward-looking statements that are contained herein, except in accordance with applicable securities laws.

Non-Generally Accepted Accounting Principles (GAAP) Financial Measures and Ratios

In addition to GAAP prescribed measures, this news release references certain non-GAAP measures, including adjusted financial results, that we believe provide useful information to investors regarding EQB’s financial condition and results of operations. Readers are cautioned that non-GAAP measures often do not have any standardized meaning, and therefore, are unlikely to be comparable to similar measures presented by other companies.

Adjustments listed below are presented on a pre-tax basis:

Q2 2024

$5.7 million non-recurring expenses and acquisition and integration-related costs associated with Concentra and ACM; and
$1.6 million intangible asset amortization.

Q1 2024

$2.1 million acquisition and integration-related costs associated with Concentra and ACM, and
$3.4 million intangible asset amortization.

Q1 2023

$3.2 million net fair value amortization adjustments,
$4.7 million acquisition and integration-related costs, and
$1.5 million intangible asset amortization.

The following table presents a reconciliation of GAAP reported financial results to non-GAAP adjusted financial results.

Reconciliation of reported and adjusted financial results

For the three months ended

For the six months ended

($000, except share and per share amounts)

30-Apr-24

31-Jan-24

31-Mar-23

30-Apr-24

31-Mar-23

Reported results

Net interest income

267,338

256,010

240,797

523,348

459,122

Non-interest revenue

49,322

42,762

27,034

92,084

43,416

Revenue

316,660

298,772

267,831

615,432

502,538

Non-interest expense

150,420

139,485

126,548

289,905

265,728

Pre-provision pre-tax income(3)

166,240

159,287

141,283

325,527

236,810

Provision for credit loss

22,217

15,535

6,248

37,752

33,044

Income tax expense

38,307

39,370

35,516

77,677

58,428

Net income

105,716

104,382

99,519

210,098

145,338

Net income available to common shareholders

103,041

101,875

97,201

204,916

140,715

Adjustments

Net interest income – earned on the escrow account

(2,220)

Net interest income – fair value amortization/adjustments

(4,167)

(843)

Net interest income – paid to subscription receipt holders

(654)

Non-interest revenue – fair value amortization/adjustments

941

876

Non-interest expenses – non-recurring and acquisition-related costs(1)

(5,710)

(2,053)

(4,744)

(7,763)

(41,665)

Non-interest expenses – fair value amortization/adjustments

(66)

(66)

Non-interest expenses – intangible asset amortization

(1,599)

(3,398)

(1,476)

(4,997)

(1,476)

Provision for credit loss – purchased loans

(19,020)

Pre-tax adjustments – income before tax

7,309

5,451

3,060

12,760

59,386

Income tax expense – tax impact on above adjustments(2)

1,983

1,483

850

3,466

16,121

Income tax expense – 2022 tax rate adjustment

(5,621)

Post-tax adjustments – net income

5,326

3,968

2,210

9,294

48,886

Adjusted results

Net interest income

267,338

256,010

236,630

523,348

455,405

Non-interest revenue

49,322

42,762

27,975

92,084

44,292

Revenue

316,660

298,772

264,605

615,432

499,697

Non-interest expense

143,111

134,034

120,262

277,145

222,521

Pre-provision pre-tax income(3)

173,549

164,738

144,343

338,287

277,176

Provision for credit loss

22,217

15,535

6,248

37,752

14,024

Income tax expenses

40,290

40,853

36,366

81,143

68,928

Net income

111,042

108,350

101,729

219,392

194,224

Net income available to common shareholders

108,177

105,719

99,411

213,896

189,601

Diluted earnings per share

Weighted average diluted common shares outstanding

38,522,025

38,344,339

37,910,348

38,434,002

37,264,510

Diluted earnings per share – reported

2.67

2.66

2.56

5.33

3.78

Diluted earnings per share – adjusted

2.81

2.76

2.62

5.57

5.09

Diluted earnings per share – adjustment impact

0.14

0.10

0.06

0.24

1.31

(1) Includes non-recurring and acquisition and integration-related costs associated with Concentra Bank and ACM.

(2) Income tax expense associated with non-GAAP adjustment was calculated based on the statutory tax rate applicable for that period, taking into account the federal tax rate increase.

(3) This is a non-GAAP measure, see Other non-GAAP financial measures and ratios section.

Other non-GAAP financial measures and ratios:

Adjusted return on equity (ROE) is calculated on an annualized basis and is defined as adjusted net income available to common shareholders as a percentage of weighted average common shareholders’ equity (reported) outstanding during the period.
Assets under administration (AUA): is sum of (1) assets over which EQB’s subsidiaries have been named as trustee, custodian, executor, administrator, or other similar role; (2) loans held by credit unions for which EQB’s subsidiaries act as servicer.
Assets under management (AUM): is the sum of total balance sheet assets, loan principal derecognized but still managed by EQB, and assets managed on behalf on investors.
Liquid assets: is a measure of EQB’s cash or assets that can be readily converted into cash, which are held for the purposes of funding loans, deposit maturities, and the ability to collect other receivables and settle other obligations.
Loans under management (LUM): is the sum of loan principal reported on the consolidated balance sheet and loan principal derecognized but still managed by EQB.
Net interest margin (NIM): this profitability measure is calculated on an annualized basis by dividing net interest income by the average total interest earning assets for the period.
Pre-provision pre-tax income (PPPT): this is the difference between revenue and non-interest expenses.
Total loan assets: this is calculated on a gross basis (prior to allowance for credit losses) as the sum of both Loans – Personal and Loans – Commercial on the balance sheet and adding their associated allowance for credit losses.

SOURCE EQB Inc.

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