EQB announces 4% q/q and 24% y/y dividend increase bolstered by record Q3 adjusted revenue and earnings with ROE continuing ahead of 15%+ target

TORONTO, Aug. 28, 2024 /PRNewswire/ – EQB Inc. (TSX: EQB) (TSX: EQB.PR.C) today reported record revenue and earnings1 for the three and nine months ended July 31, 2024, that reflect growth in net interest income, loans under management and higher non-interest revenue reaching 17% of total revenue in the quarter, including contributions from its alternative asset management platform, ACM Advisors.

EQB changed its fiscal year in 2023 to end October 31, resulting in a one-time ten-month transition year and a four-month final quarter of 2023. As a result, the comparisons below are shown year-over-year from the second quarter ending June 30, 2023, as the most similar and comparable three-month period (“y/y”).

Third quarter 2024 compared to second quarter of 2024 and 2023:

Adjusted ROE2 15.9% (reported 15.2%)
Adjusted diluted EPS2 $2.96, +5% q/q, -1% y/y (reported $2.84, +6% q/q, -16% y/y)
Revenue $327.2 million, +3% q/q, +15% y/y
Net interest margin2 2.09%, -2 bps q/q, +10 bps y/y
PPPT4 $181.5 million, +5% q/q, +12% y/y (reported $176.7 million, +6% q/q, -5% y/y)
Adjusted net income2 $117.2 million, +6% q/q, +1% y/y (reported $112.2 million, +6% q/q, -14% y/y)
Total AUM + AUA2 $125.4 billion, +2% q/q, +16% y/y

EQ Bank customer growth +6% q/q and +32% y/y to over 485,000 customers
Book value per share $75.67, +3% q/q, +12% y/y
Common share dividends $0.47 per share declared, increasing 2 cents or +4% q/q, +24% y/y
Total capital ratio 16.6% with CET1 of 14.7%

Nine months ended July 31, 2024, compared to nine months ended June 30, 2023:

Adjusted ROE2 15.7% (reported 15.1%)
Adjusted diluted EPS2 $8.53, +6% y/y (reported $8.17, +14% y/y)
Adjusted net income2 $336.6 million, +9% y/y (reported $322.3 million, +17% y/y)

“This was another quarter of strong financial performance from Canada’s Challenger Bank™ despite the moderating effects of higher interest rates on real estate market activity,” said Andrew Moor, president and CEO, EQB. “Highlights included sequential earnings growth, ROE above our 15% target – consistent with our 10-year average – and continued expansion of EQ Bank’s customer base driven most recently by consumer demand for our new Notice Savings Account, the first-of-its-kind-in Canada with no fees or minimum balance requirements. PCLs also improved in line with our expectations, and we anticipate continued progress now that monetary policy is normalizing. This emerging backdrop is conducive to the return of more pronounced asset growth in fiscal 2025 as we help Canadians meet their needs for all forms of housing in a supply-constrained environment.”

1 Record quarterly performance excludes Q4 2023 which had four months due to the change of EQB’s fiscal year to end October 31.

2 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.

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

4 PPPT represents pre-provision-pre-tax income, a non-GAAP measure of financial performanc

EQ Bank welcomes over 28,000 customers in Q3 growing to 485,000, +6% q/q and +32% 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 led to a substantial increase in consumer awareness of EQ Bank and supported the rapid growth of new customer accounts as Canadians explored the advantages that accrue from using all-digital, interest-bearing accounts with no fees on everyday banking.
The recently launched and first-of-its-kind Notice Savings Account, with no fees or minimum balance requirements, pairs high interest rates with the flexibility to withdraw on short notice. It has proven to be attractive to both existing and new customers who now benefit from greater diversity in the savings product landscape.

Personal Banking loans under management reach $32.5 billion with strong retention

The single-family uninsured portfolio remained steady q/q at $19.8 billion, as strong customer retention offset the impact of slower housing market activity on new originations.
Decumulation lending assets (including reverse mortgages and insurance lending) +11% q/q and +56% y/y to $1.9 billion with growth accelerating as a result of successful consumer advertising that bolstered public awareness, strong broker service and value to borrowers.
The innovative Laneway House Mortgage, introduced subsequent to quarter-end, diversifies the Bank’s single-family solutions portfolio and improves options to borrowers in urban centres while helping to address access to housing. This dedicated construction financing loan, available through broker partners, supports Canadians wishing to expand living space, add additional rental income streams or downsize in place through secondary suites.

Commercial Banking loans under management +$1.6 billion q/q to $34.4 billion

EQB continues to prioritize insured multi-unit residential lending in major cities across the country with nearly 80% of its total commercial loans under management (LUM) insured through various CMHC programs. Insured multi-unit residential LUM +7% q/q and +33% y/y to $24.1 billion.
As a result of the Bank’s lending focus on properties where people live, it has very limited exposure to the Canadian commercial office real estate market (~0.5% of loan assets) and those balances declined in the quarter. Consistent with the Bank’s long-term risk appetite, commercial office lending is generally confined to multi-tenanted, mixed-used properties occupied by medical and professional businesses.

Provisions reflect credit risk at this point in the cycle

The Bank is appropriately reserved for credit losses with net allowances as a percentage of total loan assets of 26 bps, compared to 23 bps at April 30, 2024, and 20 bps at June 30, 2023.
Adjusted provision for credit losses (PCL)2 of $19.6 million (reported $21.3 million in Q3) reflected the impacts of improving macroeconomic forecasts and expected credit loss modelling, Stage 3 provisions of $4.5 million associated with residential and commercial lending and $16.0 million associated with the equipment financing business. Realized losses excluding equipment financing were $1.4 million, annualized 1 bp of lending assets.
Net impaired loans increased by $84.7 million to $526.6 million, which corresponds to 109 bps of total loan assets compared to 92 bps at April 30, 2024, and 47 bps from June 30, 2023. This increase is attributed to increases in Commercial lending with ~60% related to two commercial loans where the Bank does not expect to incur losses, as well as equipment finance and single-family residential.

EQB increases common share dividend

EQB’s Board of Directors declared a dividend of $0.47 per common share payable on September 30, 2024, to shareholders of record as of September 13, 2024, representing a 4% increase from the dividend paid in June 2024 and 24% above the payment made in September 2023.
On August 28, 2024, EQB’s Board suspended the Dividend Reinvestment Plan (DRIP) due to the strength of the Bank’s capital position and ability to confidently generate sufficient capital over the medium to long-term to support the growth of the Bank. EQB maintains the right to reinstate the DRIP in future periods.
The Board declared a quarterly dividend of $0.373063 per preferred share, payable on September 30, 2024, to shareholders of record at the close of business September 13, 2024.
For the purposes of the Income Tax Act (Canada) and any similar provincial legislation, dividends declared are eligible dividends, unless otherwise indicated.

EQB preferred share redemption

On September 30, 2024, EQB will redeem all of the 2,911,800 outstanding shares of its Non-Cumulative 5-Year Rate Reset Preferred Shares, Series 3 (the “Series 3 Preferred Shares”). The redemption price per share for the Series 3 Preferred Shares will be $25.00 for each Series 3 Preferred Share of the Company.
The Series 3 Preferred Shares are currently listed for trading on the Toronto Stock Exchange under the symbol EQB.PR.C and will be de-listed from the TSX, as at the close of trading on September 30, 2024. Beneficial holders of Series 3 Preferred Shares should contact the financial institution, broker or other intermediary through which they hold these shares to confirm how they will receive their redemption proceeds.

Fiscal 2024 earnings guidance now reflects year-to-date results with reaffirmed 15%+ ROE

With three quarters of the fiscal year complete, EQB today reaffirmed previously stated annual guidance for adjusted ROE of 15%+, as well as for pre-provision pre-tax income, dividend growth and CET1 capital.
Full year range for EPS, now $11.50-$11.75, and book value per share growth, now 11-13%, incorporate year-to-date results and trends including credit provision experience and for book value, includes the liability associated with the option EQB has to acquire the remaining interest in ACM.

“With three quarters of the fiscal year complete, we are trending well relative to expectations with record quarterly revenue and another quarter of ROE at nearly 16%,” said Chadwick Westlake, CFO, EQB. “We’ve built a resilient and diverse business model that should gain even more traction as economic activity improves and we enter a lower rate environment with higher consumer confidence. We remain focused on allocating capital to benefit long-term franchise value, while increasing our emphasis on business mix and operational effectiveness as we scale EQB.”

Analyst conference call and webcast: 7:00 a.m. ET August 29, 2024EQB’s Andrew Moor, president and CEO, Chadwick Westlake, CFO, and Marlene Lenarduzzi, CRO, will host the company’s third 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.

EQB renews its base shelf prospectusEQB has renewed its existing base shelf prospectus effective August 27, 2024, and filed and obtained a receipt for a short form base shelf prospectus (the “Shelf Prospectus”) with the Securities Commissions in each of the provinces and territories of Canada. With the Shelf Prospectus, EQB is allowed to make public offerings of common shares, preferred shares, debt securities, subscription receipts, warrants, share purchase contracts and units (the “Securities”) during the 25‐month period that the Shelf Prospectus is effective. The Securities may be offered in one or more offerings, separately or together, in separate series, in amounts, at prices and on terms to be determined based on market conditions at the time of sale, and set forth in an accompanying prospectus supplement. EQB has filed the Shelf Prospectus in order to maintain financial flexibility and to have the ability to offer Securities on an accelerated basis to fund current and future growth of the business. A copy of the Shelf Prospectus is available under the Company’s profile on www.sedarplus.ca.

This news release does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of Securities in any jurisdiction in which such offer, solicitation or sale would be unlawful. Further, this news release does not constitute an offer to sell or the solicitation of an offer to buy in the United States and the Securities referred to in this news release may not be offered or sold in the United States absent registration under the U.S. Securities Act of 1933 or pursuant to an applicable exemption from the registration requirements under the U.S. Securities Act of 1933 and applicable state securities laws.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Consolidated balance sheet (unaudited)

($000s) As at

July 31, 2024

October 31, 2023

June 30, 2023

Assets:

     Cash and cash equivalents

509,608

549,474

373,492

     Restricted cash

904,196

767,195

870,247

     Securities purchased under reverse repurchase agreements

1,339,578

908,833

1,208,930

     Investments

1,806,413

2,120,645

2,235,530

     Loans – Personal

32,584,931

32,390,527

32,333,611

     Loans – Commercial

15,372,643

14,970,604

15,103,519

     Securitization retained interests

738,986

559,271

474,542

     Deferred tax assets

30,481

14,230

14,392

     Other assets

782,900

652,675

704,440

Total assets

54,069,736

52,933,454

53,318,703

Liabilities and Shareholders’ Equity

Liabilities:

     Deposits

33,258,969

31,996,450

32,137,347

     Securitization liabilities

14,919,830

14,501,161

15,397,103

     Obligations under repurchase agreements

1,128,238

875,718

     Deferred tax liabilities

161,025

128,436

106,723

     Funding facilities

1,803,221

1,731,587

1,487,008

     Other liabilities

681,213

602,039

594,952

Total liabilities

50,824,258

50,087,911

50,598,851

Shareholders’ Equity:

     Preferred shares

181,411

181,411

181,411

     Common shares

501,594

471,014

466,711

     Other equity instruments

147,808

     Contributed (deficit) surplus

(25,801)

12,795

12,668

     Retained earnings

2,432,426

2,185,480

2,065,478

     Accumulated other comprehensive loss

(3,964)

(5,157)

(6,416)

3,233,474

2,845,543

2,719,852

Non-controlling interests

12,004

Total equity

3,245,478

2,845,543

2,719,852

Total liabilities and equity

54,069,736

52,933,454

53,318,703

Consolidated statement of income (unaudited)

Three months ended

Nine months ended

($000s, except per share amounts)

July 31, 2024

June 30, 2023

July 31, 2024

June 30, 2023

Interest income:

     Loans – Personal

501,420

420,578

1,452,673

1,139,990

     Loans – Commercial

256,788

256,731

777,511

716,927

     Investments

16,432

18,856

51,187

51,503

     Other

32,210

21,083

81,518

57,733

806,850

717,248

2,362,889

1,966,153

Interest expense:

     Deposits

387,208

322,503

1,111,772

860,147

     Securitization liabilities

132,810

118,416

391,839

329,753

     Funding facilities

12,773

11,891

41,577

30,817

     Other

2,692

12,739

22,986

34,615

535,483

465,549

1,568,174

1,255,332

Net interest income

271,367

251,699

794,715

710,821

Non-interest revenue:

     Fees and other income

22,561

14,489

59,740

38,890

     Net gains on loans and investments

6,145

29,659

18,267

21,145

     Gain on sale and income from retained interests

22,755

16,104

65,341

39,683

     Net gains on securitization activities and derivatives

4,410

596

4,607

4,546

55,871

60,848

147,955

104,264

Revenue

327,238

312,547

942,670

815,085

Provision for credit losses

21,274

13,042

59,026

46,086

Revenue after provision for credit losses

305,964

299,505

883,644

768,999

Non-interest expenses:

     Compensation and benefits

69,912

59,707

202,242

183,068

     Other

80,657

67,323

238,232

209,690

150,569

127,030

440,474

392,758

Income before income taxes

155,395

172,475

443,170

376,241

Income taxes:

     Current

44,083

26,612

115,351

77,417

     Deferred

(842)

14,938

5,567

22,561

43,241

41,550

120,918

99,978

Net income

112,154

130,925

322,252

276,263

Dividends on preferred shares

2,351

2,331

7,054

6,954

Net income available to common shareholders and non-controlling interests

109,803

128,594

315,198

269,309

Net income attributable to:

     Common shareholders

109,538

128,594

314,454

269,309

     Non-controlling interests

265

744

109,803

128,594

315,198

269,309

Earnings per share:

     Basic

2.86

3.41

8.24

7.24

     Diluted

2.84

3.39

8.17

7.18

Consolidated statement of comprehensive income (unaudited)

Three months ended

Nine months ended

($000s)

July 31, 2024

June 30, 2023

July 31, 2024

June 30, 2023

Net income

112,154

130,925

322,252

276,263

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

(1,591)

(1,734)

     Net unrealized gains (losses) gains from change in fair value

34,658

(31,474)

59,979

(19,372)

     Reclassification of net (gains) losses to income

(29,687)

32,302

(48,184)

25,165

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

Equity instruments designated at Fair Value through Other Comprehensive Income:

     Reclassification of (losses) gains from AOCI on sale of investments

(25,599)

(25,599)

604

     Net unrealized gains (losses) from change in fair value

534

(30,989)

2,086

(33,325)

     Reclassification of net losses to retained earnings

26,089

4,936

26,089

5,712

4,404

(25,225)

12,637

(21,216)

Income tax (expense) recovery

(1,194)

7,005

(3,427)

6,279

3,210

(18,220)

9,210

(14,937)

Cash flow hedges:

Net unrealized (losses) gains from change in fair value

(23,284)

28,856

(23,553)

18,090

Reclassification of net gains to income

(2,844)

(11,082)

(14,608)

(13,100)

(26,128)

17,774

(38,161)

4,990

Income tax recovery (expense)

7,084

(4,936)

10,366

(1,340)

(19,044)

12,838

(27,795)

3,650

Total other comprehensive loss

(15,834)

(5,382)

(18,585)

(11,287)

Total comprehensive income

96,320

125,543

303,667

264,976

Total comprehensive income attributable to:

Common shareholders

96,054

125,543

302,922

264,976

Non-controlling interests

265

744

96,319

125,543

303,666

264,976

Consolidated statement of changes in shareholders’ equity (unaudited)

($000s) Three-month period ended

July 31, 2024

Preferred
Shares

Common
Shares

Contributed
Deficit

Retained
Earnings

Accumulated other comprehensive
income (loss)

Other equity
instruments

Cash
Flow
Hedges

Financial
Instruments
at FVOCI

Total

Attributable
to equity
holders

Non-
controlling
interests

Total

Balance, beginning 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

Net Income

111,889

111,889

265

112,154

Realized loss on sale of shares, net of tax

(18,975)

(18,975)

(18,975)

Transfer of AOCI losses to retained earnings, net of tax

18,618

18,618

18,618

18,618

Transfer of AOCI losses to net income, net of tax

1,056

1,056

1,056

1,056

Other comprehensive loss, net of tax

(19,044)

3,210

(15,834)

(15,834)

(15,834)

Exercise of stock options

5,005

5,005

5,005

Limited recourse capital notes issued

150,000

150,000

150,000

Issuance cost, net of tax

(2,192)

(2,192)

(2,192)

Dividends:

     Preferred shares

(2,351)

(2,351)

(2,351)

     Common shares

(17,253)

(17,253)

(450)

(17,703)

Share tender rights

(1,032)

(1,032)

(1,032)

Stock-based compensation

924

924

924

Transfer relating to the exercise of stock options

882

(882)

Balance, end of period

181,411

501,594

147,808

(25,801)

2,432,426

15,823

(19,787)

(3,964)

3,233,474

12,004

3,245,478

($000s) Three-month period ended

June 30, 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

463,862

12,002

1,954,394

30,132

(31,166)

(1,034)

2,610,635

2,610,635

Net Income

130,925

130,925

130,925

Realized Loss on sale of investment securities

(3,565)

(3,565)

(3,565)

Other comprehensive loss, net of tax

12,838

(18,220)

(5,382)

(5,382)

(5,382)

Exercise of stock options

2,707

2,707

2,707

Dividends:

     Preferred shares

(2,331)

(2,331)

(2,331)

     Common shares

(13,945)

(13,945)

(13,945)

Stock-based compensation

808

808

808

Transfer relating to the exercise of stock options

142

(142)

Balance, end of period

181,411

466,711

12,668

2,065,478

42,970

(49,386)

(6,416)

2,719,852

2,719,852

($000s) Nine-month period ended

July 31, 2024

Preferred
Shares

Common
Shares

Contributed
Deficit

Retained
Earnings

Accumulated other comprehensive
income (loss)

Other equity
instruments

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

NCI on acquisition

12,310

12,310

Net Income

321,508

321,508

744

322,252

Realized loss on sale of shares, net of tax

(18,975)

(18,975)

(18,975)

Transfer of AOCI losses to retained earnings, net of tax

18,618

18,618

18,618

18,618

Transfer of AOCI losses to net income, net of tax

1,160

1,160

1,160

1,160

Other comprehensive loss, net of tax

(27,795)

9,210

(18,585)

(18,585)

(18,585)

Common shares issued

11,000

11,000

11,000

Exercise of stock options

16,844

16,844

16,844

Limited recourse capital notes issued

150,000

150,000

150,000

Issuance cost, net of tax

(2,192)

(2,192)

(2,192)

Dividends:

     Preferred shares

(7,054)

(7,054)

(7,054)

     Common shares

(48,533)

(48,533)

(1,050)

(49,583)

Share tender rights

(38,897)

(38,897)

(38,897)

Stock-based compensation

3,037

3,037

3,037

Transfer relating to the exercise of stock options

2,736

(2,736)

Balance, end of period

181,411

501,594

147,808

(25,801)

2,432,426

15,823

(19,787)

(3,964)

3,233,474

12,004

3,245,478

($000s) Nine-month period ended

June 30, 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

276,263

276,263

276,263

Realized loss on sale of financial instruments, net of tax

(3,882)

(3,882)

(3,882)

Transfer of AOCI losses to retained earnings, net of tax

446

446

446

446

Investment elimination on acquisition

33

33

33

33

Other comprehensive loss, net of tax

3,650

(14,937)

(11,287)

(11,287)

(11,287)

Common shares issued

223,112

223,112

223,112

Exercise of stock options

9,903

9,903

9,903

Share issuance cost, net of tax

(2,908)

(2,908)

(2,908)

Dividend payout from principal

(655)

(655)

(655)

Dividends:

Preferred shares

(6,954)

(6,954)

(6,954)

Common shares

(39,510)

(39,510)

(39,510)

Stock-based compensation

2,651

2,651

2,651

Transfer relating to the exercise of stock options

891

(891)

Shares on acquisition

110,987

110,987

110,987

Balance, end of period

181,411

466,711

12,668

2,065,478

42,970

(49,386)

(6,416)

2,719,852

2,719,852

Consolidated statement of cash flows (unaudited)

Three months ended

Nine months ended

($000s)

July 31 2024

June 30, 2023

July 31 2024

June 30, 2023

CASH FLOWS FROM OPERATING ACTIVITIES

Net income

112,154

130,925

322,252

276,263

Adjustments for non-cash items in net income:

     Financial instruments at fair value through income

(14,453)

56,610

(3,093)

9,982

     Amortization of premiums/discount on investments

(13,393)

2,439

(44,422)

4,497

     Amortization of capital assets and intangible costs

13,253

11,919

36,373

43,293

     Provision for credit losses

21,274

13,042

59,026

46,086

     Securitization gains

(16,656)

(13,690)

(48,658)

(33,632)

     Stock-based compensation

924

808

3,037

2,651

     Dividend income earned, not received

(27,964)

(27,964)

     Income taxes

43,241

41,550

120,918

99,978

     Securitization retained interests

33,670

22,055

92,304

57,109

Changes in operating assets and liabilities:

     Restricted cash

(121,048)

(203,717)

(137,001)

(240,539)

     Securities purchased under reverse repurchase agreements

60,377

(476,322)

(430,745)

(458,858)

     Loans receivable, net of securitizations

(132,856)

(943,719)

(847,878)

(2,136,227)

     Other assets

(97,507)

(65,068)

(106,038)

84,525

     Deposits

(924,138)

549,817

1,165,004

1,471,007

     Securitization liabilities

(269,988)

89,135

407,423

1,053,921

     Obligations under repurchase agreements

(28,940)

(1,128,238)

126,837

     Funding facilities

963,380

718,291

71,634

332,618

     Subscription receipts

(232,018)

     Other liabilities

(53,946)

57,750

(12,310)

(129,537)

     Income taxes paid

(21,742)

(34,342)

(71,816)

(112,768)

Cash flows (used in) from operating activities

(417,454)

(99,421)

(552,228)

237,224

CASH FLOWS FROM FINANCING ACTIVITIES

    Proceeds from issuance of common shares

5,005

2,707

27,844

229,453

    Net proceeds from issuance of limited recourse notes

147,808

147,808

    Term loan facility

275,000

    Dividends paid on preferred shares

(2,351)

(2,331)

(7,054)

(6,954)

    Dividends paid on common shares

(17,253)

(13,945)

(48,533)

(39,510)

Cash flows used in financing activities

133,209

(13,569)

120,065

457,989

CASH FLOWS FROM INVESTING ACTIVITIES

     Purchase of investments

(7,896)

(162,220)

(352,319)

(1,227,957)

     Acquisition of subsidiary

(75,483)

(495,369)

     Proceeds on sale or redemption of investments

132,370

374,215

789,016

1,044,039

     Net change in Canada Housing Trust re-investment accounts

22,050

(58,762)

69,009

109,878

     Purchase of capital assets and system development costs

(9,890)

(12,372)

(37,926)

(51,311)

Cash flows from (used in) investing activities

136,634

140,861

392,297

(620,720)

Net (decrease) increase in cash and cash equivalents

(147,611)

27,871

(39,866)

74,493

Cash and cash equivalents, beginning of period

657,219

345,621

549,474

298,999

Cash and cash equivalents, end of period

509,608

373,492

509,608

373,492

Cash flows from operating activities include:

Interest received

975,954

743,478

2,510,358

1,747,881

Interest paid

(646,530)

(432,654)

(1,461,202)

(810,895)

Dividends received

521

1,022

1,634

3,108

About EQB Inc.

EQB Inc. (TSX: EQB and EQB.PR.C) is a leading digital financial services company with $125 billion in combined assets under management and administration (as at July 31, 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 670,000 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:
Mike Rizvanovic
Managing 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 expectation, statements with respect to the anticipated timing of the redemption of the Series 3 Preferred Shares, 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:

Q3 2024

$2.7 million non-recurring operational effectiveness expenses and acquisition and integration-related costs associated with Concentra and ACM;
$2.2 million intangible asset amortization; and
$1.7 million provision for credit losses due to change in ECL methodology from five to four economic scenarios and associated weights.

Q2 2024

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

Q2 2023

$28.0 million related to a strategic investment;
$3.4 million acquisition and integration-related costs;
$0.9 million intangible asset amortization; and
$0.9 million other expenses.

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 nine months ended

($000, except share and per share amounts)

31-Jul-24

30-Apr-24

30-Jun-23

31-Jul-24

30-Jun-23

Reported results

     Net interest income

271,367

267,338

251,699

794,715

710,821

     Non-interest revenue

55,871

49,322

60,848

147,955

104,264

     Revenue

327,238

316,660

312,547

942,670

815,085

     Non-interest expense

150,569

150,420

127,030

440,474

392,758

     Pre-provision pre-tax income(3)

176,669

166,240

185,517

502,196

422,327

     Provision for credit loss

21,274

22,217

13,042

59,026

46,086

     Income tax expense

43,241

38,307

41,550

120,918

99,978

     Net income

112,154

105,716

130,925

322,252

276,263

     Net income available to common shareholders

109,538

103,041

128,594

314,454

269,309

Adjustments

     Net interest income – earned on the escrow account

(2,220)

     Net interest income – fair value amortization/adjustments

(843)

     Net interest income – paid to subscription receipt holders

(654)

     Non-interest revenue – strategic investment

(27,965)

(27,965)

     Non-interest revenue – fair value amortization/adjustments

876

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

(2,652)

(5,710)

(3,377)

(10,416)

(45,042)

     Non-interest expenses – other expenses

(858)

(858)

     Non-interest expenses – fair value amortization/adjustments

(66)

     Non-interest expenses – intangible asset amortization

(2,223)

(1,599)

(885)

(7,219)

(2,361)

     Provision for credit loss – purchased loans

(19,020)

     Provision for credit loss – ECL methodology change and weights

(1,698)

(1,698)

     Pre-tax adjustments – income before tax

6,573

7,309

(22,844)

19,333

36,542

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

1,543

1,983

(7,425)

5,009

8,695

     Income tax expense – 2022 tax rate adjustment

(5,621)

     Post-tax adjustments – net income

5,030

5,326

(15,419)

14,324

33,468

     Adjustments attributed to minority interests

(310)

(190)

(624)

     Post-tax adjustments – net income to common shareholders

4,720

5,136

(15,419)

13,700

33,467

Adjusted results

     Net interest income

271,367

267,338

251,699

794,715

707,104

     Non-interest revenue

55,871

49,322

32,883

147,955

77,175

     Revenue

327,238

316,660

284,582

942,670

784,279

     Non-interest expense

145,694

143,111

121,910

422,839

344,431

     Pre-provision pre-tax income(3)

181,544

173,549

162,672

519,831

439,848

     Provision for credit loss

19,576

22,217

13,042

57,328

27,066

     Income tax expenses

44,784

40,290

34,124

125,927

103,052

     Net income

117,184

111,042

115,506

336,576

309,730

     Net income available to common shareholders

114,258

108,177

113,175

328,154

302,777

Diluted earnings per share

     Weighted average diluted common shares outstanding

38,606,268

38,522,025

37,975,115

38,490,651

37,501,378

     Diluted earnings per share – reported

2.84

2.67

3.39

8.17

7.18

     Diluted earnings per share – adjusted

2.96

2.81

2.98

8.53

8.07

     Diluted earnings per share – adjustment impact

0.12

0.14

(0.41)

0.36

0.89

(1)

Includes non-recurring operational effectiveness 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.
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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