TORONTO, Dec. 7, 2023
/PRNewswire/ - EQB Inc. (TSX: EQB) (TSX: EQB.PR.C) today reported
record annual earnings for its new fiscal year ended October 31, 2023, highlighted by growth in loans
under management, margin expansion, higher non-interest revenues,
accretion from the prior-year acquisition of Concentra Bank and
effective risk management. On the strength of this performance, EQB
raised its common share dividend and issued guidance for fiscal
2024 anchored in the expectation of another consecutive year of
greater than 15% ROE.
EQB now reports its financial results on the same fiscal year
basis as the Canadian banking industry, which will enable better
performance comparison between EQB's wholly owned subsidiary
Equitable Bank (the "Bank") and its peers. To effect this
changeover, fiscal year 2023 ("FY23") is for the
ten month-period from January 1,
2023 to October 31, 2023. The
fourth quarter ("Q4") is for the four months ended
October 31, 2023. For FY23 only,
there was no Q3 and, as a result, quarter-over-quarter ("q/q")
comparisons below are to the three months ended June 30, 2023. All references to year-over-year
("y/y") comparisons are to the twelve months ended December 31, 2022. There is no change to the
dividend schedule.
- Adjusted ROE1 Q4 16.5% and FY23 17.1%
(reported Q4 15.8% and FY23 17.5%)
- Adjusted diluted EPS1 Q4 $3.80 and FY23 $9.40 (reported Q4 $3.64 and FY23 $9.59)
- Book value per share $70.33 (+4% q/q, +12% y/y)
- Common share dividends declared $0.40 per share (+5% q/q, +21% y/y vs.
December 2022)
- Total AUM + AUA2 $111
billion (+3% q/q, +8% y/y) with $20
billion of loans under management reflecting the total
multi-unit insured portfolio
- Net interest margin (NIM) expanded 1 bps q/q to 2.00% in
Q4 with FY23 adjusted NIM 1.97% (reported 1.98%)
- EQ Bank customer growth +9% q/q and 30% y/y to over
400,000 customers at October 31,
2023
- Total capital ratio 15.2% with CET1 of 14.0%; total
liquid assets $3.8 billion or 7.2% of
total assets and Equitable Bank's Liquidity Coverage Ratio well in
excess of the regulatory minimum of 100%3
"Forward thinking customers look to Canada's Challenger Bank for innovation, while
EQB shareholders look for consistently superior value creation. Our
team delivered both in 2023," said Andrew
Moor, President and Chief Executive Officer, EQB. "We
introduced new services across EQ Bank, Equitable Bank and
Concentra Trust where we support our credit union partners.
Customer enthusiasm for our new EQ Bank card offering and
all-digital First Home Savings Account was nothing short of
brilliant, and EQ Bank set the foundation for our brand journey
with its remarkably successful "Make Bank" campaign. In lending, we
increased customer retention and market share while adhering to our
long-standing risk disciplines to keep our credit book strong
against economic headwinds. With its overwhelming focus on lending
to build and renovate housing for Canadians, our commercial banking
business generated strong growth in insured multi-unit loans. We
also prepared well for the future with robust capital ratios,
excellent liquidity and a sound approach to managing interest rate
in the banking book. We will have new opportunities for diversified
growth when we close our announced agreement to acquire a majority
interest in ACM Advisors Ltd., a leading Canadian alternative asset
manager that will become part of EQB Inc. As we enter our
20th year as a public company, our purpose to change
Canadian banking to enrich people's lives is making an important
impact, and we're positioned to move from strength to
strength."
EQB surpassed raised earnings guidance for ten-month FY23
with strong revenue
- Adjusted and reported Q4 revenue1 $395 million and FY23 $944
million (reported $976
million) on lending growth, NIM expansion and higher
non-interest revenue
- Adjusted and reported Q4 net interest income1
$346 million and FY23 $834 million (reported $838 million), with Q4 NIM 2.00% and FY23 NIM
1.97% adjusted1 (1.98% reported)
- Adjusted and reported Q4 non-interest revenue1
$49.5 million and FY23 $110.4 million adjusted (reported $137.4 million) on higher fee income and strength
in multi-unit insured lending gains on sale and securitization
income
- Adjusted pre-provision pre-tax income1 $529.3 million (reported $540.9 million) exceeded guidance of $490 million to $520
million
- Adjusted diluted EPS1 Q4 $3.80 (reported $3.64) and FY23 $9.40 (reported $9.59) compared to annual guidance of
$9.00-9.20 per share
EQ Bank customers +30% in FY23 to over 400,000 with deposits
of $8.2 billion
- EQ Bank customer base +9% q/q and +30% y/y as daily account
openings accelerated in 2023 due to the increasing popularity of
the Savings Plus Account that operates like a high interest
chequing account, as well as the addition of new digital offerings
such as the EQ Bank First Home Savings Account (FHSA), the
introduction of the EQ Bank Card and expanded offerings in
Québec
- In FY24, EQ Bank expects to launch a new brand campaign
following tremendous success with FY23's "Make Bank" campaign, and
introduce Canada's first
all-digital small business banking services to help business owners
save and earn more through an easy, secure and delightful
experience
Personal Banking lending +1% y/y to $32.4 billion
- Single family portfolio increased to $30.0 billion at October
31, 2023 as customer retention increased while new
originations moderated as a result of recent Bank of Canada interest rate increases. As expected,
Equitable Bank stayed the course with its proven credit risk
management approach. Single family uninsured flat q/q and +3%
y/y
- 35% of single-family lending is insured against default and the
average credit score for uninsured mortgage customers is 713 (new
originations 742)
- Decumulation lending assets (which include reverse mortgages
and insurance lending) +18% q/q and +43% y/y to $1.5 billion. With its new multi-media
advertising campaign to support brand awareness of its challenger
product offering, the Bank expects strong continued growth in
FY24
Commercial Banking loans under management +20% y/y to
$30 billion
- The Bank's commercial operations primarily finance development
and renovation of rental housing and construction of condominium
buildings in Canada's major
cities. More than 70% of the Bank's commercial loans under
management are insured, including construction loans
- Exposures to higher risk asset classes are low, with office,
hotel, shopping malls and big box retail sectors accounting for
approximately 2% of the Bank's total loan assets. Over two-thirds
of commercial banking loans under management (LUM) are insured
multi-unit residential mortgages
- Insured multi-unit residential LUM +11% q/q and +27% y/y to
$20.0 billion
Consistent and active credit risk management approach
- Provision for credit losses (PCL) $19.6
million in Q4 reflecting contributions of the four-month
period and the impacts of both future expected losses driven by
macroeconomic forecasts and loss modelling ($2.3 million of this PCL was for Stages 1 and 2),
and increased provisions of $17.3
million associated with Stage 3. In Q4, 87% of Stage 3
provision was contributed by equipment financing and a single
commercial loan
- Net impaired loans 76 bps of total assets at October 31, 2023, +48 bps from December 31, 2022 and +29 bps from June 30, 2023. Annualized realized loss rate for
Q4 was 7 bps of total loan assets ($10.6
million), compared to 3 basis points ($3.2 million) in 2022
- The Bank is appropriately reserved for credit losses with net
allowances as a percentage of total loan assets of 22 bps at
October 31, 2023 compared to 20 bps
at June 30, 2023 and 18 bps at
December 31, 2022
Stable, diversified and growing funding with more than 95%
term or insured
- Total deposits flat q/q and +2% y/y to $32.0 billion
- As part of the Bank's ongoing funding diversification, EQB
successfully launched a Bearer Deposit Note (BDN) program in
Sept 2023. This program facilitates
issuance of short-term instruments to a new class of fixed income
investors
EQB increases common share dividend
- EQB's Board of Directors declared a dividend of $0.40 per common share payable on December 29, 2023 to shareholders of record as of
December 20, 2023, representing a 5%
increase from the dividend paid on September
29, 2023 and 21% above the payment made on December 30, 2022 consistent with guidance of 20
to 25% annual growth
- The Board also declared a quarterly dividend of $0.373063 per preferred share, payable on
December 29, 2023 to shareholders of
record at the close of business December 20,
2023
- For the purposes of the Income Tax Act (Canada) and any similar provincial
legislation, dividends declared are eligible dividends, unless
otherwise indicated
FY24 guidance includes earnings growth, 15%+ Adjusted
ROE
- FY2024 guidance for adjusted pre-provision pre-tax earnings,
adjusted diluted EPS, adjusted ROE, dividends, book value per share
and CET1 ratio of 13%+, along with balance sheet growth are found
in the Q4 2023 MD&A
- Guidance incorporates fee-based revenue and earnings accretion
from the acquisition of a majority interest in ACM Advisors
expected to close before the end of the calendar year
"Fiscal 2023 again validated the strength of EQB across economic
and credit cycles. Our focus on diversifying sources of funding,
revenue and asset classes positioned the business to perform above
the increased guidance we provided last quarter," said Chadwick Westlake, Chief Financial Officer, EQB.
"Our 2024 outlook recognizes both near-term economic challenges and
the strength of our distinct challenger business platforms. We
benefited from the Concentra Bank acquisition over the past year
and grew sources of non-interest revenue. With this momentum and
our strategic roadmap, we believe EQB can deliver increasing
long-term value to customers and shareholders."
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 acquisition and integration related costs. 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.
|
3 At October
31, 2023 Equitable Bank's liquid assets held for regulatory
purposes was $3.7 billion, which represents 228% of the Bank's
minimum required policy liquidity. For additional information, see
EQB's Management Discussion & Analysis.
|
Analyst conference call and webcast: 8:00 a.m. Eastern December
8, 2023
EQB's Andrew Moor, President and
Chief Executive Officer, and Chadwick
Westlake, Chief Financial Officer, will host the company's
fourth quarter conference call and webcast. The listen-only webcast
with accompanying slides will be available at:
eqbank.investorroom.com/events-webcasts. To access the
conference call with operator assistance, dial 416-764-8609
five minutes prior to the start time.
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheet
($000s) As
at
|
October 31,
2023
|
December 31,
2022
|
Assets:
|
|
|
Cash and cash
equivalents
|
549,474
|
495,106
|
Restricted
cash
|
767,195
|
737,656
|
Securities purchased
under reverse repurchase agreements
|
908,833
|
200,432
|
Investments
|
2,120,645
|
2,289,618
|
Loans –
Personal
|
32,390,527
|
31,996,950
|
Loans –
Commercial
|
14,970,604
|
14,513,265
|
Securitization
retained interests
|
559,271
|
373,455
|
Deferred tax
assets
|
14,230
|
-
|
Other
assets
|
652,675
|
538,475
|
|
52,933,454
|
51,144,957
|
Liabilities and
Shareholders' Equity
|
|
|
Liabilities:
|
|
|
Deposits
|
31,996,450
|
31,051,813
|
Securitization liabilities
|
14,501,161
|
15,023,627
|
Obligations under repurchase agreements
|
1,128,238
|
665,307
|
Deferred
tax liabilities
|
128,436
|
72,675
|
Funding
facilities
|
1,731,587
|
1,239,704
|
Other
liabilities
|
602,039
|
556,876
|
|
50,087,911
|
48,610,002
|
Shareholders'
Equity:
|
|
|
Preferred
shares
|
181,411
|
181,411
|
Common
shares
|
471,014
|
462,561
|
Contributed surplus
|
12,795
|
11,445
|
Retained
earnings
|
2,185,480
|
1,870,100
|
Accumulated other comprehensive (loss) income
|
(5,157)
|
9,438
|
|
2,845,543
|
2,534,955
|
|
52,933,454
|
51,144,957
|
Consolidated Statement of Income
($000s, except per
share amounts) Period/Year ended
|
2023
|
2022
|
Interest
income:
|
|
|
Loans –
Personal
|
1,410,571
|
917,708
|
Loans –
Commercial
|
860,363
|
640,293
|
Investments
|
65,362
|
21,337
|
Other
|
70,123
|
36,893
|
|
2,406,419
|
1,616,231
|
Interest
expense:
|
|
|
Deposits
|
1,077,520
|
578,998
|
Securitization
liabilities
|
402,443
|
260,761
|
Funding
facilities
|
44,527
|
19,979
|
Other
|
43,650
|
23,088
|
|
1,568,140
|
882,826
|
Net interest
income
|
838,279
|
733,405
|
Non-interest
revenue:
|
|
|
Fees and other
income
|
46,895
|
31,081
|
Net gains (losses) on
loans and investments
|
34,442
|
(8,054)
|
Gains on sale and
income from retained interests
|
56,384
|
26,765
|
Net losses on
securitization activities and derivatives
|
(336)
|
(1,011)
|
|
137,385
|
48,781
|
Revenue
Provision for credit losses
|
975,664
38,856
|
782,186
37,258
|
Revenue after provision
for credit losses
|
936,808
|
744,928
|
Non-interest
expenses:
|
|
|
Compensation and
benefits
|
199,752
|
183,605
|
Other
|
234,991
|
192,866
|
|
434,743
|
376,471
|
Income before income
taxes
|
502,065
|
368,457
|
Income
taxes:
|
|
|
Current
|
84,066
|
84,903
|
Deferred
|
46,409
|
13,373
|
|
130,475
|
98,276
|
Net income
|
371,590
|
270,181
|
Dividends on preferred shares
|
6,998
|
5,566
|
Net income available to common shareholders
|
364,592
|
264,615
|
Earnings per
share:
Basic
Diluted
|
9.67
9.59
|
7.63
7.55
|
Consolidated Statement of Comprehensive Income
($000s) Period/Year
ended
|
2023
|
2022
|
Net income
|
371,590
|
270,181
|
Other comprehensive income
– items that may be reclassified subsequently
to income
|
|
|
Debt instruments at Fair Value through Other
Comprehensive Income:
|
|
|
Reclassification of
losses from AOCI on sale of investment
|
-
|
(1,010)
|
Net unrealized losses
from change in fair value
|
(36,208)
|
(33,678)
|
Reclassification of net losses
to income
|
37,432
|
10,315
|
|
|
|
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 investment
|
(10,951)
|
604
|
Net unrealized losses
from change in fair value
|
(34,767)
|
(13,156)
|
Reclassification of net
losses to retained earnings
|
11,042
|
3,843
|
Income tax recovery
|
(33,452)
9,210
|
(33,082)
9,033
|
|
(24,242)
|
(24,049)
|
Cash flow
hedges
|
|
|
Net unrealized gains
from change in fair value
|
40,951
|
53,926
|
Reclassification of net (gains) losses
to income
|
(38,718)
|
2,103
|
Income tax
expense
|
2,233
(631)
|
56,029
(14,693)
|
|
1,602
|
41,336
|
Total other comprehensive (loss)
income
|
(22,640)
|
17,287
|
Total comprehensive income
|
348,950
|
287,468
|
Consolidated Statement of Changes in
Shareholders' Equity
($000s)
|
2023
|
|
Preferred
shares
|
Common
shares
|
Contributed
surplus
|
Retained
earnings
|
Accumulated other comprehensive
income (loss)
|
Total
|
Cashflow
hedges
|
Financial
instruments
at FVOCI
|
Total
|
Balance, beginning of year
|
181,411
|
462,561
|
11,445
|
1,870,100
|
42,016
|
(32,578)
|
9,438
|
2,534,955
|
Net income
|
-
|
-
|
-
|
371,590
|
-
|
-
|
-
|
371,590
|
Realized losses on sale
of shares
|
-
|
-
|
-
|
(7,722)
|
-
|
-
|
-
|
(7,722)
|
Transfer of AOCI losses
to retained earnings
|
|
|
|
|
-
|
8,045
|
8,045
|
8,045
|
Other comprehensive income, net of tax
|
-
|
-
|
-
|
-
|
1,602
|
(24,242)
|
(22,640)
|
(22,640)
|
Exercise of stock options
|
-
|
13,161
|
-
|
-
|
-
|
-
|
-
|
13,161
|
Share issuance costs,
net of tax
|
-
|
(6,230)
|
-
|
-
|
-
|
-
|
-
|
(6,230)
|
Dividends:
|
|
|
|
|
|
|
|
|
Preferred shares
|
-
|
-
|
-
|
(6,998)
|
-
|
-
|
-
|
(6,998)
|
Common
shares
|
-
|
-
|
-
|
(41,490)
|
-
|
-
|
-
|
(41,490)
|
Stock-based compensation
|
-
|
-
|
2,872
|
-
|
-
|
-
|
-
|
2,872
|
Transfer relating to the exercise
of stock options
|
-
|
1,522
|
(1,522)
|
-
|
-
|
-
|
-
|
-
|
Balance, end of year
|
181,411
|
471,014
|
12,795
|
2,185,480
|
43,618
|
(48,775)
|
(5,157)
|
2,845,543
|
($000s)
|
2022
|
|
Preferred
shares
|
Common
shares
|
Contributed
surplus
|
Retained
earnings
|
Accumulated other comprehensive
income (loss)
|
Total
|
Cashflow
hedges
|
Financial
instruments
at FVOCI
|
Total
|
Balance, beginning of year
|
70,607
|
230,160
|
8,693
|
1,650,757
|
680
|
(8,263)
|
(7,583)
|
1,952,634
|
Net income
|
-
|
-
|
-
|
270,181
|
-
|
-
|
-
|
270,181
|
Realized losses on sale
of shares
|
-
|
-
|
-
|
(2,839)
|
-
|
-
|
-
|
(2,839)
|
Transfer of AOCI losses
to retained earnings
|
-
|
-
|
-
|
-
|
-
|
(299)
|
(299)
|
(299)
|
Investment elimination
on acquisition
|
-
|
-
|
-
|
-
|
-
|
33
|
33
|
33
|
Other comprehensive income, net of tax
|
-
|
-
|
-
|
-
|
41,336
|
(24,049)
|
17,287
|
17,287
|
Common shares
issued
|
-
|
223,112
|
-
|
-
|
-
|
-
|
-
|
223,112
|
Exercise of stock options
|
-
|
9,274
|
-
|
-
|
-
|
-
|
-
|
9,274
|
Purchase of treasury preferred shares
|
(183)
|
-
|
-
|
-
|
-
|
-
|
-
|
(183)
|
Net loss on
cancellation of treasury preferred shares
|
-
|
-
|
-
|
(6)
|
-
|
-
|
-
|
(6)
|
Dividend payout from
principal
|
-
|
(655)
|
-
|
-
|
-
|
-
|
-
|
(655)
|
Dividends:
|
|
|
|
|
|
|
|
|
Preferred shares
|
-
|
-
|
-
|
(5,566)
|
-
|
-
|
-
|
(5,566)
|
Common shares
|
-
|
-
|
-
|
(42,427)
|
-
|
-
|
-
|
(42,427)
|
Stock-based compensation
|
-
|
-
|
3,422
|
-
|
-
|
-
|
-
|
3,422
|
Transfer relating to the exercise
of stock options
|
-
|
670
|
(670)
|
-
|
-
|
-
|
-
|
-
|
Shares on
acquisition
|
110,987
|
-
|
-
|
-
|
-
|
-
|
-
|
110,987
|
Balance, end of year
|
181,411
|
462,561
|
11,445
|
1,870,100
|
42,016
|
(32,578)
|
9,438
|
2,534,955
|
Consolidated Statement of Cash Flows
($000s) Period/Year
ended
|
2023
|
2022
|
CASH FLOWS
FROM OPERATING ACTIVITIES
|
|
|
Net income
|
371,590
|
270,181
|
Adjustments for non-cash items in net income:
|
|
|
Financial instruments at fair value through profit
or loss
|
45,533
|
(10,816)
|
Amortization of premiums/discount on investments
|
7,678
|
1,215
|
Amortization of capital assets
and intangible costs
|
39,155
|
46,870
|
Provision for credit losses
|
38,856
|
37,258
|
Securitization gains
|
(46,948)
|
(22,418)
|
Stock-based compensation
|
2,871
|
3,422
|
Dividend income
earned, not received
|
(28,380)
|
-
|
Income taxes
|
130,475
|
98,276
|
Securitization retained interests
|
75,304
|
53,834
|
Changes in operating assets
and liabilities:
|
|
|
Restricted cash
|
(29,539)
|
(193,620)
|
Securities purchased under reverse repurchase agreements
|
(708,401)
|
349,598
|
Loans receivable, net of securitizations
|
(1,126,698)
|
(5,061,011)
|
Other assets
|
(57,566)
|
168,660
|
Deposits
|
865,734
|
3,702,998
|
Securitization liabilities
|
(519,066)
|
925,452
|
Obligations under
repurchase agreements
|
462,931
|
(711,456)
|
Funding
facilities
|
491,883
|
685,469
|
Other liabilities
|
108,201
|
(157,502)
|
Income taxes paid
|
(90,318)
|
(156,525)
|
Cash flows from operating activities
|
33,295
|
29,885
|
CASH FLOWS
FROM FINANCING ACTIVITIES
|
|
|
Proceeds from issuance of common shares
|
6,931
|
231,731
|
Term loan
facility
|
-
|
275,000
|
Dividends paid on preferred shares
|
(6,998)
|
(5,566)
|
Dividends paid on common
shares
|
(41,490)
|
(42,427)
|
Cash flows (used
in) from financing activities
|
(41,557)
|
458,738
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
Purchase of investments
|
(989,055)
|
(585,721)
|
Investment in
subsidiary
|
-
|
(495,369)
|
Proceeds from
sale or redemption of investments
|
1,007,663
|
559,680
|
Net change
in Canada Housing
Trust re-investment accounts
|
78,988
|
(168,787)
|
Purchase of capital assets
and system development costs
|
(34,966)
|
(76,571)
|
Cash flows from
(used in) investing activities
|
62,630
|
(766,768)
|
Net increase (decrease)
in cash and cash equivalents
|
54,368
|
(278,145)
|
Cash and cash equivalents, beginning of year
|
495,106
|
773,251
|
Cash and cash equivalents, end of year
|
549,474
|
495,106
|
Cash flows
from operating activities include:
|
|
|
Interest received
|
2,137,216
|
1,437,499
|
Interest paid
|
(1,221,598)
|
(560,656)
|
Dividends received
|
31,243
|
4,074
|
About EQB Inc.
EQB Inc. trades on the Toronto Stock Exchange (TSX: EQB and
EQB.PR.C) and has over $111 billion in combined assets under
management and administration2. A wholly owned
subsidiary of EQB, Equitable Bank, Canada's Challenger Bank™, is the seventh
largest bank in Canada by assets
and serves more than 578,000 customers. Equitable Bank's
subsidiaries Concentra Bank and Concentra Trust support Canadian
credit unions and their more than 6 million members. Equitable
Bank has a clear mandate to drive change in Canadian banking to
enrich people's lives. Founded more than 50 years ago, it provides
diversified personal and commercial banking, and through its
digital EQ Bank platform (eqbank.ca) has been named the top
Schedule I Bank in Canada on the
Forbes World's Best Banks 2021, 2022 and 2023 lists. Please visit
eqbank.investorroom.com for more details.
Investor
contact:
Sandie Douville
VP, Investor Relations & ESG Strategy
investor_enquiry@eqbank.ca
|
Media
contact:
Maggie Hall
Director, PR & Media Relations
maggie.hall@eqbank.ca
|
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:
2023
- $28.0 million related to a
strategic investment,
- $15.1 million acquisition and
integration-related costs associated with Concentra and ACM,
- $3.5 million intangible asset
amortization,
- $3.3 million net fair value
amortization adjustments, and
- $0.9 million other expenses.
2022
- $2.2 million interest earned on
the escrow account where the proceeds of the subscription receipts
are held(1),
- $49.9 million acquisition and
integration-related costs,
- $19.0 million provision credit
for credit losses recorded on purchased loan portfolios,
- $3.3 million net fair
value-related amortization recorded for November and December 2022,
- $2.2 million interest expenses
paid to subscription receipt holders(2) in connection
with the Concentra acquisition, and
- $3.8 million increase in future
tax expense associated with additional 1.5% tax rate introduced for
banks in 2022.
(1) The net proceeds
from the issuance of subscription receipts were held in an escrow
account and the interest income earned was recognized upon closing
of the Concentra acquisition. (2) The interest expense refers to
the dividend equivalent amount paid to subscription receipt
holders. The subscription receipt holders were entitled to receive
a payment equal to the common share dividend declared multiplied by
the number of subscription receipts held on the common share
dividend payment date. These subscription receipts were converted
into common shares at a 1:1 ratio upon the closing of the Concentra
acquisition.
|
The following table presents a reconciliation of GAAP reported
financial results to non-GAAP adjusted financial results.
Reconciliation of
reported and adjusted financial results
|
As at or for the
quarter ended
|
|
For the year
ended
|
($000, except share and
per share amounts)
|
31-Oct-23
|
30-Jun-23
|
31-Dec-22
|
|
31-Oct-23
|
31-Dec-22
|
Reported
results
|
|
|
|
|
|
|
Net interest
income
|
345,783
|
251,699
|
218,325
|
|
838,279
|
733,405
|
Non-interest
revenue
|
49,503
|
60,848
|
16,382
|
|
137,385
|
48,781
|
Revenue
|
395,286
|
312,547
|
234,707
|
|
975,664
|
782,186
|
Non-interest
expense
|
181,165
|
127,030
|
139,180
|
|
434,743
|
376,471
|
Pre-provision pre-tax
income(3)
|
214,121
|
185,517
|
95,527
|
|
540,921
|
405,715
|
Provision for credit
loss
|
19,566
|
13,042
|
26,796
|
|
38,856
|
37,258
|
Income tax
expense
|
53,409
|
41,550
|
22,912
|
|
130,475
|
98,276
|
Net
income
|
141,146
|
130,925
|
45,819
|
|
371,590
|
270,181
|
Net income available to
common shareholders
|
138,797
|
128,594
|
43,514
|
|
364,592
|
264,615
|
Adjustments
|
|
|
|
|
|
|
Net interest income –
earned on the escrow account
|
-
|
-
|
(2,220)
|
|
-
|
(2,220)
|
Net interest income –
fair value amortization/adjustments
|
-
|
-
|
3,324
|
|
(4,167)
|
3,324
|
Net interest income – paid to subscription receipt
holders
|
-
|
-
|
(654)
|
|
-
|
2,220
|
Non-interest revenue –
strategic investment
|
-
|
(27,965)
|
-
|
|
(27,965)
|
-
|
Non-interest revenue –
fair value amortization/adjustments
|
-
|
-
|
(65)
|
|
941
|
(65)
|
Non-interest expenses –
acquisition-related costs(1)
|
(6,972)
|
(3,377)
|
(36,921)
|
|
(15,093)
|
(49,942)
|
Non-interest expenses –
other expenses
|
-
|
(858)
|
-
|
|
(858)
|
-
|
Non-interest expenses –
intangible asset amortization
|
(1,181)
|
(885)
|
-
|
|
(3,542)
|
-
|
Non-interest expenses –
fair value amortization/adjustments
|
-
|
-
|
-
|
|
(66)
|
-
|
Provision for credit
loss – purchased loans
|
-
|
-
|
(19,020)
|
|
-
|
(19,020)
|
Pre-tax
adjustments
|
8,153
|
(22,844)
|
56,326
|
|
(11,631)
|
72,221
|
Income tax expense –
tax impact on above adjustments(2)
|
2,264
|
(7,425)
|
15,271
|
|
(4,311)
|
19,435
|
Income tax expense –
2022 tax rate adjustment
|
-
|
-
|
(5,621)
|
|
-
|
(3,769)
|
Post-tax
adjustments
|
5,889
|
(15,419)
|
46,676
|
|
(7,320)
|
56,555
|
Adjusted
results
|
|
|
|
|
|
|
Net interest
income
|
345,783
|
251,699
|
218,775
|
|
834,112
|
736,729
|
Non-interest
revenue
|
49,503
|
32,883
|
16,317
|
|
110,361
|
48,716
|
Revenue
|
395,286
|
284,582
|
235,092
|
|
944,473
|
785,445
|
Non-interest
expense
|
173,012
|
121,910
|
102,259
|
|
415,184
|
326,529
|
Pre-provision pre-tax
income(3)
|
222,274
|
162,672
|
132,833
|
|
529,289
|
458,916
|
Provision for credit
loss
|
19,566
|
13,042
|
7,776
|
|
38,856
|
18,238
|
Income tax
expenses
|
55,673
|
34,124
|
32,562
|
|
126,163
|
113,942
|
Net income
|
147,035
|
115,506
|
92,495
|
|
364,270
|
326,736
|
Net income available to common shareholders
|
144,686
|
113,175
|
90,190
|
|
357,272
|
321,170
|
Diluted earnings
per share
|
|
|
|
|
|
|
Weighted average
diluted common shares outstanding
|
38,117,929
|
37,975,115
|
36,632,711
|
|
38,013,724
|
35,031,166
|
Diluted earnings per
share – reported
|
3.64
|
3.39
|
1.19
|
|
9.59
|
7.55
|
Diluted earnings per
share – adjusted
|
3.80
|
2.98
|
2.46
|
|
9.40
|
9.17
|
Diluted earnings per
share – adjustment
impact
|
0.16
|
(0.41)
|
1.27
|
|
(0.19)
|
1.62
|
(1) Includes costs
associated with ACM acquisition.
|
(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): it 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
assets reported on the consolidated balance sheet and loan
principal derecognized but still managed by EQB.
($000s)
|
31-Oct-23
|
30-Jun-23
|
Change
|
31-Dec-22
|
Change
|
Total assets on the
consolidated balance sheet
|
52,933,454
|
53,318,703
|
(1 %)
|
51,144,957
|
3 %
|
Loan principal
derecognized
|
14,998,436
|
12,591,570
|
19 %
|
10,424,114
|
44 %
|
Assets under
management
|
67,931,890
|
65,910,273
|
3 %
|
61,569,071
|
10 %
|
- 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.
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SOURCE EQ Bank