TORONTO, Aug. 1, 2023
/PRNewswire/ - EQB Inc. (TSX: EQB)
(TSX: EQB.PR.C) today reported record earnings for the
three and six months ended June 30,
2023. This performance reflects portfolio growth, sequential
margin expansion, higher non-interest revenue, efficiency
improvement as annualized Concentra Bank integration cost saving
targets were realized ahead of plan, and a one-time benefit from a
strategic investment. Due to the strong year-to-date
performance, EQB increased and updated relative 12-month
earnings guidance, including raising diluted EPS guidance to
+18-22% from +10-15%. See additional detail in EQB's Q2
Management's Discussion and Analysis (MD&A).
Second quarter 2023 compared to second quarter 2022:
- Adjusted Q2 2023 ROE1 18.3% (Reported
20.8%)
- Adjusted Q2 2023 net income1 $115.5MM +88% (+14% q/q), Reported $130.9MM +123% (+32% q/q), with net interest
margin expanding 7bps q/q to 1.99%
- Adjusted Q2 diluted EPS1 $2.98 +70% (+14% q/q), Reported $3.39 +103.0% (+32% q/q)
- EQ Bank customer growth +31% to 367,790 with deposits
+8% to $8.2 billion (+1% q/q) and
customer engagement of 51%
- Total AUM + AUA2 $108 billion +3% q/q.
$53.3 billion of on-balance sheet
assets +35% (+3% q/q); 51% of total loans under management are
insured
- Total capital ratio 15.4% with CET1 at 14.1%;
total liquid assets $4.1
billion or 7.7% of total assets
- Book Value Per Share $67.33, +14% (+4% q/q)
- Common share dividends declared $0.38 per share for Q2 2023, +23% (+3% q/q)
Year-to-Date 2023 compared to Year-to-Date 2022:
- Adjusted YTD 2023 ROE1 17.5% (Reported 18.6%)
ahead of 15%+ guidance
- Adjusted YTD 2023 net income1 $217.2MM (+41%), Reported $230.4MM (+57%) with adjusted net interest margin
expanding 11bps to 1.95% (reported 1.97%)
- Adjusted YTD diluted EPS1 $5.60 (+27%), Reported $5.95 (+42%)
"By consistently applying our Challenger Bank philosophy,
Equitable delivered record-breaking EPS and an ROE performance that
exceeded our own industry-leading long-term average. These are
meaningful accomplishments that allowed us to increase earnings
guidance. At a time when Canadians need more and better value from
the banking industry, Equitable Bank is providing it. Whether it's
our no-fee, high interest EQ Bank digital services, our recently
launched fully digital First Home Savings Account or the loans we
make to build much-needed affordable housing, we are living our
social purpose and in return rewarding our investors. Significant
growth in our customer base, strong customer engagement and our
plans to continue to bring innovation to the market give me
well-founded confidence that we are set to thrive in the years
ahead," said Andrew Moor, President
and Chief Executive Officer.
First half of 2023 performance trending ahead of 2023
guidance on record Q2 results
- Adjusted Q2 revenue1 +72% y/y and +8% q/q to
$284.6 million on lending growth, net
interest margin expansion, and higher non-interest revenue
(Reported revenue +90% y/y, +17% q/q to $312.5 million)
- Adjusted Q2 net interest income1 +50% y/y and +6%
q/q to $251.7 million with NIM of
1.99%, +18bps y/y and 7bps q/q (Q2 Reported +51% y/y with NIM of
1.99%, +19bps y/y and +4bps q/q)
- Adjusted Q2 non-interest revenue1 +$35.4 million
y/y, (Reported $60.8 million) on
higher fee income (including Concentra Bank) and continued strength
in multi-unit insured lending gains on sale and securitization
income, relative to a loss in Q2 2022. Reported non-interest
revenue included a one-time revenue benefit of $28.0 million that was not included in adjusted
results revenue
EQ Bank customers +31% y/y and deposits +9% y/y
- EQ Bank customer base grew to 367,790 at June 30 with strong account opening momentum from
its high-impact Make Bank marketing campaign (customer
signups increased 133% vs. Q2 2022), the launch of EQ Bank Card
(now enabled with mobile wallet technology), and the introduction
of services in Québec. EQ Bank customer everyday engagement
remained at a quarterly high of 51%
- EQ Bank is positioned for continued growth in 2023, offering
customers more solutions to meet their everyday banking needs,
including the advantages of free cash withdrawals at any ATM
nationally, cashback rewards on all card purchases, and no foreign
exchange fees on international purchases. In July, EQ Bank launched
a fully digital First Home Savings Account to help Canadians save
money faster to buy their first home
Personal Banking assets +35% y/y to $32.3 billion
- Single-family portfolio +29% y/y to $30.3 billion reflecting Equitable Bank's
consistent and prudent approach to credit risk management. Of the
single-family residential portfolio, 36% of single-family
residential lending is insured and the average customer beacon for
uninsured mortgage customers is 714 (new originations 740)
- Reverse mortgage assets +143% y/y and +10% q/q to $1,025 million. Growth reflected increased
awareness of Equitable Bank's reverse mortgage solutions among
Canadians nearing or in retirement and the Bank's share of an
expanding market
- Insurance lending assets +57% y/y and +16% q/q to $115 million
Commercial Banking assets +25% y/y to $15.1 billion
- Commercial loans under management (LUM) +7% q/q to $27.7 billion with more than 70% of this growth
driven by EQB's insured businesses, and +50% y/y with the addition
of Concentra Bank. CMHC insured multi-unit residential mortgages
represents more than 65% of Commercial LUM and nearly 80% of the
growth in LUM for the quarter
- Commercial uninsured loan portfolio +19% y/y and +0.4% q/q to
$8.2 billion. Equipment Financing
+46% y/y and +4% q/q to $1.3
billion
- Insured multi-unit residential loans under management +63% y/y
and +8% q/q to $18.1 billion
Credit quality indicators reflect prudence in a higher
interest rate environment
- Provision for credit losses (PCL)1 $13.0 million in Q2 related to continued
portfolio growth and stability in macroeconomic forecasts and
loss modelling. Stage 1 & 2 was $5.9
million, and Stage 3 was $7.2
million
- Net impaired loans 47bps of total assets at June 30, 2023, +29bps from prior year and +15bps
from prior quarter. Annualized realized loss rate for Q2 2023 was
4bps of total loan assets2 ($4.6 million), compared to less than 1bps
($1.5 million) in Q2 2022
- The Bank remains well reserved for credit losses with
allowances as a percentage of total loan assets2 of
20bps at June 30, 2023 vs. 19bps at
March 31, 2023
Diversification and stability of funding sources generating
consistent high liquidity
- Equitable Bank increased total deposits in Q1 to $32 billion, +2% q/q and +35% y/y, supported by
diverse funding sources growth and EQ Bank deposit expansion
- In May, the Bank successfully completed its fourth issuance of
Covered Bonds in Europe (a 3-year,
€300 million offering at 52bps over the Euro mid-swap rate),
to bring the total value of this lowest cost source of wholesale
funding to €1.2 billion
Second full quarter of Concentra Bank earnings, annualized
cost synergy targets achieved
- The acquisition of Concentra Bank in Q4 2022 introduced
complementary asset growth, diversification in funding and revenue
sources plus enhanced distribution capabilities
- The target was $30 million in
cost synergy and mid-single digit EPS accretion within 12-18
months, both have been realized on a run-rate basis, with updated
2023 EQB guidance incorporating the outperformance
- EQB continues to build and expand its credit union
relationships, and Concentra Trust performance is delivering
non-interest revenue ahead of expectations for 2023
EQB announces an increase in common share dividend for Q2
2023
- EQB's Board of Directors declared a common share dividend of
$0.38 per common share payable on
September 30, 2023 to shareholders of
record as of September 15, 2023
- EQB's Board of Directors declared a quarterly dividend of
$0.373063 per preferred share,
payable on September 30, 2023 to
shareholders of record at the close of business September 15, 2023
- For the purposes of the Income Tax Act (Canada) and any similar provincial
legislation, dividends declared will be eligible dividends, unless
otherwise indicated
- To account for the transition to EQB's new fiscal year, there
will be a one-time, 10-month reporting period ending October 31, 2023. See this quarter's
MD&A for both upgraded 12-month guidance, as well as new
guidance for this 10-month period
"EQB's standout performance relative to guidance and bank peers
reflects our consistent long-term approach to allocating capital
and generating leading ROE, anchored in exceptional credit,
liquidity and capital management. This remains a dynamic time
globally for banks, but with our deeply customer-focused challenger
operating model and performance year-to-date, we have conviction in
our increased 2023 guidance and look forward to starting our new
fiscal year on November
1st with improved comparability of EQB to peers,"
said Chadwick Westlake, EQB's Chief
Financial Officer.
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, 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.
|
Analyst conference call and webcast: 8:30
a.m. ET Eastern August 2,
2023
EQB will host its second-quarter conference call
and webcast on Wednesday August 2,
2023. To access the call with operator assistance, dial
(416) 764-8609 five minutes prior to the start time. Or to
join without operator assistance, you may register your phone
number up to 15 minutes in advance of start time to receive an
automatic call-back connection to the conference at: click to
register here.
Call archive
A replay of the conference call with the
accompanying slides will be archived on EQB's Investor Relations
website: click here to visit the site.
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
Consolidated balance sheet (unaudited)
($000s)
|
June 30, 2023
|
December 31,
2022
|
June 30,
2022
|
Assets:
|
|
|
|
Cash and cash
equivalents
|
373,492
|
495,106
|
539,509
|
Restricted
cash
|
870,247
|
737,656
|
557,283
|
Securities purchased
under reverse repurchase agreements
|
1,208,930
|
200,432
|
420,009
|
Investments
|
2,235,530
|
2,289,618
|
1,097,004
|
Loans –
Personal
|
32,333,611
|
31,996,950
|
24,122,303
|
Loans –
Commercial
|
15,103,519
|
14,513,265
|
12,123,469
|
Securitization
retained interests
|
474,542
|
373,455
|
227,013
|
Deferred tax
assets
|
14,392
|
-
|
-
|
Other
assets
|
704,440
|
538,475
|
331,168
|
|
53,318,703
|
51,144,957
|
39,417,758
|
Liabilities and
shareholders' equity
|
|
|
|
Liabilities:
|
|
|
|
Deposits
|
32,137,347
|
31,051,813
|
23,708,958
|
Securitization liabilities
|
15,397,103
|
15,023,627
|
11,366,847
|
Obligations under repurchase agreements
|
875,718
|
665,307
|
814,494
|
Deferred
tax liabilities
|
106,723
|
72,675
|
64,180
|
Funding
facilities
|
1,487,008
|
1,239,704
|
711,380
|
Subscription receipts
|
-
|
-
|
230,821
|
Other
liabilities
|
594,952
|
556,876
|
426,527
|
|
50,598,851
|
48,610,002
|
37,323,207
|
Shareholders'
equity:
|
|
|
|
Preferred
shares
|
181,411
|
181,411
|
70,424
|
Common
shares
|
466,711
|
462,561
|
234,372
|
Contributed surplus
|
12,668
|
11,445
|
10,106
|
Retained
earnings
|
2,065,478
|
1,870,100
|
1,773,658
|
Accumulated other comprehensive (loss) income
|
(6,416)
|
9,438
|
5,991
|
|
2,719,852
|
2,534,955
|
2,094,551
|
|
53,318,703
|
51,144,957
|
39,417,758
|
Consolidated statement of income (unaudited)
($000s, except per
share amounts)
|
Three months
ended
|
Six months
ended
|
|
June 30, 2023
|
June 30,
2022
|
June 30, 2023
|
June 30,
2022
|
Interest
income:
|
|
|
|
|
Loans –
Personal
|
420,578
|
190,830
|
812,394
|
364,610
|
Loans –
Commercial
|
256,731
|
133,540
|
498,499
|
249,286
|
Investments
|
18,856
|
3,351
|
40,749
|
7,206
|
Other
|
21,083
|
5,558
|
38,435
|
8,417
|
|
717,248
|
333,279
|
1,390,077
|
629,519
|
Interest
expense:
|
|
|
|
|
Deposits
|
322,503
|
110,413
|
615,734
|
194,885
|
Securitization
liabilities
|
118,416
|
53,741
|
236,590
|
103,031
|
Funding
facilities
|
11,891
|
2,468
|
19,809
|
2,774
|
Other
|
12,739
|
-
|
25,448
|
-
|
|
465,549
|
166,622
|
897,581
|
300,690
|
Net interest
income
|
251,699
|
166,657
|
492,496
|
328,829
|
Non-interest
income:
|
|
|
|
|
Fees and other
income
|
14,489
|
7,866
|
28,387
|
13,899
|
Net gains (losses) on
loans and investments
|
29,659
|
(16,839)
|
26,359
|
(12,041)
|
Gains on sale and
income from retained interests
|
16,104
|
6,445
|
30,436
|
21,060
|
Net gains on
securitization activities and derivatives
|
596
|
-
|
2,700
|
-
|
|
60,848
|
(2,528)
|
87,882
|
22,918
|
Revenue
|
312,547
|
164,129
|
580,378
|
351,747
|
Provision for credit
losses
|
13,042
|
5,233
|
19,290
|
5,108
|
Revenue after provision
for credit losses
|
299,505
|
158,896
|
561,088
|
346,639
|
Non-interest
expenses:
|
|
|
|
|
Compensation and
benefits
|
59,707
|
40,067
|
118,069
|
76,839
|
Other
|
67,323
|
38,209
|
135,509
|
76,370
|
|
127,030
|
78,276
|
253,578
|
153,209
|
Income before income
taxes
|
172,475
|
80,620
|
307,510
|
193,430
|
Income
taxes:
|
|
|
|
|
Current
|
26,612
|
22,091
|
55,263
|
45,607
|
Deferred
|
14,938
|
(307)
|
21,803
|
1,040
|
|
41,550
|
21,784
|
77,066
|
46,647
|
Net income
|
130,925
|
58,836
|
230,444
|
146,783
|
Dividends on preferred
shares
|
2,331
|
1,086
|
4,649
|
2,175
|
Net income available to
common shareholders
|
128,594
|
57,750
|
225,795
|
144,608
|
|
|
|
|
|
Earnings per
share:
|
|
|
|
|
Basic
|
3.41
|
1.69
|
6.00
|
4.24
|
Diluted
|
3.39
|
1.67
|
5.95
|
4.19
|
Consolidated statement of comprehensive income
(unaudited)
($000s)
|
|
Three months
ended
|
Six months
ended
|
|
|
June 30, 2023
|
June 30,
2022
|
June 30, 2023
|
June 30,
2022
|
Net income
|
|
130,925
|
58,836
|
230,444
|
146,783
|
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 investment
|
|
-
|
(926)
|
-
|
(926)
|
Net unrealized losses
from change in fair value
|
|
(31,474)
|
(8,011)
|
(17,584)
|
(29,380)
|
Reclassification of
net losses to income
|
|
32,302
|
2,729
|
21,180
|
5,006
|
Other comprehensive
income – items that will not be reclassified subsequently to
income:
|
|
|
|
|
|
Equity instruments
designated at Fair Value through Other Comprehensive
Income:
|
|
|
|
|
|
Net unrealized losses
from change in fair value
|
|
(30,989)
|
(5,278)
|
(31,782)
|
(6,703)
|
Reclassification of net
losses to retained earnings
|
|
4,936
|
1,836
|
4,914
|
3,045
|
|
|
(25,225)
|
(9,650)
|
(23,272)
|
(28,958)
|
Income tax
recovery
|
|
7,005
|
2,531
|
6,464
|
7,594
|
|
|
(18,220)
|
(7,119)
|
(16,808)
|
(21,364)
|
Cash flow
hedges:
|
|
|
|
|
|
Net unrealized gains
from change in fair value
|
|
28,856
|
19,668
|
13,040
|
45,909
|
Reclassification of net
(gains) losses to income
|
|
(11,082)
|
1,944
|
(11,704)
|
2,373
|
|
|
17,774
|
21,612
|
1,336
|
48,282
|
Income tax
expense
|
|
(4,936)
|
(5,667)
|
(382)
|
(12,660)
|
|
|
12,838
|
15,945
|
954
|
35,622
|
Total other
comprehensive (loss) income
|
|
(5,382)
|
8,826
|
(15,854)
|
14,258
|
Total comprehensive
income
|
|
125,543
|
67,662
|
214,590
|
161,041
|
Consolidated Statement of Changes in Shareholders' Equity
(unaudited)
($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
|
Total
|
Balance, beginning of
period
|
181,411
|
463,862
|
12,002
|
1,954,394
|
30,132
|
(31,166)
|
(1,034)
|
2,610,635
|
Net Income
|
-
|
-
|
-
|
130,925
|
-
|
-
|
-
|
130,925
|
Realized Loss on Sale
of investment securities
|
-
|
-
|
-
|
(3,565)
|
-
|
-
|
-
|
(3,565)
|
Other comprehensive
income, net of tax
|
-
|
-
|
-
|
-
|
12,838
|
(18,220)
|
(5,382)
|
(5,382)
|
Exercise of stock
options
|
-
|
2,707
|
-
|
-
|
-
|
-
|
-
|
2,707
|
Dividends:
|
|
|
|
|
|
|
|
|
Preferred
shares
|
-
|
-
|
-
|
(2,331)
|
-
|
-
|
-
|
(2,331)
|
Common
shares
|
-
|
-
|
-
|
(13,945)
|
-
|
-
|
-
|
(13,945)
|
Stock-based
compensation
|
-
|
-
|
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
|
|
($000s) Three month
period
ended
June 30, 2022
|
Balance, beginning of
period
|
70,607
|
232,854
|
9,357
|
1,727,169
|
20,357
|
(22,508)
|
(2,151)
|
2,037,836
|
Net Income
|
-
|
-
|
-
|
58,836
|
-
|
-
|
-
|
58,836
|
Realized Loss on Sale
of investment securities
|
-
|
-
|
-
|
(1,355)
|
-
|
(684)
|
(684)
|
(2,039)
|
Other comprehensive
income, net of tax
|
-
|
-
|
-
|
-
|
15,945
|
(7,119)
|
8,826
|
8,826
|
Exercise of stock
options
|
-
|
1,463
|
-
|
-
|
-
|
-
|
-
|
1,463
|
Purchase of
treasury
preferred
shares
|
(183)
|
-
|
-
|
-
|
-
|
-
|
-
|
(183)
|
Net loss on
cancellation of
treasury preferred
shares
|
-
|
-
|
-
|
(6)
|
-
|
-
|
-
|
(6)
|
Dividends:
|
|
|
|
|
|
|
|
|
Preferred shares
|
-
|
-
|
-
|
(1,086)
|
-
|
-
|
-
|
(1,086)
|
Common shares
|
-
|
-
|
-
|
(9,900)
|
-
|
-
|
-
|
(9,900)
|
Stock-based
compensation
|
-
|
-
|
804
|
-
|
-
|
-
|
-
|
804
|
Transfer relating to
the
exercise of stock
options
|
-
|
55
|
(55)
|
-
|
-
|
-
|
-
|
-
|
Balance, end of
period
|
70,424
|
234,372
|
10,106
|
1,773,658
|
36,302
|
(30,311)
|
5,991
|
2,094,551
|
|
|
|
|
|
|
|
|
|
|
($000s) Six 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
|
Total
|
Balance, beginning of
period
|
181,411
|
462,561
|
11,445
|
1,870,100
|
42,016
|
(32,578)
|
9,438
|
2,534,955
|
Net Income
|
-
|
-
|
-
|
230,444
|
-
|
-
|
-
|
230,444
|
Realized loss on sale
of investment securities
|
-
|
-
|
-
|
(3,294)
|
-
|
-
|
-
|
(3,294)
|
Other comprehensive
income, net of tax
|
-
|
-
|
-
|
-
|
954
|
(16,808)
|
(15,854)
|
(15,854)
|
Exercise of stock
options
|
-
|
6,470
|
-
|
-
|
-
|
-
|
-
|
6,470
|
Share issuance cost,
net of tax
|
-
|
(2,908)
|
-
|
-
|
-
|
-
|
-
|
(2,908)
|
Dividends:
|
|
|
|
|
|
|
|
|
Preferred
shares
|
-
|
-
|
-
|
(4,649)
|
-
|
-
|
-
|
(4,649)
|
Common
shares
|
-
|
-
|
-
|
(27,123)
|
-
|
-
|
-
|
(27,123)
|
Stock-based
compensation
|
-
|
-
|
1,811
|
-
|
-
|
-
|
-
|
1,811
|
Transfer relating to
the
exercise of stock
options
|
-
|
588
|
(588)
|
-
|
-
|
-
|
-
|
-
|
Balance, end of
period
|
181,411
|
466,711
|
12,668
|
2,065,478
|
42,970
|
(49,386)
|
(6,416)
|
2,719,852
|
|
($000s) Six month
period
ended
June 30, 2022
|
Balance, beginning of
period
|
70,607
|
230,160
|
8,693
|
1,650,757
|
680
|
(8,263)
|
(7,583)
|
1,952,634
|
Net Income
|
-
|
-
|
-
|
146,783
|
-
|
-
|
-
|
146,783
|
Realized loss on sale
of investment securities
|
-
|
-
|
-
|
(2,251)
|
-
|
(684)
|
(684)
|
(2,935)
|
Other comprehensive
income, net of tax
|
-
|
-
|
-
|
-
|
35,622
|
(21,364)
|
14,258
|
14,258
|
Exercise of stock
options
|
-
|
3,867
|
-
|
-
|
-
|
-
|
-
|
3,867
|
Purchase of
treasury
preferred
shares
|
(183)
|
-
|
-
|
-
|
-
|
-
|
-
|
(183)
|
Net loss on
cancellation of
treasury preferred
shares
|
-
|
-
|
-
|
(6)
|
-
|
-
|
-
|
(6)
|
Dividends:
|
|
|
|
|
|
|
|
|
Preferred shares
|
-
|
-
|
-
|
(2,175)
|
-
|
-
|
-
|
(2,175)
|
Common shares
|
-
|
-
|
-
|
(19,450)
|
-
|
-
|
-
|
(19,450)
|
Stock-based
compensation
|
-
|
-
|
1,758
|
-
|
-
|
-
|
-
|
1,758
|
Transfer relating to
the
exercise of stock
options
|
-
|
345
|
(345)
|
-
|
-
|
-
|
-
|
-
|
Balance, end of
period
|
70,424
|
234,372
|
10,106
|
1,773,658
|
36,302
|
(30,311)
|
5,991
|
2,094,551
|
|
|
|
|
|
|
|
|
|
|
Consolidated Statement of Cash Flows (unaudited)
($000s)
|
Three months
ended
|
Six months
ended
|
|
June 30, 2023
|
June 30,
2022
|
June 30, 2023
|
June 30,
2022
|
CASH FLOWS FROM OPERATING
ACTIVITIES
|
|
|
|
|
Net income
|
130,925
|
58,836
|
230,444
|
146,783
|
Adjustments for
non-cash items in net income:
|
|
|
|
|
Financial instruments
at fair value through income
|
56,610
|
3,103
|
18,184
|
1,376
|
Amortization of
premiums/discount on investments
|
2,439
|
330
|
4,223
|
630
|
Amortization of
capital assets and intangible costs
|
11,919
|
9,211
|
24,163
|
18,044
|
Provision for credit
losses
|
13,042
|
5,233
|
19,290
|
5,108
|
Securitization
gains
|
(13,690)
|
(1,620)
|
(26,435)
|
(6,248)
|
Stock-based
compensation
|
808
|
804
|
1,811
|
1,758
|
Dividend income
earned, not received
|
(27,964)
|
-
|
(27,964)
|
-
|
Income
taxes
|
41,550
|
21,784
|
77,066
|
46,647
|
Securitization
retained interests
|
22,055
|
12,742
|
41,912
|
25,160
|
Changes in operating
assets and liabilities:
|
|
|
|
|
Restricted
cash
|
(203,717)
|
(108,652)
|
(132,591)
|
(95,119)
|
Securities purchased
under reverse repurchase agreements
|
(476,322)
|
(420,009)
|
(1,008,498)
|
130,021
|
Loans receivable, net
of securitizations
|
(943,719)
|
(2,000,934)
|
(997,836)
|
(3,344,734)
|
Other
assets
|
(65,068)
|
3,162
|
(91,517)
|
(1,105)
|
Deposits
|
549,817
|
1,493,378
|
1,053,768
|
2,903,026
|
Securitization
liabilities
|
89,135
|
401,333
|
373,523
|
(227)
|
Obligations under
repurchase agreements
|
(28,940)
|
(65,709)
|
210,411
|
(562,269)
|
Funding
facilities
|
718,291
|
386,805
|
247,304
|
511,252
|
Subscription
receipts
|
-
|
435
|
-
|
230,821
|
Other
liabilities
|
57,750
|
(33,605)
|
6,635
|
13,092
|
Income taxes
paid
|
(34,342)
|
(28,616)
|
(81,859)
|
(93,658)
|
Cash flows used in
operating activities
|
(99,421)
|
(261,989)
|
(57,966)
|
(69,642)
|
CASH FLOWS FROM FINANCING
ACTIVITIES
|
|
|
|
|
Proceeds from issuance
of common shares
|
2,707
|
1,463
|
3,562
|
3,867
|
Dividends paid on
preferred shares
|
(2,331)
|
(1,086)
|
(4,649)
|
(2,176)
|
Dividends paid on
common shares
|
(13,945)
|
(9,900)
|
(27,123)
|
(19,450)
|
Cash flows used in
financing activities
|
(13,569)
|
(9,523)
|
(28,210)
|
(17,759)
|
CASH FLOWS FROM INVESTING
ACTIVITIES
|
|
|
|
|
Purchase of
investments
|
(162,220)
|
(926)
|
(709,528)
|
(58,826)
|
Proceeds on sale or
redemption of investments
|
374,215
|
122,300
|
762,277
|
233,768
|
Net change in Canada
Housing Trust re-investment accounts
|
(58,762)
|
(21,882)
|
(67,579)
|
(295,103)
|
Purchase of capital
assets and system development costs
|
(12,372)
|
(13,752)
|
(20,608)
|
(26,180)
|
Cash flows from (used
in) investing activities
|
140,861
|
85,740
|
(35,438)
|
(146,341)
|
Net increase (decrease)
in cash and cash equivalents
|
27,871
|
(185,772)
|
(121,614)
|
(233,742)
|
Cash and cash
equivalents, beginning of period
|
345,621
|
725,281
|
495,106
|
773,251
|
Cash and cash
equivalents, end of period
|
373,492
|
539,509
|
373,492
|
539,509
|
Cash flows from
operating activities include:
|
|
|
|
|
Interest
received
|
743,478
|
289,106
|
1,233,302
|
560,154
|
Interest
paid
|
(432,654)
|
(143,009)
|
(667,566)
|
(265,080)
|
Dividends
received
|
1,022
|
899
|
2,063
|
2,170
|
About EQB Inc.
Equitable Bank—Canada's Challenger Bank™—is a wholly owned
subsidiary of EQB Inc., which trades on the Toronto Stock Exchange
(TSX: EQB) (TSX: EQB.PR.C) and serves more than 543,000 customers.
Equitable Bank's wholly owned subsidiary Concentra Bank supports
Canadian credit unions and their more than 6 million members. With
over $108 billion in combined assets
under management and administration, Equitable Bank has a clear
mandate to drive change in Canadian banking to enrich people's
lives. Founded more than 50 years ago, Canada's Challenger Bank™ 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:
David Lee
Investor Relations
investor_enquiry@eqbank.ca
|
Media contact:
Deborah Chatterton
Director, Communications
dchatterton@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 Management's Discussion and
Analysis (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.
Adjusted financial results
To enhance comparability between reporting periods, increase
consistency with other financial institutions, and provide the
reader with a better understanding of EQB's performance, adjusted
results were introduced starting in Q1 2022. Adjusted results are
non-GAAP financial measures.
Adjustments impacting current and prior periods:
Adjustments listed below are presented on a pre-tax basis:
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.
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.
Q2 2022
- $2.7 million of acquisition and
integration-related costs, and
- $0.9 million interest expenses
paid to subscription receipt holders(1).
(1) The interest
expense refers to the dividend equivalent amount paid to
subscription receipt holders. The subscription receipt holders are
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
|
For the three months ended
|
|
For the six months ended
|
($000, except share and
per share amounts)
|
30-Jun-23
|
31-Mar-23
|
30-Jun-22
|
|
30-Jun-23
|
30-Jun-22
|
Reported results
|
|
|
|
|
|
|
Net interest
income
|
251,699
|
240,797
|
166,657
|
|
492,496
|
328,829
|
Non-interest
revenue
|
60,848
|
27,034
|
(2,528)
|
|
87,882
|
22,918
|
Revenue
|
312,547
|
267,831
|
164,129
|
|
580,378
|
351,747
|
Non-interest
expense
|
127,030
|
126,548
|
78,276
|
|
253,578
|
153,209
|
Pre-provision pre-tax
income(4)
|
185,517
|
141,283
|
85,853
|
|
326,800
|
198,538
|
Provision for credit
loss (recoveries)
|
13,042
|
6,248
|
5,233
|
|
19,290
|
5,108
|
Income tax
expense
|
41,550
|
35,516
|
21,784
|
|
77,066
|
46,647
|
Net
income
|
130,925
|
99,519
|
58,836
|
|
230,444
|
146,783
|
Net income available to
common shareholders
|
128,594
|
97,201
|
57,750
|
|
225,795
|
144,608
|
Adjustments
|
|
|
|
|
|
|
Net interest income –
fair value amortization/adjustments
|
-
|
(4,167)
|
-
|
|
(4,167)
|
-
|
Net interest income – paid to subscription receipt
holders(1)
|
-
|
-
|
947
|
|
-
|
1,861
|
Non-interest revenue –
strategic investment
|
(27,965)
|
-
|
-
|
|
(27,965)
|
-
|
Non-interest revenue –
fair value amortization/adjustments
|
-
|
941
|
-
|
|
941
|
-
|
Non-interest expenses –
acquisition-related costs
|
(3,377)
|
(4,744)
|
(2,709)
|
|
(8,121)
|
(7,842)
|
Non-interest expenses –
other expenses
|
(858)
|
-
|
-
|
|
(858)
|
-
|
Non-interest expenses –
fair value amortization/adjustments
|
-
|
(66)
|
-
|
|
(66)
|
-
|
Non-interest expenses –
intangible asset amortization
|
(885)
|
(1,476)
|
-
|
|
(2,361)
|
-
|
Pre-tax
adjustments
|
(22,844)
|
3,060
|
3,656
|
|
(19,784)
|
9,703
|
Income tax expense –
tax impact on above adjustments(2)
|
(7,425)
|
850
|
958
|
|
(6,575)
|
2,542
|
Post-tax
adjustments
|
(15,419)
|
2,210
|
2,698
|
|
(13,209)
|
7,161
|
Adjusted results
|
|
|
|
|
|
|
Net interest
income
|
251,699
|
236,630
|
167,604
|
|
488,329
|
330,690
|
Non-interest
revenue
|
32,883
|
27,975
|
(2,528)
|
|
60,858
|
22,918
|
Revenue
|
284,582
|
264,605
|
165,076
|
|
549,187
|
353,608
|
Non-interest
expense
|
121,910
|
120,262
|
75,567
|
|
242,172
|
145,367
|
Pre-provision pre-tax
income(3)
|
162,672
|
144,343
|
89,509
|
|
307,015
|
208,241
|
Provision for credit
loss (recoveries)
|
13,042
|
6,248
|
5,233
|
|
19,290
|
5,108
|
Income tax
expenses
|
34,124
|
36,366
|
22,742
|
|
70,490
|
49,189
|
Net income
|
115,506
|
101,729
|
61,534
|
|
217,235
|
153,944
|
Net income available to common shareholders
|
113,175
|
99,411
|
60,448
|
|
212,586
|
151,769
|
Diluted earnings per share
|
|
|
|
|
|
|
Weighted average
diluted common shares outstanding
|
37,975,115
|
37,910,348
|
34,479,387
|
|
37,942,911
|
34,512,207
|
Diluted earnings per
share – reported
|
3.39
|
2.56
|
1.67
|
|
5.95
|
4.19
|
Diluted earnings per
share – adjusted
|
2.98
|
2.62
|
1.75
|
|
5.60
|
4.40
|
Diluted earnings per
share – adjustment
impact
|
(0.41)
|
0.06
|
0.08
|
|
(0.35)
|
0.21
|
(1) The interest
expense refers to the dividend equivalent amount paid to
subscription receipt holders. The subscription receipt holders are
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.
|
(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 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)
|
30-Jun-23
|
31-Mar-23
|
Change
|
30-Jun-22
|
Change
|
Total assets on the
consolidated balance sheet
|
53,318,703
|
51,793,019
|
3 %
|
39,417,758
|
35 %
|
Loan principal
derecognized
|
12,591,570
|
11,542,502
|
9 %
|
6,349,413
|
98 %
|
Assets under management
|
65,910,273
|
63,335,521
|
4 %
|
45,767,171
|
44 %
|
- 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 EQB Inc.