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."

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, 2024
EQB'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 prospectus
EQB 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)

Consolidated statement of income (unaudited)

Consolidated statement of comprehensive income (unaudited)

Consolidated statement of changes in shareholders' equity (unaudited)

Consolidated statement of cash flows (unaudited)

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:

• $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.

• $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.

• $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.

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.

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SOURCE EQB Inc.