Equitable Bank Investor Relations
Initial 2023 guidance shows ROE performance to continue including the benefit of Concentra Bank
TORONTO, Nov. 8, 2022 /CNW/ - EQB Inc. (TSX: EQB) (TSX: EQB.PR.C) ("EQB") today reported its financial results for the three and nine months ended September 30, 2022, that were driven by strong conventional lending, customer account and core earnings growth with rigorous margin management. It also issued preliminary guidance for 2023 that incorporates the initial contributions of its Concentra Bank acquisition that closed on November 1, 2022.
Record Q3 results reflected growth in core businesses aligned to 2022 guidance across Personal and Commercial Banking portfolios, stable provisions for credit losses, resilient capital, and the margin benefit of funding diversification including EQ Bank deposits and covered bonds. Compared to Q2 2022, non-interest revenue increased particularly due to growth in the Bank's core revenue from insured multi-family securitization, outpacing the impacts of headwinds that led to non-core mark-to-market adjustments in strategic investments and fair value adjustments.
Q3 adjusted net interest income1 reaches record $187 million, +24% y/y
| Conventional loan2 growth across all asset classes
EQ Bank customer accounts grow to over 290,000 |
Year-to-date, EQB set an all-time record for earnings, adjusted pre-provision, pre-tax earnings1 and book value per share. These results are tracking ahead of annual guidance and supported today's announcement of a sequential common share dividend increase of 7%.
YTD adjusted net interest income1 reaches record $518 million, +21% y/y
| Strong credit metrics reflect effective risk
Capital ratios support strategy, growth in dividends
Record BVPS, YTD Adjusted ROE1 tracking to guidance
|
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. |
"On November 1st, we became the 7th largest independent bank in Canada by assets with the successful closing of our Concentra acquisition, now taking us to a pro forma $100 billion in combined assets under management and assets under administration. I can't think of a better way to begin this exciting next chapter than with the momentum generated on an organic basis in the third quarter. We grew conventional loans 29% year-over-year or $5.6 billion without deviating from our proven methods of assessing credit worthiness and contribution to ROE. With interest rates rising, our high standards for loan quality have never been more necessary or appropriate. This performance, bolstered by our focus on margin management, will propel future earnings. Most important, growth in our customer base presents additional opportunities to live up to our Challenger Bank purpose of driving change in banking to enrich people's lives," said Andrew Moor, President and CEO. "Now, as we integrate Concentra, and pursue our 2023 performance targets, this purpose takes on additional meaning as we welcome new employees, customers and credit union partners and work to realize the substantial benefits of the transaction."
Record YTD performance puts full-year organic growth guidance in range
Net interest income increases to all-time record on growth in portfolio and NIM
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. |
Non-interest revenue improves from a loss in Q2 2022 to net revenue of $9.5 million
Personal Banking conventional lending +27% y/y with reverse mortgages +194% y/y
Commercial Banking assets +24% y/y to $12.5 billion, well-ahead of target
Credit quality indicators reflect prudence in a higher interest rate environment
EQ Bank customers +23% y/y, deposits consistent at $7.6 billion
Equitable Bank continues to diversify funding sources, optimize cost of funds
Strong capital and liquidity positions
EQB announces +7% q/q increase in common share dividend for the quarter, +78% y/y
Concentra Bank integration underway following November 1, 2022 closing
EQB publishes preliminary 2023 adjusted guidance including Concentra Bank
"We've reinforced that EQB's operating model is designed to perform across economic cycles, and this resilience translated again in Q3. The balance sheet, credit and capital are well positioned, diversified and performing to plan. Combined with our team's exceptional focus on ROE and margin management, we believe 2022 will close out on track or ahead of guidance, and we will enter 2023 from a point of strength, including with the addition of Concentra Bank. We will refine our 2023 guidance with Q4 results in February 2023 after operating Concentra Bank for a few months and managing through continued macroeconomic developments. That said, achieving 2023 guidance will be tremendously rewarding to all stakeholders as Canada's Challenger Bank takes its place among the country's largest financial institutions," said Chadwick Westlake, EQB's Chief Financial Officer.
Equitable Bank announces appointment of three deeply experienced, independent directors, effective immediately taking the Board to 12 independent directors
"As Canada's 7th largest independent Canadian bank by assets, Equitable Bank's scope and scale dictate that we enhance our governance, which is exactly what the appointments of these accomplished leaders achieves," said David LeGresley, Chair of the Board of Equitable Bank. "Their presence will be accretive to our deliberations as Canada's Challenger Bank embarks on its next chapter of growth, service and performance. I welcome Carolyn, Marcos and Michael and look forward to the contributions they will make to our Bank's broader purpose of enriching people's lives."
Analyst conference call and webcast: 8:30 a.m. ET Eastern November 9, 2022
EQB will host its third quarter conference call and webcast on Wednesday November 9, 2022. To access the call live, please dial (416) 764-8609 five minutes prior to the start time. The listen-only webcast with accompanying slides will be available at eqbank.investorroom.com/events-webcasts.
Call archive
A replay of the call will be available until November 23, 2022 at midnight at (416) 764-8677 (passcode 753301 followed by the number sign). Alternatively, the webcast will be archived on the Bank's Investor Relations website.
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance sheets (unaudited)
($000s) As at | September 30, 2022 | December 31, 2021 | September 30, 2021 |
Assets: | |||
Cash and cash equivalents | 298,999 | 773,251 | 646,501 |
Restricted cash | 547,836 | 462,164 | 466,641 |
Securities purchased under reverse repurchase agreements | 750,072 | 550,030 | 600,007 |
Investments | 1,092,628 | 1,033,438 | 829,561 |
Loans – Personal | 24,343,276 | 22,421,603 | 21,413,300 |
Loans – Commercial | 12,448,825 | 10,479,159 | 10,061,492 |
Securitization retained interests | 276,464 | 207,889 | 204,820 |
Other assets | 392,009 | 231,536 | 202,745 |
40,150,109 | 36,159,070 | 34,425,067 | |
Liabilities and shareholders' equity | |||
Liabilities: | |||
Deposits | 24,048,937 | 20,856,383 | 19,932,120 |
Securitization liabilities | 11,611,083 | 11,375,020 | 11,195,418 |
Obligations under repurchase agreements | 748,881 | 1,376,763 | 804,300 |
Deferred tax liabilities | 75,755 | 63,141 | 70,118 |
Funding facilities | 800,283 | 200,128 | 330,479 |
Subscription receipts | 232,018 | - | - |
Other liabilities | 471,499 | 335,001 | 221,354 |
37,988,456 | 34,206,436 | 32,553,789 | |
Shareholders' equity: | |||
Preferred shares | 70,424 | 70,607 | 71,195 |
Common shares | 236,368 | 230,160 | 228,645 |
Contributed surplus | 10,908 | 8,693 | 8,272 |
Retained earnings | 1,839,561 | 1,650,757 | 1,578,128 |
Accumulated other comprehensive income (loss) | 4,392 | (7,583) | (14,962) |
2,161,653 | 1,952,634 | 1,871,278 | |
40,150,109 | 36,159,070 | 34,425,067 |
Consolidated statements of income (unaudited)
($000s, except per share amounts) | Three months ended | Nine months ended | |||
September 30, 2022 | September 30, 2021 | September 30, 2022 | September 30, 2021 | ||
Interest income: | |||||
Loans – Personal | 225,502 | 165,171 | 590,112 | 490,591 | |
Loans – Commercial | 172,579 | 107,203 | 421,865 | 311,630 | |
Investments | 3,377 | 4,223 | 10,583 | 10,946 | |
Other | 9,178 | 2,209 | 17,595 | 7,435 | |
410,636 | 278,806 | 1,040,155 | 820,602 | ||
Interest expense: | |||||
Deposits | 153,638 | 75,358 | 348,523 | 229,836 | |
Securitization liabilities | 64,567 | 52,269 | 167,598 | 163,439 | |
Funding facilities | 6,180 | 327 | 8,954 | 670 | |
224,385 | 127,954 | 525,075 | 393,945 | ||
Net interest income | 186,251 | 150,852 | 515,080 | 426,657 | |
Non-interest revenue: | |||||
Fees and other income | 6,679 | 5,629 | 20,578 | 16,802 | |
Net (loss) gain on loans and investments | (7,697) | 4,569 | (19,738) | 8,015 | |
Gains on securitization activities and income | 10,499 | 1,050 | 31,559 | 19,570 | |
9,481 | 11,248 | 32,399 | 44,387 | ||
Revenue | 195,732 | 162,100 | 547,479 | 471,044 | |
Provision for credit losses | 5,354 | (3,500) | 10,462 | (6,254) | |
Revenue after provision for credit losses | 190,378 | 165,600 | 537,017 | 477,298 | |
Non-interest expenses: | |||||
Compensation and benefits | 41,767 | 33,430 | 118,606 | 94,799 | |
Other | 42,315 | 34,012 | 118,685 | 94,950 | |
84,082 | 67,442 | 237,291 | 189,749 | ||
Income before income taxes | 106,296 | 98,158 | 299,726 | 287,549 | |
Income taxes: | |||||
Current | 17,142 | 23,102 | 62,749 | 65,842 | |
Deferred | 11,575 | 2,583 | 12,615 | 9,239 | |
28,717 | 25,685 | 75,364 | 75,081 | ||
Net income | 77,579 | 72,473 | 224,362 | 212,468 | |
Dividends on preferred shares | 1,086 | 1,099 | 3,261 | 3,324 | |
Net income available to common shareholders | 76,493 | 71,374 | 221,101 | 209,144 | |
Earnings per share: | |||||
Basic | 2.24 | 2.10 | 6.48 | 6.17 | |
Diluted | 2.22 | 2.07 | 6.41 | 6.08 | |
Consolidated statements of comprehensive income (unaudited)
($000s) | Three months ended | Nine months ended | |||
September 30, 2022 | September 30, 2021 | September 30, 2022 | September 30, 2021 | ||
Net income | 77,579 | 72,473 | 224,362 | 212,468 | |
Other comprehensive income – items that will | |||||
Debt instruments at Fair Value through Other | |||||
Reclassification of (losses) from AOCI on sale of investment | (84) | - | (1,010) | - | |
Net unrealized (losses) from change in fair value | (2,510) | (502) | (31,890) | (3,730) | |
Reclassification of net losses (gains) to income | 1,324 | (1,264) | 6,330 | 54 | |
Other comprehensive income – items that will | |||||
Equity instruments designated at Fair Value through | |||||
Net unrealized (losses) gains from change in fair value | (4,910) | 1,151 | (11,613) | 17,253 | |
Reclassification of net losses to retained earnings | - | - | 3,045 | - | |
(6,180) | (615) | (35,138) | 13,577 | ||
Income tax recovery (expense) | 1,625 | 163 | 9,218 | (3,566) | |
(4,555) | (452) | (25,920) | 10,011 | ||
Cash flow hedges: | |||||
Net unrealized gains from change in fair value | 2,967 | 3,189 | 48,876 | 19,254 | |
Reclassification of net losses (gains) to income | 1,126 | (61) | 3,499 | (295) | |
4,093 | 3,128 | 52,375 | 18,959 | ||
Income tax (expense) | (1,075) | (822) | (13,735) | (4,980) | |
3,018 | 2,306 | 38,640 | 13,979 | ||
Total other comprehensive (loss) income | (1,537) | 1,854 | 12,720 | 23,990 | |
Total comprehensive income | 76,042 | 74,327 | 237,082 | 236,458 |
Consolidated statements of changes in shareholders' equity (unaudited)
($000s) Three month period ended | September 30, 2022 | |||||||
Preferred | Common | Contributed | Retained | Accumulated other comprehensive income (loss) | ||||
Cash Flow Hedges | Financial | Total | Total | |||||
Balance, beginning of period | 70,424 | 234,372 | 10,106 | 1,773,658 | 36,302 | (30,311) | 5,991 | 2,094,551 |
Net Income | - | - | - | 77,579 | - | - | - | 77,579 |
Transfer of Losses of AOCI to Retained Earnings | - | - | - | - | - | (62) | (62) | (62) |
Other comprehensive income, net of tax | - | - | - | - | 3,018 | (4,555) | (1,537) | (1,537) |
Exercise of stock options | - | 1,974 | - | - | - | - | - | 1,974 |
Dividends: | ||||||||
Preferred shares | - | - | - | (1,086) | - | - | - | (1,086) |
Common shares | - | - | - | (10,590) | - | - | - | (10,590) |
Stock-based compensation | - | - | 824 | - | - | - | - | 824 |
Transfer relating to the exercise of stock options | - | 22 | (22) | - | - | - | - | - |
Balance, end of period | 70,424 | 236,368 | 10,908 | 1,839,561 | 39,320 | (34,928) | 4,392 | 2,161,653 |
($000s) Three month period ended | September 30, 2021 | |||||||
Balance, beginning of period | 72,001 | 224,997 | 8,237 | 1,513,118 | (8,273) | (8,543) | (16,816) | 1,801,537 |
Net Income | - | - | - | 72,473 | - | - | - | 72,473 |
Other comprehensive income, net of tax | - | - | - | - | 2,306 | (452) | 1,854 | 1,854 |
Exercise of stock options | - | 3,060 | - | - | - | - | - | 3,060 |
Purchase of treasury preferred shares | (806) | - | - | - | - | - | - | (806) |
Net loss on cancellation of treasury preferred shares | - | - | - | (71) | - | - | - | (71) |
Dividends: | ||||||||
Preferred shares | - | - | - | (1,099) | - | - | - | (1,099) |
Common shares | - | - | - | (6,293) | - | - | - | (6,293) |
Stock-based compensation | - | - | 623 | - | - | - | - | 623 |
Transfer relating to the exercise of stock options | - | 588 | (588) | - | - | - | - | - |
Balance, end of period | 71,195 | 228,645 | 8,272 | 1,578,128 | (5,967) | (8,995) | (14,962) | 1,871,278 |
Consolidated statements of changes in shareholders' equity (unaudited)
($000s) Nine month period ended | September 30, 2022 | |||||||
Preferred | Common | Contributed | Retained | Accumulated other comprehensive income (loss) | ||||
Cash Flow | Financial | Total | Total | |||||
Balance, beginning of period | 70,607 | 230,160 | 8,693 | 1,650,757 | 680 | (8,263) | (7,583) | 1,952,634 |
Net Income | - | - | - | 224,362 | - | - | - | 224,362 |
Realized Loss on Sale of Shares | - | - | - | (2,251) | - | - | - | (2,251) |
Transfer of Losses of AOCI to Retained Earnings | - | - | - | - | - | (745) | (745) | (745) |
Other comprehensive income, net of tax | - | - | - | - | 38,640 | (25,920) | 12,720 | 12,720 |
Exercise of stock options | - | 5,841 | - | - | - | - | - | 5,841 |
Purchase of treasury preferred shares | (183) | - | - | - | - | - | - | (183) |
Net loss on cancellation of treasury preferred shares | - | - | - | (6) | - | - | - | (6) |
Dividends: | ||||||||
Preferred shares | - | - | - | (3,261) | - | - | - | (3,261) |
Common shares | - | - | - | (30,040) | - | - | - | (30,040) |
Stock-based compensation | - | - | 2,582 | - | - | - | - | 2,582 |
Transfer relating to the exercise of stock options | - | 367 | (367) | - | - | - | - | - |
Balance, end of period | 70,424 | 236,368 | 10,908 | 1,839,561 | 39,320 | (34,928) | 4,392 | 2,161,653 |
($000s) Nine month period ended | September 30, 2021 | |||||||
Balance, beginning of period | 72,477 | 218,166 | 8,092 | 1,387,919 | (19,943) | (19,009) | (38,952) | 1,647,702 |
Net Income | - | - | - | 212,468 | - | - | - | 212,468 |
Other comprehensive income, net of tax | - | - | - | - | 13,979 | 10,011 | 23,990 | 23,990 |
Exercise of stock options | - | 8,775 | - | - | - | - | - | 8,775 |
Purchase of treasury preferred shares | (1,282) | - | - | - | - | - | - | (1,282) |
Net loss on cancellation of treasury preferred shares | - | - | - | (91) | - | - | - | (91) |
Dividends: | ||||||||
Preferred shares | - | - | - | (3,324) | - | - | - | (3,324) |
Common shares | - | - | - | (18,844) | - | - | - | (18,844) |
Stock-based compensation | - | - | 1,884 | - | - | - | - | 1,884 |
Transfer relating to the exercise of stock options | - | 1,704 | (1,704) | - | - | - | - | - |
Balance, end of period | 71,195 | 228,645 | 8,272 | 1,578,128 | (5,964) | (8,998) | (14,962) | 1,871,278 |
Consolidated statements of cash flows (unaudited)
($000s) | Three months ended | Nine months ended | ||
Three and nine month periods ended | September 30, 2022 | September 30, 2021 | September 30, 2022 | September 30, 2021 |
CASH FLOWS FROM OPERATING ACTIVITIES | ||||
Net income | 77,579 | 72,473 | 224,362 | 212,468 |
Adjustments for non-cash items in net income: | ||||
Financial instruments at fair value through income | (3,990) | (5,240) | (2,614) | (10,852) |
Amortization of premiums/discount on investments | 311 | 22 | 941 | 68 |
Amortization of capital assets and intangible costs | 9,696 | 8,555 | 27,740 | 23,789 |
Provision for credit losses | 5,354 | (3,500) | 10,462 | (6,254) |
Securitization gains | (8,973) | (3,084) | (15,221) | (15,439) |
Stock-based compensation | 824 | 623 | 2,582 | 1,884 |
Income taxes | 28,717 | 25,685 | 75,364 | 75,081 |
Securitization retained interests | 13,477 | 11,395 | 38,637 | 33,295 |
Changes in operating assets and liabilities: | ||||
Restricted cash | 9,447 | 40,654 | (85,672) | 37,398 |
Securities purchased under reverse repurchase agreements | (330,063) | (499,992) | (200,042) | (149,804) |
Loans receivable, net of securitizations | (577,886) | (1,588,722) | (3,922,620) | (3,260,888) |
Other assets | (6,277) | (8,276) | (7,382) | (3,078) |
Deposits | 382,733 | 1,350,465 | 3,285,759 | 3,359,352 |
Securitization liabilities | 245,281 | (284,294) | 245,054 | (792,361) |
Obligations under repurchase agreements | (65,613) | 603,029 | (627,882) | 552,423 |
Funding facilities | 88,903 | 330,479 | 600,155 | 330,479 |
Subscription receipts | 1,197 | - | 232,018 | - |
Other liabilities | (34,422) | 3,544 | (21,331) | 15,191 |
Income taxes paid | (31,958) | (10,485) | (125,616) | (43,016) |
Cash flows (used in) from operating activities | (195,663) | 43,331 | (265,306) | 359,736 |
CASH FLOWS FROM FINANCING ACTIVITIES | ||||
Proceeds from issuance of common shares | 1,974 | 3,060 | 5,841 | 8,775 |
Dividends paid on preferred shares | (1,086) | (1,099) | (3,261) | (3,324) |
Dividends paid on common shares | (10,590) | (6,293) | (30,040) | (18,844) |
Cash flows used in financing activities | (9,702) | (4,332) | (27,460) | (13,393) |
CASH FLOWS FROM INVESTING ACTIVITIES | ||||
Purchase of investments | (8,466) | (189,056) | (67,292) | (673,906) |
Proceeds on sale or redemption of investments | 44,150 | 244,963 | 277,918 | 474,429 |
Net change in Canada Housing Trust re-investment accounts | (51,141) | (29,530) | (346,244) | (29,619) |
Purchase of capital assets and system development costs | (19,688) | (10,627) | (45,868) | (28,489) |
Cash flows (used in) from investing activities | (35,145) | 15,750 | (181,486) | (257,585) |
Net (decrease) increase in cash and cash equivalents | (240,510) | 54,749 | (474,252) | 88,758 |
Cash and cash equivalents, beginning of period | 539,509 | 591,752 | 773,251 | 557,743 |
Cash and cash equivalents, end of period | 298,999 | 646,501 | 298,999 | 646,501 |
Cash flows from operating activities include: | ||||
Interest received | 362,766 | 256,184 | 922,920 | 764,336 |
Interest paid | (152,137) | (112,378) | (417,217) | (386,564) |
Dividends received | 859 | 1,198 | 3,029 | 4,114 |
About EQB Inc.
EQB trades on the Toronto Stock Exchange (TSX: EQB and EQB.PR.C) and serves more than 370,000 Canadians through its wholly owned subsidiary Equitable Bank, Canada's Challenger Bank™. Equitable Banks wholly owned subsidiary Concentra Bank supports credit unions across Canada that serve more than 5 million members. Equitable Bank has over $100 billion in combined assets under management and administration, with a clear mandate to drive change in Canadian banking to enrich people's lives. Founded over 50 years ago, Canada's Challenger Bank™ provides diversified personal and commercial banking and through its EQ Bank platform (eqbank.ca) has been named the top Schedule I Bank in Canada on the Forbes World's Best Banks 2022 and 2021 lists. Please visit equitablebank.ca for details.
Investor contact:
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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.
Adjusted financial results
On February 7, 2022, Equitable Bank announced a definitive agreement to acquire a majority interest in Concentra Bank (Concentra), subject to customary closing conditions and regulatory approvals. On September 28, 2022, the Bank received approval from the Ministry of Finance to acquire Concentra and subsequently closed the transaction on November 1, 2022. The EQB.R subscription receipts were converted to common shares and proceeds were used to fund the transaction. Beginning in Q4 2021, Equitable Bank incurred certain acquisition costs. 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:
Concentra acquisition/integration costs, pre-tax:
(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 net proceeds from the issuance were held in an escrow account and the interest income earned is not recognized until the closing date. |
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 three months ended | For the nine months ended | ||||
30-Sep-22 | 30-Jun-22 | 30-Sep-21 | 30-Sep-22 | 30-Sep-21 | ||
Reported financial results ($thousands) | ||||||
Net interest income | 186,251 | 166,657 | 150,852 | 515,080 | 426,657 | |
Non-interest revenue | 9,481 | (2,528) | 11,248 | 32,399 | 44,387 | |
Revenue | 195,732 | 164,129 | 162,100 | 547,479 | 471,044 | |
Non-interest expense | 84,082 | 78,276 | 67,442 | 237,291 | 189,749 | |
Pre-provision pre-tax income | 111,650 | 85,853 | 94,658 | 310,188 | 281,295 | |
Provision for credit loss | 5,354 | 5,233 | (3,500) | 10,462 | (6,254) | |
Income tax expense | 28,717 | 21,784 | 25,685 | 75,364 | 75,081 | |
Net income | 77,579 | 58,836 | 72,473 | 224,362 | 212,468 | |
Net income available to common shareholders | 76,493 | 57,750 | 71,374 | 221,101 | 209,144 | |
Adjustments ($ thousands) | ||||||
Interest expenses – paid to subscription receipt holders(1) | 1,013 | 947 | - | 2,874 | - | |
Non-interest expenses – acquisition / integration related costs | 5,179 | 2,709 | - | 13,021 | - | |
Pre-tax adjustments | 6,192 | 3,656 | - | 15,895 | - | |
Income tax expense(2) | 1,622 | 958 | - | 4,165 | - | |
Post-tax adjustments | 4,570 | 2,698 | - | 11,730 | - | |
Adjusted financial results ($ thousands) | ||||||
Net interest income | 187,264 | 167,604 | 150,852 | 517,954 | 426,657 | |
Non-interest revenue | 9,481 | (2,528) | 11,248 | 32,399 | 44,387 | |
Revenue | 196,745 | 165,076 | 162,100 | 550,353 | 471,044 | |
Non-interest expense | 78,903 | 75,567 | 67,442 | 224,270 | 189,749 | |
Pre-provision pre-tax income | 117,842 | 89,509 | 94,658 | 326,083 | 281,295 | |
Provision for credit loss | 5,354 | 5,233 | (3,500) | 10,462 | (6,254) | |
Income tax expense | 30,339 | 22,742 | 25,685 | 79,528 | 75,081 | |
Net income | 82,149 | 61,534 | 72,473 | 236,093 | 212,468 | |
Net income available to common shareholders | 81,063 | 60,448 | 71,374 | 232,831 | 209,144 | |
Diluted earnings per share ($, except number of shares) | ||||||
Weighted average number of diluted common shares outstanding | 34,450,617 | 34,479,387 | 34,492,008 | 34,491,452 | 34,414,146 | |
Diluted earnings per share - reported | 2.22 | 1.67 | 2.07 | 6.41 | 6.08 | |
Diluted earnings per share - adjusted | 2.35 | 1.75 | 2.07 | 6.75 | 6.08 | |
Impact of adjustments on diluted earnings per share | 0.13 | 0.08 | - | 0.34 | - | |
(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 net proceeds from the issuance are held in an escrow account and the interest income earned is not recognized until the closing date. (2) Income tax expense associated with non-GAAP adjustment was calculated based on the statutory tax rate applicable for that period. |
In addition to the adjusted results that are presented above, additional adjusted financial measures and ratios are disclosed as follows:
Reconciliation of adjusted efficiency ratio
($000s, except percentages) | For the three months ended | For the nine months ended | ||||||||
30-Sep-22 | 30-Jun-22 | Change | 30-Sep-21 | Change | 30-Sep-22 | 30-Sep-21 | Change | |||
Non-interest expenses – reported | 84,082 | 78,276 | 7 % | 67,442 | 25 % | 237,291 | 189,749 | 25 % | ||
Adjustments on a pre-tax basis: Non-interest expenses – acquisition/integration related costs | (5,179) |
(2,709) | 91 % | - | N/A | (13,021) | - | N/A | ||
Non-interest expenses – adjusted | 78,903 | 75,567 | 4 % | 67,442 | 17 % | 224,270 | 189,749 | 18 % | ||
Revenue – reported | 195,732 | 164,129 | 19 % | 162,100 | 21 % | 547,479 | 471,044 | 16 % | ||
Adjustment on a pre-tax basis: | ||||||||||
Interest expenses – paid to subscription receipt holders | 1,013 | 947 | 7 % | - | N/A | 2,874 | - | N/A | ||
Revenue – adjusted | 196,745 | 165,076 | 19 % | 162,100 | 21 % | 550,353 | 471,044 | 17 % | ||
Efficiency ratio – adjusted | 40.1 % | 45.8 % | (5.7 %) | 41.6 % | (1.5 %) | 40.8 % | 40.3 % | 0.5 % |
Reconciliation of adjusted return on equity (ROE)
($000s, except percentages) | For the three months ended | For the nine months ended | ||||||
30-Sep-22 | 30-Jun-22 | Change | 30-Sep-21 | Change | 30-Sep-22 | 30-Sep-21 | Change | |
Net income available to common shareholders – reported | 76,493 | 57,750 | 32 % | 71,374 | 7 % | 221,101 | 209,144 | 6 % |
Adjustments on an after-tax basis: Costs associated with Concentra acquisition | 4,570 | 2,698 | 69 % | - | N/A | 11,730 | - | N/A |
Net income available to common shareholders – adjusted | 81,063 | 60,448 | 34 % | 71,374 | 14 % | 232,831 | 209,144 | 11 % |
Weighted average common equity outstanding – adjusted | 2,066,734 | 2,001,383 | 3 % | 1,764,632 | 17 % | 1,992,412 | 1,688,350 | 18 % |
Return on equity - adjusted | 15.6 % | 12.1 % | 3.5 % | 16.0 % | (0.4 %) | 15.6 % | 16.6 % | (1.0 %) |
Other non-GAAP financial measures and ratios
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-Sep-22 | 30-Jun-22 | Change | 30-Sep-21 | Change |
Total assets on the consolidated balance sheet | 40,150,109 | 39,417,758 | 2 % | 34,425,067 | 17 % |
Loan principal derecognized | 7,181,301 | 6,349,413 | 13 % | 5,746,788 | 25 % |
Assets under management | 47,331,410 | 45,767,171 | 3 % | 40,171,855 | 18 % |
Conventional loans: are the total on-balance sheet loan principal excluding prime single family and insured multi-unit residential mortgages.
($000s) | 30-Sep-22 | 30-Jun-22 | Change | 30-Sep-21 | Change |
Alternative single-family mortgages | 16,492,710 | 16,264,259 | 1 % | 13,262,144 | 24 % |
Reverse mortgages | 514,020 | 421,406 | 22 % | 174,844 | 194 % |
Insurance lending | 79,610 | 73,219 | 9 % | 41,625 | 91 % |
Total Conventional loans – Personal | 17,086,340 | 16,758,884 | 2 % | 13,478,613 | 27 % |
Business Enterprise Solutions | 1,318,727 | 1,228,665 | 7 % | 1,043,089 | 26 % |
Commercial Finance Group | 4,973,158 | 4,516,012 | 10 % | 3,736,987 | 33 % |
Specialized finance | 750,322 | 738,675 | 2 % | 506,268 | 48 % |
Equipment leasing | 965,155 | 902,054 | 7 % | 680,642 | 42 % |
Total Conventional loans – Commercial | 8,007,362 | 7,385,406 | 8 % | 5,966,986 | 34 % |
Total Conventional loans | 25,093,702 | 24,144,290 | 4 % | 19,445,599 | 29 % |
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: is the difference between revenue and non-interest expenses.
SOURCE EQB Inc.
https://eqb.investorroom.com/2022-11-08-EQB-Reports-Record-Q3-Earnings-on-Margin-Expansion,-AUM-Surpasses-47B,-Board-Declares-Fourth-Consecutive-Quarterly-Dividend-Increase-and-Appoints-New-Directors