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

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

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

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

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

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

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

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

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

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

² Adjusted measures and ratios are Non-Generally Accepted Accounting Principles (GAAP) measures and ratios. Adjusted measures and ratios are calculated in the same manner as reported measures and ratios, except that financial information included in the calculation of adjusted measures and ratios is adjusted to exclude the impact of the Concentra Bank and ACM acquisition and integration related costs, and other non-recurring items which management determines would have a significant impact on a reader's assessment of business performance. For additional information and a reconciliation of reported results to adjusted results, see the "Non-GAAP financial measures and ratios" section.

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

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

EQ Bank welcomes over 28,000 customers in Q3 growing to 485,000, +6% q/q and +32% y/y

• The "Second Chance" marketing campaign across English Canada with Eugene and Dan Levy and "Deuxième chance" across Québec with Diane Lavallée et Laurence Leboeuf led to a substantial increase in consumer awareness of EQ Bank and supported the rapid growth of new customer accounts as Canadians explored the advantages that accrue from using all-digital, interest-bearing accounts with no fees on everyday banking.
• The recently launched and first-of-its-kind Notice Savings Account, with no fees or minimum balance requirements, pairs high interest rates with the flexibility to withdraw on short notice. It has proven to be attractive to both existing and new customers who now benefit from greater diversity in the savings product landscape.

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

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

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

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

Provisions reflect credit risk at this point in the cycle

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

EQB increases common share dividend

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

EQB preferred share redemption

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

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

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

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

Analyst conference call and webcast: 7:00 a.m. ET August 29, 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)

($000s) As at	July 31, 2024	October 31, 2023	June 30, 2023
Assets:
Cash and cash equivalents	509,608	549,474	373,492
Restricted cash	904,196	767,195	870,247
Securities purchased under reverse repurchase agreements	1,339,578	908,833	1,208,930
Investments	1,806,413	2,120,645	2,235,530
Loans - Personal	32,584,931	32,390,527	32,333,611
Loans - Commercial	15,372,643	14,970,604	15,103,519
Securitization retained interests	738,986	559,271	474,542
Deferred tax assets	30,481	14,230	14,392
Other assets	782,900	652,675	704,440
Total assets	54,069,736	52,933,454	53,318,703
Liabilities and Shareholders' Equity
Liabilities:
Deposits	33,258,969	31,996,450	32,137,347
Securitization liabilities	14,919,830	14,501,161	15,397,103
Obligations under repurchase agreements	-	1,128,238	875,718
Deferred tax liabilities	161,025	128,436	106,723
Funding facilities	1,803,221	1,731,587	1,487,008
Other liabilities	681,213	602,039	594,952
Total liabilities	50,824,258	50,087,911	50,598,851
Shareholders' Equity:
Preferred shares	181,411	181,411	181,411
Common shares	501,594	471,014	466,711
Other equity instruments	147,808	-	-
Contributed (deficit) surplus	(25,801)	12,795	12,668
Retained earnings	2,432,426	2,185,480	2,065,478
Accumulated other comprehensive loss	(3,964)	(5,157)	(6,416)
	3,233,474	2,845,543	2,719,852
Non-controlling interests	12,004	-	-
Total equity	3,245,478	2,845,543	2,719,852
Total liabilities and equity	54,069,736	52,933,454	53,318,703

Consolidated statement of income (unaudited)

	Three months ended		Nine months ended
($000s, except per share amounts)	July 31, 2024	June 30, 2023	July 31, 2024	June 30, 2023
Interest income:
Loans - Personal	501,420	420,578	1,452,673	1,139,990
Loans - Commercial	256,788	256,731	777,511	716,927
Investments	16,432	18,856	51,187	51,503
Other	32,210	21,083	81,518	57,733
	806,850	717,248	2,362,889	1,966,153
Interest expense:
Deposits	387,208	322,503	1,111,772	860,147
Securitization liabilities	132,810	118,416	391,839	329,753
Funding facilities	12,773	11,891	41,577	30,817
Other	2,692	12,739	22,986	34,615
	535,483	465,549	1,568,174	1,255,332
Net interest income	271,367	251,699	794,715	710,821
Non-interest revenue:
Fees and other income	22,561	14,489	59,740	38,890
Net gains on loans and investments	6,145	29,659	18,267	21,145
Gain on sale and income from retained interests	22,755	16,104	65,341	39,683
Net gains on securitization activities and derivatives	4,410	596	4,607	4,546
	55,871	60,848	147,955	104,264
Revenue	327,238	312,547	942,670	815,085
Provision for credit losses	21,274	13,042	59,026	46,086
Revenue after provision for credit losses	305,964	299,505	883,644	768,999
Non-interest expenses:
Compensation and benefits	69,912	59,707	202,242	183,068
Other	80,657	67,323	238,232	209,690
	150,569	127,030	440,474	392,758
Income before income taxes	155,395	172,475	443,170	376,241
Income taxes:
Current	44,083	26,612	115,351	77,417
Deferred	(842)	14,938	5,567	22,561
	43,241	41,550	120,918	99,978
Net income	112,154	130,925	322,252	276,263
Dividends on preferred shares	2,351	2,331	7,054	6,954
Net income available to common shareholders and non-controlling interests	109,803	128,594	315,198	269,309
Net income attributable to:
Common shareholders	109,538	128,594	314,454	269,309
Non-controlling interests	265	-	744	-
	109,803	128,594	315,198	269,309
Earnings per share:
Basic	2.86	3.41	8.24	7.24
Diluted	2.84	3.39	8.17	7.18

Consolidated statement of comprehensive income (unaudited)

	Three months ended		Nine months ended
($000s)	July 31, 2024	June 30, 2023	July 31, 2024	June 30, 2023
Net income	112,154	130,925	322,252	276,263
Other comprehensive income - items that will be reclassified subsequently to income:
Debt instruments at Fair Value through Other Comprehensive Income:
Reclassification of losses from AOCI on sale of investments	(1,591)	-	(1,734)	-
Net unrealized gains (losses) gains from change in fair value	34,658	(31,474)	59,979	(19,372)
Reclassification of net (gains) losses to income	(29,687)	32,302	(48,184)	25,165
Other comprehensive income - items that will not be reclassified subsequently to income:
Equity instruments designated at Fair Value through Other Comprehensive Income:
Reclassification of (losses) gains from AOCI on sale of investments	(25,599)	-	(25,599)	604
Net unrealized gains (losses) from change in fair value	534	(30,989)	2,086	(33,325)
Reclassification of net losses to retained earnings	26,089	4,936	26,089	5,712
	4,404	(25,225)	12,637	(21,216)
Income tax (expense) recovery	(1,194)	7,005	(3,427)	6,279
	3,210	(18,220)	9,210	(14,937)
Cash flow hedges:
Net unrealized (losses) gains from change in fair value	(23,284)	28,856	(23,553)	18,090
Reclassification of net gains to income	(2,844)	(11,082)	(14,608)	(13,100)
	(26,128)	17,774	(38,161)	4,990
Income tax recovery (expense)	7,084	(4,936)	10,366	(1,340)
	(19,044)	12,838	(27,795)	3,650
Total other comprehensive loss	(15,834)	(5,382)	(18,585)	(11,287)
Total comprehensive income	96,320	125,543	303,667	264,976
Total comprehensive income attributable to:
Common shareholders	96,054	125,543	302,922	264,976
Non-controlling interests	265	-	744	-
	96,319	125,543	303,666	264,976

Consolidated statement of changes in shareholders' equity (unaudited)

($000s) Three-month period ended			July 31, 2024
	Preferred Shares	Common Shares			Contributed Deficit	Retained Earnings	Accumulated other comprehensive income (loss)
				Other equity instruments			Cash Flow Hedges	Financial Instruments at FVOCI	Total	Attributable to equity holders	Non- controlling interests	Total
Balance, beginning of period	181,411	495,707		-	(24,811)	2,359,116	34,867	(42,671)	(7,804)	3,003,619	12,189	3,015,808
Net Income	-	-		-	-	111,889	-	-	-	111,889	265	112,154
Realized loss on sale of shares, net of tax	-	-		-	-	(18,975)	-	-	-	(18,975)	-	(18,975)
Transfer of AOCI losses to retained earnings, net of tax	-	-		-	-	-	-	18,618	18,618	18,618	-	18,618
Transfer of AOCI losses to net income, net of tax	-	-		-	-	-	-	1,056	1,056	1,056	-	1,056
Other comprehensive loss, net of tax	-	-		-	-	-	(19,044)	3,210	(15,834)	(15,834)	-	(15,834)
Exercise of stock options	-	5,005		-	-	-	-	-	-	5,005	-	5,005
Limited recourse capital notes issued	-	-		150,000	-	-	-	-	-	150,000	-	150,000
Issuance cost, net of tax	-	-		(2,192)	-	-	-	-	-	(2,192)	-	(2,192)
Dividends:
Preferred shares	-	-		-	-	(2,351)	-	-	-	(2,351)	-	(2,351)
Common shares	-	-		-	-	(17,253)	-	-	-	(17,253)	(450)	(17,703)
Share tender rights	-	-		-	(1,032)	-	-	-	-	(1,032)	-	(1,032)
Stock-based compensation	-	-		-	924	-	-	-	-	924	-	924
Transfer relating to the exercise of stock options	-	882		-	(882)	-	-	-	-	-	-	-
Balance, end of period	181,411	501,594		147,808	(25,801)	2,432,426	15,823	(19,787)	(3,964)	3,233,474	12,004	3,245,478

($000s) Three-month period ended	June 30, 2023
	Preferred Shares	Common Shares	Contributed Surplus	Retained Earnings	Accumulated other comprehensive income (loss)
					Cash Flow Hedges	Financial Instruments at FVOCI	Total	Attributable to equity holders	Non-controlling interests	Total
Balance, beginning of period	181,411	463,862	12,002	1,954,394	30,132	(31,166)	(1,034)	2,610,635	-	2,610,635
Net Income	-	-	-	130,925	-	-	-	130,925	-	130,925
Realized Loss on sale of investment securities	-	-	-	(3,565)	-	-	-	(3,565)	-	(3,565)
Other comprehensive loss, net of tax	-	-	-	-	12,838	(18,220)	(5,382)	(5,382)	-	(5,382)
Exercise of stock options	-	2,707	-	-	-	-	-	2,707	-	2,707
Dividends:
Preferred shares	-	-	-	(2,331)	-	-	-	(2,331)	-	(2,331)
Common shares	-	-	-	(13,945)	-	-	-	(13,945)	-	(13,945)
Stock-based compensation	-	-	808	-	-	-	-	808	-	808
Transfer relating to the exercise of stock options	-	142	(142)	-	-	-	-	-	-	-
Balance, end of period	181,411	466,711	12,668	2,065,478	42,970	(49,386)	(6,416)	2,719,852	-	2,719,852

($000s) Nine-month period ended			July 31, 2024
	Preferred Shares	Common Shares			Contributed Deficit	Retained Earnings	Accumulated other comprehensive income (loss)
				Other equity instruments			Cash Flow Hedges	Financial Instruments at FVOCI	Total	Attributable to equity holders	Non- controlling interests	Total
Balance, beginning of period	181,411	471,014		-	12,795	2,185,480	43,618	(48,775)	(5,157)	2,845,543	-	2,845,543
NCI on acquisition	-	-		-	-	-	-	-	-	-	12,310	12,310
Net Income	-	-		-	-	321,508	-	-	-	321,508	744	322,252
Realized loss on sale of shares, net of tax	-	-		-	-	(18,975)	-	-	-	(18,975)	-	(18,975)
Transfer of AOCI losses to retained earnings, net of tax	-	-		-	-	-	-	18,618	18,618	18,618	-	18,618
Transfer of AOCI losses to net income, net of tax	-	-		-	-	-	-	1,160	1,160	1,160	-	1,160
Other comprehensive loss, net of tax	-	-		-	-	-	(27,795)	9,210	(18,585)	(18,585)	-	(18,585)
Common shares issued		11,000		-	-	-	-	-	-	11,000	-	11,000
Exercise of stock options	-	16,844		-	-	-	-	-	-	16,844	-	16,844
Limited recourse capital notes issued	-	-		150,000	-	-	-	-	-	150,000	-	150,000
Issuance cost, net of tax	-	-		(2,192)	-	-	-	-	-	(2,192)	-	(2,192)
Dividends:
Preferred shares	-	-		-	-	(7,054)	-	-	-	(7,054)	-	(7,054)
Common shares	-	-		-	-	(48,533)	-	-	-	(48,533)	(1,050)	(49,583)
Share tender rights	-	-		-	(38,897)	-	-	-	-	(38,897)	-	(38,897)
Stock-based compensation	-	-		-	3,037	-	-	-	-	3,037	-	3,037
Transfer relating to the exercise of stock options	-	2,736		-	(2,736)	-	-	-	-	-	-	-
Balance, end of period	181,411	501,594		147,808	(25,801)	2,432,426	15,823	(19,787)	(3,964)	3,233,474	12,004	3,245,478

($000s) Nine-month period ended	June 30, 2023
	Preferred Shares	Common Shares	Contributed Surplus	Retained Earnings	Accumulated other comprehensive income (loss)
					Cash Flow Hedges	Financial Instruments at FVOCI	Total	Attributable to equity holders	Non- controlling interests	Total
Balance, beginning of period	70,424	236,368	10,908	1,839,561	39,320	(34,928)	4,392	2,161,653	-	2,161,653
Net Income	-	-	-	276,263	-	-	-	276,263	-	276,263
Realized loss on sale of financial instruments, net of tax	-	-	-	(3,882)	-	-	-	(3,882)	-	(3,882)
Transfer of AOCI losses to retained earnings, net of tax	-	-	-	-	-	446	446	446	-	446
Investment elimination on acquisition	-	-	-	-	-	33	33	33	-	33
Other comprehensive loss, net of tax	-	-	-	-	3,650	(14,937)	(11,287)	(11,287)	-	(11,287)
Common shares issued	-	223,112	-	-	-	-	-	223,112	-	223,112
Exercise of stock options	-	9,903	-	-	-	-	-	9,903	-	9,903
Share issuance cost, net of tax	-	(2,908)	-	-	-	-	-	(2,908)	-	(2,908)
Dividend payout from principal	-	(655)	-	-	-	-	-	(655)	-	(655)
Dividends:
Preferred shares	-	-	-	(6,954)	-	-	-	(6,954)	-	(6,954)
Common shares	-	-	-	(39,510)	-	-	-	(39,510)	-	(39,510)
Stock-based compensation	-	-	2,651	-	-	-	-	2,651	-	2,651
Transfer relating to the exercise of stock options	-	891	(891)	-	-	-	-	-	-	-
Shares on acquisition	110,987	-	-	-	-	-	-	110,987	-	110,987
Balance, end of period	181,411	466,711	12,668	2,065,478	42,970	(49,386)	(6,416)	2,719,852	-	2,719,852

Consolidated statement of cash flows (unaudited)

	Three months ended		Nine months ended
($000s)	July 31 2024	June 30, 2023	July 31 2024	June 30, 2023
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	112,154	130,925	322,252	276,263
Adjustments for non-cash items in net income:
Financial instruments at fair value through income	(14,453)	56,610	(3,093)	9,982
Amortization of premiums/discount on investments	(13,393)	2,439	(44,422)	4,497
Amortization of capital assets and intangible costs	13,253	11,919	36,373	43,293
Provision for credit losses	21,274	13,042	59,026	46,086
Securitization gains	(16,656)	(13,690)	(48,658)	(33,632)
Stock-based compensation	924	808	3,037	2,651
Dividend income earned, not received	-	(27,964)	-	(27,964)
Income taxes	43,241	41,550	120,918	99,978
Securitization retained interests	33,670	22,055	92,304	57,109
Changes in operating assets and liabilities:
Restricted cash	(121,048)	(203,717)	(137,001)	(240,539)
Securities purchased under reverse repurchase agreements	60,377	(476,322)	(430,745)	(458,858)
Loans receivable, net of securitizations	(132,856)	(943,719)	(847,878)	(2,136,227)
Other assets	(97,507)	(65,068)	(106,038)	84,525
Deposits	(924,138)	549,817	1,165,004	1,471,007
Securitization liabilities	(269,988)	89,135	407,423	1,053,921
Obligations under repurchase agreements	-	(28,940)	(1,128,238)	126,837
Funding facilities	963,380	718,291	71,634	332,618
Subscription receipts	-	-	-	(232,018)
Other liabilities	(53,946)	57,750	(12,310)	(129,537)
Income taxes paid	(21,742)	(34,342)	(71,816)	(112,768)
Cash flows (used in) from operating activities	(417,454)	(99,421)	(552,228)	237,224
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common shares	5,005	2,707	27,844	229,453
Net proceeds from issuance of limited recourse notes	147,808	-	147,808	-
Term loan facility	-	-	-	275,000
Dividends paid on preferred shares	(2,351)	(2,331)	(7,054)	(6,954)
Dividends paid on common shares	(17,253)	(13,945)	(48,533)	(39,510)
Cash flows used in financing activities	133,209	(13,569)	120,065	457,989
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of investments	(7,896)	(162,220)	(352,319)	(1,227,957)
Acquisition of subsidiary	-	-	(75,483)	(495,369)
Proceeds on sale or redemption of investments	132,370	374,215	789,016	1,044,039
Net change in Canada Housing Trust re-investment accounts	22,050	(58,762)	69,009	109,878
Purchase of capital assets and system development costs	(9,890)	(12,372)	(37,926)	(51,311)
Cash flows from (used in) investing activities	136,634	140,861	392,297	(620,720)
Net (decrease) increase in cash and cash equivalents	(147,611)	27,871	(39,866)	74,493
Cash and cash equivalents, beginning of period	657,219	345,621	549,474	298,999
Cash and cash equivalents, end of period	509,608	373,492	509,608	373,492
Cash flows from operating activities include:
Interest received	975,954	743,478	2,510,358	1,747,881
Interest paid	(646,530)	(432,654)	(1,461,202)	(810,895)
Dividends received	521	1,022	1,634	3,108

About EQB Inc.

EQB Inc. (TSX: EQB and EQB.PR.C) is a leading digital financial services company with $125 billion in combined assets under management and administration (as at July 31, 2024). It offers banking services through Equitable Bank, a wholly owned subsidiary and Canada's seventh largest bank by assets, and wealth management through ACM Advisors, a majority owned subsidiary specializing in alternative assets. As Canada's Challenger Bank, Equitable Bank has a clear mission to drive change in Canadian banking to enrich people's lives. It leverages technology to deliver exceptional personal and commercial banking experiences and services to over 670,000 customers and more than six million credit union members through its businesses. Through its digital EQ Bank platform (eqbank.ca), its customers have named it one of Canada's top banks on the Forbes World's Best Banks list since 2021.

Please visit eqb.investorroom.com for more details.

Investor contact:
Mike Rizvanovic
Managing Director, Investor Relations
[email protected]

Media contact:
Maggie Hall
Director, PR & Communications
[email protected]

Cautionary Note Regarding Forward-Looking Statements

Statements made by EQB in the sections of this news release, in other filings with Canadian securities regulators and in other communications include forward-looking statements within the meaning of applicable securities laws (forward-looking statements). These statements include, but are not limited to, statements about EQB's objectives, strategies and initiatives, financial performance expectation, statements with respect to the anticipated timing of the redemption of the Series 3 Preferred Shares, and other statements made herein, whether with respect to EQB's businesses or the Canadian economy. Generally, forward-looking statements can be identified by the use of forward-looking terminology such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "planned", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases which state that certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or "be achieved", or other similar expressions of future or conditional verbs. Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, closing of transactions, performance or achievements of EQB to be materially different from those expressed or implied by such forward-looking statements, including but not limited to risks related to capital markets and additional funding requirements, fluctuating interest rates and general economic conditions, legislative and regulatory developments, changes in accounting standards, the nature of our customers and rates of default, and competition as well as those factors discussed under the heading "Risk Management" in the MD&A and in EQB's documents filed on SEDAR at www.sedar.com. All material assumptions used in making forward-looking statements are based on management's knowledge of current business conditions and expectations of future business conditions and trends, including their knowledge of the current credit, interest rate and liquidity conditions affecting EQB and the Canadian economy. Although EQB believes the assumptions used to make such statements are reasonable at this time and has attempted to identify in its continuous disclosure documents important factors that could cause actual results to differ materially from those contained in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. Certain material assumptions are applied by EQB in making forward-looking statements, including without limitation, assumptions regarding its continued ability to fund its mortgage business, a continuation of the current level of economic uncertainty that affects real estate market conditions, continued acceptance of its products in the marketplace, as well as no material changes in its operating cost structure and the current tax regime. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. EQB does not undertake to update any forward-looking statements that are contained herein, except in accordance with applicable securities laws.

Non-Generally Accepted Accounting Principles (GAAP) Financial Measures and Ratios

In addition to GAAP prescribed measures, this news release references certain non-GAAP measures, including adjusted financial results, that we believe provide useful information to investors regarding EQB's financial condition and results of operations. Readers are cautioned that non-GAAP measures often do not have any standardized meaning, and therefore, are unlikely to be comparable to similar measures presented by other companies.

Adjustments listed below are presented on a pre-tax basis:

Q3 2024

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

Q2 2024

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

Q2 2023

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

The following table presents a reconciliation of GAAP reported financial results to non-GAAP adjusted financial results.

Reconciliation of reported and adjusted financial results	For the three months ended					For the nine months ended
($000, except share and per share amounts)	31-Jul-24	30-Apr-24		30-Jun-23		31-Jul-24		30-Jun-23
Reported results
Net interest income	271,367	267,338		251,699		794,715		710,821
Non-interest revenue	55,871	49,322		60,848		147,955		104,264
Revenue	327,238	316,660		312,547		942,670		815,085
Non-interest expense	150,569	150,420		127,030		440,474		392,758
Pre-provision pre-tax income(3)	176,669	166,240		185,517		502,196		422,327
Provision for credit loss	21,274	22,217		13,042		59,026		46,086
Income tax expense	43,241	38,307		41,550		120,918		99,978
Net income	112,154	105,716		130,925		322,252		276,263
Net income available to common shareholders	109,538	103,041		128,594		314,454		269,309
Adjustments
Net interest income - earned on the escrow account	-	-		-		-		(2,220)
Net interest income - fair value amortization/adjustments	-	-		-		-		(843)
Net interest income - paid to subscription receipt holders	-	-		-		-		(654)
Non-interest revenue - strategic investment	-	-		(27,965)		-		(27,965)
Non-interest revenue - fair value amortization/adjustments	-	-		-		-		876
Non-interest expenses - non-recurring operational effectiveness and acquisition-related costs(1)	(2,652)	(5,710)		(3,377)		(10,416)		(45,042)
Non-interest expenses - other expenses	-	-		(858)		-		(858)
Non-interest expenses - fair value amortization/adjustments	-	-		-		-		(66)
Non-interest expenses - intangible asset amortization	(2,223)	(1,599)		(885)		(7,219)		(2,361)
Provision for credit loss - purchased loans	-	-		-		-		(19,020)
Provision for credit loss - ECL methodology change and weights	(1,698)	-		-		(1,698)		-
Pre-tax adjustments - income before tax	6,573	7,309		(22,844)		19,333		36,542
Income tax expense - tax impact on above adjustments(2)	1,543	1,983		(7,425)		5,009		8,695
Income tax expense - 2022 tax rate adjustment	-	-		-		-		(5,621)
Post-tax adjustments - net income	5,030	5,326		(15,419)		14,324		33,468
Adjustments attributed to minority interests	(310)	(190)		-		(624)		-
Post-tax adjustments - net income to common shareholders	4,720	5,136		(15,419)		13,700		33,467
Adjusted results
Net interest income	271,367	267,338		251,699		794,715		707,104
Non-interest revenue	55,871	49,322		32,883		147,955		77,175
Revenue	327,238	316,660		284,582		942,670		784,279
Non-interest expense	145,694	143,111		121,910		422,839		344,431
Pre-provision pre-tax income(3)	181,544	173,549		162,672		519,831		439,848
Provision for credit loss	19,576	22,217		13,042		57,328		27,066
Income tax expenses	44,784	40,290		34,124		125,927		103,052
Net income	117,184	111,042		115,506		336,576		309,730
Net income available to common shareholders	114,258	108,177		113,175		328,154		302,777
Diluted earnings p er share
Weighted average diluted common shares outstanding	38,606,268	38,522,025		37,975,115		38,490,651		37,501,378
Diluted earnings per share - reported	2.84	2.67		3.39		8.17		7.18
Diluted earnings per share - adjusted	2.96	2.81		2.98		8.53		8.07
Diluted earnings per share - adjustment impact	0.12	0.14		(0.41)		0.36		0.89

(1)	Includes non-recurring operational effectiveness and acquisition and integration-related costs associated with Concentra Bank and ACM.
(2)	Income tax expense associated with non-GAAP adjustment was calculated based on the statutory tax rate applicable for that period, taking into account the federal tax rate increase.
(3)	This is a non-GAAP measure, see Other non-GAAP financial measures and ratios section.

Other non-GAAP financial measures and ratios:

• Adjusted return on equity (ROE) is calculated on an annualized basis and is defined as adjusted net income available to common shareholders as a percentage of weighted average common shareholders' equity (reported) outstanding during the period.
• Assets under administration (AUA): is sum of (1) assets over which EQB's subsidiaries have been named as trustee, custodian, executor, administrator, or other similar role; (2) loans held by credit unions for which EQB's subsidiaries act as servicer.
• Assets under management (AUM): is the sum of total balance sheet assets, loan principal derecognized but still managed by EQB, and assets managed on behalf on investors.
• Loans under management (LUM): is the sum of loan principal reported on the consolidated balance sheet and loan principal derecognized but still managed by EQB.
• Net interest margin (NIM): this profitability measure is calculated on an annualized basis by dividing net interest income by the average total interest earning assets for the period.
• Pre-provision pre-tax income (PPPT): this is the difference between revenue and non-interest expenses.
• Total loan assets: this is calculated on a gross basis (prior to allowance for credit losses) as the sum of both Loans - Personal and Loans - Commercial on the balance sheet and adding their associated allowance for credit losses.

SOURCE EQB Inc.