EQB Reports Continued Strong Lending Growth and Core Earnings, Assets under Management up to $45.8 Billion, Increases Dividend

Full-Year 2022 Guidance for Key Metrics Confirmed

TORONTO, Aug. 9, 2022 /CNW/ - EQB Inc. (TSX: EQB) (TSX: EQB.PR.C) (TSX: EQB.R) (EQB) today reported earnings for the three and six months ended June 30, 2022 that reflected strong Q2 performance in core operations including record quarterly net interest income but with revenue growth offset at the bottom line by mark-to-market and fair value adjustments to non-interest income due to the impact of significant declines in North American equity markets on its strategic investment and security portfolios.  

Core Personal and Commercial business performance in Q2 featured conventional lending growth of 36% year over year, adjusted quarterly net interest income² up 18%, margins in line with 2022 guidance and fee-based income up 41%. However, after reflecting the decline in non-interest income, Q2 adjusted earnings² were held to $1.75 diluted and adjusted ROE² was 12.1%. EQB deploys capital to strategic fintech investments to gain access to early-stage technologies and innovative business models. Changes in their fair value and other derivatives are not indicative of core business performance.

Q2 adjusted net interest income^2 +$25.8 million or +18% to $167.6 million (reported +$24.8 million or +17%) offset by $12.6 million in value adjustments on securities/strategic investments and derivatives  •     Adjusted earnings^2 -13% to $61.5 million, reported earnings -17% y/y to $58.8 million  •     Adjusted diluted EPS^2 -13% to $1.75, reported diluted EPS -17% to $1.67  •     Adjusted NIM^2 1.81% consistent to Q2 2021, reported NIM^1 1.80%, -1 bps y/y  •     Adjusted ROE^2 12.1%, reported ROE 11.6%	Conventional loan^1 momentum continued through Q2  •     Conventional loans^1 +36% y/y to $24.1 billion  •     Single family alternative +35% y/y to $16.3 billion  •     Decumulation loans +200% y/y to $495 million  •     Commercial Finance Group +28% y/y to         $4.5 billion, Specialized Finance +107% y/y to $739 million,         and Equipment Leases +40% y/y to $902 million  •      Assets Under Management (AUM)^1 +21% y/y to $45.8 million EQ Bank adds 58,000 customers y/y
Year-to-date EQB set an all-time record for earnings, with 15.6% adjusted ROE^2 (reported 14.9%) and on-target core business performance including growth in net interest margins and a stable, well-provisioned credit portfolio. These results supported another dividend increase.
YTD earnings reflect margin, asset growth  •     Adjusted earnings^2 +10% y/y to $153.9 million, reported earnings +5% y/y to $146.8 million  •     Adjusted diluted EPS^2 +10% y/y to $4.40, reported diluted EPS +5% to $4.19  •     Adjusted net interest income^2 +20% y/y to $330.7 million  •     Adjusted NIM^2 1.84%, +5 bps y/y, reported NIM^11.83%, +4 bps y/y	Record BVPS, YTD Adjusted ROE^2 ahead of guidance  •     Adjusted ROE^2 15.6%, reported ROE 14.9%  •     Book value per share +16% to $59.25 Strong credit metrics from long-term prudence  •     Net impaired loans -23 bps y/y to 0.18% of total assets Capital ratios support strategy, growth in dividends  •     CETI ratio 13.5%, 0.5% above guidance

^1. These are Non-Generally Accepted Accounting Principles (GAAP) measures, see the "Non-GAAP financial measures and ratios" section. ² Adjusted measures and ratios are Non-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.

"EQB's core businesses delivered strong, on-plan performance despite market headwinds that impacted second quarter non-interest income in the form of mark-to-market adjustments. In alignment with our ROE targets, we generated risk-managed growth in our now $24 billion conventional loan¹ portfolios of 36% year over year and 7% since March. Consistent with our established risk management practices, we also continued to proactively adjust our underwriting approach across the business to respond to elevated risks from inflation, the Bank of Canada's response to inflation and our expectations of changing collateral values. That said, as we exited the quarter, the fundamental forces that provide a solid foundation for our business – including strong demand for housing in Canada's major urban centers fueled by population growth, and our distinctive position as Canada's Challenger Bank –  remain firmly in place," said Andrew Moor, President and CEO. "Priorities for the current quarter include the introduction of EQ Bank's payment card, the launch of EQ Bank in Québec and readying ourselves to acquire Concentra Bank which will add significant scale and opportunity to serve more Canadians."

Record YTD performance has EQB on track to meet 2022 guidance

• Although growth in conventional asset originations is expected to moderate in the second half of 2022 on risk-managed actions taken by EQB over the first two quarters, EQB today expressed confidence in stated annual guidance for the full-year 2022 of +12-15% in total lending portfolio growth (YTD 21%), +8-10% adjusted EPS² growth (YTD +10%), adjusted ROE² of 15%+ (YTD 15.6%), adjusted pre-provision, pre-tax income² +12% (YTD +12%), book value per share +12% (YTD +16%) and CET1 13%+ (June 30, 2022 13.5%)
• Guidance was reaffirmed based on outperformance in the first half of 2022, and will be supported by EQB's asset diversification and pricing strategies and the potential that rising interest rates will increase mortgage renewal and retention

Net interest income moves higher with stable margins

• Q2 adjusted net interest income² +18% y/y to $167.6 million (+17% or $166.7 million reported) driven by growth in average asset balances
• Q2 adjusted net interest margin² (NIM) of 1.81% (1.80% reported) was on target with 2022 guidance (flat to 2021), primarily reflecting growth in higher-yielding conventional loans¹ but with lower prepayment income
• Full-year 2022 outlook for NIM expected to remain stable with an anticipated decline in prepayment income brought on by rising interest rates offset by asset diversification, pricing strategies and continued funding diversification

^1. These are non-GAAP measures, see the "Non-GAAP financial measures and ratios" section. ² Adjusted measures and ratios are Non-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.

Non-interest income reflects mark-to-market, fair value adjustments

• Q2 fees and other income +41% y/y to $7.9 million reflecting growth in loan portfolio and origination/servicing fees
• Severe capital market volatility led to mark-to-market losses of $8.7 million on EQB's strategic investment portfolio. This portfolio was conceived and constructed to enable EQB's subsidiary, Equitable Bank to gain exposure to innovative business models and early-stage technologies that are accretive to Equitable Bank's position as Canada's Challenger Bank
• EQB expects volatility to continue in the second half of 2022, but this does not reflect the underlying strategic value of these investments
• EQB expects fees and other income to increase in line with the total portfolio and gains on securitization activity to remain stable or increase relative to Q2 2022
• Q2 gains on securitization income were $2.2 million compared to $8.6 million a year ago due to decreased derecognition volumes and a decline in gain-on-sale margin from historically high levels; EQB expects to see a modest recovery in such income in the last half of 2022

Continued investment in Challenger innovations across people, process, and platforms

• Adjusted non-interest expenses¹ in Q2 +16% y/y to $75.6 million driven by growth in assets and investments in capabilities to advance EQB's strategic innovation agenda; management continues to expect operating leverage in 2022 to be flat on average
• YTD, EQB's banking operations remain the most efficient of any Canadian bank at 41.1% adjusted efficiency ratio¹ (43.6% reported), but elevated in Q2 to 45.8% adjusted¹ (47.7% reported), due primarily to the reduction in total quarterly revenue driven by mark-to-market and fair-value losses

Personal Banking asset growth +19% y/y to record $24.0 billion  

• Single-family alternative portfolio +35% y/y and +6% q/q to $16.3 billion (2022 annual guidance +12-15%) supported by higher originations and a 1.9% decline in the loan attrition rate
• Single-family alternative growth expected to slow in the latter half of 2022, reflecting market conditions
• Reverse mortgage assets +231% y/y to $421 million and +38% q/q (2022 annual guidance +150%) reflecting expanded distribution and increasing brand awareness of Equitable Bank as an attractive provider of reverse mortgages to Canadians nearing or in retirement as well as growth in this market
• Insurance lending (CSV) +95% y/y to $73 million and +24% q/q (2022 annual guidance +100%) as growth was assisted by partnerships with nine leading insurers and the recent introduction of Immediate Financing Arrangement, a product available to whole life insurance policy holders to immediately access 100% of their total annual premium as equity

¹ Adjusted measures and ratios are Non-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.

Commercial Banking asset growth +25% y/y to $12.1 billion

• Commercial Finance Group loan portfolio +28% y/y and +10% q/q to $4.5 billion (2022 annual guidance +10-15%), Business Enterprise Solutions +22% y/y and +6% q/q to $1.2 billion (2022 annual guidance +10-15%) and Specialized Finance +107% y/y and +3% q/q to $739 million (2022 annual guidance +20-30%)
• Equipment leasing portfolio +40% y/y and +17% q/q to approximately $900 million (2022 annual guidance +10-15%) with 67% of new assets comprised of high credit-quality prime leases
• Insured Multi-unit residential portfolio +15% y/y and +14% q/q to $4.8 billion (2022 guidance 0-5%)

Strong capital and liquidity positions

• Liquid assets¹ were $3.1 billion or 7.8% of total assets at June 30, 2022, a prudent level that reflects anticipated cash needs for upcoming quarters, compared to $2.9 billion or 9.1% a year ago when pandemic-related uncertainties were much higher
• Retail and securitization funding markets remain liquid and efficient and with rising interest rates deposit markets are expected to see even more positive inflow
• Equitable Bank's Common Equity Tier 1 ratio was 13.5% at June 30, 2022 (unchanged from March 31, 2022) and compared to 14.4 % at June 30, 2021, reflecting its success in deploying capital organically
• Total risk-weighted assets +29% y/y and +5% q/q to $14.8 billion

Credit quality indicators reflect long-term prudence, risk management responsiveness

• PCL was $5.2 million in Q2 2022 due to portfolio growth and as macroeconomic forecasts and loss modelling considered the impact of rising interest rates and geopolitical tensions compared to a net benefit of $2.0 million in Q2 2021 when future expected losses recorded in 2020 were released because of improving macroeconomic variables
• Allowances now approximate pre-pandemic levels and PCL is expected to be consistent with Q2 levels and grow with the size of the portfolio assuming economic forecasts prove to be accurate
• Net impaired loans declined to 0.18% of total assets at June 30, 2022 from 0.41% at June 30, 2021 – reflecting net reductions across single family mortgages ($17.5 million), conventional commercial loans ($36.7 million), and equipment leases ($2.7 million) over the past 12 months – and also declined from 0.22% at March 31, 2022 due to the discharge of one delinquent commercial loan
• EQB is well reserved for credit losses with allowances as a percentage of total loan assets of 14 bps at June 30, 2022 compared to 19 bps at June 30, 2021
• Realized losses were less than 1 basis point of total loan assets or $2.4 million YTD – better than its industry-leading 10-year credit history – compared to $6.6 million or 2 basis points a year ago

¹ These are non-GAAP measures, see the "Non-GAAP financial measures and ratios" section.

Equitable Bank continued to diversify its sources of funding and optimize costs of funds

• During the second quarter (May 27, 2022), Equitable Bank completed its second legislative covered bond issuance of €300 million. Due May 27, 2025, the bonds were issued with an AA rating at a spread of 20 basis points over EUR mid swaps and are listed on the Irish Stock Exchange (Euronext Dublin)
• Equitable Bank plans a series of covered bond issuances and expects its capacity for such issuances to increase when the agreement to acquire Concentra Bank closes. Inclusive of all costs, the bonds represent Equitable Bank's lowest cost of wholesale funding
• Excluding EQ Bank deposits, Equitable Bank's total other deposit principal was +34% y/y and +8% q/q to $15.9 billion at June 30, 2022 and included its Deposit Note program of $1.9 billion

EQ Bank deposits +16% y/y to record $7.6 billion with attractive economics

• EQ Bank expanded its customer base by +26% y/y to 279,939 (with nearly 14,000 new customers in the second quarter alone) and during July, increased its customer base to approximately 285,000
• As more Canadians take advantage of EQ Bank's best-in-class digital experience and increase product usage (as they did with +80% y/y growth in digital transactions in Q2 and +6% growth in products held per customer/y), EQ Bank is benefiting from improved economics as customer lifetime value grows with rising alternative funding, while customer acquisition costs remain stable, even while EQ Bank pays competitive deposit rates with no everyday fees
• EQ Bank deposits +16% y/y and +5% q/q (2022 annual guidance +20-30%) to $7.6 billion

EQ Bank poised to introduce payment card, serve customers in Québec

• This fall will see the introduction of the EQ Bank payment card, which will allow customers to make purchases wherever Mastercard are accepted. This payments experience will complement current offerings and the new functionality will allow Canadians to use EQ Bank for the majority of their day-to-day banking needs as a primary bank
• EQ Bank services are also coming to Québec this fall, an important step for EQB, which has proudly served Québec customers through the brokered deposit and brokered mortgage channels for many years and has participated in the local economy as an employer of talented Challengers in its Montréal office since 2010

Equitable Bank continues to prepare for the closing of the Concentra Bank acquisition

• On February 7, 2022, Equitable Bank announced that it entered into a definitive agreement, as well as supporting agreements, to acquire Concentra Bank, Canada's 13th largest Schedule I bank by assets, subject to customary closing conditions and regulatory approvals
• During the second quarter, Equitable Bank received unconditional clearance from the Competition Bureau Canada in the form of an advance ruling issued in connection with the acquisition
• Equitable Bank and Concentra Bank have jointly formed a Transformation Management Office with dedicated resources to develop detailed integration plans in advance of closing while both banks continue to operate independently in serving customers

EQB announces +7% q/q increase in Common Share Dividend or +68% y/y

• EQB's Board of Directors declared a common share dividend of $0.31 per common share or $1.24 annualized, payable on September 30, 2022 to shareholders of record September 15, 2022
• The three dividend increases announced since the beginning of 2022 reflect EQB's philosophy of growing the dividend while maintaining a payout ratio that is much lower than other Canadian banks and using retained capital to fuel portfolio growth with high future ROE
• EQB's Board also declared a quarterly dividend of $0.373063 per preferred share, payable on September 30, 2022 to shareholders of record at the close of business September 15, 2022
• EQB dividends are designated as eligible dividends for the purposes of the Income Tax Act (Canada) and any similar provincial and territorial legislation

Normal course issuer bid (NCIB)

• EQB'sNCIB allows it to repurchase up to 2,325,951 of its common shares and 289,340 of its non-cumulative 5-year reset preferred shares Series 3, representing approximately 10% of its public float as at December 10, 2021 prior to December 10, 2022. During Q2, EQB repurchased and cancelled 7,600 preferred shares at an average price of $24.93. No common shares were purchased during the first six months of 2022

"What is important to us is to drive results in our core personal and commercial business lines. In this regard, we have identified high-quality opportunities short and long term where our risk-managed capital allocation decisions will position EQB to continuously achieve our ROE target of 15% to 17%. From the perspective of our strategic investment portfolio, market-driven fluctuations reflected in the second quarter do not change the business value of these investments as they give us access to leading-edge knowledge, technologies and capabilities and, as recently as Q1, allowed us to capture significant gains. Putting all the component pieces of our outlook together, we look forward to proving the resiliency of our business model and consistency of our Challenger purpose through this next stage of the economic cycle while delivering on our full-year guidance," said Chadwick Westlake, EQB's Chief Financial Officer.

Analyst conference call and webcast: 8:30 a.m. ET Eastern August 10, 2022
EQB will host its second quarter conference call and webcast on Wednesday August 10, 2022.  To access the call live, please dial [phone] 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 August 24, 2022 at midnight at [phone] (passcode 542700 followed by the number sign). Alternatively, the webcast will be archived on EQB's website.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Consolidated balance sheets (unaudited)

($000s) As at	June 30, 2022		December 31, 2021	June 30, 2021
Assets:
Cash and cash equivalents	539,509		773,251	591,752
Restricted cash	557,283		462,164	507,295
Securities purchased under reverse repurchase agreements		420,009	550,030	100,015
Investments	1,097,004		1,033,438	859,925
Loans – Personal	24,122,303		22,421,603	20,225,222
Loans – Commercial	12,123,469		10,479,159	9,667,652
Securitization retained interests	227,013		207,889	203,491
Other assets	331,168		231,536	186,901
	39,417,758		36,159,070	32,342,253
Liabilities and Shareholders' Equity
Liabilities:
Deposits	23,708,958		20,856,383	18,588,223
Securitization liabilities	11,366,847		11,375,020	11,483,635
Obligations under repurchase agreements	814,494		1,376,763	201,271
Deferred tax liabilities	64,180		63,141	67,520
Funding facilities	711,380		200,128	-
Subscription receipts	230,821		-	-
Other liabilities	426,527		335,001	200,067
	37,323,207		34,206,436	30,540,716
Shareholders' equity:
Preferred shares	70,424		70,607	72,001
Common shares	234,372		230,160	224,997
Contributed surplus	10,106		8,693	8,237
Retained earnings	1,773,658		1,650,757	1,513,118
Accumulated other comprehensive income (loss)	5,991		(7,583)	(16,816)
	2,094,551		1,952,634	1,801,537
	39,417,758		36,159,070	32,342,253

Consolidated statements of income (unaudited)

($000s, except per share amounts)	Three months ended		Six months ended
	June 30, 2022	June 30, 2021	June 30, 2022	June 30, 2021
Interest income:
Loans – Personal	190,830	164,363	364,610	325,420
Loans – Commercial	133,540	103,169	249,286	204,427
Investments	3,351	3,824	7,206	6,723
Other	5,558	2,606	8,417	5,226
	333,279	273,962	629,519	541,796
Interest expense:
Deposits	110,413	76,693	194,885	154,478
Securitization liabilities	53,741	55,278	103,031	111,170
Funding facilities	2,468	152	2,774	343
	166,622	132,123	300,690	265,991
Net interest income	166,657	141,839	328,829	275,805
Non-interest income:
Fees and other income	7,866	5,598	13,899	11,173
Net (losses) gains on loans and investments	(16,839)	4,907	(12,041)	3,446
Gains on securitization activities and income from securitization retained interests	6,445	6,430	21,060	18,520
	(2,528)	16,935	22,918	33,139
Revenue	164,129	158,774	351,747	308,944
Provision for credit losses	5,233	(1,982)	5,108	(2,754)
Revenue after provision for credit losses	158,896	160,756	346,639	311,698
Non-interest expenses:
Compensation and benefits	40,067	32,396	76,839	61,369
Other	38,209	32,594	76,370	60,938
	78,276	64,990	153,209	122,307
Income before income taxes	80,620	95,766	193,430	189,391
Income taxes:
Current	22,091	20,698	45,607	42,740
Deferred	(307)	4,267	1,040	6,656
	21,784	24,965	46,647	49,396
Net income	58,836	70,801	146,783	139,995
Dividends on preferred shares	1,086	1,111	2,175	2,225
Net income available to common shareholders	57,750	69,690	144,608	137,770
Earnings per share:
Basic	1.69	2.05	4.24	4.07
Diluted	1.67	2.02	4.19	4.01

Consolidated statements of comprehensive income (unaudited)

($000s)	Three months ended		Six months ended
	June 30, 2022	June 30, 2021	June 30, 2022	June 30, 2021
Net income	58,836	70,801	146,783	139,995
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	(8,011)	(1,570)	(29,380)	(3,228)
Reclassification of net losses to income	2,729	178	5,006	1,317
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) gains from change in fair value	(5,278)	6,374	(6,703)	16,102
Reclassification of net losses to retained earnings	1,836	-	3,045	-
	(9,650)	4,982	(28,958)	14,191
Income tax recovery (expense)	2,531	(1,307)	7,594	(3,725)
	(7,119)	3,675	(21,364)	10,466
Cash flow hedges:
Net unrealized gains from change in fair value	19,668	2,155	45,909	16,065
Reclassification of net losses (gains) to income	1,944	231	2,373	(234)
	21,612	2,386	48,282	15,831
Income tax expense	(5,667)	(628)	(12,660)	(4,161)
	15,945	1,758	35,622	11,670
Total other comprehensive income	8,826	5,433	14,258	22,136
Total comprehensive income	67,662	76,234	161,041	162,131

Consolidated statements of changes in shareholders' equity (unaudited)

($000s) Three month period ended									June 30, 2022
	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	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) Three month period ended                                                                                                                                            June 30, 2021
Balance, beginning of period	72,194	224,397	7,722	1,449,715	(10,031)	(12,218)	(22,249)	1,731,779
Net Income	-	-	-	70,801	-	-	-	70,801
Other comprehensive income, net of tax	-	-	-	-	1,758	3,675	5,433	5,433
Exercise of stock options	-	489	-	-	-	-	-	489
Purchase of treasury preferred shares	(193)	-	-	-	-	-	-	(193)
Net loss on cancellation of treasury preferred shares	-	-	-	(10)	-	-	-	(10)
Dividends:
Preferred shares	-	-	-	(1,111)	-	-	-	(1,111)
Common shares	-	-	-	(6,277)	-	-	-	(6,277)
Stock-based compensation	-	-	626	-	-	-	-	626
Transfer relating to the exercise of stock options	-	111	(111)	-	-	-	-	-
Balance, end of period	72,001	224,997	8,237	1,513,118	(8,273)	(8,543)	(16,816)	1,801,537

Consolidated statements of changes in shareholders' equity (unaudited)

($000s) Six month period ended								June 30, 2022
	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	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
($000s) Six month period ended                                                                                                                                                 June 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	-	-	-	139,995	-	-	-	139,995
Other comprehensive income, net of tax	-	-	-	-	11,670	10,466	22,136	22,136
Exercise of stock options	-	5,715	-	-	-	-	-	5,715
Purchase of treasury preferred shares	(476)	-	-	-	-	-	-	(476)
Net loss on cancellation of treasury preferred shares	-	-	-	(20)	-	-	-	(20)
Dividends:
Preferred shares	-	-	-	(2,225)	-	-	-	(2,225)
Common shares	-	-	-	(12,551)	-	-	-	(12,551)
Stock-based compensation	-	-	1,261	-	-	-	-	1,261
Transfer relating to the exercise of stock options	-	1,116	(1,116)	-	-	-	-	-
Balance, end of period	72,001	224,997	8,237	1,513,118	(8,273)	(8,543)	(16,816)	1,801,537

Consolidated statements of cash flows (unaudited) 

($000s)	Three months ended		Six months ended
Three and six month periods ended	June 30, 2022	June 30, 2021	June 30, 2022	June 30, 2021
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	58,836	70,801	146,783	139,995
Adjustments for non-cash items in net income:
Financial instruments at fair value through income	3,103	1,778	1,376	(5,612)
Amortization of premiums/discount on investments	330	28	630	46
Amortization of capital assets and intangible costs	9,211	7,897	18,044	15,234
Provision for credit losses	5,233	(1,982)	5,108	(2,754)
Securitization gains	(1,620)	(8,177)	(6,248)	(12,355)
Stock-based compensation	804	626	1,758	1,261
Income taxes	21,784	24,965	46,647	49,396
Securitization retained interests	12,742	11,221	25,160	21,900
Changes in operating assets and liabilities:
Restricted cash	(108,652)	25,398	(95,119)	(3,256)
Securities purchased under reverse repurchase agreements	(420,009)	250,022	130,021	350,188
Loans receivable, net of securitizations	(2,000,934)	(1,025,059)	(3,344,734)	(1,672,166)
Other assets	3,162	(709)	(1,105)	5,198
Deposits	1,493,378	980,721	2,903,026	2,008,887
Securitization liabilities	401,333	(247,738)	(227)	(508,067)
Obligations under repurchase agreements	(65,709)	201,271	(562,269)	(50,606)
Funding facilities	386,805	-	511,252	-
Subscription receipts	435	-	230,821	-
Other liabilities	(33,605)	(23,931)	13,092	11,647
Income taxes paid	(28,616)	(15,306)	(93,658)	(32,531)
Cash flows (used in) from operating activities	(261,989)	251,826	(69,642)	316,405
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common shares	1,463	489	3,867	5,715
Dividends paid on preferred shares	(1,086)	(1,111)	(2,176)	(2,225)
Dividends paid on common shares	(9,900)	(6,277)	(19,450)	(12,551)
Cash flows used in financing activities	(9,523)	(6,899)	(17,759)	(9,061)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of investments	(926)	(453,543)	(58,826)	(484,850)
Proceeds on sale or redemption of investments	122,300	213,111	233,768	229,466
Net change in Canada Housing Trust re-investment accounts	(21,882)	336	(295,103)	(89)
Purchase of capital assets and system development costs	(13,752)	(9,346)	(26,180)	(17,862)
Cash flows from (used in) investing activities	85,740	(249,442)	(146,341)	(273,335)
Net (decrease) increase in cash and cash equivalents	(185,772)	(4,515)	(233,742)	34,009
Cash and cash equivalents, beginning of period	725,281	596,267	773,251	557,743
Cash and cash equivalents, end of period	539,509	591,752	539,509	591,752
Cash flows from operating activities include:
Interest received	289,106	250,337	560,154	508,152
Interest paid	(143,009)	(134,229)	(265,080)	(274,186)
Dividends received	899	1,434	2,170	2,916

About EQB Inc.

EQB Inc. trades on the Toronto Stock Exchange (TSX: EQB, EQB.PR.C and EQB.R) and serves more than 360,000 Canadians through its wholly owned subsidiary Equitable Bank, Canada's Challenger Bank™. Equitable Bank has a clear mandate to drive change in Canadian banking to enrich people's lives. Founded over 50 years ago, Equitable Bank provides diversified personal and commercial banking and through its EQ Bank platform (eqbank.ca), it 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.

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 that it entered into a definitive agreement to acquire a majority interest in Concentra Bank (Concentra), subject to customary closing conditions and regulatory approvals, and is expected to close later in 2022. As a result of the announced agreement, Equitable Bank has incurred certain acquisition costs beginning in Q4 2021.  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:

• Q2 2022 – $2.7 million of acquisition and integration related costs and $0.9 million of interest expenses paid to subscription receipt holders¹; and
• Q1 2022 – $5.1 million of acquisition and integration related costs and $0.9 million of interest expenses paid to subscription receipt holders.

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

___________________________

^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 will be 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.  In the event that the acquisition does not close, the interest that accrues to the investment will be paid to the subscription receipt holders, along with the return of their initial investment.

Reconciliation of reported and adjusted financial results	As at or for the three months ended				For the six months ended
	30-Jun-22	31-Mar-22	30-Jun-21		30-Jun-22	30-Jun-21
Reported financial results ($thousands)
Net interest income	166,657	162,172	141,839		328,829	275,805
Non-interest income	(2,528)	25,446	16,935		22,918	33,139
Revenue	164,129	187,618	158,774		351,747	308,944
Non-interest expense	78,276	74,933	64,990		153,209	122,307
Pre-provision pre-tax income	85,853	112,685	93,784		198,538	186,637
Provision for credit loss	5,233	(125)	(1,982)		5,108	(2,754)
Income tax expense	21,784	24,863	24,965		46,647	49,396
Net income	58,836	87,947	70,801		146,783	139,995
Net income available to common shareholders	57,750	86,858	69,690		144,608	137,770
Adjustments ($ thousands)
Interest expenses – paid to subscription receipt holders^(1)			-		1,861	-
	947	914
Non-interest expenses – acquisition/integration related costs			-		7,842	-
	2,709	5,133
Pre-tax adjustments	3,656	6,047	-		9,703	-
Income tax expense^(2)	958	1,584	-		2,542	-
Post-tax adjustments	2,698	4,463	-		7,161	-
Adjusted financial results ($ thousands)
Net interest income	167,604	163,086	141,839		330,690	275,805
Non-interest income	(2,528)	25,446	16,935		22,918	33,139
Revenue	165,076	188,532	158,774		353,608	308,944
Non-interest expense	75,567	69,800	64,990		145,367	122,307
Pre-provision pre-tax income	89,509	118,732	93,784		208,241	186,637
Provision for credit loss	5,233	(125)	(1,982)		5,108	(2,754)
Income tax expense	22,742	26,447	24,965		49,189	49,396
Net income	61,534	92,410	70,801		153,944	139,995
Net income available to common shareholders	60,448	91,321	69,690		151,769	137,770
Diluted earnings per share ($, except number of shares)
Weighted average number of diluted common shares outstanding	34,479,387	34,545,393	34,434,216		34,512,207	34,374,572
Diluted earnings per share - reported	1.67	2.51	2.02		4.19	4.01
Diluted earnings per share - adjusted	1.75	2.64	2.02		4.40	4.01
Impact of adjustments on diluted earnings per share	0.08	0.13	-		0.22	-

(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 will be 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.  In the event that the acquisition does not close, the interest that accrues to the investment will be paid to the subscription receipt holders, along with the return of their initial investment. (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 six months ended
		30-Jun-22				31-Mar-22		Change	30-Jun-21		Change			30-Jun-22		30-Jun-21		Change
Non-interest expenses – reported				78,276			74,933	4 %		64,990	20 %			153,209			122,307	25 %
Adjustments on a pre-tax basis:      Non-interest expenses –       acquisition/integration related costs				(2,709)			(5,133)	(47 %)		-	N/A			(7,842)			-	N/A
Non-interest expenses – adjusted				75,567			69,800	8 %		64,990	16 %			145,367			122,307	19 %
Revenue – reported
Adjustment on a pre-tax basis:				164,129			187,618	(13 %)		158,774	3 %			351,747			308,944	14 %
Interest expenses – paid to      subscription receipt holders				947			914	4 %		-	N/A			1,861			-	N/A
Revenue – adjusted				165,076			188,532	(12 %)		158,774	4 %			353,608			308,944	14 %
Efficiency ratio – adjusted				45.8 %			37.0 %	8.8 %		40.9 %	4.9 %			41.1 %			39.6 %	1.5 %

• Reconciliation of adjusted return on equity (ROE)

($000s, except percentages)			For the three months ended						For the six months ended
	30-Jun-22			31-Mar-22	Change	30-Jun-21	Change		30-Jun-22	30-Jun-21	Change
Net income available to common shareholders – reported	57,750			86,858	(34 %)	69,690	(17 %)		144,608	137,770	5 %
Adjustments on an after-tax basis:      Costs associated with Concentra      acquisition	2,698			4,463	(40 %)	-	N/A		7,161	-	N/A
Net income available to common shareholders – adjusted	60,448			91,321	(34 %)	69,690	(13 %)		151,769	137,770	10 %
Weighted average common equity outstanding – adjusted	2,001,383			1,926,646	4 %	1,694,570	18 %		1,956,738	1,653,599	18 %
Return on equity - adjusted	12.1 %			19.2 %	(7.1 %)	16.5 %	(4.4 %)		15.6 %	16.8 %	(1.2 %)

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-Jun-22	31-Mar-22	Change	30-Jun-21	Change
Total assets on the consolidated balance sheet	39,417,758	37,149,968	6 %	32,342,253	22 %
Loan principal derecognized	6,349,413	6,272,342	1 %	5,585,644	14 %
Assets under management	45,767,171	43,422,310	5 %	37,927,897	21 %

• Conventional loans: are the total on-balance sheet loan principal excluding Prime single family and Insured multi-unit residential mortgages.

($000s)	30-Jun-22	31-Mar-22	Change	30-Jun-21	Change
Alternative single family mortgages	16,264,259	15,399,287	6 %	12,058,136	35 %
Reverse mortgages	421,406	304,285	38 %	127,138	231 %
Cash surrender value loans	73,219	59,196	24 %	37,566	95 %
Total Conventional loans – Personal	16,758,884	15,762,768	6 %	12,222,840	37 %
Business Enterprise Solutions	1,228,665	1,154,573	6 %	1,011,089	22 %
Commercial Finance Group	4,516,012	4,111,394	10 %	3,538,869	28 %
Specialized finance	738,675	714,856	3 %	357,257	107 %
Equipment leasing	902,054	772,868	17 %	643,095	40 %
Total Conventional loans – Commercial	7,385,406	6,753,691	9 %	5,550,310	33 %
Total Conventional loans	24,144,290	22,516,459	7 %	17,773,150	36 %

• 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.

Investor contact: Richard Gill, Vice President, Corporate Development & Investor Relations, [email protected], 416-513-3638; Media contact: Jessica Kosmack, Senior Manager, Communications, [email protected], 647-600-2512