Canada’s Challenger Bank TM
TSX:EQB
EQB Inc. | Fourth Quarter Report 2024
It’s Time
Drive change in Canadian banking to enrich people’s lives.
For the three and twelve months ended October 31, 2024
Note: all cover measures as at October 31, 2024.
696,000+
Customers served
285.6% 10-year
Total shareholder return
$127 billion
Total assets under management & administration
Page 2
Table of Contents
EQB Strategy and Quick Facts
3
EQB corporate profile
4
Selected financial highlights
6
Overview and outlook
10
EQB’s Challenger approach:
i.
Long-term Commitment to challenger approach
14
ii.
Innovation in banking to better serve Canadians
15
iii.
Strength in meeting Canada’s housing needs
16
iv.
Momentum and growth
16
v.
Continued emphasis on risk management
17
Management's Discussion and Analysis (MD&A)
20
Adjustments to financial results
22
Detailed financial summary for 2024
24
Business line overview
29
Fourth quarter results
46
Glossary
78
Non-generally accepted accounting principles (GAAP) financial measures and ratios
79
Reports and consolidated financial statements
80
Consolidated financial statements
86
Notes to consolidated financial statements
92
Directors and executive officers
160
Shareholder and corporate information
161
Caution regarding forward-looking statements
Statements made in the sections of this report including those entitled “EQB corporate profile”, “Overview and outlook”, “EQB’s
Challenger approach”, “Provision for credit losses”, “Credit portfolio quality”, “Liquidity investments and equity securities”, “Capital
position”, “Risk management”, and 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”, “guidance”,
“planned”, “estimates”, “forecasts”, “outlook”, “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”, “should”, “might” or “will be taken”, “occur”, “be
achieved”, “will likely” 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 including, without limitation, impacts as a result of COVID-
19, global geopolitical risk, business acquisition, legislative and regulatory developments, changes in accounting standards, the nature
of EQB’s customers and rates of default, and competition as well as those factors discussed under the heading “Risk Management”
herein and in EQB’s documents filed on SEDAR+ at www.sedarplus.ca.
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 loan business, a continuation of the current level of economic
uncertainty that affects real estate market conditions including, without limitation, impacts as a result of COVID-19, 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.
Page 3
EQB strategy
Supported by its proven business model, EQB Inc. and its subsidiaries use a time-tested strategy and approach to drive
change in Canadian banking to enrich people’s lives.
Customer and service mission
Being the best at service, from building great
digital experiences to empowered customer-
facing teams to address customer needs
Differentiated value creation model
Deliver long-term shareholder value through
disciplined capital allocation and business
management that generates 15-17% ROE annually(1)
Innovating and advocating
for Canadians
Innovate across product and technology as
Canada’s leading digital bank and advocate
for regulatory change to benefit Canadians,
including Open Banking
Robust risk management
Consistently achieve the lowest credit losses of all
Canadian bank peers by leveraging a prudent risk
appetite and benefitting from decades of
underwriting expertise
Building long-term franchise value
Allocate capital and investment dollars consistently to build lasting franchise value that translates into
superior performance through cycles
Quick facts
> 696,000
Customers directly served by EQB
Inc. and its subsidiaries, growing by
hundreds every day
7th largest bank
Equitable Bank is 7th largest bank in
Canada by assets, and the owner of
Concentra Trust – the 7th largest
trust company in Canada
$127 billion
Assets under Management & Assets
under Administration(1), diversified
across Personal Banking,
Commercial Banking,
Trust services and private
investment fund services
> 6 million
Canadians indirectly served with
products and services delivered by
Canadian Credit Unions to their
members
EQ Bank was named Brand of the
Year by strategy magazine as
“EQ Bank takes on the big guys”
Carbon neutral
Scope 1 and 2 carbon neutral and
first Canadian bank to disclose
Scope 3 carbon emissions
(1) See Glossary and Non-GAAP financial measures and ratios section of this MD&A.
Note: Quick facts as at October 31, 2024
Page 4
EQB corporate profile
EQB Inc. (TSX: EQB, “EQB”) is a leading financial services
company with over $127 billion in combined assets under
management and administration(1). Its wholly owned
subsidiary Equitable Bank is Canada’s 7th largest bank by
assets and offers innovative banking services to Canadians,
while ACM Advisors, a majority-owned subsidiary acquired
on December 14, 2023, specializes in alternative asset
management primarily for institutional investors.
Equitable Bank is Canada’s Challenger Bank™, a position
established as part of its mission to drive change in
Canadian banking to enrich people’s lives. In challenging,
Equitable Bank (“the Bank”) seeks to inject much-needed
competition into specific parts of the banking industry in
ways that advantage both consumers and businesses.
The Bank serves 696,000 Canadians and nearly 200
Canadian credit unions with approximately six million
members, through two main businesses: Personal Banking
- including EQ Bank, the leading digital bank in Canada -
and Commercial Banking. Equitable Bank and its
subsidiaries, Equitable Trust, Concentra Bank and
Concentra Trust, are regulated by the Office of the
Superintendent of Financial Institutions Canada (OSFI).
EQB is a member of the S&P/TSX Composite, S&P/TSX
Completion, S&P/TSX Bank, S&P/TSX Dividend Aristocrats,
S&P Canada BMI, and MSCI Small Cap (Canada) indices.
Equitable Bank is rated BBB (high) by DBRS and BBB- by
Fitch, reflecting the Bank’s sound credit fundamentals
including consistent profitability, strong capital position,
and diversification of assets and funding.
Canadians choose Equitable Bank for smarter products,
unmatched value, and exceptional service. To deliver all
three, the Bank specializes in market segments where it can
improve the banking experience and deliver unique value
by rethinking conventional approaches and pushing for
smarter ways to do business. The Bank differentiates by
providing a host of challenger bank retail services, single-
family residential lending, decumulation lending,
commercial real estate mortgage lending, specialized
commercial financing, equipment financing, credit union
services and trust services.
The Bank’s challenger approach has allowed it to become a
leading single-family residential lender. Continued
innovation in the independent mortgage broker channel
reflects the Bank’s long-term focus on providing great
service to brokers and mortgage customers.
(1) This is a Non-GAAP measure, see Non-GAAP financial measures and ratios section of
this MD&A.
In its commercial lending businesses, the Bank has become
a leader in the insured multi-unit residential securitization
market in Canada by focusing on serving customers who
build and renovate much-needed rental apartment supply.
EQ Bank is Canada’s first-born all-digital bank, providing
great experience and value to Canadians, and serving as a
convenient and compelling alternative to traditional banks.
It was the first to move to a cloud-based platform and its
digital capabilities are proven and differentiated to support
cost-effective product development and fintech
collaborations. As a leader in Canadian banking, EQ Bank
was chosen by Forbes and Canadian consumers as
Canada’s Top Schedule I Bank in 2021, 2022 and 2023, and
Best Online Bank in 2024.
The Bank operates with a fintech mindset and collaborates
with partners to innovate rapidly to deliver best-in-class
digital banking services to Canadian consumers. The Bank’s
relationships with fintech market leaders continues to help
the Bank reach new customers and deliver value to
Canadians.
A strategic advantage of Equitable Bank’s business model is
the ability to deploy deposits consistently and profitably
across its diverse personal and commercial lending
operations. This approach to diversifying assets and
deposit-funding sources allows the Bank to achieve its
corporate growth objectives and reduces its risk profile.
Equitable Bank’s talented teams are the foundation of its
success. The Bank employs over 1,800 challengers who are
aligned to drive change in Canadian banking. The Bank’s
inclusive, welcoming and pride-inducing culture was
recognized in 2024 on the LinkedIn Top Companies list for
workplace growth and career progression and on the 2023
list of Canada’s Best Workplaces™.
As a subsidiary of EQB Inc., ACM Advisors specializes in the
creation, structuring, and management of pooled Canadian
commercial mortgage funds. ACM is one of the largest
private investment fund managers in Canada with over
2,000 clients including institutional investors and accredited
retail investors. ACM contributes to fee-based revenue and
supports EQB’s long-term ROE performance ambition,
without adding credit or balance sheet exposure.
Strategically, it provides opportunities for EQB to explore
opportunities to expand into specialized wealth
management products.
Page 5
Change of EQB’s fiscal year
EQB changed its fiscal year to end on October 31 for 2023 onward, from prior fiscal periods ending December 31. With
this change, EQB’s reporting cycle is now consistent with Canada’s publicly traded banks.
In this document, the 12-month fiscal 2024 period is presented compared to a 10-month fiscal 2023. The Q4 2024 is
presented as at or for the three months ended October 31, 2024 and compared to Q3 2024 (three months ended July
31, 2024) and Q4 2023 (four months ended October 31, 2023).
The change in fiscal year did not result in changes to the dividend payment schedule. EQB continues to pay dividends on
the last business day of March, June, September and December.
Page 6
Selected financial highlights
n.m. – not meaningful
Select financial and other highlights
As at or for years ended
Twelve
months
31-Oct-24
Ten
Months
31-Oct-23
Twelve
months
31-Dec-22
2024 (twelve months) vs.
2023 (ten months)
Adjusted results ($000s)(1)
Net interest income
1,059,293
834,112
736,729
225,181
n.m.
Non-interest revenue
204,953
110,361
48,716
94,592
n.m.
Revenue
1,264,246
944,473
785,445
319,773
n.m.
Non-interest expenses
571,386
415,184
326,529
156,202
n.m.
Pre-provision pre-tax income(2)
692,860
529,289
458,916
163,571
n.m.
Provision for credit losses (recoveries)
89,230
38,856
18,238
50,374
n.m.
Income before income taxes
603,630
490,433
440,678
113,197
n.m.
Income tax expense
165,655
126,163
113,942
39,492
n.m.
Net income
437,975
364,270
326,736
73,705
n.m.
Net income available to common shareholders
425,227
357,272
321,170
67,955
n.m.
Earnings per share – diluted ($)
11.03
9.40
9.17
1.63
n.m.
Return on equity (%)(3)
15.0
17.1
15.7
(2.1)
Efficiency ratio (%)(3)(4)
45.2
44.0
41.6
1.2
Net interest margin (%)(2)
2.07
1.97
1.87
0.10
Reported results ($000s)
Net interest income
1,050,489
838,279
733,405
212,210
n.m.
Non-interest revenue
204,953
137,385
48,781
67,568
n.m.
Revenue
1,255,442
975,664
782,186
279,778
n.m.
Non-interest expenses
594,099
434,743
376,471
159,356
n.m.
Pre-provision pre-tax income(2)
661,343
540,921
405,715
120,422
n.m.
Provision for credit losses (recoveries)
107,013
38,856
37,258
68,157
n.m.
Income before income taxes
554,330
502,065
368,457
52,265
n.m.
Income tax expense
152,658
130,475
98,276
22,183
n.m.
Net income
401,672
371,590
270,181
30,082
n.m.
Net income available to common shareholders
389,836
364,592
264,615
25,244
n.m.
Earnings per share ($) – basic
10.19
9.67
7.63
0.52
n.m.
Earnings per share ($) – diluted
10.11
9.59
7.55
0.52
n.m.
Return on equity (%)
13.8
17.5
12.9
(3.7)
Efficiency ratio (%)
47.3
44.6
48.1
2.7
Net interest margin (%)(2)
2.05
1.98
1.86
0.07
Revenue per average full time equivalent ($)(3)
682
567
464
115
n.m.
Balance sheet and other information ($ millions)
Total assets
53,234
52,933
51,145
301
1%
Assets under management(2)
79,354
67,932
61,569
11,422
17%
Loans – Personal & Commercial
47,034
47,361
46,510
(327)
(1%)
Loans under management(2)
67,861
62,397
57,078
5,464
9%
Assets under administration(2)
47,684
43,173
41,234
4,511
10%
Total deposit principal
33,164
31,577
30,831
1,587
5%
EQ Bank deposit principal
9,055
8,233
7,923
822
10%
Total risk-weighted assets(3)
19,487
19,809
18,926
(322)
(2%)
Credit quality (%)
Reported provision for credit losses – rate(3)
0.23
0.10
0.10
0.13
Net impaired loans as a % of total loan assets
1.32
0.76
0.28
0.56
Net allowance for credit losses as a % of total loan assets
0.32
0.22
0.18
0.10
Page 7
Select financial and other highlights
As at or for years ended
Twelve
months
31-Oct-24
Ten
Months
31-Oct-23
Twelve
months
31-Dec-22
2024 (twelve months) vs.
2023 (ten months)
Share information
Common share price – close ($)
106.82
68.82
56.73
38.00
55%
Book value per common share ($)(3)
77.51
70.33
62.65
7.18
10%
Common shares outstanding (thousand)
38,450
37,879
37,564
571
2%
Common share market capitalization ($ millions)
4,107
2,607
2,131
1,500
58%
Common shareholders’ equity ($ millions)(3)
2,980
2,664
2,354
316
12%
Dividends paid – common share ($)
1.74
1.10
1.21
0.64
58%
Dividends paid – preferred share – Series 3 ($)
1.48
1.11
1.49
0.37
33%
Dividend yield – common shares (%)(3)
1.9
2.2
2.0
(0.3)
Capital ratios and leverage ratio (%)(5)
Common equity tier 1 ratio
14.3
14.0
13.7
0.3
Tier 1 capital ratio
15.0
14.6
14.7
0.4
Total capital ratio
15.6
15.2
15.1
0.4
Leverage ratio
5.3
5.3
5.3
-
Business information
Employees – average full time equivalent
1,840
1,721
1,386
119
7%
EQ Bank customers (thousands)
513
401
308
112
28%
(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 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 Adjustments to financial results section, and Non-GAAP financial measures and ratios section of
this MD&A.
(2) These are non-GAAP measures, see Non-GAAP financial measures and ratios section of this MD&A.
(3) See Glossary section of this MD&A.
(4) Increases in this ratio reflect reduced efficiencies, whereas decreases reflect improved efficiencies.
(5) Regulatory capital requirements for Equitable Bank are determined in accordance with OSFI’s Capital Adequacy Requirements (CAR) Guideline, which is
based on the capital standards developed by the Basel Committee on Banking Supervision. Leverage ratio is calculated using OSFI’s Leverage
Requirements (LR) Guideline. See Glossary section of this MD&A.
Page 8
Selected financial highlights – eight quarters
Select financial highlights
2024
2023
2022
Q4
Q3
Q2
Q1
Four
months
Q4
Q2
Q1
Q4(3)
Adjusted results ($000s)(1)
Net interest income
264,578 271,367 267,338
256,010 345,783
251,699 236,630
218,775
Non-interest revenue
56,998
55,871
49,322
42,762
49,503
32,883
27,975
16,317
Revenue
321,576 327,238 316,660
298,772 395,286
284,582 264,605
235,092
Non-interest expenses
148,547 145,694 143,111
134,034 173,012
121,910 120,262
102,259
Pre-provision pre-tax income(2)
173,029 181,544 173,549
164,738 222,274
162,672 144,343
132,833
Provision for credit losses
31,902
19,576
22,217
15,535
19,566
13,042
6,248
7,776
Income before income taxes
141,127 161,968 151,332
149,203 202,708
149,630
138,095
125,057
Income tax expense
39,728
44,784
40,290
40,853
55,673
34,124
36,366
32,562
Net income
101,399 117,184 111,042
108,350 147,035
115,506 101,729
92,495
Net income available to common
shareholders
97,073 114,258 108,177
105,719 144,686
113,175
99,411
90,190
Earnings per share – diluted ($)
2.51
2.96
2.81
2.76
3.80
2.98
2.62
2.46
Return on equity (%)
13.1
15.9
15.9
15.6
16.5
18.3
16.9
15.9
Efficiency ratio (%)
46.2
44.5
45.2
44.9
43.8
42.8
45.4
43.5
Reported results ($000s)
Net interest income
255,774 271,367 267,338
256,010 345,783
251,699 240,797
218,325
Non-interest revenue
56,998
55,871
49,322
42,762
49,503
60,848
27,034
16,382
Revenue
312,772 327,238 316,660
298,772 395,286
312,547 267,831
234,707
Non-interest expenses
153,625 150,569 150,420
139,485 181,165
127,030 126,548
139,180
Pre-provision pre-tax income(2)
159,147 176,669 166,240
159,287 214,121
185,517 141,283
95,527
Provision for credit losses
47,987
21,274
22,217
15,535
19,566
13,042
6,248
26,796
Income before income taxes
111,160 155,395 144,023
143,752 194,555
172,475
135,035
68,731
Income tax expense
31,740
43,241
38,307
39,370
53,409
41,550
35,516
22,912
Net income
79,420 112,154 105,716
104,382 141,146
130,925
99,519
45,819
Net income available to common
shareholders
75,382 109,538 103,041
101,875 138,797
128,594
97,201
43,514
Earnings per share ($) – basic
1.96
2.86
2.70
2.68
3.67
3.41
2.58
1.20
Earnings per share ($) – diluted
1.95
2.84
2.67
2.66
3.64
3.39
2.56
1.19
Return on equity (%)
10.2
15.2
15.1
15.0
15.8
20.8
16.5
7.7
Efficiency ratio (%)
49.1
46.0
47.5
46.7
45.8
40.6
47.2
59.3
Revenue per average full time equivalent ($)(2)
167
177
172
165
227
180
159
139
Balance sheet and other information
($ millions)
Total assets
53,234
54,070
53,940
53,099
52,933
53,319
51,793
51,145
Assets under management(2)
79,354
78,200
76,515
74,136
67,932
65,910
63,336
61,569
Loans – Personal & Commercial
47,034
47,958
47,909
47,792
47,361
47,437
46,580
46,510
Loans under management(2)
67,861
66,878
65,525
63,929
62,397
60,112
58,238
57,078
Assets under administration(2)
47,684
47,152
46,974
44,725
43,173
42,037
41,469
41,234
Total deposits principal
33,164
32,710
33,559
31,760
31,577
31,783
31,278
30,831
EQ Bank deposits principal
9,055
8,890
8,653
8,328
8,233
8,204
8,097
7,923
Total risk-weighted assets
19,487
19,650
19,720
20,108
19,809
19,427
18,981
18,926
Page 9
Select financial highlights
2024
2023
2022
Q4
Q3
Q2
Q1
Four
months
Q4
Q2
Q1
Q4(3)
Credit quality (%)
Reported provision for credit losses – rate
0.40
0.18
0.19
0.13
0.12
0.11
0.05
0.25
Net impaired loans as a % of total loan assets
1.32
1.09
0.92
0.94
0.76
0.47
0.32
0.28
Net Allowance for credit losses as a % of total
loan assets
0.32
0.26
0.23
0.22
0.22
0.20
0.19
0.18
Share information
Common share price – close ($)
106.82
96.37
83.11
92.32
68.82
70.00
58.30
56.73
Book value per common share ($)
77.51
75.67
73.73
71.33
70.33
67.33
64.47
62.65
Common shares outstanding (thousands)
38,450
38,382
38,276
38,173
37,879
37,730
37,680
37,564
Common shareholders market
capitalization ($ millions)
4,107
3,699
3,181
3,524
2,607
2,641
2,197
2,131
Common shareholders' equity ($ millions)
2,980
2,904
2,822
2,723
2,664
2,538
2,429
2,354
Dividends paid – common share ($)
0.47
0.45
0.42
0.40
0.38
0.37
0.35
0.33
Dividends paid – preferred share – Series 3 ($)
0.37
0.37
0.37
0.37
0.37
0.37
0.37
0.37
Dividend yield – common shares (%)
1.9
2.0
1.9
1.9
2.0
2.3
2.3
2.5
Capital ratios and leverage ratio (%)
Common Equity Tier 1 ratio
14.3
14.7
14.1
14.2
14.0
14.1
14.0
13.7
Tier 1 capital ratio
15.0
16.1
14.8
14.8
14.6
14.8
15.0
14.7
Total capital ratio
15.6
16.6
15.3
15.4
15.2
15.4
15.5
15.1
Leverage ratio
5.3
5.6
5.2
5.4
5.3
5.2
5.3
5.3
Business information
Employees – average full time equivalent
1,868
1,849
1,836
1,808
1,743
1,740
1,685
1,635
EQ Bank customers (thousands)
513
485
457
426
401
368
336
308
(1) Adjusted measures and ratios are Non-GAAP measures and ratios. For additional information, see Adjustments to financial results section, and
Non-GAAP financial measures and ratios section of this document.
(2) These are non-GAAP measures and ratios, see Non-GAAP financial measures and ratios section of this document.
(3) Q4 2022 results included two months of Concentra Bank’s contribution to income statement measures and to denominators of several measures.
Page 10
Overview and outlook
Annual performance overview
In 2024, EQB continued delivering against its value creation strategy with record annual earnings and adjusted Return
on Equity (ROE) of 15.0% (reported ROE of 13.8%). Revenue for the year was a record $1.26 billion, adjusted pre-
provision pre-tax income was $693 million (reported $661 million), and adjusted EPS was $11.03 ($10.11 on a reported
basis) driving book value per share growth +10% y/y. Results reflected continued strength in EQB’s multi-unit residential
business, growth in fee-based non-interest revenue including the contribution of ACM Advisors, and nearly 30% growth
in the EQ Bank customer base.
Reflecting the diverse business growth levers for EQB, these results were achieved notwithstanding: slower housing
market growth due to the impact of interest rates remaining higher for longer; and a challenging credit market
translating into higher personal and commercial impaired loans and significantly higher provisions for credit losses in
equipment financing. These conditions are expected to significantly improve in 2025, with impaired loans expected to
decline significantly and a much-improved position in equipment financing following the losses booked in 2024, which
reflects specific long-haul trucking vintages, adjustments to forward looking business mix for originations and losses
booked relating to Pride Group. Additional detail on equipment leasing is provided below and in the Section: Provision for
Credit Losses.
Recent Bank of Canada decisions to reduce its policy interest rate are beginning to have a positive effect on the housing
market – as seen through originations and new commitments – creating a more constructive environment for loan
resolutions in both personal and commercial lending.
Given the strong continued organic capital generation of its businesses, Equitable Bank grew capital from 14.0% to
14.3% in 2024, after deploying $325 million in capital to repay EQB debt facilities (~70% of outstanding debt was paid off
in 2024). Equitable Bank targets strong capital levels of 13%+ CET1 and is committed to optimizing its shareholders’
capital. As such, updated lending growth guidance for 2025 has been provided. In addition, for return of capital to
shareholders, EQB has confirmed new medium-term guidance for annual dividends and intends to renew and increase
the size of its Normal Course Issuer Bid (NCIB) in 2025 to give it additional options for capital deployment.
Summary of drivers of 2024 and fourth quarter performance:
•
Net interest income (NII): Adjusted $1.06 billion for the year ($1.05 billion reported), representing a 6% y/y
increase in monthly NII driven by the size of the lending portfolio, elevated prepayment income relative to 2023 and
strong contributions from wholesale funding and EQ Bank to net interest margin, up 10 bps y/y to 2.07%. Funding
costs continued to benefit from the diversification of the Bank’s funding channels, and reduction in EQB debt
facilities. Offsets to net interest margin included maintaining a higher EQ Bank deposit rate than the pace of Bank of
Canada reductions, shift in commercial lending from uninsured lending to insured lending that commands a thinner
margin, and the impacts of larger average cash balances associated with wholesale funding and capital markets
activity in Q3 and Q4.
•
Non-interest revenue (NIR): adjusted and reported NIR were $205 million in 2024, representing 16% of total
revenue, and a +55% increase in average monthly adjusted NIR to $17 million in 2024. This performance was driven
by strong ongoing contributions by EQB’s fee-based businesses – Concentra Trust, EQ Bank payments, BIN
sponsorships, ACM Advisors (acquired in December 2023), and strong growth in multi-unit residential lending
securitization. NIR was $57 million for Q4, an increase of 2% q/q, and an increase of 15% y/y.
•
Lending portfolio: In 2024, EQB grew its overall loans under management (LUM) by 9% y/y to $67.9 billion. Loans
under management growth was driven by strong insured multi-unit lending LUM growth (+30% y/y, +8% q/q),
decumulation lending growing to $2.1 billion (+47% y/y, +10% q/q), and insured commercial construction lending to
$2.6 billion (+59% y/y, -3% q/q). Loan growth in single-family uninsured lending was affected by the impact of higher
interest rates on new origination, partially offset by higher retention. See more detail in: Loans under Management.
Page 11
•
Impaired loans: Net impaired loans were $624 million, increasing $97 million over the quarter to 132 bps of total
loans, compared to 109 bps last quarter and 76 bps at October 31, 2023. Personal lending accounted for $63 million
of the increase, as additions to single-family residential impaired loans outpaced resolutions; however, with
increasing activity in the Canadian housing market, it is expected that the pace of resolutions will increase in 2025.
Personal lending experienced $1.9 million in realized losses in Q4, and $6.1 million for 2024, representing 1 bp of
Personal lending loan assets for the year. Commercial lending net impaired loans contributed $33 million to the
increase in the quarter, primarily from one large loan. Commercial lending excluding equipment finance
experienced $2.4 million of realized losses in 2024, representing 0.5 bps of total loan assets. Equipment financing
net impaired loans increased by $26 million over last year and $1.4 million q/q.
•
Provisions for credit losses (PCLs): Adjusted PCLs for 2024 were $89 million (reported $107 million). Equipment
finance contributed 71% of this total in 2024 (reported 74%) or $63 million (reported $80 million). Q4 2024
represented $31.9 million on an adjusted basis (reported $48.0 million), with $16.0 million (reported $32.1 million)
related to equipment finance.
o
Personal lending provisions were $1.2 million in 2024 (vs $11.8 million in F2023 for 10 months), representing
0.4 bps of total personal loan assets. Single-family residential and decumulation contributed $6.6 million in
2024, $0.2 million in Stage 1 & 2 and $6.4 million in Stage 3 provisions associated with impaired loans. In Q4,
provisions for single-family and decumulation were $3.8 million with Stage 1 & 2 provisions of $1.5 million and
Stage 3 PCLs were $2.3 million. Consumer lending had a $5.4 million recovery in the year, mostly resulting
from a new cash reserve received from a lending partner, and provisions of $1.3 million in Q4.
o
Commercial lending (excluding equipment finance) had $26.3 million in provisions in 2024, representing
19 bps of commercial loan assets. In Q4, Stage 3 provisions in the commercial lending portfolio were
$10.7 million – representing 8 bps of commercial loan assets – largely driven by three commercial loans.
o
Equipment financing: $79.6 million for 2024 with $32.1 million within Q4 on a reported basis. Of the Q4
provision, half of the provision is related to leases associated with Pride Group. Provisions for credit losses
has been adjusted by $16.1 million in Q4 tied to suspected irregularities with this purchasing arrangement.
The overall allowance for equipment finance portfolio is $57 million, representing 4.8% of equipment finance
loan and lease assets. For additional details, please refer to the Provision for Credit Losses section of this MD&A.
•
Non-interest expenses: Total adjusted non-interest expenses(1) in 2024 were $571 million (reported $594 million).
Average monthly expenses increased 15% y/y (+14% reported), inclusive of ACM’s contribution since December
2023 and driven by ongoing investments in innovation, growth and capabilities. EQB’s adjusted efficiency ratio(1)
was 45.2% in 2024 (reported 47.3%), +1.2% (reported +2.7%) y/y, driven by investment in team, technology,
marketing – that successfully drove EQ Bank growth – and increased product costs associated with a growing
customer base.
•
Interest rate risk management: EQB’s risk appetite for interest rate risk is unchanged, and EQB continues to
target a one-year duration of equity. EQB’s measures its interest rate sensitivity as the impact to Economic Value of
Shareholders’ Equity (EVE) associated with an immediate and sustained 100 bps parallel increase in interest rates –
the impact of this interest rate shock would be ($31.8 million) or (1.1%) of equity.
Page 12
Medium-Term Guidance and 2025 Outlook
To provide EQB shareholders with greater insight into EQB’s long-term business potential, EQB is providing medium-
term guidance for key performance metrics. EQB’s business model has proven to be highly effective in delivering
shareholder value through economic and market cycles over the past 20 years.
Guidance is based on assumptions and economic/market forecasts which change. Medium term guidance is intended as
a three-year range with 2025 expected to be within range for all measures.
Core Performance Measures (Adjusted)
Medium-Term Guidance
ROE
15-17%
Pre-provision, Pre-tax Income Growth Rate
12-15%
Diluted Earnings Per Share (EPS) Growth Rate
12-15%
Dividend Growth Rate
~15%
Book Value Per Share (BVPS) Growth Rate
~13%
CET 1 Capital Ratio
13% plus
Operating Leverage
Flat to slightly positive
Total Loans Under Management Growth Rate
8-12%
(1) Guidance represents expected growth rates from October 31, 2024 to October 31, 2025. Guidance is forward-looking information; readers should refer
to the Caution regarding forward-looking statements section herein. The purpose of the guidance provided herein is to assist readers in understanding the
expected and targeted financial results, and this information may not be appropriate for other purposes.
2025 Guidance on Adjusted Financial Performance Metrics:
ROE: EQB remains committed to its value creation model and maintaining ROE of greater than 15%, which is well ahead
of industry averages, and a level that was achieved in 2024 despite higher-than-expected loan loss provisions, which are
anticipated to moderate meaningfully in 2025. Given EQB’s disciplined approach to capital deployment, an expected
increase in origination activity in a lower rate environment, EQB is confident that its ROE target can be achieved in 2025.
Pre-provision, pre-tax income:
•
Revenue: Following a record year with total revenue exceeding $1 billion for the first time, EQB is expecting to
build on this growth in 2025. Net interest income is set to benefit from recent and expected Bank of Canada policy
rates which should support higher loan originations across the lending portfolio. Expectations for next year include
NIM above 2.0%, maintained through EQB’s matched funding approach, disciplined hedging strategy, and ongoing
optimization of the EQ Bank value proposition. The outlook for non-interest revenue is favourable for the
upcoming year as EQB is expected to benefit from; i) momentum in fee-based revenue from credit union services
and Concentra Trust; ii) solid growth in ACM Advisors, where results are trending above expectations ; and, iii)
continued financing activity in the insured multi-unit residential market, which is expected to remain a very strong
contributor to non-interest revenue.
•
Non-interest expenses: EQB prioritizes investing in its businesses through the economic cycle in order to
maximize franchise value over the long term while maintaining the discipline necessary to consistently deliver an
ROE of 15%+. In 2025, EQB will continue to make strategic investments to support growth initiatives, including:
i) further accelerating the growth of EQ Bank through brand, marketing and product/experience development; and
ii) the public launch of EQ Bank’s Small Business Account, bringing high interest, no fee services for small and
medium-sized business customers. In addition, EQB will continue to invest in important operational areas such as
risk management and compliance capabilities to support the growing scale and complexity of the Bank.
Page 13
•
Operating leverage: With an already industry-leading efficiency ratio, EQB targets flat-to-slightly-positive y/y
operating leverage over the medium-term. Operational effectiveness cost reductions that EQB made in 2024 are
expected to continue in 2025; however, given EQB’s commitment to supporting ongoing innovation and strategic
growth, EQB commits to delivering target ROE and expense growth that reflects continued investment in growing
the Bank and its capabilities.
EPS growth: EQB has reported industry-leading EPS growth over the long-term and is confident that growth can
continue in this range, with an expectation for significantly improved provisions for credit losses in 2025.
Return of capital: At approximately 23%, EQB successfully executed on its guidance to grow its common share dividend
20-25% for the five-year period ending 2024 as part of its policy of returning capital to investors while maintaining a
payout ratio purposefully below industry peers to allow capital to be reinvested for growth at high ROEs. EQB’s new
medium-term guidance is annual dividend growth of 15%. In addition, for return on capital, EQB intends to renew its
NCIB in 2025.
CET1 ratio: Equitable Bank is committed to maintaining strong capital levels, well above regulatory minimums
mandated by the Office of the Superintendent of Financial Institutions (OSFI). For 2025, guidance remains 13%+.
PCLs: In 2024, the majority of EQB’s elevated PCLs were driven by the equipment financing portfolio. EQB’s 2025 outlook
is informed by several factors, including expectation of slowing impaired loan formations, delayed resolutions that are
expected to resolve in the near-term, positive feedback from clients as they benefit from lower interest rates, and EQB’s
proactive approach to tightening credit standards where warranted.
Loan growth: Higher interest rates impacted EQB’s loan growth in 2024, especially as activity in the Canadian housing
market slowed. Downward trajectory on Bank of Canada policy rates is expected to result in improved origination
activity across EQB’s loan portfolio in 2025, particularly for single-family residential uninsured mortgages and loans to
commercial clients. For EQB’s higher growth loan portfolios, EQB continues to see robust demand for reverse mortgages
among Canadian seniors and those nearing retirement who wish to unlock equity in their homes and insured multi-unit
residential mortgages driven by the need for rental housing in Canada.
Page 14
EQB’s Challenger approach
Long-Term Commitment to Challenger approach
For more than 50 years, EQB’s wholly owned subsidiary Equitable Bank and its operating companies(1) have proudly
served and addressed the unique financial needs of Canadians. As Canada’s Challenger Bank™, Equitable lives its
purpose to “drive change in Canadian banking to enrich people’s lives” by challenging the status quo for the betterment
of customers, advocating for competition and innovation in the industry, and keeping customer service, experience, and
value at the heart of its approach.
EQB’s purpose-driven approach creates differentiated value for Canadians, as well as the Bank’s employees and EQB’s
shareholders. This year, EQB celebrated its 20th anniversary as a public company and two decades of delivering 15%+
ROE on average annually through its proven and consistent value creation model. ROE serves as EQB’s most important
financial guidepost, driving business decisions from pricing to investments. Delivering 15-17% ROE consistently ensures
EQB’s value creation flywheel keeps turning to generate capital organically and grow book value per share by 13-15%
annually, while still supporting growing dividends for shareholders. EQB has set its medium-term dividend growth target
at 15% to continue fuel the value creation flywheel and put organically generated capital to work.
The success of EQB’s value creation model is demonstrated in performance and momentum, with EQB’s 10-year Total
Shareholder Return (TSR) significantly outperforming the Canadian banking peer group averages. Looking to 2025, EQB
will continue to invest purposefully in expanding products and services to reach and serve even more Canadians, while
delivering results to shareholders for whom high ROE continues to be a top expectation.
(1)
Inclusive of operating companies Equitable Trust, Bennington Financial Services, Concentra Bank and Concentra Trust.
Page 15
Innovation in banking to better serve Canadians
Fuelled by a deep passion for serving Canadians with complex needs, the Bank continues to demonstrate its skill in
building innovative and differentiated products. This year EQ Bank launched its Notice Savings Account, the first-of-its-
kind in Canada with no fee and no minimum balance requirements, giving customers higher interest rates on their
choice of a 10- or 30-day notice period to withdraw funds. Customer reception far surpassed expectations proving, yet
again, that EQ Bank not only understands the needs of Canadians, but also can translate that understanding to valued
and well-used products and services. EQ Bank also took important steps to make foreign exchange of USD to/from CAD
more cost effective. In 2025, EQ Bank will introduce tiered rates on foreign exchange to make larger transfers more
economical for customers, offering rates amongst the best in Canada for transfers up to $1,000,000 (unlike most banks
in Canada, who often charge as much as 2.0-2.5% for exchanges up for $10,000). EQ Bank will also fully launch its
customer-first value proposition to Canadian Small Businesses, bringing the benefits of high interest, no fees, unlimited
transactions, and access to business GICs, supported by an entirely digital onboarding experience, to this important and
underserved market.
Existing lending products and services continue to grow and evolve to meet the changing needs of Canadians. EQB’s
decumulation portfolio grew 47% in 2024, driven by expanded distribution relationships and investments in brand
building, while specialized lending grew 8%. In both areas, EQB applies its differentiated approach to underwriting and
understanding unique asset classes to bring lending services to otherwise underserved Canadians.
EQB continues to invest in services and capabilities to support Credit Unions across the country, including consulting
and deposit services, wholesale banking and syndicated lending solutions. EQB has also helped Credit Unions better
support the communities they serve, for example, through expanding access to products such as the Registered
Disability Savings Plan (RDSP), ensuring greater availability of this important government matching program for as many
eligible Canadians as possible.
When EQB Inc. completed its majority acquisition of leading Canadian alternative asset manager ACM Advisors Ltd. in
December 2023, the event marked EQB’s entry into the wealth and asset management industry. Since closing the
acquisition, ACM has exceeded both revenue and earnings expectations. As the ACM team prepares to launch its
upcoming social and climate-linked fund, EQB Inc. is proudly supporting this business expansion effort.
Page 16
Strength in meeting Canada’s housing needs
Consistent with its social purpose, EQB’s Commercial Business focuses on providing affordable solutions for the housing
market in Canada, where robust demand persists, in particular in major urban centres. Through its commercial lending
activities, EQB:
•
Supports the construction and renovation of apartments across a range of building sizes
•
Provides financing for the construction of condominiums
•
Lends to specialized landlords that buy older rental stock with a view to renovating the property with more
efficient mechanical systems, upgrading the building envelope, and improving appliances and interior finishes
Equitable Bank is proudly the country’s largest securitizer of CMHC-insured multi-unit residential housing, significantly
contributing to apartment construction, purchase, and refinancing including for affordable units. EQB’s total multi-unit
residential loan portfolio under management as of October 31, 2024 was $26.1 billion, up 30% from $20.0 billion y/y.
Momentum and growth
2024 was another year of records for EQB, with revenue growing 34% and adjusted Pre-Provision Pre-Tax income (PPPT)
up 31% y/y. EQB’s lending portfolio grew in 2024 in line with projections and EQB’s commitment to delivering profitable
growth over the long term and through economic and credit cycles. Prudent credit risk management and disciplined,
deliberate choices of where to compete for maximum advantage are key elements of this long-term commitment and
result in superior risk-adjusted returns, consistent ROE for shareholders, and solid performance through cycles. Looking
to 2025, investment will continue to be made to enhance broker and customer experience, technology, and efficiency
across both personal and commercial lines of business, while the Bank prepares for improved economic conditions and
increased volumes in single-family residential lending.
(1) Periods for ROE, EPS and
efficiency: for peers as of
Q3 2024 and for EQB is
Q4 2024
(2) Total Shareholder Return
is as of October 31, 2024;
See Glossary section of
this MD&A
(3) Peers include Bank of
Montreal, Bank of Nova
Scotia, Canadian Imperial
Bank of Commerce,
National Bank, Royal Bank
of Canada, Toronto-
Dominion Bank
(4) Weighted average 10-year
efficiency calculated as a
sum of 10 year’s expenses
/ sum of 10-year revenue
Page 17
EQ Bank’s strong growth trajectory continued in 2024, as the digital bank launched new products and services to meet
the needs of Canadian consumers, while increasing awareness through its “Make Bank” marketing campaign. In 2024,
EQ Bank added more than 112,000 customers and today serves more than 513,000 Canadians from coast to coast with
over $9 billion in total deposits, aided by the launch of new deposit products including the small business account in
beta and Notice Savings Account. For the fourth consecutive year, EQ Bank received international recognition with its
inclusion on the Forbes World’s Best Banks list. In recognition of its accomplishments in marketing and brand, EQ Bank
won three marketing awards in 2024, including the prestigious Brand of the Year award from Strategy Magazine, a gold
award for Brand Building in Financial Services from the Canadian Marketing Association, and bronze for Performance in
Advertising Film from the Advertising & Design Club of Canada. In 2025, EQ Bank will continue to build on the success of
its Make Bank campaign and 2024 product launches to reach more Canadians with purpose-driven banking products.
Continued emphasis on risk management
Equitable Bank has a deep culture of disciplined capital allocation and prudent risk management. Equitable Bank has a
comprehensive approach to both its financial and non-financial risks. Additional detail on Equitable Bank’s Risk
Management approach can be found in the Section titled Risk Management. This discipline anchors consistent ROE for
shareholders and performance through cycles, and the Bank’s robust risk management framework, policies and
processes are complemented by high capital levels to absorb unexpected losses and provide resilience against tail
events and residual risks. The section below provides perspectives on three of Equitable Bank’s core financial risks:
credit, market, and liquidity risk.
Credit Risk
Despite credit challenges industry-wide this year, in particular in equipment financing, Equitable Bank’s operating model
remains clear and distinct versus peers in Canada. Due to the Bank’s robust credit risk management practices, Equitable
Bank has achieved the lowest credit loss rate as a percentage of loan assets among all Schedule I banks in the S&P/TSX
Bank Index over the last fifteen years, with an average overall provision for credit losses of 0.07% of total loan assets
in that same period.
Equitable Bank considers its approach to the management of credit risk a strategic advantage and employs its prudent
underwriting approach through business and economic cycles. The Bank’s credit risk practices include limiting exposure
to higher risk markets and mitigating the risk of loss through protection beyond the borrower’s ability to repay, most
often through higher quality secured lending (over 99% of loans are secured by assets in a first lien position).
Page 18
Within residential lending, as at October 31, 2024, the average LTV of the Bank’s overall uninsured single-family lending
portfolio was 63% and the average LTV of newly originated loans in Q4 2024 was 70%. These LTVs ensure sufficient
borrower equity and provide Equitable Bank cushion in the event of asset price declines or a default when there is a
need for recovery. The Bank always maintains first lien positions on uninsured loans, a critical lever in managing
downside risk, and focuses on lending to creditworthy residential borrowers, with an average credit score for uninsured
single-family residential mortgage borrowers of 711 in 2024. We support customers that are sole proprietors who may
not have salaried income. As such, other lenders with less robust underwriting practices have difficulty in understanding
the customer’s true credit risk profile. The Bank, on the other hand, has deep and specialized experience in lending to
such customers, having done so for close to 20 years. The Bank seeks to provide differentiated value to this customer
segment with responsive service and products that include single-family residential mortgages with amortizations up to
30 years, rather than longer duration amortizations which are not always in the best interest of borrowers given higher
interest costs over the term of the mortgage and slower equity accumulation.
Commercial banking contributes almost half of Equitable Bank’s earnings using a proven business model and approach
refined over many decades. Within the commercial lending portfolio, the Bank focuses on asset classes that have strong
demand (e.g., the multi-unit residential property market) and in geographic areas with strong population growth
forecasts, while limiting exposures to weaker markets, such as office (0.5% of total loan assets, with an average LTV of
70%), and hotel, shopping malls and big box retail sectors (cumulatively accounting for approximately 1% of the Bank’s
total assets). Within office, the Bank’s exposures are focused on vocational offices occupied by dentists, doctors, and
other service providers, where physical spaces are essential for providing patient care. Regardless of asset class or
market, the Bank focuses on obtaining high quality covenants, most commonly personal guarantees to help mitigate
risk of default and as secondary source of repayment. By following such practices, the Bank minimizes its exposure to
adverse market conditions and ensures the quality and stability of its commercial real estate portfolio.
Page 19
Market Risk
Equitable Bank employs a disciplined approach to management of market risks (including interest rate risk and equity
price risk) arising from its business activities. To mitigate market risk driven by changes in interest rates, Equitable Bank
aims to match assets with liabilities of similar duration. The Bank maintains a hedging program to ensure that the bank’s
net sensitivity to rates is aligned with its target risk profile. The Bank uses simulated interest rate change sensitivity
models to estimate the effects of various interest rate change scenarios on net interest income and on the economic
value of shareholders’ equity (EVE). At October 31, 2024, Economic Value of Shareholders’ Equity (EVE) sensitivity was
(1.1%) or $31.8 million loss if there is an immediate and sustained 100 bps parallel increase in interest rates. See the Risk
Management section of this MD&A for more detail.
Liquidity and Funding Risk
Equitable Bank adheres to prudent standards to manage its liquidity and funding. The Bank’s comprehensive liquidity
and funding risk management framework ensures that it always has sufficient sources of funding to support its
operations and growth. The framework is built on the following key principles:
•
Maintain a diversified funding profile that consists of retail deposits, brokered deposits, securitization
programs, institutional deposit notes, covered bonds, and wholesale funding facilities to reduce reliance on any
single source of funding and enhance access to cost-effective and stable funding.
•
Monitor and manage the bank’s liquidity position, term maturity profile and sensitivity to stress scenarios.
These metrics help assess the Bank’s ability to withstand various liquidity shocks and comply with regulatory
requirements and internal limits. As at October 31, 2024, Equitable Bank’s Liquidity Coverage Ratio was above
regulatory minimum of 100%.
•
Ensure access to contingent funding sources in times of stress. The Bank regularly reviews and updates the
contingency funding plan (CFP), which outlines the contingent funding sources and capacity, roles and
responsibilities, governance structure, escalation procedures, communication strategy and potential actions to
be taken in the event of a liquidity crisis. The Bank’s CFP is tested periodically through simulations and drills to
ensure its effectiveness and readiness.
Liquidity risk management is deeply embedded in the Bank’s decision-making processes and operations, spanning from
risk appetite to product design and strategic tools. For instance, EQ Bank’s new Notice Savings Account is specifically
designed with liquidity management considerations at its core. Additionally, EQ Bank strategically leverages the benefits
of Canada Deposit Insurance Company (CDIC) coverage by limiting account sizes to avoid accepting large amounts of
uninsured deposits from individual depositors. Reflecting management’s conservative liquidity approach, uninsured
demand and redeemable deposits account for only 4% of Equitable Bank’s total funding.
Page 20
Management’s Discussion and Analysis
For the three and twelve months ended October 31, 2024
Management’s Discussion and Analysis (MD&A) is provided to enable readers to assess the financial position and the
results of the consolidated operations of EQB Inc. (EQB) for the three and twelve months ended October 31, 2024. This
MD&A should be read in conjunction with EQB’s audited interim consolidated financial statements for the three months
ended October 31, 2024 (see Tables 22-24 in the Fourth quarter results section of this report) and the audited
consolidated financial statements and accompanying notes for the twelve months ended October 31, 2024. All amounts
are in Canadian dollars. This report, and the information provided herein, is dated as at December 10, 2024.
EQB’s continuous disclosure materials, including interim filings, annual MD&A and Consolidated Financial Statements,
Annual Information Form, Environmental, Social, and Governance (ESG) Performance Report, Management Information
Circular, Notice of Annual Meeting of Shareholders and Proxy Circular are available on EQB’s website at and on SEDAR+
at www.sedarplus.ca.
Page 21
Contents:
Income statement review:
Adjustments to financial results
22
Detailed financial summary
24
Balance sheet review:
Total loan principal
32
Credit portfolio quality
34
Deposits and funding
37
Liquidity investments and equity securities
39
Other assets and other liabilities
40
Off-balance sheet arrangements
40
Related party transactions
41
Capital position
41
Shareholders’ equity
45
Fourth quarter review:
Fourth quarter results
46
Interim financial statements
52
Accounting standards and policies:
Accounting policy changes
55
Critical accounting estimates
55
Disclosure controls and procedures
56
Internal control over financial report
56
Changes in internal control over financial
reporting
56
Risk Management
57
Glossary
78
Non-GAAP financial measures and ratios
79
Page 22
Adjustments to financial results
Adjustments impacting current and prior periods:
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 listed below are presented on a pre-tax basis:
2024
•
$8.8 million fair value adjustment on a covered bond maturity,
•
$2.2 million new office lease related costs prior to occupancy,
•
$11.2 million non-recurring operational effectiveness expenses and acquisition and integration-related
costs associated with Concentra and ACM,
•
$9.3 million intangible asset amortization,
•
$16.1 million provision for credit losses associated with an equipment financing purchase facility(1), and
•
$1.7 million provision for credit losses due to a one-time change in ECL methodology from five to four
economic scenarios and adjusting associated weights.
2023
•
$28.0 million related to a one-time strategic investment gain,
•
$15.1 million acquisition and integration-related costs associated with Concentra and ACM,
•
$3.5 million intangible asset amortization,
•
$3.3 million net fair value amortization adjustments, and
•
$0.9 million other expenses.
(1) This adjustment related to the provision provided for the equipment financing loans acquired from a Canadian subsidiary of Pride Group Holdings
Inc. Refer to Section “Provision for credit losses, Table 4” for more details.
Page 23
The following table presents a reconciliation of GAAP reported financial results to non-GAAP adjusted financial
results. For additional adjusted measures and information regarding non-GAAP financial measures, please refer to
the Non-GAAP financial measures and ratios section of this MD&A.
Reconciliation of reported and adjusted financial results
As at or for the quarter ended
For the year ended
($000, except share and per share amounts)
31-Oct-24
31-Jul-24
31-Oct-23
(four months)
31-Oct-24
31-Oct-23
(ten months)
Reported results
Net interest income
255,774
271,367
345,783
1,050,489
838,279
Non-interest revenue
56,998
55,871
49,503
204,953
137,385
Revenue
312,772
327,238
395,286
1,255,442
975,664
Non-interest expense
153,625
150,569
181,165
594,099
434,743
Pre-provision pre-tax income(3)
159,147
176,669
214,121
661,343
540,921
Provision for credit loss
47,987
21,274
19,566
107,013
38,856
Income tax expense
31,740
43,241
53,409
152,658
130,475
Net income
79,420
112,154
141,146
401,672
371,590
Net income available to common shareholders
75,382
109,538
138,797
389,836
364,592
Adjustments
Net interest income – covered bond fair value adjustment
8,804
-
-
8,804
-
Net interest income – fair value amortization/adjustments
-
-
-
-
(4,167)
Non-interest revenue – strategic investment
-
-
-
-
(27,965)
Non-interest revenue – fair value amortization/adjustments
-
-
-
-
941
Non-interest expenses – new office lease related costs
(2,208)
-
-
(2,208)
-
Non-interest expenses – non-recurring operational effectiveness and
acquisition-related costs(1)
(755)
(2,652)
(6,972)
(11,171)
(15,093)
Non-interest expenses – other expenses
-
-
-
-
(858)
Non-interest expenses – fair value amortization/adjustments
-
-
-
-
(66)
Non-interest expenses – intangible asset amortization
(2,115)
(2,223)
(1,181)
(9,334)
(3,542)
Provision for credit loss – equipment financing
(16,085)
-
(16,085)
-
Provision for credit loss – ECL methodology change and weights
-
(1,698)
-
(1,698)
-
Pre-tax adjustments – income before tax
29,967
6,573
8,153
49,301
(11,631)
Income tax expense – tax impact on above adjustments(2)
7,988
1,543
2,264
12,997
(4,311)
Post-tax adjustments – net income
21,979
5,030
5,889
36,303
(7,320)
Adjustments attributed to minority interests
(288)
(310)
-
(912)
-
Post-tax adjustments – net income to common shareholders
21,691
4,720
5,889
35,391
(7,320)
Adjusted results
Net interest income
264,578
271,367
345,783
1,059,293
834,112
Non-interest revenue
56,998
55,871
49,503
204,953
110,361
Revenue
321,576
327,238
395,286
1,264,246
944,473
Non-interest expense
148,547
145,694
173,012
571,386
415,184
Pre-provision pre-tax income(3)
173,029
181,544
222,274
692,860
529,289
Provision for credit loss
31,902
19,576
19,566
89,230
38,856
Income tax expenses
39,728
44,784
55,673
165,655
126,163
Net income
101,399
117,184
147,035
437,975
364,270
Net income available to common shareholders
97,073
114,258
144,686
425,227
357,272
Diluted earnings per share
Weighted average diluted common shares outstanding
38,723,974
38,606,268
38,117,929
38,549,300
38,013,724
Diluted earnings per share – reported
1.95
2.84
3.64
10.11
9.59
Diluted earnings per share – adjusted
2.51
2.96
3.80
11.03
9.40
Diluted earnings per share – adjustment impact
0.56
0.12
0.16
0.92
(0.19)
(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 Non-GAAP financial measures and ratios section of this MD&A.
Page 24
Detailed financial summary
Income statement and earnings summary
Table 1: Income Statement highlights
($000s, except per share amounts)
2024
2023
(ten months)
Change
Adjusted results(1)
Revenue
1,264,246
944,473
n.m.
Non-interest expenses
571,386
415,184
n.m.
Provision for credit losses
89,230
38,856
n.m.
Income tax expenses
165,655
126,163
n.m.
Net income
437,975
364,270
n.m.
Net income available to common shareholders
425,227
357,272
n.m.
Earnings per share – diluted ($)
11.03
9.40
n.m.
Reported results
Revenue
1,255,442
975,664
n.m.
Non-interest expenses
594,099
434,743
n.m.
Provision for credit losses
107,013
38,856
n.m.
Income tax expenses
152,658
130,475
n.m.
Net income
401,672
371,590
n.m.
Net income available to common shareholders
389,836
364,592
n.m.
Earnings per share – diluted ($)
10.11
9.59
n.m.
n.m. - not meaningful
(1) Adjusted measures and ratios are Non-GAAP measures and ratios. For additional information, see Adjustments to financial results section, and
Non-GAAP financial measures and ratios section of this MD&A.
Page 25
Net interest income (NII) is the main driver of EQB’s revenue and profitability. Table 2 details EQB’s NII by product and
portfolio.
Table 2: Net interest income
(1) Average rates are calculated based on the daily average balances outstanding during the period. (2) Adjusted measures and ratios are Non-GAAP
measures and ratios. For additional information, see Adjustments to financial results section, and Non-GAAP financial measures and ratios section of
this MD&A.
Adjusted net interest income (NII)(1) for the twelve-month period was $1.06 billion (reported $1.05 billion). Average
net interest income per month for 2024 was $88.3 million, +6% from 2023 (reported $87.5 million, +4%). The increase
was primarily driven by growth in higher spread uninsured loan assets, especially single-family mortgages and
decumulation lending, and expanded net interest margin (NIM) through the year, as rates on deposits and wholesale
funding increased less than rates on EQB’s uninsured single-family portfolio.
Adjusted NIM)(1) +10bps (reported +7bps), largely fuelled by higher yields in uninsured personal lending assets and
growth in those businesses, and despite declining margin in the conventional commercial book. The reduction in
average rate on commercial loans was primarily driven by growth in insured construction loans which require less
regulatory capital and therefore produce lower margins.
(1) Adjusted measures and ratios are Non-GAAP measures and ratios. For additional information, see Adjustments to financial results section, and
Non-GAAP financial measures and ratios section of this MD&A.
($000s, except percentages)
2024
2023 (ten months)
Average
Balance
Revenue/
Expense
Average
rate(1)
Average
Balance
Revenue/
Expense
Average
rate(1)
Revenues derived from:
Cash and debt securities
3,760,817
173,507
4.61%
3,428,695
130,792
4.58%
Equity securities
31,851
1,341
4.21%
55,534
2,463
5.33%
Single-family mortgages – insured
10,128,428
365,189
3.61%
10,921,546
305,702
3.36%
Single-family mortgages – uninsured
19,712,287
1,357,396
6.89%
19,175,503
957,418
5.99%
Decumulation loans
1,788,921
122,840
6.87%
1,222,703
67,634
6.64%
Consumer lending
878,076
99,586
11.34%
840,845
79,103
11.30%
Total Personal loans
32,507,712
1,945,011
5.98%
32,160,597
1,409,857
5.26%
Commercial loans
8,674,492
756,005
8.72%
8,205,992
623,274
9.12%
Equipment financing
1,239,293
121,878
9.83%
1,262,367
99,642
9.48%
Insured multi-unit residential mortgages
4,949,293
141,799
2.87%
5,680,227
137,446
2.91%
Total Commercial loans
14,863,078
1,019,682
6.86%
15,148,586
860,362
6.82%
Average interest-earning assets
51,163,458
3,139,542
6.14%
50,793,412
2,403,474
5.68%
Expenses related to:
Deposits
32,320,488
1,481,271
4.58%
31,408,726
1,078,755
4.12%
Securitization liabilities
14,930,398
522,673
3.50%
15,541,453
402,343
3.11%
Others
1,394,493
76,304
5.47%
1,962,818
88,264
5.40%
Average interest-bearing liabilities
48,645,379
2,080,248
4.28%
48,912,997
1,569,362
3.85%
Adjusted net interest income and margin(2)
1,059,293
2.07%
834,112
1.97%
Adjustment associated with covered bond expenses
-
(8,804)
-
-
Adjustments associated with Concentra acquisition
-
-
(107)
4,167
Reported net interest income and margin
51,163,458
1,050,489
2.05%
50,793,305
838,279
1.98%
Page 26
Non-interest revenue
Table 3: Non-interest revenue
($000s)
2024
2023
(ten months)
Change
Fees and other income(1)
81,087
46,895
n.m.
Gains on strategic investments
7,063
28,975
n.m.
Net gains on other investments(1)
13,216
5,467
n.m.
Gain on sale and income from retained interests
89,020
56,384
n.m.
Net gains (losses) on securitization activities and derivatives
14,567
(336)
n.m.
Total non-interest revenue– reported
204,953
137,385
n.m.
Gains on strategic investments
-
(27,965)
n.m.
Fair value amortization/adjustment on other investments
-
941
n.m.
Total non-interest revenue – adjusted(2)
204,953
110,361
n.m.
n.m. - not meaningful
(1) The grouping for certain gains reported under Net gains on other investments in Q1 2023, was changed to Fees and other income starting Q2 2023.
Prior period grouping has not been changed. (2) Adjusted measures and ratios are Non-GAAP measures and ratios. For additional information, see
Adjustments to financial results section, and Non-GAAP financial measures and ratios section of this MD&A.
Non-interest revenue in 2024 reached $205 million, or $17.1 million per month, an increase of 55% y/y on an
adjusted basis(1) (reported +24%). This improvement was driven by underlying performance across fee-based
businesses, the inclusion of ACM Advisors revenue from December 2023 onward and growth of the multi-unit
residential lending. Notably:
•
Fees and other income benefited primarily from the contribution of ACM in 2024, increases in EQ Bank and
payment-related revenue, and higher service income from both equipment leasing and Concentra Trust
businesses,
•
Strategic investments produced fair-value gains on holdings of the private equity investments,
•
Other investments were primarily driven by higher mark-to-market gains on debt securities,
•
Gain on sale revenue grew due to higher volume of CMHC multis securitized and derecognized, and
•
Securitization and derivatives recognized a net gain compared to a loss in 2023.
(1) Adjusted measures and ratios are Non-GAAP measures and ratios. For additional information, see Adjusted financial results section, and Non-GAAP
financial measures and other financial and banking measures and terms section of this MD&A.
Page 27
Provision for credit losses
Table 4: Provision for credit losses
($000s)
2024
2023
(ten months)
Change
Stage 1 and 2 provision
8,242
10,907
n.m.
Stage 3 provision
98,771
27,949
n.m.
Total Provision for credit losses – reported
107,013
38,856
n.m.
Less: Provision for credit losses – equipment financing
(16,085)
-
n.m.
Less: Stage 1 and 2 provision – ECL methodology change and weights
(1,698)
-
n.m.
Total Provision for credit losses – adjusted(1)
89,230
38,856
n.m.
n.m. not meaningful
(1) Adjusted measures and ratios are Non-GAAP measures and ratios. For additional information, see Adjusted financial results section, and Non-GAAP
financial measures and other financial and banking measures and terms section of this MD&A.
The Provision for Credit Losses (PCL) represents the net addition to the Bank’s Allowance for Credit Losses (ACL),
accounting for any recoveries during the period. The ACL is the reserve to absorb future expected credit losses and is
discussed in detail in the “Credit portfolio quality” section of this MD&A.
In 2024, total reported PCL was $107 million, driven by $80 million for equipment financing, $26 million for
commercial loans and $1 million in personal lending.
•
Of the total PCL, the stage 1 and 2 provision was $8.2 million, down $2.7 million from 2023, mostly driven by
decrease in stage 1 and 2 PCL for personal lending due primarily to a new cash reserve received from a
consumer lending partner in Q1 2024, plus favorable changes to macroeconomic forecasts used in EQB’s loss
modeling of these assets. Decreases were offset by increased PCL for equipment financing and $1.7 million
provision as a result of a methodology change in calculating expected credit losses tied to changing to four
economic scenarios and updating their associated weights. This $1.7 million one-time change is presented as
the adjustment to the 2024 reported PCL.
•
Stage 3 provisions are related to credit-impaired loans. The increase in stage 3 provision mainly resulted from
the increase in non-performing equipment leases and delinquent commercial loans, as well as additional
provisions provided in the year for the equipment financing portfolio based on the updates on incurred loss
events and the resulting revised estimates of lifetime credit losses on those affected impaired assets.
Within the equipment financing business, there is a purchase facility under which $77 million exposure net of
provisions and cash reserves of long-haul transportation equipment and related leases remain outstanding that were
acquired from a Canadian subsidiary of Pride Group Holdings Inc. Reflected in Q4 reported results is the previously
identified operational exposure and losses associated with Pride Group; these losses have been separated from
normal course business, but remain accounted for in credit losses. In the fourth quarter, EQB recorded a provision of
$16.1 million associated with the performing and non-performing loans that were acquired through this purchase
facility, which is presented as the adjustment to the 2024 reported PCL. In materials filed by the Pride Group with the
court in its creditor protection proceedings and in the reports to the court filed by Ernst & Young Inc., in its capacity
as the monitor of the Pride Group in those proceedings, there is disclosure of irregularities in the financing and
record-keeping practices, resulting in multiple financiers asserting a first priority interest in the same collateral and
situations where the underlying collateral was not, or is no longer, in the form intended by the parties. Additionally
the underlying documentation and practices relating to security registration in respect of the program with Pride
Group are also contributing factors which will determine the impact on those losses. The creditor protection
proceedings are ongoing and there remains uncertainty about the timing and outcome of the proceedings, including
as it relates to competing entitlements to certain assets acquired.
Page 28
Non-interest expenses
Table 5: Non-interest expenses and efficiency ratio
($000s, except percentages and FTE)
2024
2023
(ten months)
Change
Compensation and benefits
272,346
199,752
n.m.
Technology and system costs
82,374
61,662
n.m.
Regulatory, legal and professional fees
55,631
43,159
n.m.
Product costs
89,046
66,542
n.m.
Marketing and corporate expenses
77,849
52,674
n.m.
Premises
16,853
10,954
n.m.
Total non-interest expenses – reported
594,099
434,743
n.m.
Less: new office lease related costs
(2,208)
-
n.m.
Less: non-recurring operational effectiveness and acquisition-related costs
(20,505)
(19,559)
n.m.
Total non-interest expenses – adjusted(1)
571,386
415,184
n.m.
Efficiency ratio – reported
47.3%
44.6%
2.7%
Efficiency ratio – adjusted(1)
45.2%
44.0%
1.2%
Full-time employee equivalent (FTE) – period average
1,840
1,721
119
n.m. not meaningful
(1) Adjusted measures and ratios are Non-GAAP measures and ratios. For additional information, see Adjusted financial results section, and Non-GAAP
financial measures and other financial and banking measures and terms section of this MD&A.
EQB’s adjusted efficiency ratio(1) was 45.2% in 2024 (reported 47.3%), +1.2% (reported +2.7%) y/y as expense growth,
explained below, outpaced the increase in revenue.
Total adjusted non-interest expenses(1) (NIX) increased +$156 million (reported +$159 million), including ACM’s
contribution since December 2023. Average monthly expenses increased 15% y/y (+14% reported) with the following
drivers:
•
Compensation and benefits increased in support of the Challenger Bank’s expansion in key functions such as
product development, technology advancement, compliance, and customer support.
•
Technology and system increased on investments in EQB’s digital capacity to enhance performance,
functionality, and cybersecurity of the Bank’s cloud-based banking system, and delivery of value-add digital
solutions.
•
Product, marketing, and corporate increased on transaction costs associated with growing brokered HISA
deposits and EQ Bank direct deposits (with increasing EQ Bank Card activity), as well as higher loan servicing
fees. Marketing increases were primarily due to franchise investment in EQ Bank through marketing and its
“Second Chance” campaign with Dan and Eugene Levy and “Deuxieme chance” with Diane Lavellee and
Laurence Leboeuf.
•
Regulatory and professional fees increased largely due to higher legal, and business advisory service
charges in the normal course of the business, and higher deposit insurance premium payments as the eligible
deposits grew over the year.
(1) Adjusted measures and ratios are Non-GAAP measures and ratios. For additional information, see Adjusted financial results section, and Non-GAAP
financial measures and other financial and banking measures and terms section of this MD&A.
Page 29
Business line overview
Personal Banking
Personal banking operates through five businesses lines – EQ Bank, Residential Lending, Wealth Decumulation,
Consumer Lending and Payments-as-a-Service in support of fintech partners. These businesses provide innovative
products and services that disrupt the status quo in Canadian banking by giving customers better financial value and
a superior end-to-end experience. EQB’s personal banking customer segments are diverse: students, the self-
employed, entrepreneurs, newcomers to Canada, high-net worth individuals, Canadians planning retirement, and
retirees. In 2024, EQ Bank launched the beta-version of business banking to deliver its compelling value proposition
to small-business owners. The public launch of business banking, among other product launches, is planned for
2025, and will aim to create better banking experiences and address segments underserved by other financial
institutions. The Bank’s competition includes other Schedule I banks, trust companies, mortgage lenders, credit
unions and certain fintechs.
The table below summarizes portfolio measures as at year ended October 31, 2024:
($ billions)
2024 Actual
Y/Y Growth(2)
EQ Bank deposits
Deposit principal
9.1
10%
Single-Family Residential Lending
Uninsured mortgages
20.0
3%
Wealth Decumulation
Reverse mortgages &
insurance lending
2.1
47%
Consumer Lending
0.88
(6%)
Total Conventional loans(1)
23.0
5%
Single-Family Residential Lending
Insured
9.2
(13%)
Total Personal banking loans
32.2
(1%)
(1) This is a Non-GAAP measure, see Non-GAAP financial measures and ratios section of this MD&A. (2) Y/Y growth is comparing
October 31, 2024 to October 31, 2023.
2024 milestones included:
•
EQ Bank deposits surpassing $9 billion (10% y/y growth) driven by new product development, marketing and
platform improvements and unprecedented customer growth primarily due to franchise investment in EQ Bank
through the “Second Chance” marketing campaign
•
Launch of Canada’s first all-digital, no fee and no account minimums Notice Savings Account, designed to offer
customers attractive interest rates and flexibility, while simultaneously providing the Bank with improved funding
security
•
Beta launch of banking services for small businesses to provide high value and convenient digital banking
solutions anchored in the promise of exceptional customer service and convenience
•
Meaningful market share gains and increased portfolio value for the Bank’s reverse mortgage business through
investments in service, marketing, brand recognition and distribution
•
Record broker satisfaction scores in uninsured single-family residential lending, partly driven by recent technology
investments and improved customer retention supported by the market environment
Page 30
Commercial Banking
EQB’s Commercial Banking business operates through
seven business lines – Business Enterprise Solutions,
Commercial Finance Group, Multi-Unit Insured,
Specialized Finance, Equipment Financing, Credit Union
Services, and Concentra Trust.
Commercial Banking is focused on providing banking
solutions for the urban housing market in Canada
including the development and renovation of
apartments, condominiums, and other types of multi-
residential properties in major cities across the country.
Multi-unit residential lending represents 60% of
Commercial on-balance sheet lending and 83% of
Commercial total loans under management (on- and
off-balance sheet lending). It is geared to support
growing and densifying urban centers where mortgage loans
are backed by in-demand real estate assets that provide
housing and services that support urban living. Real estate
assets that are most susceptible to changing economic
conditions, such as hotels, are not core to the business.
EQB has established strong relationships with its clients, brokers and partners through whom it originated over $13.3
billion in Commercial Real Estate loans in 2024. The Bank has built a deep understanding of the urban housing
market and the trends and challenges that affect it. Apartment buildings have retained their values as occupancy and
rents have increased in the face of housing shortages and despite the headwinds of higher interest rates. The Bank
has a strategic focus on financing the construction of new apartment buildings and renovating existing housing units,
which are both areas of significant demand and opportunity in urban centres. The Bank continues to focus on
insured loans backed by the Government of Canada and supported by borrower incentives offered by CMHC.
The charts below demonstrate i) the average price for multi-unit residential buildings in the GTA(1), and ii) the average
rent for a 2-bedroom apartment and vacancy rate for multi-unit residential housing across Canada(2):
(1) Colliers GTA Multifamily Market Report. (2) CBRE Canadian Real Estate Market Outlook.
Page 31
The table below summarizes portfolio measures at year end October 31, 2024:
($ billions)
2024 Actual
Y/Y Growth(1)
Business Enterprise Solutions
Loans to entrepreneurs and SMEs(2)
1.6
9%
Commercial Finance Group
Loans to medium sized institutional and
corporate investors
5.6
(8%)
Specialized Finance
Specialized lending to medium sized and
corporate investors
1.2
8%
Equipment Financing
Equipment leases to entrepreneurs and SMEs(2)
1.2
(12%)
Total Conventional loans(3)
9.5
(4%)
Insured Multi-Unit Residential
(on balance sheet)
CMHC-insured real estate mortgages(4)
5.3
5%
Total Commercial Banking loans on balance sheet
14.8
(1%)
Total insured multi-unit residential mortgages under management(5)
26.1
30%
Total Commercial Banking loans (on- and off-balance sheet)
35.6
19%
(1) Y/Y growth is comparing October 31, 2024 to October 31, 2023. (2) Small or medium-sized enterprises. (3) This is a Non-GAAP measure, see Non-
GAAP financial measures and ratios section of this MD&A. (4) Insured multi-unit residential include only on-balance sheet loans. (5) includes on and off-
balance sheet insured multi-unit residential loans
Among 2024 key milestones:
•
EQB’s total commercial loan portfolio grew to $35.6 billion due to the strong growth of the Commercial Bank’s
insured lending platform
•
Originations of CMHC Insured Construction loans within Commercial Finance Group grew to $3.7 billion,
representing 184% growth over 2023
•
Insured Multi-Unit Residential loan portfolio grew 30% y/y inclusive of off-balance sheet loans
•
Continued strong growth for Specialize Finance Group with 8% y/y portfolio growth to $1.2 billion
Page 32
Balance sheet review
Balance sheet summary
Table 6: Balance sheet highlights
($ millions, except percentages)
31-Oct-24
31-Oct-23
Change
Total assets
53,234
52,933
301
1%
Total assets under management (AUM) and assets under administration
(AUA)
127,038
111,105
15,933
14%
Loan principal – Personal(1)
32,211
32,416
(205)
(1%)
Loan principal – Commercial(1)
14,818
14,983
(165)
(1%)
Total deposits principal(1)
33,164
31,577
1,587
5%
EQ Bank deposit principal(1)
9,055
8,233
822
10%
Total liquid assets(2) as a % of total assets
7.5%
7.2%
0.3%
(1) The principal numbers are reported on a consolidated basis, including Concentra, prior to any acquisition-related fair value adjustments that are
captured in balance sheet measures. (2) This is a Non-GAAP measure, refer to the Non-GAAP financial measures and ratios section of this MD&A.
Total AUM and AUA reached $127 billion, +$16 billion or +14% from last year, including $6 billion growth in CMHC
insured multi-unit lending assets. In view of funding, EQ Bank deposits surpassed $9 billion at October 31, 2024.
Total loan principal
EQB’s strategy is to maintain a diverse portfolio of loans to optimize ROE while managing credit risk rigorously. The
table below presents EQB’s loan principal by lending business and Table 8 provides continuity schedules for the on-
balance sheet loan portfolio.
Table 7: Loan principal by lending business(1)
($000s)
31-Oct-24
31-Oct-23
Change
Single-family mortgages – insured
9,190,224
10,547,686
(1,357,462)
(13%)
Single-family mortgages – uninsured
20,000,717
19,467,440
533,277
3%
Decumulation loans
2,139,404
1,460,098
679,306
47%
Consumer lending
880,873
940,847
(59,974)
(6%)
Total Personal Lending – on balance sheet
32,211,218
32,416,071
(204,853)
(1%)
Commercial loans
8,350,223
8,623,561
(273,338)
(3%)
Equipment financing
1,195,412
1,354,906
(159,494)
(12%)
Insured multi-unit residential mortgages
5,272,698
5,004,523
268,175
5%
Total Commercial Lending – on balance sheet
14,818,333
14,982,990
(164,657)
(1%)
Total Loans – on balance sheet
47,029,551
47,399,061
(369,510)
(1%)
Insured multi-unit residential mortgages – derecognized
20,831,024
14,998,436
5,832,588
39%
Total Commercial Lending – loans under management(2)
35,649,357
29,981,426
5,667,931
19%
Total Loans under management (LUM)(2)
67,860,575
62,397,497
5,463,078
9%
(1) The principal numbers are reported on a consolidated basis, including Concentra, excluding any acquisition-related fair value adjustments that are
captured in balance sheet measures. (2) This is a non-GAAP measure, see Non-GAAP financial measures and ratios section of this MD&A.
Page 33
Loans under management (LUM) increased 9% y/y, mostly driven by growth of CMHC insured multi-unit residential
lending that the Bank manages, uninsured single-family and decumulation lending portfolios.
Personal lending portfolio declined by 1%, as growth in conventional loans was offset by a deliberate decrease in
lower margin insured single-family lending activity which experienced low originations and renewals through the
year. Uninsured single-family business grew 3%, with a slow pace of originations in the year reflecting lower housing
market activity compared to 2023. With recent interest rate cuts announced by the Bank of Canada, economists
expect residential housing demand will gradually rise next year. The decumulation lending portfolio expanded
strongly from a year ago, benefiting from both originations and accrued interest through the period. Consumer
lending decreased 6% y/y, as we strategically lowered the originations in that business.
Commercial loans (Commercial Finance Group, Business Enterprise Solutions, and Specialized Finance) decreased 3%
y/y due to high maturities and unscheduled payments and despite strong originations in CMHC insured construction
loans. The equipment financing portfolio declined to $1.2 billion from $1.4 billion a year ago on a deliberate strategic
reduction in originations in select asset classes, and discharges and scheduled payments over the year that outpaced
new originations. The CMHC insured multi-unit business achieved 30% growth y/y, supported by strong activity in
that part of the residential housing sector.
Of the overall on-balance sheet portfolio, over 65% is associated with multi-unit residential properties, inclusive of
CMHC-insured residential apartments. “Commercial loans” in the table include both CMHC-insured construction and
other multi-unit residential lending (e.g., retirement homes, student residences, loans being readied for CMHC
funding).
Table 8: On-Balance Sheet loan principal continuity schedule(1)
($000s, except percentages)
As at or for the twelve months ended October 31, 2024
Personal
Commercial
Total
2023 closing balance
32,416,071
14,982,990
47,399,061
Originations
6,494,544
11,857,524
18,352,068
Derecognition
-
(7,071,949)
(7,071,949)
Net repayments
(6,699,397)
(4,950,232)
(11,649,629)
2024 closing balance
32,211,218
14,818,333
47,029,551
% Change from 2023
(1%)
(1%)
(1%)
Net repayments percentage(2)
20.7%
33.0%
24.6%
($000s, except percentages)
As at or for the ten months ended October 31, 2023
Personal
Commercial
Total
2022 closing balance
32,112,410
14,541,396
46,653,806
Originations
6,827,898
8,109,316
14,937,214
Derecognition
-
(5,244,786)
(5,244,786)
Net repayments
(6,524,237)
(2,422,936)
(8,947,173)
2023 closing balance
32,416,071
14,982,990
47,399,061
% Change from 2022
1%
3%
2%
Net repayments percentage(2)
20.3%
16.7%
19.2%
(1) The principal numbers are reported on a consolidated basis, including Concentra, prior to acquisition-related fair value adjustments that are
captured in balance sheet measures. (2) Net repayments percentage is calculated by dividing net repayments by the previous period’s closing balance.
Page 34
Credit portfolio quality
Equitable Bank regularly evaluates the profile of its loan portfolio and adjusts decisions and activities based on a
range of inputs. These include borrower behaviours and external variables, including real estate values, equipment
resale values, and economic conditions. When judging that the risk associated with a particular region or product is
no longer acceptable, the Bank adjusts underwriting criteria so that the policies continue to be prudent and reflective
of current and expected economic conditions, thereby safeguarding the future health of the portfolio.
There are several aspects of the Bank’s risk management approach and existing loan portfolios that have and will
continue to help mitigate the risk of credit losses. The Bank remains appropriately reserved for credit losses given the
composition of its loan portfolios and current economic forecasts. Allowances for Credit Losses, net of cash reserves,
as a percentage of total loan assets equaled 32bps at October 31, 2024 compared to 22bps at October 31, 2023.
Equitable Bank’s general approach to lending is sound and the Bank has modest exposure to higher risk lending markets:
•
The Bank focuses on lending in urban and suburban markets that have diversified employment bases and more
liquid real estate markets. This approach results in lower risk as it reduces both the probability that borrowers
will default and the loss in the event they do.
•
Commercial Banking lending, including equipment financing, is diversified across industries and geographies.
Commercial Banking has defined asset-class exposure limits and focuses on assets that the Bank believes will be
resilient through an economic cycle, such as multi-unit residential and mixed-use properties. These segments
make up 42% of the Commercial loan portfolio, while categories such as shopping centres and hotels, which the
Bank believes are more sensitive to economic conditions, comprise 3.0% and 0.1% of Commercial loans or 1.0%
and 0.02% of the total loan portfolio, respectively. Approximately 0.5% of the Bank’s loan assets are offices with
an average LTV of 70%, and lending is largely restricted to small properties outside of the downtown office
centres that are less impacted by the shift towards working from home.
•
In equipment financing, personal covenants and cash security deposit are required on most higher-risk leases
and in some cases additional real assets are pledged.
Equitable Bank’s loan portfolios have protection beyond a borrower’s ability to repay:
•
Underwriting focuses foremost on a borrower’s ability to repay a loan. The average credit score of the Bank’s
uninsured single-family residential borrowers, inclusive of Concentra Bank, was 711 as at October 31, 2024,
compared to 711 as at July 31, 2024 and 713 a year ago. Similarly, the average credit score of small business
mortgage borrowers ranged between 720-730. These credit scores are indicative of a borrower’s positive
repayment histories and lower propensity to default under normal economic conditions.
•
56% of loans under management are insured against credit losses, ultimately with the backing of the
Government of Canada.
•
Approximately 99% of the Bank’s uninsured loan portfolio is secured by assets. Uninsured mortgage loans are
supported by first-position claims on real estate and leases by first position claims on equipment, so Equitable
Bank has a real asset with tangible value behind almost every loan. While the consumer portfolio is not secured,
relationships with origination partners include preferential return against lending receivables.
•
If the prices of the assets securing mortgage loans decline, the Bank is further protected by a portfolio with a
low overall LTV ratio. The average LTV on the Bank’s uninsured residential mortgage portfolio was 63% as at
October 31, 2024. Further to this collateral, almost all uninsured commercial mortgage borrowers and the
majority of leases are backed by personal guarantees and/or personal or corporate covenants. In the mortgage
business, due diligence involves assessing the financial capacity of borrowers and guarantors.
Page 35
Allowance for Credit Losses
Stage 1 and 2 reserves increased y/y mostly due to growth in loan assets, an increase in estimated credit loss on
performing equipment financing loans, and a change in methodology for calculating expected credit losses on all
performing loans, offset by favourable changes to macroeconomic forecasts, particularly benefiting uninsured
personal lending. Effective Q3 2024, EQB removed its least severe downside scenario and now uses four probability-
weighted forward-looking scenarios instead of five to determine Stage 1 and 2 allowances. Using three or four
scenarios is consistent with industry practice and will allow management to better reflect expectations of the
probability and severity of downside economic scenarios and resulted in a one-time increase in allowances of $1.7
million in Q3 2024. Please see EQB’s consolidated financial statements and accompanying notes.
Stage 3 allowances are associated with EQBs impaired loans and determined on a loan-by-loan basis. Management
believes these allowances are adequate as at October 31, 2024. Stage 3 allowances on EQB’s loan portfolio are
generally supported by up-to-date, independent property appraisals.
Table 9: Loan credit metrics – Allowance for Credit Losses (ACL)
($000s, except percentages)
31-Oct-24
31-Oct-23
Change
Stage 1 and 2 allowance for credit losses
108,576
101,161
7,415
7%
Stage 3 allowance for credit losses
55,845
17,994
37,851
210%
Total Allowance for Credit Losses
164,421
119,155
45,266
38%
Net ACL – total net of cash reserves(1)
148,970
104,338
44,632
43%
Net ACL as a % of total loan assets
0.32%
0.22%
0.10%
Net ACL as a % of uninsured loan assets
0.50%
0.35%
0.15%
Net ACL as a % of gross impaired
22%
27%
(5%)
The table below provides allowance metrics that illustrate stage migration and loss rate dynamics:
Table 10: Stage 1 and 2 loan credit metrics
31-Oct-24
31-Jul-24
30-Apr-24
31-Jan-24
31-Oct-23
Stage 1 – proportion of loan assets(2)
78.2%
76.3%
74.0%
71.4%
72.1%
Stage 1 – effective allowance rate(3)
0.15%
0.13%
0.13%
0.12%
0.13%
Stage 2 – proportion of loan assets
20.3%
22.5%
25.0%
27.7%
27.1%
Stage 2 – effective allowance rate
0.40%
0.35%
0.30%
0.34%
0.32%
Table 11: Stage 1 and 2 Allowance for credit losses by lending business
($000s, except bps)
31-Oct-24
31-Jul-24
Change
31-Oct-23
Change
Uninsured personal loans (excluding consumer lending) – stage 1 & 2
allowances
28,948
27,372
1,576
27,876
1,072
as a % of uninsured personal loans (excluding consumer lending) (bps)
13
13
-
13
-
Consumer lending – stage 1 & 2 allowances net of cash reserves
1,823
684
1,139
7,452
(5,629)
as a % of consumer lending (bps)
21
8
13
80
(59)
Uninsured commercial loans – stage 1 & 2 allowances
23,689
23,679
10
24,363
(674)
as a % of uninsured commercial loans (bps)
43
39
4
37
6
Equipment financing – stage 1 & 2 allowances
39,834
31,289
8,545
24,462
15,372
as a % of equipment financing (bps)
356
267
89
181
175
Insured personal and commercial loans – stage 1 & 2 allowances
1,039
1,133
(94)
1,216
(177)
as a % of insured personal and commercial loans (bps)
0.60
0.64
(0.04)
0.70
(0.10)
Total loans – stage 1 & 2 allowances net of cash reserves
95,333
84,157
11,176
85,369
9,964
as a % of total loans (bps)
20
18
2
18
2
(1) The consumer lending portfolio is backed by guarantees of $15.5 million (July 31, 2024 - $15.7 million, October 31, 2023 - $14.8 million) provided by
a third party. (2) Stage 1 and 2 percentages do not equal 100%: loans in stage 3 account for the difference and are not included in this table. (3) The
effective allowance rate equals the net allowance for loans in the stage divided by the period end loan balances in that stage.
Page 36
Compared to October 31, 2023, Stage 1 and 2 allowances against uninsured personal loans (excluding consumer
lending) remained steady, while uninsured commercial loans and equipment financing increased by 6 bps and 175
bps, respectively. The increase in allowances for equipment financing included the additional provision booked in Q4
2024 associated with the purchased performing leases in that portfolio. The consumer lending allowance decline
during the period reflected a new agreement with a consumer lending origination partner in Q1 2024 and creation of
a cash reserve to secure against losses. The Bank leverages macroeconomic forecasts from Moody’s Analytics and
uses them in credit loss modelling. For a summary of key forecast assumptions for each scenario, please refer to
Note 10 (d & e) to the 2024 consolidated financial statements.
Impaired loans
Table 12: Impaired loan metrics
($000s, except percentages)
31-Oct-24
31-Oct-23
Change
Gross impaired loan assets
679,528
379,590
299,938
79%
Net impaired loan assets
623,683
361,596
262,087
72%
Net impaired loan assets as a % of total loan assets
1.32%
0.76%
0.56%
Net impaired loans as at October 31, 2024 were $624 million or 1.32% of total loan assets, including $298 million
residential mortgages (with weighted average LTV of 71%), $269 million commercial loans and $57 million equipment
financing.
Over the year, $242 million impaired residential mortgages and $247 million impaired commercial loans were
discharged or resolved, with realized losses being 13 bps of total loan assets.
The Bank closely monitors the delinquency and impairment status of each loan, assesses each impaired loan and
takes appropriate steps to ensure optimal resolutions. In most cases, LTVs are within acceptable thresholds,
providing a buffer for the Bank and reducing the risk of potential credit losses. Management believes the Bank is well
reserved to manage credit losses that are expected to arise from impaired loans.
Page 37
Deposits and funding
Deposits
Equitable Bank’s deposits provide a reliable and diversified base of funding that can be effectively matched against
loan maturities. Term deposits consistently contribute approximately 80% of total funding with demand deposits
representing the remainder.
EQ Bank deposits +10% y/y to $9.1 billion. With direct access to Canadian depositors, EQ Bank introduced its Notice
Savings Account and a pre-launch Business Account in the year and achieved positive contributions to funding as a
result. These new products reflect the Bank’s commitment to introducing innovative, high-value solutions for
Canadians as Canada’s Challenger Bank™.
In the Deposit Principal table below, EQ Bank Notice Savings deposits are included as Demand deposits – EQ Bank.
The rates on these accounts are adjustable by EQ Bank and subject to change, similar to other demand products;
however, the Notice Savings account is not ‘demand’ by design, as customers are required to provide notice to
withdraw the balances (10 or 30 days depending on the product).
For wholesale funding, the covered bond portfolio grew +20% y/y due to new issuances, net of maturity, over the
year. In Q2 2024, the Bank completed its fifth covered bond issuance (Canada’s first social covered bond issued by a
Canadian bank and also EQB’s first issuance of a social bond under its Sustainable Bond Framework) with an €500
million (CAD$735 million) offering.
Table 13: Deposit principal
($000s)
31-Oct-24
31-Oct-23
Change
Term deposits:
Brokered
16,453,116
15,877,380
575,736
4%
EQ Bank
4,673,234
4,644,623
28,611
1%
Credit unions
1,667,673
1,908,415
(240,742)
(13%)
Deposit notes
1,522,847
1,592,417
(69,570)
(4%)
Covered bonds
2,037,333
1,701,796
335,537
20%
Corporate and institutional
70,497
111,644
(41,147)
(37%)
Total
26,424,700
25,836,275
588,425
2%
Share of term deposits of total (%)
80%
82%
(2%)
Demand deposits:
Brokered
454,238
542,836
(88,598)
(16%)
EQ Bank (including Notice Savings Account)
4,381,968
3,588,092
793,876
22%
Credit unions
502,321
479,451
22,870
5%
Strategic partnerships
1,236,059
996,627
239,432
24%
Corporate and institutional
164,687
133,869
30,818
23%
Total
6,739,273
5,740,875
998,398
17%
Share of demand deposits of total (%)
20%
18%
2%
Total deposit principal
33,163,973
31,577,150
1,586,823
5%
EQ Bank deposit principal (excludes accrued interest)
9,055,202
8,232,715
822,487
10%
Page 38
Securitization liabilities
A portion of EQB’s securitization transactions do not qualify as loans for balance sheet derecognition and therefore
the associated obligations are recognized on the consolidated balance sheet and accounted for as securitization
liabilities. The securitization liability was $14.6 billion at October 31, 2024 (October 31, 2023 – $14.5 billion). EQB’s
securitization liability also included $3.1 billion (October 31, 2023 – $2.7 billion) of securitizations through two funding
programs which are sponsored by Domestic Systemically Important Banks (D-SIBs) and provide EQB with a source of
matched funding for qualifying uninsured single-family mortgages.
Funding facilities
Secured funding facilities
Equitable Bank has two credit facilities with major Schedule I Canadian banks to fund residential mortgages prior to
securitization with an aggregate capacity of $1.6 billion (October 31, 2023 – $1.6 billion). As at October 31, 2024, the
outstanding balance on these facilities was $0.4 billion (October 31, 2023 – $1.1 billion).
Concentra Bank maintains a $16 million (October 31, 2023 – $25 million) secured credit facility with a major Schedule
I Canadian bank to support issued letters of credit. In addition, Concentra Bank maintains a $50 million (October 31,
2023 – $100 million) secured line of credit with SaskCentral, which is used primarily for settlement and clearing
purposes. As at October 31, 2024 and October 31, 2023, there were no amounts outstanding under either of these
facilities.
Unsecured funding facilities
EQB has a funding agreement with a consortium of Schedule I Canadian banks for senior unsecured funding facilities
comprised of a revolving facility of up to $200 million and a term loan facility of up to $120 million. As at October 31,
2024, EQB had an outstanding balance of $120 million (October 31, 2023 – $373 million).
Equitable Bank launched its Bearer Deposit Notes (“BDN”) program in September 2023. This program furthered the
Bank’s funding diversity in capital markets through issuance of short-term unsecured notes, expanding the investor
base and adding complementary funding sources to the Bank’s established funding channels. As at October 31, 2024,
total BDN outstanding principal was $428 million.
Equitable Bank also has access to liquidity facilities sponsored by the Government of Canada, namely the Bank of
Canada’s Standing Term Liquidity Facility and Emergency Lending Assistance program. As at October 31, 2024 and
October 31, 2023, no drawdown was made on these facilities.
Details related to these funding facilities can be found in Note 17 to the 2024 consolidated financial statements.
Page 39
Liquidity investments and equity securities
Equitable Bank holds a diversified portfolio of liquid assets
Equitable Bank maintains liquid assets at a level that is sufficient to meet its upcoming obligations even through
periods of disruption in financial markets or challenging economic conditions. The size and composition of the
liquidity portfolio at any point in time is influenced by several factors such as expected future cash needs and the
availability of various funding sources. Further, the Bank applies a strategic approach to liquidity management
through rigorous asset-liability matching analysis and stress testing. Even with this liquidity risk management
framework, a significant or protracted disruption to funding markets could require the Bank to take further liquidity
protection measures.
In addition to assets that are held for the purpose of providing liquidity protection, the Bank maintains a portfolio of
liquid equity securities, 79% of which are investment-grade preferred shares, that the Bank is able to liquidate in the
event of financial stress. Please refer to the Risk Management section of this document for more details on the Bank’s
Liquidity and Funding Risk policies and procedures.
Table 14: Liquid assets
($000s, except percentages)
31-Oct-24
31-Oct-23
Change
Eligible deposits with regulated financial institutions(1)
579,544
516,551
62,993
12%
Debt securities
39,614
60,508
(20,894)
(35%)
Debt instruments issued or guaranteed by Government of Canada or
provincial governments:
Investments purchased under reverse repurchase agreements
1,260,118
908,833
351,285
39%
Loans and investments held in the form of debt securities(2), net of
obligations under repurchase agreements
2,107,491
2,235,278
(127,787)
(6%)
Liquid assets held for regulatory purposes
3,986,767
3,721,170
265,597
7%
Other deposits with regulated financial institutions(3)
12,098
33,322
(21,224)
(64%)
Equity securities(4)
15,403
40,455
(25,052)
(62%)
Total
4,014,268
3,794,947
219,321
6%
Total assets held for regulatory purposes as a % of total Equitable
Bank assets
7.5%
7.0%
0.5%
Total liquid assets as a % of total assets
7.5%
7.2%
0.3%
(1) Eligible deposits with regulated financial institutions represent deposits of Equitable Bank and its subsidiaries, which are held at major Canadian
financial institutions and excludes $123.1 million (October 31, 2023 – $171.8 million) of restricted cash held as collateral with third parties for Equitable
Bank’s derivative transactions, issuance of letters of credit, loan origination and servicing activities, BIN sponsorship and banking settlements in the
normal course of business and $848.9 million (October 31, 2023 – $595.4 million) of cash held in trust accounts and deposits held with banks as
collateral for Equitable Bank’s securitization activities.
(2) Loans held in the form of debt securities represent loans securitized and retained by Equitable Bank and are reported in the Loans receivable
balances. Investments held in the form of debt securities include MBS, CMB and provincial bonds purchased from third parties. The investments’
reported values represent the fair market values associated with these securities.
(3) Other deposits with regulated financial institutions are deposits held by EQB Inc. and ACM.
(4) Equity securities are 79% investment-grade publicly traded preferred shares and 21% publicly traded common shares.
Liquid assets(1) were $4.0 billion as at October 31, 2024, +6% y/y. The Bank’s target level of liquidity reflects forecasts
that take into account deposit and other funding maturities, shifts in the demand term deposit mix and anticipated
future funding needs.
(1) This is a non-GAAP measures, see Non-GAAP financial measures and ratios section of this MD&A.
Page 40
Other assets and other liabilities
Please refer to Notes 14 and 18 to EQB’s 2024 consolidated financial statements for a detailed breakdown of Other
assets and Other liabilities as at October 31, 2024 and October 31, 2023.
Other assets
Other assets were $899 million as at October 31, 2024, + $246 million or 38% y/y, mainly driven by the addition of
intangible assets and goodwill arising from the ACM acquisition, capitalized physical and right-of-use assets
associated with a new office premises, a new strategic investment in a Canadian financial services company, higher
assets held for sale associated with the non-performing equipment financing loans, increased BIN sponsorship
receivables, and prepayment related to loan purchase commitment, offset by lower income tax recovery and fair
value gains from derivative financial instruments.
Other liabilities
Other liabilities were $637 million as at October 31, 2024, +$35 million or 6% above October 31, 2023, largely a result
of right-of-use liabilities pertaining to a new office lease, higher loan servicing fee payable due to growth in
securitization activity, an increase in current and future tax payable, and BIN sponsorship-related liabilities, which in
part offset lower fair value losses on the derivative portfolio, a decrease in the collateral amount received from the
derivative activity and lower deferred revenue associated with an interest rate buydown.
Off-balance sheet arrangements
EQB engages in certain financial transactions that, for accounting purposes, are not recorded on its consolidated
balance sheets. Off-balance sheet transactions are generally undertaken for risk, capital, and funding management
purposes. These include certain securitization transactions, the commitments EQB makes to fund its pipeline of loan
originations, and letters of credit issued in the normal course of business (see Note 25 to the 2024 consolidated
financial statements in EQB’s report).
Securitization of financial assets
Certain securitization transactions qualify for derecognition when EQB has transferred substantially all of the risks,
rewards, and control associated with the securitized assets. The outstanding securitized loan principal that qualified
for derecognition totalled $20.8 billion at October 31, 2024 (October 31, 2023 – $15.0 billion).
The securitization liabilities associated with these transferred assets were approximately $20.3 billion at October 31,
2024 (October 31, 2023 – $15.2 billion). The securitization retained interests recorded with respect to certain
securitization transactions were $813.7 million at October 31, 2024 (October 31, 2023 – $559.3 million) and the
associated servicing liability was $100.5 million at October 31, 2024 (October 31, 2023 – $81.2 million).
Commitments and letters of credit
The Bank provides commitments, including letters of credit, to extend credit to borrowers and had outstanding
commitments to fund $6.3 billion (October 31, 2023 – $5.8 billion) of loans and investments in the ordinary course of
business as at October 31, 2024.
The letters of credit represent assurances that it will make payments in the event that a borrower cannot meet its
obligations to a third party. The letters of credit in the amount of $32.6 million were issued and outstanding as at
October 31, 2024 (October 31, 2023 – $65.5 million), none of which were claimed.
Page 41
Related-party transactions
Certain of EQB’s management personnel have transacted with and/or invested in its deposits, and/or the Series 3
preferred shares (which were fully redeemed on September 30, 2024) in the ordinary course of business. See Note
26 to the 2024 consolidated financial statements for further details.
Capital position
Equitable Bank manages its capital in accordance with guidelines established by OSFI, based on standards issued by
the Bank for International Settlements’ Basel Committee on Banking Supervision (BCBS). OSFI’s Capital Adequacy
Requirements (CAR) Guideline details how Basel III rules apply to Canadian banks.
OSFI has mandated that all federally regulated financial institutions meet target Capital Ratios, those being a CET1
Ratio of 7.0%, a Tier 1 Capital Ratio of 8.5%, and a Total Capital Ratio of 10.5%. The Bank utilizes an Internal Capital
Adequacy Assessment Process (ICAAP) to assess capital requirements based on Equitable Bank’s inherent risks and
set internal capital targets to support its strategic and financial planning.
Regulatory Capital Developments
On October 20, 2023, OSFI released an update of CAR (2024 Capital Adequacy Requirements) that took effect fiscal
Q1 2024, which included changes in capital requirements associated with negative amortization mortgages with
growing balance, where payments are insufficient to cover the interest components. Equitable Bank’s capital
requirements have not changed as a result of this requirement, as the Bank does not offer variable rate residential
mortgage products with fixed payments that lead to this update. Ongoing updates to CAR do have the potential to
change the treatment of asset portfolio and impact future risk-weighted assets.
2024 results have reflected the revised Basel III disclosures and prior periods have not been restated.
Page 42
Risk-weighted assets of Equitable Bank
Table 15: Risk-weighted assets of Equitable Bank
($000s, except percentages)
As at October 31, 2024
Assets /
Amounts
Risk
Weighting
Risk-weighted
assets
On balance sheet:
Cash and cash equivalents
1,551,530
20%
308,759
Securities purchased under reverse repurchase agreements
1,260,118
0%
-
Investments
1,627,314
15%
241,226
Loans – Personal
32,318,163
28%
9,056,064
Loans – Commercial
14,824,330
39%
5,712,448
Securitization retained interests
813,719
100%
813,719
Other assets
708,330
36%
257,818
Total Equitable Bank assets subject to risk rating
53,103,504
16,390,034
Less: Eligible Stage 1 and 2 allowance
(108,575)
-
Total Equitable Bank assets
52,994,929
16,390,034
Off-balance sheet:
Loan commitments
695,780
Derivatives
157,608
Other
-
Total credit risk
17,243,422
Operational risk(1)
2,243,197
Total
19,486,619
($000s, except percentages)
As at October 31, 2023
Assets /
Amounts
Risk
Weighting
Risk-weighted
assets
On balance sheet:
Cash and cash equivalents
1,283,346
20%
251,685
Securities purchased under reverse repurchase agreements
908,833
0%
354
Investments
2,120,645
14%
299,880
Loans – Personal
32,442,232
26%
8,595,551
Loans – Commercial
15,020,060
47%
7,114,549
Securitization retained interests
559,271
100%
559,271
Other assets
663,024
22%
146,880
Total Equitable Bank assets subject to risk rating
52,997,411
16,968,170
Less: Eligible Stage 1 and 2 allowance
(101,161)
-
Total Equitable Bank assets
52,896,250
16,968,170
Off-balance sheet:
Loan commitments
847,367
Derivatives
115,441
Other
4,536
Total credit risk
17,935,514
Operational risk(1)
1,873,725
Total
19,809,239
(1) For operational risk, Equitable Bank applied the Simplified Standardized Approach in accordance with OSFI CAR Guideline requirements.
The RWA for operational risk is determined by multiplying the operational risk capital charge by 12.5.
Page 43
Risk-weighted assets of Equitable Bank
During 2024, risk-weighted assets (RWA) decreased by $323 million (2%), mainly resulting from declines in the Bank’s
exposures of higher-risk weight uninsured commercial lending portfolio over the year, partially offset by increase
from growth in assets including uninsured single-family mortgages, securitization retained interests, and other
assets, plus higher operational risk capital charges attributable to revenue growth.
Compared to Q3 2024, RWA dropped $163 million (1%) due to decrease in uninsured commercial mortgage and
equipment financing assets, offset in part by growth of uninsured single-family residential mortgages and reverse
mortgages, securitization retained interest, and higher operational risk exposures.
Capital measures
Table 16: Capital measures of Equitable Bank
($000s, except percentages)
31-Oct-24
31-Oct-23
Change
Common Equity Tier 1 Capital (CET1):
Common shares
933,749
930,178
3,571
0%
Contributed surplus
14,330
13,886
444
3%
Retained earnings
2,028,450
2,057,262
(28,812)
(1%)
Accumulated other comprehensive loss (AOCI)(1)
(14,239)
(49,956)
35,717
(71%)
Less: Regulatory adjustments to CET1 Capital
(182,039)
(187,870)
5,831
(3%)
Common Equity Tier 1 Capital(1)
2,780,251
2,763,500
16,751
1%
Additional Tier 1 capital (AT1):
Non-cumulative preferred shares
-
72,554
(72,554)
n.m.
Other qualifying Additional tier 1 instruments(2)
147,458
-
147,458
n.m.
Additional Tier 1 capital issued by a subsidiary to third parties
(amount allowed in AT1) (3)
-
57,628
(57,628)
n.m.
Tier 1 Capital(1)
2,927,709
2,893,682
34,027
1%
Tier 2 Capital:
Eligible Stage 1 and 2 allowance
108,574
101,162
7,412
7%
Additional Tier 1 capital issued by a subsidiary to third parties
(amount allowed in Tier 2) (3)
-
6,719
(6,719)
n.m.
Tier 2 Capital(1)
108,574
107,881
693
1%
Total Capital(1)
3,036,283
3,001,563
34,720
1%
Total risk-weighted assets (RWA)
19,486,619
19,809,239
(322,619)
(2%)
Capital ratios and Leverage ratio:
CET1 ratio
14.3%
14.0%
0.3%
Tier 1 capital ratio
15.0%
14.6%
0.4%
Total capital ratio
15.6%
15.2%
0.4%
Leverage ratio
5.3%
5.3%
-%
n.m. not meaningful
(1) As prescribed by OSFI (under Basel III rules), AOCI is recognized as part of CET1, however, the AOCI associated with cash flow hedge reserves that
relate to the hedging of items that are not fair valued is excluded. (2) Refer to the limited recourse capital notes issued by Equitable Bank to its parent
company, EQB Inc. Amount is presented net of issuance costs. (3) The prior period balance associated with the preferred shares issued by Concentra
Bank to third-party investors, which have been fully redeemed in Q4 2024.
Page 44
Regulatory capital components
CET1 capital increased by $16.8 million y/y, which was mainly driven by organic capital growth of $399 million from
earnings in the year, net of dividends including the two large special dividend payments made to its parent company,
EQB Inc. of $150 million and $175 million in Q2 and Q4 2024 respectively, and favorable movement in accumulated
other comprehensive loss balance associated with changes in fair value of the Bank’s equity and debt security
investments. CET1 capital decreased $110 million q/q primarily due to the $175 million special dividend paid in the
quarter by Equitable Bank to its parent company EQB Inc., net of earnings of Equitable Bank in the quarter.
Tier 1 capital was up by $34.0 million y/y with the increase mainly driven by higher CET1 capital as described above
and the issuance of $146.5 million ($150 million net of $3.5 million issuance costs) Limited Recourse Capital Notes
(LRCNs) to its parent company, EQB Inc., in Q3 2024. Relative to Q3 2024, Tier 1 capital decreased by $232 million,
largely driven by lower CET1 capital and the redemption of all outstanding preferred shares issued by both Equitable
Bank and its subsidiary, Concentra Bank.
Total capital movement was an outcome of changes in both CET1 capital and Tier 1 capital as explained above.
Capital ratios
Equitable Bank’s CET1 ratio at October 31, 2024 was 14.3%, +30bps y/y, mostly due to the y/y decline in RWA in the
period. Both Tier 1 capital and Total capital ratios +40bps y/y, impacted by RWA decrease and capital growth.
Compared to Q3 2024, CET1 ratio was down 40bps, mainly due to the 4% decrease in CET1 capital affected by the
dividend distribution noted above. Tier 1 capital ratio and Total capital ratio declined 1.1% and 1.0%, respectively,
largely due to the capital reduction resulting from both the dividend pay-out and preferred share redemptions.
Leverage ratio
Canadian banks are required to report on OSFI’s Leverage Ratio based on Basel III guidelines. OSFI has established
minimum Leverage Ratio targets on a confidential and institution-by-institution basis. Equitable Bank remained fully
compliant with its regulatory requirements and its Leverage Ratio was 5.3% at October 31, 2024, flat y/y and down
30bps from Q3 2024. On y/y basis, Leverage Ratio remained steady as Tier 1 capital growth was offset by total
exposure increases. Leverage Ratio declined from Q3 2024 by 0.3% as the Tier 1 capital declined 7%, while the total
exposures decreased by 1%.
Stress test
As part of its capital management process, Equitable Bank performs stress tests to understand the potential impact
of extreme but plausible adverse economic scenarios. Equitable Bank uses these tests to analyze the impact that an
increase in unemployment, changing interest rates, a decline in real estate prices, and other factors could have on
Equitable Bank’s financial position across a range of economic scenarios. In addition to the macroeconomic stress
testing scenarios, the Bank also conducts stress tests in idiosyncratic scenario, and combination scenarios. These
tests are conducted at enterprise level to stress test the Bank’s resiliency and gain insights to its risk profile.
Based on the results of the stress tests performed to date, management has determined that Equitable Bank has
sufficient capital to absorb the potential losses modelled without impairing the viability of the institution and that it
would be able to recover.
Page 45
Shareholders’ equity
Common and preferred shares of EQB Inc.
At October 31, 2024, EQB had 38,449,904 common shares issued and outstanding. In addition, there were 959,879
unexercised stock options, which are, or will be, exercisable to purchase common shares for maximum proceeds of
$63.5 million. For additional information on outstanding stock options and their associated exercise prices, please
refer to Note 20 (a) to the 2024 consolidated financial statements.
On September 30, 2024, EQB redeemed all of its 2,911,800 issued and outstanding non-cumulative 5-year rate reset
Series 3 preferred shares at $25.00 per share for a total of $72.8 million. The Series 3 preferred shares bearing the
symbol EQB.PR.C were de-listed from the Toronto Stock Exchange as at the close of the trading on the same date.
Upon this redemption, EQB does not have any preferred shares issued and outstanding.
Preferred shares of Concentra Bank
On August 31, 2024, Concentra Bank redeemed all of its issued and outstanding Class A preferred shares, Series 1
and 2, at $25.00 per share for a total of $111 million, less any tax required to be deducted and withheld by Concentra
Bank. Upon this redemption, Concentra Bank does not have any preferred shares issued and outstanding.
Normal course issuer bid (NCIB)
During the twelve months ended October 31, 2024, no common or preferred shares were purchased or cancelled
under the NCIB. EQB intends to renew and increase the size of its NCIB, which expires on January 4, 2025, subject to
regulatory approvals.
For more information on EQB’s capital deployment strategy please refer to Sections on Annual Performance
Overview and 2025 Guidance on Adjusted Financial Performance Metrics.
Limited Recourse Capital Notes (LRCNs)
On July 16, 2024, EQB Inc. issued its first Limited Recourse Capital Notes, Series 1 (LRCNs) of $150 million with
maturity on October 31, 2084. The LRCNs bear interest at 8.0% annually, payable semi-annually, for the initial period
ending on, but excluding, October 31, 2029. Thereafter, the interest rate will reset every five years at a rate equal to
the prevailing 5-year Government of Canada Yield plus 4.548%. Please refer to Note 19(c) to the 2024 consolidated
financial statements for more details.
Common share dividends
Despite changes to its fiscal reporting calendar, EQB maintains the same dividend payment schedule (i.e., the last
business day of March, June, September, and December).
On December 4, 2024, EQB’s Board declared a quarterly dividend of $0.49 per common share, payable on December
31, 2024, to common shareholders of record at the close of business on December 13, 2024. This dividend
represents a 23% and 4% increase over dividends paid in December 2023 and September 2024, respectively.
On February 7, 2022, EQB’s Board of Directors reinstated EQB’s common share Dividend Reinvestment Plan (DRIP) at
a 2% discount. Participation in the plan is optional under the terms of the plan. Shareholders may elect to reinvest
their cash dividends to purchase additional common shares based on the volume weighted average trading price of
the common shares on the TSX for the five trading days immediately preceding the dividend payment date. Common
shares issued through the DRIP are issued from treasury stock. EQB may elect to issue shares to participating
shareholders at a discount. As at February 28, 2024, EQB has set the DRIP discount at 0%.
On August 28, 2024, EQB’s Board suspended the DRIP due to the strength of the Corporation’s capital position and
ability to 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.
Page 46
Fourth quarter results
Quarterly highlights
($000s, except per share amounts) For the quarter ended
31-Oct-24
31-Jul-24
Change
31-Oct-23
(four months)
Change
Adjusted results(1)
Revenue
321,576
327,238
(2%)
395,286
n.m.
Non-interest expenses
148,547
145,694
2%
173,012
n.m.
Provision for credit losses
31,902
19,576
63%
19,566
n.m.
Income tax expenses
39,728
44,784
(11%)
55,673
n.m.
Net income
101,399
117,184
(13%)
147,035
n.m.
Net income available to common
shareholders
97,073
114,258
(15%)
144,686
n.m.
Earnings per share – diluted ($)
2.51
2.96
(15%)
3.80
n.m.
Reported results
Revenue
312,772
327,238
(4%)
395,286
n.m.
Non-interest expenses
153,625
150,569
2%
181,165
n.m.
Provision for credit losses
47,987
21,274
126%
19,566
n.m.
Income tax expenses
31,740
43,241
(27%)
53,409
n.m.
Net income
79,419
112,154
(29%)
141,146
n.m.
Net income available to common
shareholders
75,382
109,538
(31%)
138,797
n.m.
Earnings per share – diluted ($)
1.95
2.84
(31%)
3.64
n.m.
n.m. not meaningful
(1) Adjusted measures and ratios are Non-GAAP measures and ratios. For additional information, see Adjustments to financial
results section, and Non-GAAP financial measures and ratios section of this MD&A.
Page 47
Net interest income
The table below details EQB’s quarterly NII and NIM by product and portfolio.
Table 17: Net interest income
($000s, except percentages)
For the quarter ended
31-Oct-24
31-Jul-24
31-Oct-23
(four months)
Revenue/
Expense
Average
rate(1)
Revenue/
Expense
Average
rate(1)
Revenue/
Expense
Average
rate(1)
Revenues derived from:
Cash and debt securities
42,059
4.25%
48,257
4.74%
55,656
4.61%
Equity securities
84
1.40%
385
4.52%
645
5.80%
Single-family mortgages– insured
85,828
3.58%
89,327
3.52%
122,090
3.39%
Single-family mortgages– uninsured
346,933
6.95%
355,131
7.15%
412,205
6.33%
Decumulation loans
35,699
6.87%
32,209
6.88%
30,899
6.73%
Consumer lending
23,878
11.10%
24,753
11.25%
32,983
11.14%
Total Personal loans
492,338
6.06%
501,420
6.12%
598,177
5.50%
Commercial loans
180,009
8.33%
190,684
8.60%
263,160
9.26%
Equipment financing
29,418
10.02%
30,154
9.76%
42,034
9.60%
Insured multi-unit residential mortgages
32,744
2.74%
35,950
2.88%
56,670
2.95%
Total Commercial loans
242,171
6.63%
256,788
6.81%
361,864
6.96%
Average interest-earning assets
776,653
6.08%
806,850
6.21%
1,016,342
5.88%
Expenses related to:
Deposits
369,499
4.47%
387,208
4.68%
461,849
4.33%
Securitization liabilities
130,834
3.55%
132,810
3.51%
165,770
3.29%
Others
11,741
5.18%
15,465
5.41%
42,940
5.70%
Average interest-bearing liabilities
512,074
4.20%
535,483
4.34%
670,559
4.08%
Adjusted net interest income and margin(2)
264,578
2.07%
271,367
2.09%
345,783
2.00%
Adjustment associated with covered bond expenses
(8,804)
-
-
Reported net interest income and margin
255,774
2.00%
271,367
2.09%
345,783
2.00%
(1) Average rates are calculated based on the daily average balances outstanding during the period. (2) Adjusted measures and ratios are Non-GAAP
measures and ratios. For additional information, see Adjusted financial results section, and Non-GAAP financial measures and other financial and
banking measures and terms section of this MD&A.
Page 48
Q4 2024 v Q3 2024
Adjusted net interest income (NII)(1) decreased $6.8 million or 3% (reported down $15.6 million, -6%) sequentially due
primarily to the attritions in conventional commercial portfolio in the quarter, lower net interest margin (NIM), and
lower prepayment income.
Adjusted NIM)(1) dropped 2 bps, mainly because the yields of commercial loans have been trending down in the
quarter.
Q4 2024 v Q4 2023
The average adjusted NII(1) for the three-month period in Q4 2024 was $88.2 million or +2% (reported $85.3 million,
down 1%) compared to average monthly NII in Q4 2023, mainly driven by growth in uninsured single-family
mortgages and decumulation lending, and higher NIM. Adjusted NIM(1) +7bps from Q4 2023, mostly benefiting from
growing yield in uninsured personal lending which are higher margin relative to insured lending, and increased size
in those portfolios, offset by margin reduction in uninsured commercial loans and decrease in that business.
Non-interest revenue
Table 18: Non-interest revenue
($000s)
For the quarter ended
31-Oct-24
31-Jul-24
Change
31-Oct-23
(four months)
Change
Fees and other income
21,347
22,561
(5%)
18,508
n.m.
Gains on strategic investments
1,729
2,250
(23%)
3,655
n.m.
Net gains on other investments
283
3,895
(93%)
4,428
n.m.
Gain on sale and income from retained interests
23,679
22,755
4%
25,948
n.m.
Net gains (losses) on securitization activities and derivatives
9,960
4,410
126%
(3,036)
n.m.
Total non-interest revenue
56,998
55,871
2%
49,503
n.m.
n.m. - not meaningful
Q4 2024 v Q3 2024
Non-interest revenue (NIR) increased $1.1 million (+2%) q/q, largely due to higher gains on securitization activities
related to EQB’s multi-unit residential lending, offset by lower service fee income and lower net fair value gains on
debt security investments.
Q4 2024 v Q4 2023
NIR grew $7.5 million (+15%) y/y primarily driven by: fee income from ACM (acquired in Q1 2024); higher EQ Bank
prepaid card fees; and an increased gain on seller swaps, offset by lower gains on both strategic investments and
other security investments, as well as one additional month contribution in Q4 2023 (four months).
(1) Adjusted measures and ratios are Non-GAAP measures and ratios. For additional information, see Adjusted financial results section, and Non-GAAP
financial measures and other financial and banking measures and terms section of this MD&A.
Page 49
Provision for credit losses
Table 19: Provision for credit losses
($000s)
For the quarter ended
31-Oct-24
31-Jul-24
Change
31-Oct-23
(four months)
Change
Stage 1 and 2 provision
11,233
779
1,342%
2,279
n.m.
Stage 3 provision
36,754
20,495
79%
17,287
n.m.
Total Provision for credit losses − reported
47,987
21,274
126%
19,566
n.m.
Less: Provision for credit losses – equipment financing
(16,085)
-
n.m.
-
n.m.
Less: Stage 1 and 2 provision – ECL methodology change and
weights
-
(1,698)
n.m.
-
n.m.
Total Provision for credit losses − adjusted(1)
31,902
19,576
63%
19,566
n.m.
n.m. not meaningful.
(1) Adjusted measures and ratios are Non-GAAP measures and ratios. For additional information, see Adjusted financial results section, and Non-GAAP
financial measures and other financial and banking measures and terms section of this MD&A.
Q4 2024 v Q3 2024
Total PCL for Q4 was $48 million, contributed by $32 million equipment financing, $11 million commercial loans and
$5 million personal lending. Within equipment financing, $16 million PCL was added in the quarter associated with
equipment loans that were acquired from a third-party and was excluded from the adjusted PCL balance.
Other than those associated with equipment financing, the remaining PCL increase was mainly driven by higher
defaulted loans in both personal and commercial lending businesses, and loan asset growth in the quarter.
Q4 2024 v Q4 2023
The increase in PCL was mostly attributable to equipment financing with the remainder of increase tied to impaired
residential mortgages and commercial loans.
Page 50
Non-interest expenses
Table 20: Non-interest expenses and efficiency ratio
($000s, except percentages and FTE)
For the quarter ended
30-Oct-24
31-Jul-24
Change
31-Oct-23
(four months)
Change
Compensation and benefits
70,104
69,912
0%
81,683
n.m.
Technology and system costs
20,782
21,812
(5%)
25,551
n.m.
Regulatory, legal and professional fees
15,831
13,936
14%
17,877
n.m.
Product costs
22,902
21,450
7%
29,719
n.m.
Marketing and corporate expenses
17,347
19,715
(12%)
22,548
n.m.
Premises
6,659
3,744
78%
3,787
n.m.
Total non-interest expenses – reported
153,625
150,569
2%
181,165
n.m.
Less: one-time lease related costs
(2,208)
-
n.m.
-
n.m.
Less: non-recurring operational effectiveness and acquisition-
related costs
(2,870)
(4,875)
n.m.
(8,153)
n.m.
Total non-interest expenses – adjusted(1)
148,547
145,694
2%
173,012
n.m.
Efficiency ratio – reported
49.1%
46.0%
3.1%
45.8%
3.3%
Efficiency ratio – adjusted(1)
46.2%
44.5%
1.7%
43.8%
2.4%
Full-time employee equivalent (FTE) – period average
1,868
1,849
1%
1,743
7%
n.m. not meaningful.
(1) Adjusted measures and ratios are Non-GAAP measures and ratios. For additional information, see Adjusted financial results section, and Non-GAAP
financial measures and other financial and banking measures and terms section of this MD&A.
Q4 2024 v Q3 2024
Adjusted non-interest expenses(1) increased $2.9 million (reported +$3.1 million), mainly due to higher consulting
service fees, loan servicing and administration costs, and office leasing, offset in part by reduction in capital tax
accrual.
Q4 2024 v Q4 2023
Adjusted non-interest expenses(1) were $24.5 million (reported $27.5 million) lower than the same quarter last year,
mostly ascribed to one extra month in Q4 2023 and lower capital tax charge in Q4 2024, which was offset by higher
staff costs (including the addition of ACM), continued investments in technology enhancements, professional service
usage, the EQ Bank’s Second Chance/Deuxieme Chance marketing campaign with Dan and Eugene Levy, and increase
in premise rental costs.
(1) Adjusted measures and ratios are Non-GAAP measures and ratios. For additional information, see Adjusted financial results section, and Non-GAAP
financial measures and other financial and banking measures and terms section of this MD&A.
Page 51
Total loan principal
The following table provides quarterly on-balance sheet loan principal continuity schedules by lending business:
Table 21: On-Balance Sheet loan principal continuity schedule(1)
($000s, except percentages)
As at or for the three months ended October 31, 2024
Personal
Commercial
Total
Q3 2024 closing balance
32,514,588
15,404,084
47,918,672
Originations
1,506,876
3,211,270
4,718,146
Derecognition
-
(2,086,019)
(2,086,019)
Net repayments
(1,810,246)
(1,711,002)
(3,521,248)
Q4 2024 closing balance
32,211,218
14,818,333
47,029,551
% Change from Q3 2024
(1%)
(4%)
(2%)
Net repayments percentage(2)
5.6%
11.1%
7.3%
($000s, except percentages)
As at or for the four months ended October 31, 2023
Personal
Commercial
Total
Q2 2023 closing balance
32,397,957
15,122,507
47,520,464
Originations
2,861,250
3,576,170
6,437,420
Derecognition
-
(2,618,633)
(2,618,633)
Net repayments
(2,843,136)
(1,097,054)
(3,940,190)
Q4 2023 closing balance
32,416,071
14,982,990
47,399,061
% Change from Q2 2023
0%
(1%)
(0%)
Net repayments percentage(2)
8.8%
7.3%
8.3%
(1) Principal is reported on a consolidated basis, including Concentra, prior to acquisition-related fair value adjustments that are captured in balance
sheet measures. (2) Net repayments percentage is calculated by dividing net repayments by the previous period’s closing balance.
Q4 2024 v Q3 2024
Personal lending portfolio declined 1%, mostly due to decrease in insured single-family mortgages, offsetting the
growth in uninsured personal loans. The origination level of insured loans has been trending down as a result of
lower originations in a competitive environment, while the renewal rates have gone up. Uninsured single-family
mortgage portfolio +$154 million fueled by both strong originations and lower attritions in the quarter. Decumulation
loans +$199 million primary contributed by new lending and capitalized interests of reverse mortgages.
Commercial lending LUM, including the off-balance sheet CMHC multi-unit residential mortgages, +4% mainly due to
8% growth in CMHC insured multis LUM, which was offset by a decline in uninsured commercial loans and
equipment financing, associated with lower originations, as well as high volume of unscheduled payments and
maturity.
Q4 2024 v Q4 2023
Please refer to Total loan principal under the “Balance sheet review” section of this MD&A for a discussion of the
loan portfolio growth over the past twelve months.
Page 52
Interim financial statements
Table 22: Unaudited interim consolidated statement of income
($000, except per share amounts)
For the quarter ended
31-Oct-24
31-Jul-24
31-Oct-23
(four months)
Interest income:
Loans – Personal
492,338
501,420
598,177
Loans – Commercial
242,171
256,788
361,864
Investments
15,579
16,432
24,613
Other
26,564
32,210
31,688
776,652
806,850
1,016,342
Interest expense:
Deposits
378,303
387,208
461,786
Securitization liabilities
130,834
132,810
165,853
Funding facilities
9,363
12,773
24,719
Other
2,378
2,692
18,201
520,878
535,483
670,559
Net interest income
255,774
271,367
345,783
Non-interest revenue:
Fees and other income
21,347
22,561
18,508
Net gain on loans and investments
2,012
6,145
8,083
Gains on sale and income from retained interests
23,679
22,755
25,948
Net gains (losses) on securitization activities and derivatives
9,960
4,410
(3,036)
56,998
55,871
49,503
Revenue
312,772
327,238
395,286
Provision for credit losses
47,987
21,274
19,566
Revenue after provision for credit losses
264,785
305,964
375,720
Non-interest expenses:
Compensation and benefits
70,104
69,912
81,683
Other
83,521
80,657
99,482
153,625
150,569
181,165
Income before income taxes
111,160
155,395
194,555
Income taxes
Current
18,922
44,083
28,803
Deferred
12,818
(842)
24,606
31,740
43,241
53,409
Net income
79,420
112,154
141,146
Dividends on preferred shares
1,086
2,351
2,349
Distribution to LRCN holders
2,586
-
-
Net income available to common shareholders and non-controlling interests
75,748
109,803
138,797
Net income attributable to:
Common shareholders
75,382
109,538
138,797
Non-controlling interests
366
265
-
75,748
109,803
138,797
Earnings per share
Basic
1.96
2.86
3.67
Diluted
1.95
2.84
3.64
Page 53
Table 23: Unaudited interim consolidated statement of comprehensive income
($000s)
For the quarter ended
31-Oct-24
31-Jul-24
31-Oct-23
(four months)
Net income
79,420
112,154
141,146
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
(317)
(1,591)
-
Net unrealized gains (losses) from change in fair value
8,148
34,658
(18,624)
Reclassification of net (gains) losses to income
(3,912)
(29,687)
16,252
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 from AOCI on sale of investments
(5,741)
(25,599)
(10,951)
Net change in unrealized (losses) gains from change in fair value
(910)
534
(2,985)
Reclassification of net losses to retained earnings
5,499
26,089
6,128
2,767
4,404
(10,180)
Income tax (expense) recovery
(636)
(1,194)
2,746
2,131
3,210
(7,434)
Cash flow hedges:
Net change in unrealized gains (losses) on fair value
755
(23,284)
27,911
Reclassification of net losses (gains) to income
7,231
(2,844)
(27,014)
7,986
(26,128)
897
Income tax (expense) recovery
(2,192)
7,084
(249)
5,794
(19,044)
648
Total other comprehensive income (loss)
7,925
(15,834)
(6,786)
Total comprehensive income
87,345
96,320
134,360
Total comprehensive income attributable to:
Common shareholders
86,979
96,055
134,360
Non-controlling interests
366
265
-
87,345
96,320
134,360
Page 54
Table 24: Unaudited interim consolidated statement of cash flows
($000s)
For the quarter ended
31-Oct-24
30-Jul-24
31-Oct-23
(four months)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income for the period
79,420
112,154
141,146
Adjustments for non-cash items in net income:
Financial instruments at fair value through income
16,245
(14,453)
27,349
Amortization of premiums/discounts
29,514
(13,393)
3,455
Amortization of capital and intangible assets
23,663
13,253
14,992
Provision for credit losses
47,987
21,274
19,566
Securitization gains
(17,690)
(16,656)
(20,513)
Stock-based compensation
979
924
1,060
Dividend income earned, not received
-
-
(416)
Income taxes
31,740
43,241
53,409
Securitization retained interests
37,415
33,670
33,392
Changes in operating assets and liabilities:
Restricted cash
(67,791)
(121,048)
103,052
Securities purchased under reverse repurchase agreements
79,460
60,377
300,097
Loans receivable, net of securitizations
789,307
(132,856)
(128,862)
Other assets
52,121
(97,507)
33,951
Deposits
432,111
(924,138)
(188,034)
Securitization liabilities
(382,001)
(269,988)
(892,589)
Obligations under repurchase agreements
-
-
252,520
Funding facilities
(856,265)
963,380
244,579
Other liabilities
3,996
(53,946)
101,566
Income taxes paid
(26,226)
(21,742)
(8,459)
Cash flows from (used in) operating activities
273,985
(417,454)
91,261
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common shares
3,446
5,005
3,369
Redemption of preferred shares
(183,782)
-
-
Net proceeds from issuance of limited recourse notes
(368)
147,808
-
Distributions to limited recourse note holders
(2,586)
-
-
Dividends paid on preferred shares
(1,086)
(2,351)
(2,349)
Dividends paid on common shares
(18,047)
(17,253)
(14,367)
Cash flows (used in) from financing activities
(202,423)
133,209
(13,347)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of investments
669
(7,896)
(279,527)
Proceeds from sale or redemption of investments
82,005
132,370
245,386
Investment in associate
(50,000)
-
-
Net change in Canada Housing Trust re-investment accounts
7,234
22,050
146,567
Purchase of capital assets and system development costs
(29,437)
(9,890)
(14,358)
Cash flows from investing activities
10,471
136,634
98,068
Net increase (decrease) in cash and cash equivalents
82,033
(147,611)
175,982
Cash and cash equivalents, beginning of period
509,608
657,219
373,492
Cash and cash equivalents, end of period
591,641
509,608
549,474
Cash flows from operating activities include:
Supplemental statement of cash flows disclosures
Interest received
412,335
975,954
903,914
Interest paid
(286,033)
(646,530)
(554,032)
Dividends received
310
521
29,180
Page 55
Accounting standards and policies
Accounting policy changes
EQB’s significant accounting policies are essential to an understanding of its reported results of operations and
financial position. Accounting policies applied by EQB in the 2024 consolidated financial statements are the same as
those applied by EQB as at and for the fiscal year ended October 31, 2023, with the exception of the new accounting
policy added for the issuance of LRCNs, investment in associates and assets held-for-sale, refer to Note 3 to the 2024
consolidated financial statements for more details.
Critical accounting estimates
The preparation of the consolidated financial statements requires management to make estimates, judgments and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the dates of the consolidated financial statements and the reported amounts of revenue and expenses
during the reporting period. Estimates and underlying assumptions are reviewed by management on an ongoing
basis. Critical estimates and judgments utilized in preparing EQB’s consolidated financial statements affect the
assessment of the allowance for credit losses on loans, impairment of other financial instruments, fair values of
financial assets and liabilities, derecognition of financial assets transferred in securitization transactions,
effectiveness of financial hedges for accounting purposes, fair values of net identifiable assets acquired, liabilities
assumed and intangible assets recognized in a business combination, and income taxes.
In making estimates and judgments, management uses external information and observable market inputs where
possible, supplemented by internal analysis as required. These estimates and judgments have been made taking into
consideration the economic impact of the current market volatility and uncertainty due to geopolitical unrest, the
current interest rate environment, and inflationary pressures. Actual results could differ materially from these
estimates, in which case the impact would be recognized in the consolidated financial statements in future periods.
Allowance for credit losses under IFRS 9
The Expected Credit Loss (ECL) model requires management to make judgments and estimates in a number of
areas. Management must exercise significant experienced credit judgment in determining whether there has been
a significant increase in credit risk since initial recognition and in estimating the amount of ECL. The measurement
of ECL incorporates forward-looking macroeconomic variables and probability weightings of macroeconomic
scenarios, which requires significant judgment. Management also exercises significant experienced credit judgment
in determining the amount of ECL at each reporting date by considering reasonable and supportable information
that is not already incorporated in the modelling process. Changes in these inputs, assumptions, models, and
judgments directly impact the measurement of ECL.
As a result of ongoing geopolitical unrest, the current interest rate environment, and inflationary pressures, the
macroeconomic environment continues to experience volatility and uncertainty. This has resulted in a direct impact
on the forward-looking macroeconomic variables which management uses as part of its underlying assumptions
for calculating ECL.
Page 56
EQB determines ECL using probability-weighted forward-looking macroeconomic scenarios obtained on a periodic
basis from Moody’s Analytics economic forecasting services. Effective the third quarter of this year, EQB has
removed its least severe downside scenario and now uses four probability-weighted forward-looking
macroeconomic scenarios to determine ECL. Removal of this scenario will allow management to better reflect its
expectations of the probability and severity of downside economic outcomes. These macroeconomic scenarios
include a ‘base-case’ scenario which represents the most likely outcome and three additional macroeconomic
scenarios representing more optimistic and more pessimistic outcomes. In establishing ECL, Management attaches
probability weightings to economic scenarios which are representative of Management’s view of the economic and
market conditions.
For further information regarding critical accounting estimates, please refer to Notes 2(d) and 10(d) to (f) to the 2024
consolidated financial statements.
Disclosure controls and procedures
Disclosure controls and procedures are designed to provide reasonable assurance that all relevant information is
accumulated and communicated to senior management, including the President and Chief Executive Officer and the
Chief Financial Officer, on a timely basis to enable appropriate decisions to be made regarding public disclosure.
Management has evaluated the effectiveness of EQB’s disclosure controls and procedures (as defined in the rules of
the Canadian Securities Administrators) as at October 31, 2024. Based on that evaluation, Management has
concluded that these disclosure controls and procedures were effective.
Internal control over financial report
EQB Inc.’s Internal Control over Financial Reporting framework is designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements in accordance with IFRS.
EQB has evaluated the design and operational effectiveness of its Internal Controls over Financial Reporting (ICOFR)
as at October 31, 2024 to provide reasonable assurance regarding the reliability of financial reporting. This evaluation
was conducted in accordance with the Integrated (2013) Framework published by the Committee of Sponsoring
Organizations of the Treadway Commission, a recognized control model, and the requirements of National
Instrument 52-109 of the Canadian Securities Administrators. Based on this evaluation, management has concluded
that EQB’s Internal Controls over Financial Reporting were effective as at October 31, 2024.
Changes in internal control over financial reporting
There were no changes to EQB’s internal control over financial reporting that occurred during 2024 that have
materially affected, or are reasonably likely to materially affect, EQB’s internal control over financial reporting.
Page 57
Risk Management
Through its wholly owned subsidiary, Equitable Bank (the Bank), EQB is exposed to risks that are similar to those of
other financial institutions, including the symptoms and effects of both domestic and global economic conditions and
other factors that could adversely affect its business, financial condition, and operating results. These factors may
also influence an investor’s decision to buy, sell or hold shares in EQB. The Board plays an active role in monitoring
the Bank’s key risks and in determining the policies, practices, controls, and other mechanisms that are best suited to
manage these risks.
The Bank’s business activities, including its use of financial instruments, expose the Bank to various risks, the most
significant of which are credit risk, liquidity and funding risk, and market risk.
Risk management framework
The Board has overall responsibility for the establishment and oversight of the Bank’s enterprise Risk Management
Framework (RMF). The RMF is designed to ensure that all risks are managed within the Bank’s pre-defined risk
appetite thresholds outlined in its Risk Appetite Framework (RAF). The RMF and RAF are designed to align the Bank’s
overall corporate strategy, financial and capital plans, business unit strategies and day-to-day operations across the
organization.
The RMF provides the foundation for the Bank’s approach to risk management across the enterprise, including any
directly or indirectly wholly owned subsidiaries. The RMF provides an overview of our enterprise-wide risk
management programs, including the identification, assessment, measurement, monitoring, and reporting on
material risks faced by the Bank. The RMF is our overarching risk governance document and is supported by a set of
risk-specific frameworks, policies, standards and procedures. Our enterprise-wide approach to risk management
enables the Bank to meet the expectations of our shareholders, the Board, regulators, and other key stakeholders, as
well as the communities that we serve.
The Bank expects that the risks we face will evolve over time in response to internal and external factors such as the
external market and regulatory environment, technological innovation, and changes in our business model. The RMF
is designed to ensure we can effectively identify and manage changes that impact our risk profile, including new and
emerging risks. The RMF will be reviewed at least annually and is expected to change commensurately with the
Bank’s evolving size, complexity, and business and risk profiles.
The figure below illustrates the elements of our enterprise Risk Management Framework, which include:
•
Risk Governance, including Risk Appetite, Roles and Responsibilities, Organizational Structure, Board and
Management Committees, and Policies and Procedures.
•
Risk Management Approach, including how we identify, assess, control, measure, monitor, and report on
risks across all material risk types.
•
Risk Culture, Resources & Talent Management, including our approach to succession planning for key risk
leadership and oversight functions.
•
Risk Infrastructure, including the systems and tools we use to support risk management activities.
The yellow tinted sections in the “Credit Risk”, “Liquidity and Funding Risk”, and “Market Risk” below form an
integral part of the 2024 consolidated financial statements as they present required IFRS disclosures as set
out in IFRS 7 Financial Instruments: Disclosures, which permits cross-referencing between the notes to the
financial statements and the MD&A. See Note 4 of the 2024 consolidated financial statements.
Page 58
Risk principles
Our approach to risk management leverages the different programs, methods and processes used by the Bank to
understand and manage risks in pursuit of desired financial and operational resilience. By identifying and proactively
addressing risks, the Bank can improve performance and build value. To ensure that the Bank integrates risk
management efforts into all areas of the organization, the following principles have been developed to guide risk
taking activities across the Bank:
•
Tone from the Top: Led by our Board and Senior Management, we promote a strong and transparent risk
culture across the enterprise.
•
Understanding the Risk-Reward Trade-off: We only take risks that we understand, can effectively manage,
and deem worthwhile given our expectation of return.
•
Integrated Risk Management: We take an integrated approach to managing risk across our businesses and
functions.
•
Accountability Mindset: 1st line employees are accountable for understanding and managing the risks they
take, for implementing and maintaining effective controls, and for taking timely action to mitigate any issues.
•
Oversight and Challenge: 2nd line employees are accountable for providing effective challenge of risks taken
by the 1st line.
•
Change Management: We conduct a thorough review and approval process for major changes, including
new products and business initiatives, to identify and appropriately manage risks and ensure alignment with
our business strategy.
•
Ongoing Monitoring: We measure and monitor our risk exposure relative to risk appetite on an ongoing
basis and escalate material concerns to Senior Management and the Board.
•
Crisis Resilience: We take appropriate measures to prepare for a potential crisis and remain operationally
and financially resilient.
Page 59
Risk appetite
Our Risk Appetite Framework (RAF) and associated Risk Appetite Statement (RAS) are integral parts of our overall
enterprise risk management program. The RAF describes our overall approach to risk appetite and provides
stakeholders across with an understanding of how risk appetite is defined, established, managed, and governed
across the enterprise.
As the figure below shows, the RAF establishes guiding principles and governance and reporting expectations for our
risk appetite, while the associated RAS provides a qualitative description of our risk appetite for each Core Risk and
where appropriate, quantitative metrics and limits.
To capture our overall risk appetite objectives, Equitable has defined a set of guiding principles for the definition of the
enterprise RAS, as shown below:
Financial
Non-Financial
•
Capital: We maintain a strong capital position
based on regulatory guidance and business
strategy.
•
Liquidity: We maintain sufficient liquidity to
meet our commitments and obligations.
•
Market: We maintain financial resilience in the
face of adverse market conditions.
•
Earnings: We target sustainable earnings over
time to achieve our ROE objective.
•
Credit Rating: We will target an acceptable
level of debt rating that allows competitive
access to funding.
•
Risk for Reward: We optimize risk-return to
facilitate the efficient and effective deployment
of capital.
•
Reputation: We always abide by our Code of
Conduct and are guided by our values to
preserve our reputation and our customers’
trust.
•
Regulatory Compliance: We meet all
applicable regulatory requirements and
expectations.
•
Risk Assessment: We only take risks that we
understand and can effectively measure and, if
needed, manage.
•
Crisis Resilience: We take appropriate
measures to prepare for and remain resilient in
the face of potential crisis.
Page 60
Risk culture
The culture of an organization influences the soundness and effectiveness of decision-making, risk-taking, and risk
management. We have established governance and processes to support a strong risk culture, including clear
accountabilities and oversight for risk culture and behavior. The Bank’s risk culture starts with “tone at the top” set by
the Board and Senior Management and supported by our Code of Conduct and various Bank policies and procedures
that help to embed a strong risk culture across our businesses and functions. The central oversight for organisational
culture is led by Human Resources in partnership with the Risk and Compliance functions.
We have an effective and well-established risk governance framework in place that seeks to ensure risks impacting our
businesses are identified, appropriately categorized, assessed, managed and communicated to the Board in a timely
manner. The Board oversees the implementation of our risk management framework, while employees at all levels of
the organization are responsible for managing the day-to-day risks that arise in the context of their mandates.
The Bank’s risk governance structure emphasizes and balances strong independent oversight with clear ownership for
risk across the Bank. We use a three lines of defence model so that risks are appropriately and adequately managed
throughout the enterprise to achieve our strategic objectives. Under this approach, the first line of defence is the risk
owner, the second line provides independent review, challenge and risk oversight, and the third line is Internal Audit.
Our risk governance model includes a senior management committee structure that is designed to support
transparent risk reporting and discussions. The Bank’s overall risk and control oversight is provided by the Board and
its committees. The CEO and Management Committee (MC) determine the Bank’s long-term direction which is then
carried out by business segments within the Bank’s risk appetite. Risk Management, headed by the CRO, sets
enterprise risk strategy and policy and provides independent oversight to support a comprehensive and proactive risk
management approach. The CRO, who is also a member of the MC, has unfettered access to the Risk and Capital
Committee.
The following section provides an overview of the key roles and responsibilities involved in risk management.
The Bank’s risk governance structure is illustrated in the following figure.
Page 61
The Risk and Capital Committee (RCC): The RCC of the Board assists the Board in fulfilling its oversight and
governance responsibilities for the management of the Bank’s core and emerging risks and the adequacy of its
Internal Capital Adequacy Assessment Process (ICAAP), as well as strategic and capital plans. The RCC specifically
assists the Board in fulfilling its oversight role for credit, liquidity and funding, and market risks and receives ongoing
periodic reports from the Enterprise Risk Management (ERM) Committee and Asset Liability Committee (ALCO) in this
regard. The RCC also has primary oversight responsibility for operational risk, business and strategic risk, and
reputational risk. In addition, the mandate of the RCC requires that the Committee review and approve the significant
risk management policies and frameworks developed and implemented to identify, measure, mitigate, monitor, and
report on the Bank’s core risks, along with its risk-based capital requirements and the results of its stress testing for all
key risks. At present, the RCC is comprised of five independent directors, including the Chair of the Human Resources
and Compensation Committee. It meets quarterly with the Chief Executive Officer (CEO), Chief Financial Officer (CFO),
and the Chief Risk Officer (CRO).
To ensure the Bank’s strategy, capital targets and risk management are aligned, the Bank’s ICAAP, which is reviewed
annually with the RCC, determines the ongoing capital targets of the Bank and reviews those targets in the context of
its operating environment and strategic plans. Material risks are regularly stress tested to determine their impact on
capital and to ensure internal capital targets are adequate on an ongoing basis.
The RCC is supported by the following Board and management level committees:
Credit Risk Sub-Committee: The Credit Risk Sub-Committee of the RCC is responsible for approving lending
transactions which exceed the credit limits that have been delegated to management by the Board.
Page 62
Enterprise Risk Management (ERM) Committee: The ERM Committee, chaired by the CRO, consists of members of
senior management and assists the RCC in fulfilling its oversight and governance responsibilities vis-à-vis the
Bank’s risk management practices and ICAAP. To ensure that all significant risks the Bank faces are actively
managed and monitored, the ERM Committee reviews and monitors the Bank’s top and emerging risks, risk
trends, the results of its enterprise-wide stress and scenario tests, relevant policies and related risk management
considerations/actions to be taken. It reports to the RCC at least quarterly.
Asset and Liability Committee (ALCO): The RCC oversees the Bank’s ALCO, which identifies the liquidity and market
risks faced by the Bank, sets appropriate risk limits and controls, and monitors those risks and adherence to
Board approved limits. The ALCO is chaired by the CFO and is comprised of members of senior management.
Other Board Committees that monitor the organization’s activities and overall risk profile are as follows:
Audit Committee: The Audit Committee of the Board assists the Board in fulfilling its oversight responsibilities with
respect to the quality and integrity of the Bank’s financial reporting processes and the performance of the Internal
Audit function. The Audit Committee is assisted in fulfilling its mandate by the Bank’s Finance and Internal Audit
departments. Internal Audit undertakes regular and independent reviews of the Bank’s risk management controls and
procedures, the results of which are reported to the Audit and other applicable Board committees.
Governance and Nominating Committee: The Governance and Nominating Committee of the Board maintains
primary oversight over the Bank’s Legal and Regulatory Risk; this includes oversight of the Bank’s Compliance
function and ensures the Bank’s compliance with all legal and regulatory requirements, including those set out
under the Bank Act and by the Financial Consumer Agency of Canada. The Committee also is responsible for overall
corporate governance which includes Board membership (including recruitment), Board effectiveness, development
of corporate governance guidelines (including a code of conduct), transactions involving related parties, as well as
oversight of conflict of interest, whistleblower and privacy programs. Further, this committee is responsible for the
oversight of the Bank’s environmental sustainability and corporate social responsibility initiatives (ESG) in
conjunction with the review of Bank’s annual ESG report, as well as the Bank’s Public Accountability Statement, and
monitors trends and best practices in ESG.
Human Resources and Compensation Committee: The Human Resources and Compensation Committee of the
Board assists the Board in ensuring that the Bank’s compensation policies and practices are aligned with its risk
appetite and risk management frameworks. This ensures that the incentive for management to assume risks in the
pursuit of business objectives is aligned with the Bank’s Board-approved risk appetite.
Under the Bank’s Risk Management Framework, senior management reports on all key risk issues to at least one of
the aforementioned committees of the Board on a quarterly basis.
Risk identification and assessment
Risk identification and assessment is an ongoing process and is focused on recognizing and understanding existing
risks, risks that may arise from new or evolving business initiatives, aggregate risks, and emerging risks from the
changing environment. The Bank’s objective is to establish and maintain integrated risk identification and
assessment processes that enhance the understanding of risk interdependencies, consider how risk types intersect,
and support the identification of emerging risks. Risk identification and assessment is part of the risk oversight
responsibilities of the Risk and Compliance teams, and covers a wide range of activities, including but not limited to
our Risk and Control Self-Assessment (RCSA) program, Change Management and New Initiative Risk Assessment,
Stress Testing and Climate-Related Risks.
Page 63
Risk measurement
The ability to quantify risks is a key component of the Bank’s risk management process. The Bank’s risk
measurement process aligns with regulatory requirements such as capital adequacy, leverage ratios, liquidity
measures, stress testing, and maximum credit exposure. Additionally, the Bank has a process in place to quantify
risks to provide accurate and timely measurements of the risks it assumes. In quantifying risk, the Bank uses various
risk measurement methodologies, including net interest income and economic value sensitivity measures, stress
testing, and limits. Other examples of risk measurements include credit exposures, PCL, peer comparisons, trending
analysis, liquidity coverage, leverage ratios, capital adequacy metrics, and operational risk event notification metrics.
The Bank also requires businesses and oversight functions to assess key risks and internal controls through a
structured Risk and Control Self-Assessment program. Internal and external risk events are monitored to assess
whether the Bank’s internal controls are effective. This allows the Bank to identify, escalate, and monitor significant
risk issues as needed.
Risk control
The Bank’s risk control processes are established and communicated through the RCC and management-approved
policies, and associated management-approved procedures, control limits, and delegated authorities which reflect
its risk appetite and risk tolerances. We leverage our Internal Control Framework, issue management program, and
defined risk approval authorities to ensure our risks are appropriately controlled. The Bank’s approach also includes
controls to measure and manage capital adequacy, including the review, challenge, and endorsement of the Bank’s
ICAAP by senior management and the Board.
Page 64
Risk monitoring and reporting
Enterprise and business segment level risk monitoring and internal reporting are critical components of our
enterprise risk management program and support the ability of senior management and the Board to effectively
perform their risk management and oversight responsibilities. The ongoing monitoring of risk exposures against our
risk appetite enables proactive risk management and oversight and ensures that our businesses operate within
approved limits. We provide regular reporting to the ERM Committee and the RCC, including reporting on risk profile
relative to our risk appetite, portfolio quality metrics, top and emerging risks, as well as analysis of issues and key
trends. In addition, we provide risk reporting as required by applicable laws, rules and regulations to external
stakeholders including regulators, rating agencies, analysts, and shareholders.
The following sections provide updates on Equitable Bank’s credit risk and liquidity risk profiles:
Credit risk
Credit Risk is defined as the risk that, if counterparties fail to honour their obligations to the Bank, whether on- or
off- balance sheet, the Bank will not receive the full value of obligations, and the recovery costs owed to it. Credit
risk arises primarily from the Bank’s lending activities, and investment in debt and equity securities. The
accountability for managing credit risk follows the three lines of defense governance framework. The Bank’s
exposure to credit risk is measured, monitored and reported by senior management and the ERM Committee. The
Risk and Capital Committee of the Board (RCC), undertakes the approval and monitoring of the Bank’s credit risk
appetite. The RCC approves the Delegated Lending Authorities framework and delegates limits to the CRO.
Transactions that are outside of these authorities are approved by the Credit Risk Sub-Committee. To manage and
support normal course business operations, the CRO can further delegate credit risk approval authorities to
qualified individuals within the Bank, all of which is described in our policies, procedures and control frameworks.
The Bank’s primary lending business is providing first mortgages on real estate located across Canada. All
mortgages are individually evaluated by the Bank’s or its agents’ underwriters using internal and external credit risk
assessment tools and are assigned risk ratings in accordance with the level of credit risk attributed to each
transaction.
The Bank’s underwriting approach places a strong emphasis on security evaluation and risk mitigation in the
transaction. The Bank will purchase as well as originate mortgages, both insured and uninsured through third
parties. As part of the Bank’s risk management framework, the Bank ensures that these third-party sourced
mortgages are underwritten to the standards required of both Bank originated mortgages, as well as those required
by mortgage insurers, as applicable. The Bank also conducts periodic reviews of its mortgage underwriting and
servicing policies, procedures, and practices vis-à-vis the applicable requirements outlined by its mortgage insurers
to ensure that the Bank remains compliant with their ongoing operational requirements.
The Bank has implemented several risk appetite measures which allow the Bank to monitor and control inherent
risks at the enterprise and portfolio levels. These measures vary by business unit and include a combination of
approaches such as geographic concentrations, asset and industry concentration limits, and higher risk
segmentation limits. These limits are monitored and reported to senior management and the RCC on a regular basis
and are also used to inform the strategic planning process.
The Bank actively analyzes the profile of its lending businesses and new mortgage originations in tandem with
external market conditions, including market values and employment conditions that prevail in those markets
where the Bank lends. When the Bank judges that the risk associated with a particular region, segment or product is
increasing, the Bank may adjust its underwriting criteria to ensure that underwriting policies continue to be prudent
and reflective of current and expected economic conditions, and thereby safeguard the future health of the
portfolio. When appropriate, the Bank also responds to the changing marketplace with initiatives designed to
increase or decrease its mortgage originations, as required, while continuing to ensure a prudent credit risk profile
across its entire portfolio.
Page 65
Effective execution of adding new products and diversifying is an important means of risk mitigation. The Bank
follows established change management policies and procedures to ensure the successful implementation of new
offerings. The Bank will and continues to diversify into complimentary personal businesses to the existing product
suite.
Through its commercial lending platform, the Bank continues diversifying into ‘Specialized Finance’ – with a focus on
‘Lend to Lender’ arrangements. The commercial lending platform also includes Bennington Financial Corporation
which serves the brokered equipment financing market in Canada with a focus on transportation, construction, and
food service equipment.
The Bank categorizes individual credit exposures in its lending portfolios using an internal risk rating system that
rates each exposure in the portfolio on the basis of perceived risk, or probability of, a potential financial loss. This
allows the Bank to focus on monitoring and managing higher risk exposures. The risk rating of each exposure is
initially determined during the underwriting process and subsequently at credit events, and at least annually for all
corporate exposures. In case of impairment, probable recovery is determined using a combination of updated
property-specific information, historical loss experience, and experienced credit judgment to determine the
impairment provision that may be required.
The Bank invests in corporate bonds to diversify its liquidity holdings. However, such investments expose the Bank
to credit risk, should the issuer of these securities be unable to make timely interest payments or, under a worst-
case scenario, if the issuer becomes insolvent. To limit its exposure to credit risk, the Bank establishes policies with
exposure limits based on credit rating and investment type. Securities rated BBB- and higher (“low risk”) comprised
97% of the Bank’s corporate bond portfolio at October 31, 2024 (October 31, 2023 – 97%).
The Bank’s risk rating scale for the credit quality of its counterparties is based on both internal and external credit
grading systems. Table 25 below maps these grading systems against the Bank’s credit risk rating scale. It presents
the long-term risk grades for the Bank’s cash and cash equivalents, debt and equity securities, and derivative
counterparties. Low risk denotes that there is a very low risk of either default or loss, standard risk denotes that
there is a low risk of default or loss, and high risk denotes that there is some concern that default or loss could
occur.
Cash and cash equivalents and derivatives ratings are based on the issuer grade of the respective financial
institution, their subsidiaries or other financial intermediaries. Debt securities, including corporate bonds, are
categorized based on short-term or long-term issue grades, depending on the maturity dates of the securities.
Preferred share securities are categorized based on the DBRS preferred share rating scale used in the Canadian
securities market. Lending exposures are categorized according to the Bank’s internal risk rating framework, which
is based on the likelihood of default.
The Bank assigns economic and regulatory capital for its counterparty credit exposures in accordance with OSFI’s
CAR Guideline, which is based on standards issued by the BCBS. All deemed credit exposures, such as counterparty
credit risk that may arise through deposits placed with banks, derivatives contracts and other activities, are regularly
assessed to ensure that such activities are consistent with the Bank’s Risk Appetite Framework and do not expose
the Bank to undue risk of loss. All related counterparty credit limits are approved by senior management and
monitored on an ongoing basis to ensure that all such exposures are maintained within approved limits.
Table 25: Credit risk exposure ratings scale
Low risk
Standard risk
High risk
Cash and cash equivalents, investments, and derivatives:
Risk grade
AAA – BBB-
BB+ – B
B- – CC
Mortgages receivable:
Mortgage risk rating
0 – 3
4 – 5
6 – 8
The Bank has assessed the credit quality of the Bank’s assets at October 31, 2024 and October 31, 2023, on the
basis of the above mapping of internal and external risk ratings to the credit risk exposure categories.
Page 66
The table below provides the gross carrying amount of all financial assets classified as debt instruments in
accordance with IFRS 9, for which a loss allowance is calculated, including contractual amounts of undrawn loan
commitments, based on the Bank’s credit risk exposure rating scale.
Table 26: Credit quality analysis
($000s)
As at October 31, 2024
Stage 1
Stage 2
Stage 3
Total
Loans receivable:
Low risk
15,742,207
1,857,346
-
17,599,553
Standard risk
20,809,762
6,743,423
-
27,553,185
High risk
380,176
985,897
-
1,366,073
Impaired
-
-
679,528
679,528
Total
36,932,145
9,586,666
679,528
47,198,339
Less allowance
(63,654)
(43,233)
(55,845)
(162,732)
36,868,491
9,543,433
623,683
47,035,607
($000s)
As at October 31, 2024
Stage1
Stage 2
Stage 3
Total
Loan commitments:
Low risk
3,368,463
379,393
-
3,747,856
Standard risk
1,509,742
51,189
-
1,560,931
High risk
32,822
37,000
-
69,822
Total
4,911,027
467,582
-
5,378,609
Less allowance
(1,573)
(116)
-
(1,689)
4,909,454
467,466
-
5,376,920
($000s)
As at October 31, 2023
Stage 1
Stage 2
Stage 3
Total
Loans receivable:
Low risk
14,721,283
2,433,376
-
17,154,659
Standard risk
18,975,447
9,798,761
-
28,774,208
High risk
528,370
643,459
-
1,171,829
Impaired
-
-
379,590
379,590
Total
34,225,100
12,875,596
379,590
47,480,286
Less allowance
(55,962)
(43,477)
(17,994)
(117,433)
34,169,138
12,832,119
361,596
47,362,853
($000s)
As at October 31, 2023
Stage 1
Stage 2
Stage 3
Total
Loan commitments:
Low risk
2,407,447
400,891
-
2,808,338
Standard risk
1,467,184
494,386
-
1,961,570
High risk
1,859
19,526
-
21,385
Total
3,876,490
914,803
-
4,791,293
Less allowance
(1,488)
(234)
-
(1,722)
3,875,002
914,569
-
4,789,571
Page 67
The following table sets out the credit analysis for financial assets measured at FVTPL and for equity securities
measured at FVOCI.
Table 27: Credit analysis for financial assets
($000s)
31-Oct-24
31-Oct-23
Debt Instruments:
Loan receivables – FVTPL
Low risk
1,445,660
471,853
Standard risk
692
756
Carrying amount
1,446,352
472,609
Investments – FVTPL
Low risk
56,456
125,654
High risk
55,845
51,903
Carrying amount
112,301
177,557
Equity Instruments:
Equity Securities – FVTPL
High risk
20,845
17,629
Carrying amount
20,845
17,629
Equity Securities – FVOCI
Low risk
4,727
4,988
Standard risk
7,492
18,947
High risk
13,570
28,751
Carrying amount
25,789
52,686
Cash and cash equivalents
The Bank held cash and cash equivalents of $591.6 million as at October 31, 2024 (October 31, 2023 - $549.5 million).
The cash and cash equivalents are held with financial institutions that are rated at investment grade.
Collateral held as security
All mortgages are secured by real estate property located in Canada. Appraised values for collateral held against
mortgages are obtained at the time of origination, except when a mortgage is individually assessed as impaired. For
impaired mortgages, the most recent appraised value of collateral at October 31, 2024 was $820 million (October 31,
2023 – $831 million). At October 31, 2024, the appraised values of collateral held for mortgages considered past due
but not impaired, as determined when the mortgages were originated, was $582 million (October 31, 2023 – $516
million). It is the Bank’s policy to pursue the orderly and timely realization of collateral.
Real estate from foreclosures that were owned and held for sale at October 31, 2024 amounted to $0.2 million
(October 31, 2023 – $0.4 million) and are included in Other assets (Note 14) in the consolidated balance sheet. The
Bank does not use the real estate obtained through foreclosure for its own operations.
Leases are secured by first charges against the equipment leased and may include guarantees and other additional
charges against other assets such as real estate. Values for the equipment securing leases are typically determined at
the origination of the lease and generally not updated, except when a lease is individually assessed as impaired. For
impaired leases, the value of expected realizations from charges and against equipment and other security at
October 31, 2024 was $38 million (October 31, 2023 – $21 million).
The Bank does not hold collateral against investments in debt and equity securities, however, securities received
under reverse repurchase agreements are allowed to be sold or re-pledged in the absence of default by the owner.
The Bank has a commitment to return collateral to the counterparty in accordance with the terms and conditions
stipulated by the master repurchase agreement. The Bank has no contractual agreement with any counterparty that
required it to post increased collateral in the event of its credit rating being downgraded.
The contractual amount outstanding on financial assets written off to date that are still subject to enforcement
activity amounted to $5.1 million (October 31, 2023 – $3.3 million).
Page 68
Credit concentration risk
Credit concentration risk results if an unduly large proportion of the Bank’s lending business is connected. The ability
of these counterparties to meet contractual obligations may be similarly affected by changing economic or other
conditions. On a regular basis, with the approval of the Board, the Bank establishes credit limits for exposure to
certain counterparties, industries or market segments, monitor these credit exposures, and prepare detailed
analyses and reports assessing overall credit concentration risk within the Bank’s lending exposures and investment
portfolios.
Management believes that it is adequately diversified by borrower, property type and geography. At October 31,
2024, no individual borrower represented more than $230 million (October 31, 2023 – $216 million) or 0.84%
(October 31, 2023 – 0.78%) of uninsured loan principal outstanding.
The table below provides a breakdown of Equitable Bank’s loan principal by insured vs uninsured and by lending
business.
Table 28: Loan principal by lending business
($000s, except percentages)
31-Oct-24
30-Jul-24
Change
31-Oct-23
Change
Insured:
Personal
9,190,224
9,831,147
(640,923)
10,547,687
(1,357,463)
Commercial
7,925,453
7,891,128
34,325
6,809,589
1,115,864
Total loan principal outstanding
17,115,677
17,722,275
(606,598)
17,357,276
(241,599)
Total loan principal outstanding percentage
36%
37%
(1%)
37%
(1%)
Uninsured:
-
Personal
23,020,994
22,683,441
337,553
21,868,384
1,152,610
Commercial
6,892,880
7,512,956
(620,076)
8,173,401
(1,280,521)
Total loan principal outstanding
29,913,874
30,196,397
(282,523)
30,041,785
(127,911)
Total loan principal outstanding percentage
64%
63%
1%
63%
1%
The table below provides a breakdown of Equitable Bank’s loan principal outstanding by geography.
Table 29: Loan principal by province
($000s)
31-Oct-24
30-Jul-24
Change
31-Oct-23
Change
Personal
Alberta, Manitoba & Saskatchewan
5,442,907 5,609,892
(166,985) 5,709,652
(266,745)
Atlantic provinces & Quebec
2,839,424 2,863,608
(24,184) 2,940,913
(101,489)
British Columbia and Territories
4,679,152 4,629,068
50,084 4,455,626
223,526
Ontario
19,249,735 19,412,020
(162,285) 19,309,880
(60,145)
32,211,218 32,514,588
(303,370)
32,416,071
(204,853)
Commercial
Alberta, Manitoba & Saskatchewan
2,664,608 2,939,732
(275,124) 2,575,307
89,301
Atlantic provinces & Quebec
2,942,133 2,927,483
14,650 3,159,731
(217,598)
British Columbia and Territories
2,040,062 1,885,853
154,209 1,654,960
385,102
Ontario
7,171,530 7,651,016
(479,486) 7,592,992
(421,462)
14,818,333 15,404,084
(585,751)
14,982,990
(164,657)
As part of Equitable Bank’s risk management, it lends at lower LTVs, adding further credit loss protection to its loan
portfolio. The average LTV on the Bank’s uninsured residential mortgage portfolio was 63% at October 31, 2024 (July
31, 2024 – 62%, October 31, 2023 – 62%). The table below presents the Bank’s average uninsured residential LTVs on
existing loans by province.
Page 69
Table 30: Average loan-to-value of existing uninsured residential mortgages(1)(2)(3)(4)
($000s, except percentages)
31-Oct-24
31-Jul-24
Change
31-Oct-23
Change
Alberta, Manitoba & Saskatchewan
60%
60%
-
61%
(1%)
Atlantic provinces & Quebec
61%
61%
-
62%
(1%)
British Columbia and Territories
63%
63%
-
62%
1%
Ontario
64%
63%
1%
62%
2%
Total Canada
63%
62%
1%
62%
1%
(1) Geographic location based on the address of the property mortgaged. (2) Based on property values estimated using the Teranet National Bank
House Price Indices, adjusting for the Bank’s unique portfolio by using sub-indices corresponding to the 11 cities in Teranet-National Bank National
Composite 11 to estimate property values loan by loan. The index is based on actual transaction dates and prices, which Equitable Bank believes to be
most accurate and representative; however, may lag other indices leveraging data tied to date of sale. (3) The LTV of the Bank’s HELOC (HELOC,
SHELOC and Reverse Mortgage) products is not included in this table. (4) Equitable Bank has arrangements with other lenders to participate in its
single-family residential loans in certain circumstances, namely if Equitable Bank wants to cap the value of its own exposure to stay within the
boundaries of its risk appetite while still meeting a borrower’s needs. The arrangements, which have been entered into in the normal course of
business at arm’s length and on market terms, are structured such that the other lenders’ participation would always bear the first loss on the
mortgage. The loan-to-value ratios above therefore do not take into account the other lenders’ participation in order to reflect both the substance and
legal form of Equitable Bank’s exposure. Equitable Bank underwrites the loans based on the total value of its own advance and the other lender’s
participation to ensure that the borrower is able to service the aggregate amount of the loan. Other lenders’ participation in Equitable Bank’s (including
Concentra) single-family residential loans was $73.3 million as at October 31, 2024.
Within Commercial Banking, the Bank prioritizes lending against multi-unit residential rental properties, including
affordable housing. Due to strong demand in Canada for housing and the Bank’s focus on and capabilities in the
insured lending market, over two thirds of the Bank’s total commercial loans under management are backed by
credit insurance. Based on its strategy and risk appetite, ~0.5% of total Bank assets are offices and this small portfolio
has an average LTV of 70%. The Bank is selective in lending to commercial offices, largely restricting loans to
properties located in major urban centres and smaller buildings. The Bank has limited exposure to hotels, shopping
malls, big box retail and large commercial office. The Bank restricts LTVs, today averaging 65% for uninsured
commercial loans.
Table 31: Commercial loans under management by business(1)
($000s, except percentages)
31-Oct-24
31-Jul-24
Change
31-Oct-23
Change
Mortgages – to Corporates
1,953,622
2,278,318
(324,696)
2,830,654
(877,032)
Mortgages – to Small Business
1,573,930
1,584,714
(10,784)
1,437,946
135,984
Specialized financing loans
1,160,386
1,153,677
6,709
1,078,594
81,792
Construction loans(2)
3,662,285
3,999,460
(337,175)
3,276,367
385,918
Equipment financing
1,195,412
1,239,290
(43,878)
1,354,906
(159,494)
Insured multi-unit residential mortgages(3)
26,103,722
24,107,779
1,995,943
20,002,959
6,100,763
Total
35,649,357
34,363,238
1,286,119
29,981,426
5,667,931
(1) The numbers in this table are reported on consolidated basis, including Concentra, prior to acquisition-related fair value adjustments that are
captured in balance sheet measures. (2) Share of construction loans that are insured by CMHC was 72% at October 31, 2024 and 68% at July 31, 2024.
(3) Insured against credit loss by CMHC.
Counterparty Credit Risk and Credit Valuation Adjustment Risk
Credit risk on derivative financial instruments, also known as Counterparty Credit Risk (CCR), is the risk of a financial
loss from the failure of a counterparty to meet its obligation to the Bank. The Bank’s CCR exposure arises from
Treasury’s execution of derivative hedge transactions and repo-style funding transactions with other financial
institutions. The Bank monitors these exposures regularly, with oversight by the Asset Liability Committee.
Credit Valuation Adjustment (CVA) risk is defined as the risk of losses arising from changes in counterparty credit
spreads and other market risk factors that impact prices of derivative transactions and Secured Funding Transactions
(SFTs). The capital requirements for CVA risk must be calculated for derivatives and, if applicable, SFT.
Page 70
Effective November 1, 2023, Chapter 8 of the OSFI Capital Adequacy Requirements (CAR) (2024) - Guideline on CVA
risk, introduced an alternative treatment that allows a bank to calculate its CVA capital requirement equal to 100% of
the bank’s capital requirement for CCR, if certain criteria are met. Equitable Bank has assessed and concluded its
eligibility and chosen to adopt this approach to measure the CVA capital requirements for its entire derivative
portfolio.
Liquidity and funding risk
The Bank defines Liquidity and Funding Risk as the risk that it may lack sufficient liquidity and funding or may not be
able to secure them in a cost-effective or timely manner to fulfill its contractual and unexpected obligations as they
come due. These obligations primarily stem from the maturity of deposits, mortgage-backed securities, and credit
extension commitments. Additionally, funding and liquidity risk can be influenced if a significant portion of the Bank’s
deposit activities is concentrated with a single individual, organization or group of related entities, or within a specific
geographic area.
The Board defines the Bank’s Liquidity and Funding Risk appetite as ‘low’ and reviews and approves the limits to
measure and control this risk. These limits are articulated via the Board-approved Liquidity and Funding Risk
Management Policy – which is updated annually, at a minimum. This Policy requires the Bank to maintain a pool of
high-quality liquid assets and stipulates various liquidity ratios and limits, concentration limits and, among other
considerations, ongoing periodic liquidity stress testing requirements.
The Bank also adheres to OSFI’s Liquidity Adequacy Requirement (LAR) Guideline, which provides a framework that
OSFI uses to assess a federally regulated financial institution’s liquidity adequacy. The Bank’s liquidity position and
adherence to the requirements are monitored daily by senior management. Key metrics are also reported monthly to
the ALCO and, quarterly, both to the ERM Committee and the RCC of the Board.
Any exceptions to established Policy or regulatory limits are reported immediately to the ALCO or to the Board, as
applicable.
The Bank’s practice is to hold sufficient liquidity on its balance sheet to ensure that it remains well positioned to
manage unexpected events that may reduce or limit its access to funding. Senior management closely monitors the
Bank’s liquidity position daily and ensures that the level of liquid resources held, together with its ability to raise new
funding, is sufficient to meet funding commitments, deposit maturity obligations, and properly discharge other
financial obligations. Actual liquidity may vary from period to period, mainly due to the timing of anticipated cash
flows and funding seasonality. In addition to funding and liquidity management policies and procedures, the Bank
has also developed a Liquidity and Funding Risk Contingency Plan, and an OSFI-mandated Enterprise Recovery Plan,
which outlines actions to be undertaken to address the outflow of funds in the event of a funding or liquidity crisis.
Table 32: Assets held for liquidity protection
($000s, except percentages)
Policy minimum
2024
2023
Liquidity assets held for regulatory purposes
3,986,767
3,721,170
Liquidity assets as a % of minimum required policy liquidity(1)
100%
309%
228%
(1) For purposes of this calculation, the Bank’s Liquidity and Funding Risk Management Policy requires the value of assets held for liquidity protection
to be reduced to reflect their estimated liquidity value.
Stress and scenario testing is an integral part of the Bank’s Liquidity and Funding Risk Management framework and
supports the development of action plans to address funding needs in stressed environments. The Bank manages its
funding needs to ensure the ability to meet its financial commitments in a timely manner and at reasonable prices,
even in times of stress. The Bank’s stress-testing models consider scenarios that incorporate institution-specific,
market-specific and combination events. These scenarios model cash flows over a one-year period incorporating
such factors as a decline in capacity to raise new deposits, lower liquidity values for market investments and an
accelerated redemption of notice deposits. To establish these scenarios, the Bank assesses its fundraising capacity
and establishes assumptions related to the cash flow behavior of each type of asset and liability. In each scenario, the
Bank targets to hold sufficient liquid assets and have fundraising capacity sufficient to meet all obligations for at least
Page 71
a three-month forecast period while maintaining normal business activities. As at October 31, 2024, the Bank held
sufficient liquid assets and maintained sufficient funding capacity to meet all funding obligations over the one-year
forecasting period under all considered scenarios.
Equitable Bank has access to a variety of funding sources that it uses to proactively manage its funding risk profile.
Diversified funding sources include access to the direct-to-consumer EQ Bank platform, several large bank sponsored
funding facilities, deposit note, and bearer deposit note programs, and securitization vehicles. The Bank raises
deposits directly and through subsidiaries that are approved issuers of deposits eligible for CDIC insurance coverage.
The Bank is also an issuer of Covered Bonds and has to date accessed the market 5 times since 2021, raising a total
of €1,700 million, of which €1,350 million is outstanding as of October 31, 2024. While this program expands the
Bank’s suite of funding tools, it also significantly expands the underlying investor base and broadens the geographic
sources of funding.
The following table summarizes contractual maturities of the Bank’s financial liabilities.
Table 33: Contractual obligations(1)
($000s)
Payments due by period
Total Less than 1 year
1 − 3 years
4 − 5 years
After 5 years
Deposits principal and interest
36,125,035
23,808,554
9,692,052
2,592,343
32,086
Securitization liabilities principal and
interest
38,846,281
7,821,194
10,309,171
9,992,987
10,722,929
Funding facilities principal and
interest
403,245
403,245
-
-
-
Other liabilities
459,166
377,351
46,507
17,635
17,673
Total 2024 contractual obligations
75,833,727
32,410,344
20,047,730
12,602,965
10,772,688
Total 2023 contractual obligations(2)
65,733,202
29,444,663
20,669,792
8,346,979
7,271,768
(1) The balances for financial liabilities will not agree with those in our consolidated balance sheet as this table incorporates all on and off-
balance sheet obligations, on an undiscounted basis, including both principal and interest. Prior year amounts have been adjusted accordingly.
(2) The comparative numbers for total contractual obligations have been adjusted by $6,024 to include demand deposits and term commercial
deposits.
See Note 25 to the 2024 consolidated financial statements for credit commitments and contingencies as at October
31, 2024 and October 31, 2023.
Market risk
Market Risk consists of interest rate risk and equity price risk and is broadly defined as the risk of adverse impact of
market factors and prices upon the Bank’s earnings or its financial condition. Interest rate risk may be affected if an
unduly large proportion of the Bank’s assets or liabilities have unmatched terms, interest rates or other attributes,
such as optionality features embedded in its cashable deposits or mortgage commitments. For the interest sensitivity
position of the Bank at October 31, 2024, see Note 26 to the consolidated financial statements. With respect to equity
price risk, the value of the Bank’s securities portfolio may be impacted by market determined variables which are
beyond its control, such as benchmark yields, credit and/or market spreads, implied volatilities, the possibility of
credit migration and default, among others. Overall, Equitable Bank has a ‘low’ appetite for Market risk
With respect to structural interest rate risk, Equitable Bank’s objective is to manage and control its interest rate risk
exposures within acceptable parameters and the primary method of mitigating this risk involves funding Bank assets
with liabilities of a similar duration. The Bank maintains a hedging program to ensure that the Bank’s net sensitivity to
rates is aligned with its target risk profile. The responsibility for managing the Bank’s interest rate risk resides with the
ALCO, which meets monthly to review and approve/endorse Treasury-related policies, to review key interest rate risk
metrics, and to provide direction on the Bank’s operating and funding strategy. Also, senior management
continuously reviews the Bank’s interest rate risk profile and monitors its ongoing funding strategy through the daily
interest rate-setting process.
Page 72
Equitable Bank monitors interest rate risk through simulated interest rate change sensitivity models to estimate the
effects of various interest rate change scenarios on net interest income and on the economic value of shareholders’
equity (EVE). EVE is a calculation of the present value of the Bank’s asset cash flows, less the present value of liability
cash flows on a pre-tax basis. Management considers this measure to be more comprehensive than measuring
changes in net interest income, as it captures all interest rate mismatches across all terms. Certain assumptions that
are based on actual experience are also built into the simulations, including assumptions related to the pre-maturity
redemption of deposits and early payouts of mortgages.
The table below illustrates the results of management’s sensitivity modeling to immediate and sustained interest rate
increase and decrease scenarios. The models measure the impact of interest-rate changes on EVE and NII during the
month period following October 31, 2024. The estimate of sensitivity to interest rate changes is dependent on several
assumptions that could result in a different outcome in the event of an actual interest rate change.
Table 34: Net interest income shock
($000s, except percentages)
Increase in
Decrease in
interest rates
interest rates(1)
100 basis point shift
Impact on net interest income
333
2,742
Impact on EVE(1)
(31,797)
5,538
EVE impact as a % of common shareholders2 equity
(1.1%)
0.2%
(1) EVE numbers are reported on a pre-tax basis. (2) Interest rate is not allowed to decrease beyond a floor of 0% and is therefore not allowed to be
negative.
The management of Equity Price risk is assigned to the ALCO by the RCC. The ALCO manages the Company’s
securities portfolio in accordance with its Marketable Securities Policy and takes into consideration the following
factors:
• General economic conditions and the possible effect of inflation or deflation;
• The expected tax consequences of investment decisions or business strategies;
• The credit quality of each investment and its role within the overall portfolio;
• The expected total return from income and the appreciation of capital;
• The Bank’s need for liquidity, available capacity, and regularity/stability of earnings; and
• Each investment’s special relationship or special value, if any, to the overall objectives of the portfolio.
The ALCO reviews the investment performance, composition, quality, and other pertinent characteristics of the
securities portfolio at least ten times a year.
Operational risk
Equitable Bank defines Operational risk as the risk that a loss will result from people, inefficient, inadequate or
failed internal processes and systems, or from external events. Operational risk is present in virtually all business
activities of the Bank. The management of operational risk encompasses the policies and procedures established
to prevent loss resulting from people and events, including external or internal fraud, non-adherence to internal
procedures/values/objectives, or unethical behaviour. Operational resilience is built on a foundation of effective
operational risk management, which includes such areas as technology and cyber risk management, third-party
risk management and business continuity management and, as appropriate, leverage existing risk and
governance frameworks. The Bank has a ‘low’ appetite for operational risk.
Page 73
The Bank’s Operational Risk Management program includes the following key components:
• Governance: Proactive management of Operational risk is very important to mitigate exposure to financial losses,
reputational damage and/or regulatory fines. The Bank has implemented a Board-approved Operational Risk
Management Policy and an Operational Risk Management Framework, which are jointly designed to monitor,
review and report on operational risk management across the Bank. Both the Policy and the related Framework
articulate the Bank’s governance practices for the proper management of Operational risk and include clear
accountabilities for the three lines of defense, in alignment with both the BCBS’s ‘Principles for the Sound
Management of Operational Risk’, and with OSFI’s related Operational Risk Management and Resilience Guideline.
• Training: All employees within the organization are required to play a role in managing Operational risk. In this
regard, the Bank conducts operational risk management and cyber security awareness training and testing for all
employees across the Bank – to provide them with an overview of the various types of operational risks, and their
respective roles and responsibilities in helping to protect the interests and assets of the Bank.
• Risk and Control Self-Assessments (RCSAs): These tools are used on an ongoing basis to help identify and
evaluate operational risk factors within the individual businesses and functional units, as well as on a Bank-wide
basis. These tools assist in proactively identifying and assessing key operational risks inherent in the Bank’s
operations and evaluating the effectiveness of controls to manage these risks.
• Key Risk Indicators (KRIs): The Bank uses KRIs to measure, monitor and report on the level of Operational risk on
a business/functional unit basis, as well as across the organization. These KRIs also serve as early warning triggers
to highlight potential issues before the Bank experiences an incident or loss event.
• Other Operational Risk Management (ORM) Tools: In addition to the RCSAs and KRIs, several other tools are in
use as part of the Bank’s ORM program. These include an operational risk and control taxonomy, operational risk
event collection and analysis (including actual incurred losses and “near misses”), scenario analysis, and change
management risk assessment.
• Risk Measurement and Reporting: The Bank’s centralized ORM Team regularly consolidates key operational risk
trends and significant events, if any, across the Bank; these, along with quarterly KRIs, are reported to the ERM
committee and to the RCC of the Board on a quarterly basis, at a minimum.
• Business Continuity Management (BCM): The Bank maintains a robust BCM program to ensure that
Equitable Bank has the capability to sustain, manage and recover critical operations and processes in the event
of a business disruption, thereby minimizing any adverse effects on its customers, partners, and other
stakeholders. Equitable Bank’s BCM Program is comprised of various plans (i.e., Crisis Management Plan,
Business Continuity Plans, Disaster Recovery Plan and Enterprise Recovery Plan) to ensure the ability to
operate as a going concern in the event of a severe business disruption. All key business units within the
organization are required to maintain, and regularly test and review, their business continuity plans.
• Enterprise Change Management: Effective change management is key to successful implementation and
execution of business strategies and objectives. The Bank is committed to effective management of changes
through use of established controls and processes that consider the materiality and risk of each change before it is
undertaken. The Bank’s change management practices involve assessment of change materiality, and appropriate
engagement of key stakeholders and support areas. All material changes are subject to a comprehensive
assessment of impact to the Bank’s core risks to ensure appropriate identification and mitigation of risks. In
addition, all material changes are subject to a more detailed assessment of operational risks to ensure
appropriate identification and mitigation of risks as part of the project management, implementation plans, post
implementation activities, and operational execution.
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• Fraud: The Bank maintains a robust control framework designed to manage the risks related to misrepresentation
and fraudulent activities across the Bank. The Bank’s approach to fraud risk management:
• Utilizes established ORM tools as well as specific fraud related tools and processes to support the identification,
assessment, measurement and mitigation of Fraud risk;
• Establishes reporting and monitoring processes to support the approach; and
• Establishes a culture of risk awareness and understanding throughout all business units within the organization
so that fraud risk and its associated implications are considered in all significant decisions.
Fraud controls are relevant, agile, and current to accommodate new products, new channels, and evolving fraud
trends. Our Fraud risk management program utilizes proactive measures to deter, prevent and detect fraud, rather
than solely relying on reactive measures. Consistent with the Bank’s three lines of defense model, the business
units’ processes for mortgage underwriting and deposit taking form the primary layer of defense against external
fraudulent activities, with a focus on early detection and rejection of potentially fraudulent transactions.
Remaining vigilant, particularly in the face of regulatory changes, tightening mortgage qualification criteria, and
changing housing prices, the Bank has continually enhanced its capabilities through the adoption of new
technologies, the maintenance and use of data strategically, and the continual development of training and
awareness programs for staff.
In conjunction with Compliance and AML teams, the Bank’s second line Fraud Team provides independent
oversight, expert assistance in detection, the development and delivery of training, policy development and Quality
Assurance, as well as providing regular reporting to senior management and the Board.
• Model Risk: Equitable Bank defines Model risk as the risk of adverse financial (e.g. inadequate capital or
liquidity) and/or reputational consequences arising from design, development, implementation or use of a
model. Model risk can originate from inappropriate specification, incorrect parameter estimates, flawed hypotheses
and/or assumptions, mathematical computation errors, inaccurate/inappropriate/incomplete data, improper or
unintended usage, and inadequate monitoring and/or controls. Model risk is viewed by the Bank as a key
component of Operational risk.
The Bank has a ‘low’ appetite for Model risk and have implemented the principles set out OSFI Guideline E-23:
Enterprise-Wide Model Risk Management for Deposit-Taking Institutions. A Model Risk Policy, Model Validation
Standard, and Model Validation Procedures are in place to ensure the effective identification and mitigation of
Model risk.
• Technology and Cyber Security: Equitable Bank remains focused on the confidentiality, integrity and availability
of its information and cyber security controls that protect the Bank’s network, data and infrastructure. The cyber
security risk landscape includes numerous cyber threats such as cyber & data breach threats, malicious code-
ransomware threats, identity theft, denial of service, and advanced persistent threats. These and other cyber
threats continue to become more sophisticated, complex, and potentially damaging. Third party service providers
that the Bank uses may also be subject to these threats which can increase the risk of negative impact from a
cyber attack. The Bank continually assesses the performance of third-party suppliers against industry standards.
In addition, the Bank has limited control over the safety of its clients’ personal devices that may be used to
conduct transactions. To manage these risks, the Bank’s defense systems are designed as an integral part of
existing Bank infrastructure and has adopted a security-by-design approach to architecture and development
of its digital banking platform.
The Bank views cyber risk as a key component of Operational risk and proactively maintains a “defense in depth”
strategy to establish resilience by leveraging developed standards and procedures to prevent, detect, respond,
manage, and address cyber security threats from malicious attackers.
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The Bank’s Cyber Security Policy establishes the requirements and sets out the overall framework for managing
cyber and information security related risks across the organization. These include developing and implementing
the appropriate activities to detect, respond to and contain the impact of cyber security threats, along with
implementing the appropriate safeguards to ensure the delivery of critical infrastructure services. KRIs have been
established to measure, monitor, and report this risk to the Board on a regular basis. Furthermore, the Bank has an
established Technology Roadmap with the objective of continuously improving the strength of its practices and
capabilities.
The Bank works closely with critical cyber security and software suppliers to ensure that its technology capabilities
remain cyber resilient and effective in the event of any unforeseen cyber-attack. Internal teams receive daily cyber
security updates, rehearse incident table-top exercises, and take specialized training to thwart current and evolving
cyber threats.
Security risks are actively monitored and managed through cyber security management programs which include
regular cyber resilience tests conducted by qualified third parties on an annual basis, completion of the OSFI Cyber
Security Self- Assessment and continuous improvements to the Bank’s security controls and change management
processes based on best practice from recognized industry associations.
The Bank has not experienced any material cyber security breaches and has not incurred any material expenses
with respect to the remediation of such cyber events.
• Data Management and Privacy Risk: The use and management of data and its governance are becoming
increasingly important as the Bank continues to invest in digital solutions and innovation, moving its core banking
system to the cloud and the ongoing expansion of business activities. There is regulatory compliance risk associated
with data management and privacy, which form part of the Bank’s Regulatory Compliance Management Program as
discussed in the Legal and Regulatory Risk section below. The Bank has established a dedicated Enterprise Data
Team that works closely with data owners and other stakeholders on technology managed data assets to ensure
the Bank effectively addresses current and future data needs (quality, security, integrity), and that the Bank is
positioned to address emerging requirements from a data management planning and governance perspective.
• Third Party Risk: Third party suppliers are integral to the Equitable Bank’s business operations and the Bank has
designed a program to provide oversight for third party relationships. The Bank’s approach to third party risk
mitigation is outlined in policies and procedures that establish the minimum requirements for identifying and
managing risks throughout the engagement life cycle with a third party. Performance monitoring and due diligence
reviews are conducted on a regular basis. A higher level of due diligence is focused on material arrangements to
ensure that service levels are met, and that systems of controls are adequate. The Bank continues to evolve and
improve its capabilities in this area and are implementing enhancements in line with the revised regulatory
requirements (i.e., OSFI B-10 Third-Party Risk Management).
• Operational risk loss events: The Bank has process and procedures in place for monitoring and reporting
operational losses as well as near miss events. A near miss is an event that otherwise meets the definition of an
operational loss event, but for which no financial loss has been incurred, not because of effective control but
because of fortuitous circumstances. The Bank’s established processes include completing root cause analysis and
action plans for loss and near miss events within defined thresholds. This helps ensure that actions are taken to
mitigate future recurrence and potential negative impacts to financial, regulatory compliance, or to the reputation of
the Bank. During 2024, the Bank did not experience any material operational risk loss events.
Legal and regulatory risk
Legal and Regulatory risk is defined as the risk that a financial or non-financial loss could result from exposure to
fines, penalties, or punitive damages from civil litigation, contractual obligations, criminal or supervisory actions, as
well as private settlements; and from not complying with regulatory requirements, regulatory changes or regulators’
expectations. Legal and regulatory risk is inherent in the Bank’s activities and known legal and regulatory risks
continue to evolve rapidly with the pace and breath of regulatory change in Canada.
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The Bank has a ‘low’ appetite for legal and regulatory risk. The Bank’s Regulatory Compliance Management (RCM)
Program outlines how we proactively identify, manage, and mitigate regulatory compliance risk. The Bank
undertakes reasonable and prudent measures designed to achieve compliance with governing laws and regulations
and promote a strong culture of compliance management across the organization. Business units are accountable
for managing the legal and regulatory risks inherent in their business activities while the Compliance, Legal, Anti-
Money Laundering and Risk Management teams assist them by providing ongoing guidance and oversight.
Management of these risks also includes the design and implementation of mitigating controls and the timely
escalation of issues to senior management and to the Board.
Business and strategic risk
Business and strategic risk is defined as the risk that the Bank’s financial condition or resilience is adversely impacted
by its business plans and/or strategies, the implementation of those strategies, or the failure to properly respond to
changes in the external business or regulatory environment. Business and strategic risk management includes the
following components:
• Competitive Risk: Competitive risk is the risk of an inability to build or maintain a sustainable competitive
advantage in a given market or markets and includes potential for the loss of market share due to competitors
offering superior products or services. Competitive risks can arise from within or outside the financial sector, from
traditional or non-traditional competitors. The banking business is highly competitive, and the Bank’s products
compete with those offered by other banks, trust companies, insurance companies, and other financial services
companies in the jurisdictions in which it operates. Many of these companies are strongly capitalized and hold a
larger share of the Canadian banking market. There is always a risk that there will be new entrants in the market
with more efficient systems and operations that could impact the Bank’s lending or deposit-taking market share.
The Bank does not use proprietary retail branches to originate deposits or loan exposures. Deposits are raised
directly through the Bank’s online digital platform. Additionally, the Bank relies primarily on business conducted on
behalf of investing clients by members of the Canadian Investment Regulatory Organization (CIRO) and the
Registered Deposit Brokers Association (RDBA) to distribute its deposit products. Lending exposure originations
depend on a network of independent mortgage and lease brokers, brokerage firms and mortgage banking
organizations. Under adverse circumstances, it may be difficult to attract enough new deposits from agents or
lending business from brokers to meet future funding needs for new lending originations. The potential failure to
sustain or increase current levels of deposits or lending originations from these sources could negatively affect the
financial condition and operating results of the Bank.
• Systemic Risk: Systemic risk is a risk that the financial system as a whole, or major part of it, may collapse with the
likelihood of material damage to the economy, resulting in financial, legal, operational, and reputational risks for the
Bank. The Bank significantly operates in Canada and deposits its monies with Canadian federally regulated
financial institutions designated as Domestic Systemically Important Banks (DSIB). An event of systemic crisis may
result in higher unemployment and lower household income, corporate earnings, business investment and
consumer spending and could adversely affect the demand for the Bank’s loan products resulting in higher
provisions for credit losses.
The Board has approved a ‘low-to-medium’ appetite for business and strategic risk. The Bank believes that this risk
is best managed via a robust and dynamic annual strategic planning process that includes establishing Board-
approved business growth strategies and quantifiable performance targets for each business line over the
forthcoming three-to-five-year period. Management of this risk also includes regular monitoring of actual versus
forecasted performance and an effective internal monitoring and reporting process – to the ERM Committee and
the Board.
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• Environmental and Climate Risk: Environmental risk is the risk of loss of strategic, financial, operational, or
reputational value resulting from the impact of environmental issues or concerns, including climate change, and
related social risk. These risks are categorized by the industry as either: physical risks, including risks arising from a
changing climate leading to the potentially increased frequency of climate-related natural disasters; or transition
risks, those that result from the transition to a low-carbon economy. Transition risks are broader and could surface
for the Bank in the form of emerging regulatory and legal requirements, disruptions to its operations and services,
as well as through its customers themselves. The Bank considers the environmental risk associated with its single-
family residential lending portfolio and lending parameters to be low so does not conduct environmental
assessments for each of those loans. For most of the Bank’s commercial loan portfolio, as required by regulatory
frameworks, it employs third-party consultants to carry out detailed environmental assessments. The Bank also
maintains a diversified lending portfolio, which improves its resilience to geographic or sectoral-specific
environmental developments or events.
The Bank considers this risk to be a component of Business and strategic risk and evaluates future risks on a
regular basis as part of its ERM Committee meetings. The Bank conducts analyses of environmental and climate risk
at periodic intervals to determine its potential impact on the Bank’s assets in certain geographical regions.
Furthermore, we have a consistent approach to where we lend, with limited exposure to areas prone to fire and
flood risk. Proposed changes in business strategy, or an increase in risk identified through environmental-related
analysis, would be reviewed in the context of the Bank’s risk appetite.
Going forward, as the Bank continues to elaborate on its definition and management of climate-related risk, it will
leverage the recommended climate-related financial disclosure frameworks, as determined by regulators, ensuring
any framework the Bank uses apply to any risk, and considers governance, strategy, risk management, and metrics
and targets. The further development of industry views and agreement on standard taxonomy in area such as
Physical risk, Transition risk, and Liability risk will inform the further development of the Bank’s own risk
classification.
Reputational risk
Reputational risk is the risk arising from the possibility that current and potential customers, counterparties,
analysts, shareholders/investors, employees, regulators, and/or others will have an adverse perception of the
Bank. A strong reputation will generally strengthen our market position, reduce the cost of capital, increase
shareholder value, strengthen our resiliency, and help attract and retain top talent. Conversely, damage to our
reputation can result in reduced return on equity, lower share price, increased cost of capital, loss of strategic
flexibility, reduced business volumes, loss of client and strategic partner loyalty, and regulatory fines and penalties.
The sources of reputational risk are widespread. Reputational risk is a transverse risk which can manifest as an
outcome of other risk types including but not limited to credit, regulatory, legal, operational, and liquidity risks. We
can also experience reputational risk from a failure to maintain an effective control environment, exhibit good
conduct and maintain appropriate cultural practices. Managing our reputational risk is an integral part of our
organizational culture and our overall enterprise risk management approach, as well as a priority for employees and
our Board.
In accordance with the Risk Appetite Framework, the Bank’s appetite for reputational risk remains ‘low’ and it believes
that the pursuit of its long-term goals requires the proper conduct of business activities in accordance with the Bank’s
established Code of Conduct and business principles, as well as with all applicable laws and regulations. The Bank
also maintains a Reputational Risk Management Policy which, along with related compliance policies and procedures
and enterprise risk management practices, is sufficiently designed to identify, assess and manage the reputational
and other non-financial considerations present within the business.
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Glossary
•
Book value per common share: is calculated by dividing common shareholders’ equity by the number of
common shares outstanding.
•
Capital ratios: A detailed calculation of all Capital ratios can be found in Table 16 of this MD&A.
•
CET1 ratio: this measure of capital strength is defined as CET1 Capital as a percentage of total risk-
weighted assets. This ratio is calculated for Equitable Bank in accordance with the guidelines issued by OSFI.
CET1 Capital is defined as shareholders’ equity plus any qualifying other non-controlling interest in
subsidiaries less preferred shares issued and outstanding, any goodwill, other intangible assets and cash
flow hedge reserve components of accumulated other comprehensive income.
• Tier 1 and Total Capital ratios: these adequacy ratios are calculated for Equitable Bank, in accordance with
the guidelines issued by OSFI by dividing Tier 1 or Total Capital by total RWA. Tier 1 Capital is calculated by
adding non-cumulative preferred shares, limited recourse capital notes, as well as additional Tier 1 capital
issued by a subsidiary to third parties that is allowed in Tier 1, to CET1 capital. Tier 2 Capital is equal to
Equitable Bank’s eligible Stage 1 and 2 allowance plus additional Tier 1 capital issued by a subsidiary to third
parties that is allowed in Tier 2 capital. Total Capital equals to Tier 1 plus Tier 2 Capital.
• Leverage ratio: this measure is calculated by dividing Tier 1 Capital by an exposure measure. The exposure
measure consists of total assets (excluding items deducted from Tier 1 Capital) and certain off-balance sheet
items converted into credit exposure equivalents. Adjustments are also made to derivatives and secured
financing transactions to reflect credit and other risks.
•
Dividend yield: is calculated on an annualized basis and is defined as dividend per common share divided by
average of daily closing price per common share for the period.
•
Economic value of shareholders’ equity (EVE): is a calculation of the present value of EQB’s asset cash flows,
less the present value of liability cash flows on a pre-tax basis. EVE is a comprehensive measure of exposure to
interest rate changes than net interest income because it captures all interest rate mismatches across all terms.
•
Efficiency ratio: this measure is used to assess the efficiency of EQB’s cost structure relative to revenue
generation. This ratio is derived by dividing non-interest expenses by revenue. A lower efficiency ratio reflects a
more efficient cost structure.
•
Provision for credit losses (PCL) – rate: this credit quality metric is calculated on an annualized basis and is
defined as the provision for credit losses as a percentage of average loan principal outstanding during the
period. For Q4 2023, this is annualized from four months to twelve months, and for fiscal year 2023, it is
annualized from ten months to twelve months.
•
Return on equity (ROE): this profitability measure is calculated on an annualized basis and is defined as net
income available to common shareholders as a percentage of weighted average common shareholders’ equity
outstanding during the period.
•
Revenue per full time equivalent (FTE): is calculated as revenue for the period divided by the average number
of full-time equivalent employees during that period.
•
Risk-weighted assets (RWA): represents Equitable Bank’s assets and off-balance sheet exposures, weighted
according to risk as prescribed by OSFI under the CAR Guideline.
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Non-Generally Accepted Accounting Principles (GAAP)
financial measures and ratios
This section provides further discussion regarding the variety of financial measures to evaluate EQB’s performance.
Non-GAAP measures
In addition to GAAP prescribed measures, EQB uses certain non-GAAP measures that management believes 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. The primary non-GAAP measures used in this MD&A are:
Adjusted results
In addition to the adjusted results that are presented in the “Adjustments to financial result” section of this MD&A,
additional adjusted financial measures and ratios are described as follows:
•
Adjusted efficiency ratio: it is derived by dividing adjusted non-interest expenses by adjusted revenue. A lower
adjusted efficiency ratio reflects a more efficient cost structure.
•
Adjusted return on equity (ROE): it is calculated on an annualized basis and is defined as adjusted net income
available to common shareholders as a percentage of weighted average common shareholders’ equity (reported)
outstanding during the period.
Other non-GAAP financial measures and ratios:
•
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.
•
Conventional lending: are the total on-balance sheet loan principal excluding insured single-family mortgages
and insured multi-unit residential mortgages.
•
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. A detailed calculation can be found in Table 14 of this MD&A.
•
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. A detailed calculation can be found in Table 7 of this
MD&A.
•
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. A detailed calculation can be found in
Table 2 and Table 17 of this MD&A.
•
Pre-provision pre-tax income (PPPT): this is the difference between revenue and non-interest expenses.
•
Total loan assets: this is calculated on a gross basis (prior to allowance for credit losses) as the sum of both
Loans – Personal and Loans – Commercial on the balance sheet and adding their associated allowance for
credit losses.
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Reports and consolidated financial statements
Reports
81
Management’s responsibility for financial reporting
82
Independent auditor’s report
Consolidated Financial Statements
86
Consolidated Balance Sheet
87
Consolidated Statement of Income
88
Consolidated Statement of Comprehensive Income
89
Consolidated Statement of Changes in Shareholders’ Equity
91
Consolidated Statement of Cash Flows
Notes to the consolidated financial statements
92
Note 1 – Reporting entity
141
Note 14 – Other assets
92
Note 2 – Basis of preparation
144
Note 15 – Deposits
94
Note 3 – Material accounting policies
145
Note 16 – Income taxes
111
Note 4 – Risk management
146
Note 17 – Funding facilities
111
Note 5 – Business combination
147
Note 18 – Other liabilities
112
Note 6 – Financial instruments
148
Note 19 – Shareholders’ equity
121
Note 7 – Cash and cash equivalents and restricted cash
151
Note 20 – Stock-based compensation
121
Note 8 – Securities purchased under reverse repurchase
agreements
155
Note 21 – Fees and other income
121
Note 9 – Investments
155
Note 22 – Non-interest expense – other
122
Note 10 – Loans receivable
155
Note 23 – Earnings per share
129
Note 11 – Derecognition of financial assets
155
Note 24 – Capital management
132
Note 12 – Derivative financial instruments
156
Note 25 – Commitments and contingencies
138
Note 13 – Offsetting financial assets and financial liabilities
157
Note 26 – Related party transactions
158
Note 27 – Interest Rate Sensitivity
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Page. 79
Management’s responsibility
for financial reporting
The consolidated financial statements of EQB Inc. (EQB) are prepared by management, which
is responsible for the integrity and fairness of the information presented. The information
provided herein, in the opinion of management, has been prepared, within reasonable
limits of materiality, using appropriate accounting policies that are in accordance with
International Financial Reporting Standards (IFRS) as well as the accounting requirements of
the Office of the Superintendent of Financial Institutions Canada (OSFI) as these apply to its
subsidiary, Equitable Bank. The consolidated financial statements reflect amounts which
must, out of necessity, be based on informed judgments and estimates of the expected
effects of current events and transactions.
Management maintains and monitors a system of internal controls to meet its responsibility
for the integrity of the consolidated financial statements. These controls are designed to
provide reasonable assurance that EQB’s consolidated assets are safeguarded, that
transactions are executed in accordance with management’s authorization and that the
financial records form a reliable base for the preparation of accurate and timely financial
information. Management also administers a program of ethical business conduct, which
includes quality standards in hiring and training employees, written policies, and a written
corporate code of conduct. Management’s responsibility also includes maintaining adequate
accounting records and an effective risk management system.
The Board of Directors of EQB (the Board), oversees management’s responsibility for the
consolidated financial statements through the Audit Committee. The Audit Committee
conducts a detailed review of the consolidated financial statements with management and
internal and external auditors before recommending their approval to the Board.
EQB’s subsidiary, Equitable Bank, is a Schedule I Bank under the Bank Act (Canada) and is
regulated by OSFI. On a regular basis, OSFI conducts an examination to assess the
operations of Equitable Bank and its compliance with statutory requirements and sound
business practices.
KPMG LLP has been appointed as external auditors by the shareholders to examine the
consolidated financial statements of EQB in accordance with Canadian generally accepted
auditing standards. The external auditors are responsible for reporting on whether the
consolidated financial statements are fairly presented in accordance with IFRS. The
auditors have full and unrestricted access to management, the Audit Committee and the
Board of Directors to discuss their audit and related findings and have the right to request
a meeting in the absence of management at any time.
Andrew Moor
Chadwick Westlake
President and Chief Executive Officer
Chief Financial Officer
December 10, 2024
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Independent auditor’s report
To the Shareholders of EQB Inc.
Opinion
We have audited the consolidated financial statements of EQB Inc. (the Entity), which comprise:
•
the consolidated balance sheets as at October 31, 2024 and October 31, 2023
•
the consolidated statements of income and comprehensive income for the year ended October 31, 2024
and the ten-month period ended October 31, 2023
•
the consolidated statements of changes in shareholders’ equity for the year ended October 31, 2024 and
the ten-month period ended October 31, 2023
•
the consolidated statements of cash flows for the year ended October 31, 2024 and the ten-month period
ended October 31, 2023
•
and notes to the consolidated financial statements, including a summary of material accounting policy
information
(Hereinafter referred to as the “financial statements”).
In our opinion, the accompanying financial statements present fairly, in all material respects, the consolidated financial
position of the Entity as at October 31, 2024 and October 31, 2023, and its consolidated financial performance and its
consolidated cash flows for the year ended October 31, 2024 and the ten-month period ended October 31, 2023 in
accordance with IFRS Accounting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).
Basis for Opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under
those standards are further described in the “Auditor’s Responsibilities for the Audit of the Financial Statements” section
of our auditor’s report.
We are independent of the Entity in accordance with the ethical requirements that are relevant to our audit of the
financial statements in Canada and we have fulfilled our other ethical responsibilities in accordance with these
requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the
financial statements for the year ended October 31, 2024. These matters were addressed in the context of our audit of
the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on
these matters.
We have determined the matters described below to be the key audit matters to be communicated in our auditor’s
report.
Assessment of the allowance for credit losses for loans
Description of the matter
We draw your attention to Notes 2(d), 3(a)(ii), 10(d) and 10(f) to the financial statements. The Entity’s allowance for
credit losses on stage 1 and 2 loans (ACL) is $108,576 thousand. The Entity’s ACL is estimated using statistical models
that involve a number of inputs and assumptions. ACL is calculated using an expected credit loss (ECL) model which
measures the credit losses using a three-stage approach based on the extent of credit deterioration of the financial
Page 83
assets since initial recognition. Probability of default (PD) and loss given default (LGD) are inputs used to estimate ECL
and are modelled using forward-looking macroeconomic variables that are closely related with credit losses in the
relevant portfolios, and are probability weighted using four macroeconomic scenarios.
Management exercises significant judgment in determining:
•
whether there has been a significant increase in credit risk since initial recognition
•
the forward-looking macroeconomic variables that are relevant for each portfolio
•
probability weights that are applied to the macroeconomic scenarios
•
the amount of ECL by exercising experienced credit judgment in considering reasonable and supportable
information not already incorporated in models (hereafter, referred to as ‘overlays’)
In addition, as a result of geopolitical unrest, the current interest rate environment, low growth and high unemployment,
the macroeconomic environment continues to experience volatility and uncertainty. This had a direct impact on
forward-looking macroeconomic variables, probability weights and overlays.
Why the matter is a key audit matter
We identified the assessment of the ACL for loans as a key audit matter. Significant auditor judgment was required
because of the use of complex models and there is a higher degree of measurement uncertainty due to the significant
judgments described above. Assessing the ACL for loans required significant auditor effort and specialized skills and
knowledge to apply audit procedures and evaluate the results of those procedures.
How the matter was addressed in the audit
The following were the primary procedures we performed to address this key audit matter. We evaluated the design
and tested the operating effectiveness of certain controls over the Entity’s ACL process with the involvement of credit
risk and economics professionals with specialized skills and knowledge. This included controls related to:
•
monitoring of the models used to derive the PD and LGD inputs
•
monitoring of the methodology for identifying whether there has been a significant increase in credit risk
•
the review of the forward-looking macroeconomic variables that were relevant for each portfolio and
probability weights that were applied to the macroeconomic scenarios
•
the review of the methodologies and assumptions for determining overlays adjusting the modelled results.
We involved credit risk and economics professionals with specialized skills and knowledge who assisted in evaluating:
•
The models for determining PD and LGD by assessing the model monitoring methodology and checking the
accuracy of quantitative measures, where applicable
•
The methodology used to determine a significant increase in credit risk by assessing the methodology for
compliance with IFRS 9 and checking the accuracy of quantitative measures, where applicable
•
The forward-looking macroeconomic variables that were relevant to each portfolio by comparing against
external macroeconomic data
•
The probability weights that were applied to the macroeconomic scenarios through the application of our
knowledge of the economy
•
The methodologies and assumptions for determining the overlays adjusting the modelled results through the
application of our industry knowledge and relevant experience.
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Other Information
Management is responsible for the other information. Other information comprises:
•
the information included in Management’s Discussion and Analysis filed with the relevant Canadian Securities
Commissions.
•
the information, other than the financial statements and the auditor’s report thereon, included in a document
likely to be entitled “Annual Report”.
Our opinion on the financial statements does not cover the other information and we do not and will not express any
form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information identified
above and, in doing so, consider whether the other information is materially inconsistent with the financial statements
or our knowledge obtained in the audit and remain alert for indications that the other information appears to be
materially misstated.
We obtained the information included in Management’s Discussion and Analysis filed with the relevant Canadian
Securities Commissions as at the date of this auditor’s report. If, based on the work we have performed on this other
information, we conclude that there is a material misstatement of this other information, we are required to report that
fact in the auditor’s report.
We have nothing to report in this regard.
The information, other than the financial statements and the auditor’s report thereon and the Management’s Discussion
and Analysis, included in a document likely to be entitled “Annual Report” is expected to be made available to us after
the date of this auditor’s report. If, based on the work we will perform on this other information, we conclude that there
is a material misstatement of this other information, we are required to report that fact to those charged with
governance.
Responsibilities of Management and Those Charged with Governance for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance with
IFRS Accounting Standards (IFRS) as issued by the International Accounting Standards Board (IASB), and for such internal
control as management determines is necessary to enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Entity’s ability to continue as a going
concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting
unless management either intends to liquidate the Entity or to cease operations, or has no realistic alternative but to
do so.
Those charged with governance are responsible for overseeing the Entity’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with
Canadian generally accepted auditing standards will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional
judgment and maintain professional skepticism throughout the audit.
Page 85
We also:
•
Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or
error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is
sufficient and appropriate to provide a basis for our opinion.
The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of
internal control.
•
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Entity's internal control.
•
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and
related disclosures made by management.
•
Conclude on the appropriateness of management's use of the going concern basis of accounting and, based
on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may
cast significant doubt on the Entity's ability to continue as a going concern. If we conclude that a material
uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the
financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based
on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions
may cause the Entity to cease to continue as a going concern.
•
Evaluate the overall presentation, structure and content of the financial statements, including the disclosures,
and whether the financial statements represent the underlying transactions and events in a manner that
achieves fair presentation.
•
Communicate with those charged with governance regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including any significant deficiencies in internal control that
we identify during our audit.
•
Provide those charged with governance with a statement that we have complied with relevant ethical
requirements regarding independence, and communicate with them all relationships and other matters that
may reasonably be thought to bear on our independence, and where applicable, related safeguards.
•
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business
activities within the group Entity to express an opinion on the financial statements. We are responsible for the
direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.
•
Determine, from the matters communicated with those charged with governance, those matters that were of
most significance in the audit of the financial statements of the current period and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure
about the matter or when, in extremely rare circumstances, we determine that a matter should not be
communicated in our auditor’s report because the adverse consequences of doing so would reasonably be
expected to outweigh the public interest benefits of such communication.
Chartered Professional Accountants, Licensed Public Accountants
The engagement partner on the audit resulting in this auditor’s report is Steven Watts.
Toronto, Canada
December 10, 2024
Page 86
Consolidated Balance Sheet
($000s) As at
Note
October 31, 2024
October 31, 2023(1)
Assets:
Cash and cash equivalents
7
591,641
549,474
Restricted cash
7
971,987
767,195
Securities purchased under reverse repurchase agreements
8
1,260,118
908,833
Investments
9
1,627,314
2,120,645
Loans – Personal
10,11
32,273,551
32,390,527
Loans – Commercial
10,11
14,760,367
14,970,604
Securitization retained interests
11
813,719
559,271
Deferred tax assets
16
36,104
14,230
Other assets
14
899,120
652,675
Total assets
53,233,921
52,933,454
Liabilities and Shareholders’ Equity
Liabilities:
Deposits
15
33,739,612
31,996,450
Securitization liabilities
11
14,594,304
14,501,161
Obligations under repurchase agreements
11
-
1,128,238
Deferred tax liabilities
16
177,933
128,436
Funding facilities
17
946,956
1,731,587
Other liabilities
18
636,931
602,039
Total liabilities
50,095,736
50,087,911
Shareholders’ Equity:
Preferred shares
19
-
181,411
Common shares
19
505,876
471,014
Other equity instruments
19
147,440
-
Contributed (deficit) surplus
(17,374)
12,795
Retained earnings
2,483,309
2,185,480
Accumulated other comprehensive income (loss)
8,555
(5,157)
Total equity attributable to equity holders of EQB
3,127,806
2,845,543
Non-controlling interests
10,379
-
Total equity
3,138,185
2,845,543
Total liabilities and equity
53,233,921
52,933,454
Vincenza Sera
Chair of the Board
Andrew Moor
President and Chief Executive Officer
See accompanying notes to the consolidated financial statements.
(1) Effective January 1, 2023, EQB changed its fiscal year-end reporting date from December 31st to October 31st. The comparative
consolidated financial statements have been prepared for a 10-month period ended October 31, 2023. The current year amounts
presented in these consolidated financial statements are for a 12-month period and therefore, are not entirely comparable. Refer to
Note 2(f).
Page 87
Consolidated Statement of Income
($000s, except per share amounts) Year/Period ended
Note
2024
2023(1)
Interest income:
Loans – Personal
1,945,011
1,410,571
Loans – Commercial
1,019,682
860,363
Investments
66,766
65,362
Other
108,082
70,123
3,139,541
2,406,419
Interest expense:
Deposits
1,490,075
1,077,520
Securitization liabilities
11
522,673
402,443
Funding facilities
50,940
44,527
Other
25,364
43,650
2,089,052
1,568,140
Net interest income
1,050,489
838,279
Non-interest revenue:
Fees and other income
21
81,087
46,895
Net gains on loans and investments
20,279
34,442
Gains on sale and income from retained interests
11
89,020
56,384
Net gains (losses) on securitization activities and derivatives
14,567
(336)
204,953
137,385
Revenue
Provision for credit losses
10
1,255,442
107,013
975,664
38,856
Revenue after provision for credit losses
1,148,429
936,808
Non-interest expense:
Compensation and benefits
272,346
199,752
Other
22
321,753
234,991
594,099
434,743
Income before income taxes
554,330
502,065
Income taxes:
16
Current
134,253
84,066
Deferred
18,405
46,409
152,658
130,475
Net income
401,672
371,590
Dividends on preferred shares
8,140
6,998
Distribution to LRCN holders
2,586
-
Net income available to common shareholders and non-
controlling interests
390,946
364,592
Net income attributable to:
Common shareholders
389,836
364,592
Non-controlling interests
1,110
-
390,946
364,592
Earnings per share:
Basic
Diluted
23
10.19
10.11
9.67
9.59
See accompanying notes to the consolidated financial statements.
(1)Effective January 1, 2023, EQB changed its fiscal year-end reporting date from December 31st to October 31st. The comparative
consolidated financial statements have been prepared for a 10-month period ended October 31, 2023. The current year amounts presented
in these consolidated financial statements are for a 12-month period and therefore, are not entirely comparable. Refer to Note 2(f).
Page 88
Consolidated Statement of Comprehensive Income
($000s) Year/Period ended
Note
2024
2023(1)
Net income
401,672
371,590
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
(2,051)
-
Net change in unrealized gains (losses) on fair value
68,127
(36,208)
Reclassification of net (gains) losses to income
(52,096)
37,432
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 from AOCI on sale of investment
(31,340)
(10,951)
Net change in unrealized gains (losses) on fair value
1,176
(34,767)
Reclassification of net losses to retained earnings
31,588
11,042
Income tax (expense) recovery
15,404
(4,063)
(33,452)
9,210
11,341
(24,242)
Cash flow hedges
12
Net change in unrealized (losses) gains on fair value
(22,798)
40,951
Reclassification of net gains to income
(7,377)
(38,718)
Income tax recovery (expense)
(30,175)
8,174
2,233
(631)
(22,001)
1,602
Total other comprehensive loss
(10,660)
(22,640)
Total comprehensive income
391,012
348,950
Total comprehensive income attributable to:
Common shareholders
389,902
348,950
Non-controlling interest
1,110
-
391,012
348,950
See accompanying notes to the consolidated financial statements.
(1) Effective January 1, 2023, EQB Inc. changed its fiscal year-end reporting date from December 31st to October 31st. The comparative
consolidated financial statements have been prepared for a 10-month period ended October 31, 2023. The current year amounts
presented in these consolidated financial statements are for a 12-month period and therefore, are not entirely comparable. Refer to
note 2(f).
Page 89
Consolidated Statement of Changes in Shareholders’ Equity
($000s)
2024
Preferred
shares
Common
shares
Other equity
instruments
Contributed
surplus
Retained
earnings
Accumulated other
comprehensive income (loss)
Total
Cash flow
hedges
Financial
instruments
at FVOCI
Total
Attributable
to equity
holders
Non-
controlling
interests
Balance, beginning of year
181,411
471,014
-
12,795
2,185,480
43,618
(48,775)
(5,157)
2,845,543
-
2,845,543
Non-controlling interest on acquisition
-
-
-
-
-
-
-
-
-
10,770
10,770
Net income
-
-
-
-
400,562
-
-
-
400,562
1,110
401,672
Realized losses on sale of shares, net of tax
-
-
-
-
(23,056)
-
-
-
(23,056)
-
(23,056)
Transfer of AOCI losses to retained earnings,
net of tax
-
-
-
-
-
-
22,875
22,875
22,875
-
22,875
Transfer of AOCI losses to income, net of tax
-
-
-
-
-
-
1,497
1,497
1,497
-
1,497
Other comprehensive loss, net of tax
-
-
-
-
-
(22,001)
11,341 (10,660)
(10,660)
-
(10,660)
Common shares issued
-
11,000
-
-
-
-
-
-
11,000
-
11,000
Exercise of stock options
-
20,290
-
-
-
-
-
-
20,290
-
20,290
Redemption of preferred shares
(181,411)
-
-
-
(2,371)
-
-
-
(183,782)
-
(183,782)
Limited recourse capital notes issued
-
-
150,000
-
-
-
-
-
150,000
-
150,000
Issuance costs, net of tax
-
-
(2,560)
-
-
-
-
-
(2,560)
-
(2,560)
Limited recourse capital note distributions,
net of tax
-
-
-
-
(2,586)
-
-
-
(2,586)
-
(2,586)
Dividends:
Preferred shares
-
-
-
-
(8,140)
-
-
-
(8,140)
-
(8,140)
Common shares
-
-
-
-
(66,580)
-
-
-
(66,580)
(1,501)
(68,081)
Share tender rights
-
-
-
(30,613)
-
-
-
-
(30,613)
-
(30,613)
Stock-based compensation
-
-
-
4,016
-
-
-
-
4,016
-
4,016
Transfer relating to the exercise of stock
options
-
3,572
-
(3,572)
-
-
-
-
-
-
-
Balance, end of year
-
505,876
147,440
(17,374)
2,483,309
21,617
(13,062)
8,555
3,127,806
10,379
3,138,185
See accompanying notes to the consolidated financial statements.
(1) Effective January 1, 2023, EQB Inc. changed its fiscal year-end reporting date from December 31st to October 31st. The comparative consolidated financial statements have been
prepared for a 10-month period ended October 31, 2023. The current year amounts presented in these consolidated financial statements are for a 12-month period and therefore, are
not entirely comparable. Refer to Note 2(f).
Page 90
($000s)
2023
Preferred
shares
Common
shares
Contributed
surplus
Retained
earnings
Accumulated other comprehensive
income (loss)
Total
Cash flow
hedges
Financial
instruments
at FVOCI
Total
Attributable
to equity
holders
Non-
controlling
interests
Balance, beginning of year
181,411
462,561
11,445
1,870,100
42,016
(32,578)
9,438
2,534,955
-
2,534,955
Net income
-
-
-
371,590
-
-
-
371,590
-
371,590
Realized losses on sale of shares, net of
tax
-
-
-
(7,722)
-
-
-
(7,722)
-
(7,722)
Transfer of AOCI losses to retained
earnings, net of tax
-
8,045
8,045
8,045
-
8,045
Other comprehensive loss, net of tax
-
-
-
-
1,602
(24,242)
(22,640)
(22,640)
-
(22,640)
Exercise of stock options
-
13,161
-
-
-
-
-
13,161
-
13,161
Share issuance costs, net of tax
-
(6,230)
-
-
-
-
-
(6,230)
-
(6,230)
Dividends:
Preferred shares
-
-
-
(6,998)
-
-
-
(6,998)
-
(6,998)
Common shares
-
-
-
(41,490)
-
-
-
(41,490)
-
(41,490)
Stock-based compensation
-
-
2,872
-
-
-
-
2,872
-
2,872
Transfer relating to the exercise of
stock options
-
1,522
(1,522)
-
-
-
-
-
-
-
Balance, end of year
181,411
471,014
12,795
2,185,480 43,618
(48,775)
(5,157)
2,845,543
-
2,845,543
See accompanying notes to the consolidated financial statements.
(1) Effective January 1, 2023, EQB Inc. changed its fiscal year-end reporting date from December 31st to October 31st. The comparative consolidated financial statements have been
prepared for a 10-month period ended October 31, 2023. The current year amounts presented in these consolidated financial statements are for a 12-month period and therefore, are
not entirely comparable. Refer to Note 2(f).
Page 91
Consolidated Statement of Cash flows
($000s) Year/Period ended
2024
2023
CASH FLOWS FROM OPERATING ACTIVITIES
Net income
401,672
371,590
Adjustments for non-cash items in net income:
Financial instruments at fair value through income
13,152
45,533
Amortization of premiums/discounts
(14,908)
7,678
Amortization of capital and intangible assets
60,036
39,155
Provision for credit losses
107,013
38,856
Securitization gains
(66,348)
(46,948)
Stock-based compensation
4,016
2,871
Dividend income earned, not received
-
(28,380)
Income taxes
152,658
130,475
Securitization retained interests
129,719
75,304
Changes in operating assets and liabilities:
Restricted cash
(204,792)
(29,539)
Securities purchased under reverse repurchase agreements
(351,285)
(708,401)
Loans receivable, net of securitizations
(58,571)
(1,126,698)
Other assets
(53,917)
(57,566)
Deposits
1,597,115
865,734
Securitization liabilities
25,422
(519,066)
Obligations under repurchase agreements
(1,128,238)
462,931
Funding facilities
(784,631)
491,883
Other liabilities
(8,314)
108,201
Income taxes paid
(98,042)
(90,318)
Cash flows (used in) from operating activities
(278,243)
33,295
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common shares
31,290
6,931
Redemption of preferred shares
(183,782)
-
Net proceeds from issuance of limited recourse notes
147,440
-
Distributions to other equity holders
(2,586)
-
Dividends paid on preferred shares
(8,140)
(6,998)
Dividends paid on common shares
(66,580)
(41,490)
Cash flows used in financing activities
(82,358)
(41,557)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of investments
(351,650)
(989,055)
Proceeds from sale or redemption of investments
871,021
1,007,663
Acquisition of subsidiary
(75,483)
-
Investment in associate
(50,000)
-
Net change in Canada Housing Trust re-investment accounts
76,243
78,988
Purchase of capital assets and system development costs
(67,363)
(34,966)
Cash flows from investing activities
402,768
62,630
Net increase in cash and cash equivalents
42,167
54,368
Cash and cash equivalents, beginning of year
549,474
495,106
Cash and cash equivalents, end of year
591,641
549,474
Cash flows from operating activities include:
Supplemental statement of cash flows disclosures
Interest received
2,922,693
2,137,216
Interest paid
(1,747,235)
(1,221,598)
Dividends received
1,944
31,243
See accompanying notes to the consolidated financial statements.
Page 92
Notes to consolidated financial statements
($000s, except per share amounts)
Note 1 – Reporting Entity
EQB Inc. (EQB) was formed on January 1, 2004 as the parent company of its wholly owned subsidiary, Equitable
Bank. EQB is listed on the Toronto Stock Exchange (TSX) and domiciled in Canada with its registered office located
at 30 St. Clair Avenue West, Suite 700, Toronto, Ontario. Equitable Bank is a Schedule I Bank under the Bank Act
(Canada) and is regulated by the Office of the Superintendent of Financial Institutions Canada (OSFI). Equitable
Bank and its subsidiaries offer savings and lending products to personal and commercial customers across Canada.
EQB also owns 75% of ACM Asset Management Ltd. (ACM).
Note 2 – Basis of Preparation
(a) Statement of compliance
The consolidated financial statements of EQB have been prepared in accordance with IFRS Accounting Standards
(IFRS) as issued by the International Accounting Standards Board (IASB).
The consolidated financial statements have been approved for issuance by EQB’s Board of Directors (the Board)
on December 10, 2024.
(b) Basis of measurement
The consolidated financial statements have been prepared on the historical cost basis except for the following
items which are stated at fair value: derivative financial instruments, financial assets and liabilities that are
classified or designated at fair value through profit or loss and fair value through other comprehensive income.
(c) Functional currency
The functional currency of EQB and its subsidiaries is Canadian dollars, which is also the presentation currency of
the consolidated financial statements.
(d) Use of estimates and accounting judgments in applying accounting policies
The preparation of the consolidated financial statements requires management to make estimates, judgments and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the dates of the consolidated financial statements and the reported amounts of revenue and expenses
during the reporting periods. Estimates and underlying assumptions are reviewed by management on an ongoing
basis. Critical estimates and judgments utilized in preparing EQB’s consolidated financial statements affect the
assessment of the allowance for credit losses on loans, impairment of other financial instruments, impairment of
goodwill, fair values of financial assets and liabilities, put option liabilities, derecognition of financial assets
transferred in securitization transactions, determining of significant influence or control over investees,
effectiveness of financial hedges for accounting purposes, fair values of net identifiable assets acquired, liabilities
assumed and intangible assets recognized in a business combination, and income taxes.
In making estimates and judgments, management uses external information and observable market inputs where
possible, supplemented by internal analysis as required. These estimates and judgments have been made taking
into consideration the economic impact of the current market volatility and uncertainty due to geopolitical unrest,
the current interest rate environment, low growth and high unemployment. Actual results could differ materially
from these estimates, in which case the impact would be recognized in the consolidated financial statements in
future periods.
Page 93
Allowance for credit losses under IFRS 9
The Expected Credit Loss (ECL) model requires management to make judgments and estimates in a number of
areas. Management must exercise significant experienced credit judgment in determining whether there has
been a significant increase in credit risk since initial recognition and in estimating the amount of ECL. The
measurement of ECL incorporates forward-looking macroeconomic variables and probability weightings of
macroeconomic scenarios, which requires significant judgment. Management also exercises significant
experienced credit judgment in determining the amount of ECL at each reporting date by considering reasonable
and supportable information that is not already incorporated in the modelling process. Changes in these inputs,
assumptions, models, and judgments directly impact the measurement of ECL.
As a result of the current interest rate environment, low growth, high unemployment and ongoing geopolitical
unrest, the macroeconomic environment continues to experience volatility and uncertainty. This has resulted in a
direct impact on the forward-looking macroeconomic variables which management uses as part of its underlying
assumptions for calculating ECL.
EQB determines ECL using probability-weighted forward-looking macroeconomic scenarios obtained on a periodic
basis from Moody’s Analytics economic forecasting services. Effective the third quarter of this year, EQB has
removed its least severe downside scenario and now uses four probability-weighted forward-looking
macroeconomic scenarios to determine ECL. These macroeconomic scenarios include a ‘base-case’ scenario which
represents the most likely outcome and three additional macroeconomic scenarios representing more optimistic
and more pessimistic outcomes. In establishing ECL, Management attaches probability weightings to economic
scenarios which are representative of Management’s view of the economic and market conditions. Please refer to
note 10(d) and (e).
(e) Consolidation
The consolidated financial statements as at and for the twelve month year ended October 31, 2024 and ten
month period ended October 31, 2023 include the assets, liabilities and results of operations of EQB and its
subsidiaries, after the elimination of intercompany transactions and balances. EQB has control over its
subsidiaries as it is exposed to and has rights to variable returns from its involvement with the subsidiaries and it
has the ability to affect those returns through its power over their relevant activities.
EQB has a 100% ownership interest in Equitable Bank and a 75% ownership in ACM. Equitable Bank is the parent
company of its wholly owned subsidiaries, Equitable Trust, Concentra Bank, Concentra Trust, and Bennington
Financial Services. All these subsidiaries have been consolidated in the consolidated financial statements of EQB
as at October 31, 2024.
EQB and its subsidiary Equitable Bank use funding and capital vehicles to facilitate cost efficient financing of its
operations, including the issuance of covered bonds and Limited Recourse Capital Notes (LRCN). Activities of
these funding structured entities are generally limited to holding an interest in a pool of assets generated by EQB
and its subsidiaries and other securities. These structured entities include EQB Covered Bond (Legislative) GP Inc.,
EQB Covered Bond (Legislative) Guarantor Limited Partnership, EQB LRCN Limited Recourse Trust and Equitable
Bank LRCN Limited Recourse Trust. These structured entities have been established in connection with the
issuance of covered bonds and LRCN. As at October 31, 2024, all these structured entities have been consolidated
in the consolidated financial statements of EQB, due to its decision-making power over the entities and ability to
use that power to affect their returns.
Non-controlling interests are presented within equity on the Consolidated Balance Sheet separate from equity
attributable to holders of common shares of EQB. The net income attributable to non-controlling interests is
presented separately in the Consolidated Statement of Income.
(f)
Fiscal year-end reporting date change
Effective January 1, 2023, EQB changed its fiscal year-end reporting date from December 31st to October 31st. The
comparative financial statements have been prepared for a 10-month period ended October 31, 2023. The
current year amounts presented in these financial statements are for a 12-month period and therefore, are not
Page 94
entirely comparable.
EQB had changed its fiscal year-end reporting date to October 31st, to align with industry practice and investor
expectations.
Note 3 – Material Accounting Policies
The following note describes EQB’s material accounting policies. These accounting policies have been applied
consistently to all periods presented in these consolidated financial statements.
(a) Financial instruments
EQB’s Consolidated Balance Sheet consists primarily of financial instruments. The majority of EQB’s net income is
derived from interest income and expenses, as well as gains and losses related to the respective financial
instruments.
Financial assets include cash and cash equivalents, restricted cash, securities purchased under reverse
repurchase agreements, investments, loans receivable – personal, loans receivable – commercial, securitization
retained interests and derivative financial instruments. Financial liabilities include deposits, securitization
liabilities, obligations under repurchase agreements, accounts payable, funding facilities and derivative financial
instruments.
(i)
Classification and measurement of financial instruments
Financial assets are measured on initial recognition at fair value and are classified and subsequently measured at
fair value through profit or loss (FVTPL), fair value through other comprehensive income (FVOCI) or amortized cost
(AMC), based on the business model for managing the financial instruments and the contractual cash flow
characteristics of the instrument.
i.
Debt Instruments
On initial recognition, all debt instruments, including loans, are classified based on:
• The business model under which the asset is held; and
• The contractual cash flow characteristics of the financial instrument
Business model assessment
Business model assessment involves determining whether financial assets are held and managed by EQB for
generating and collecting contractual cash flows, selling the financial assets or both. EQB assesses the business
model at a portfolio level using judgment and is supported by relevant objective evidence including:
• how the performance of the asset is evaluated and reported to EQB’s management;
• the frequency, volume, reason and timing of sales in prior periods and expectations about future sale activity;
• whether the assets are held for trading purposes i.e., assets that are acquired by EQB principally for the
purpose of selling or repurchase in the near term, or held as part of a portfolio that is managed together for
short-term profits; and
• the risks that affect the performance of assets held within a business model and how those risks are managed.
Cash flow characteristics assessment
The contractual cash flow characteristics assessment involves assessing the contractual features of an instrument
to determine if they give rise to cash flows that are consistent with a basic lending arrangement, i.e. if they
represent cash flows that are solely payments of principal and interest (SPPI).
Principal is defined as the fair value of the instrument at initial recognition. Principal may change over the life of
the instrument due to repayments. Interest is defined as consideration for the time value of money and the credit
risk associated with the principal amount outstanding and for other basic lending risks and costs (liquidity risk and
administrative costs), as well as a profit margin.
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In assessing whether the contractual cash flows are SPPI, EQB considers the contractual terms of the instrument.
This includes assessing whether the financial asset contains any contractual terms that could change the timing or
amount of contractual cash flows such that the financial asset would not meet the SPPI criteria. In making the
assessment EQB considers:
• contingent events that would change the amount and/or timing of cash flows;
• leverage features;
• prepayment and extension terms;
• associated penalties relating to prepayments;
• terms that limit EQB’s claim to cash flows from specified assets; and
• features that modify consideration of the time value of money.
Debt instruments measured at AMC
Debt instruments are measured at AMC using the effective interest rate method, if they are held within a business
model whose objective is to hold the financial asset for collecting contractual cash flows where those cash flows
represent SPPI. The effective interest rate is the rate that discounts estimated future cash payments or receipts
through the expected life of the financial asset to the gross carrying amount of the financial asset.
AMC is calculated taking into account any discount or premium on acquisition, transaction costs and fees that are
an integral part of the effective interest rate. Amortization of these deferred costs is included in Interest income in
the Consolidated Statement of Income.
Impairment on debt instruments measured at AMC is calculated using the ECL approach. Loans and debt
securities measured at AMC are presented net of the Allowance for Credit Losses (ACL) in the Consolidated
Balance Sheet.
Debt instruments measured at FVOCI
Debt instruments are measured at FVOCI if they are held within a business model whose objective is to hold the
financial asset for collection of contractual cash flows and for selling financial assets, where the cash flows
represent payments that are SPPI. Subsequent to initial recognition, the assets are fair valued and unrealized
gains and losses are recorded in Other comprehensive income (OCI). Upon derecognition, realized gains and
losses are reclassified from OCI and recorded in Non-interest revenue in the Consolidated Statement of Income.
Premiums, discounts and related transaction costs are amortized over the expected life of the instrument to
Interest income – Investments in the Consolidated Statement of Income using the effective interest rate method.
Impairment on debt instruments measured at FVOCI is calculated using the ECL approach. The ACL on debt
instruments measured at FVOCI does not reduce the carrying amount of the asset in the Consolidated Balance
Sheet, which remains at its fair value. Instead, an amount equal to the impairment is recognized in Accumulated
other comprehensive income (AOCI) with a corresponding charge to Provision for credit losses in the
Consolidated Statement of Income. The accumulated allowance recognized in AOCI is recycled to the
Consolidated Statement of Income upon derecognition of the debt instrument.
Debt instruments measured at FVTPL
Debt instruments measured at FVTPL include assets held as part of a portfolio managed on a fair value basis and
assets whose cash flows do not represent payments that are SPPI. These instruments are measured at fair value in
the Consolidated Balance Sheet, with transaction costs recognized immediately in the Consolidated Statement of
Income as part of Non-interest revenue. Realized and unrealized gains and losses are recognized as part of Non-
interest revenue in the Consolidated Statement of Income.
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ii.
Equity instruments
Equity instruments are measured at FVTPL, unless they are not held for trading purposes and an irrevocable
election is made to designate these instruments at FVOCI upon initial recognition. The measurement election is
made on an instrument-by-instrument basis. For equity instruments measured at FVTPL, changes in fair value and
dividends received are recognized as part of Non-interest revenue – Net gains (losses) on loans and investments
in the Consolidated Statement of Income. EQB has elected to measure certain equity investments at FVOCI that
are held for longer term investment purposes. These instruments are measured at fair value in the Consolidated
Balance Sheet, with transaction costs being added to the cost of the instrument. Dividends are recorded in
Interest income – Investments in the Consolidated Statement of Income. Unrealized fair value gains/losses are
recognized in OCI and are not subsequently reclassified to the Consolidated Statement of Income when the
instrument is derecognized or sold.
iii. Financial assets and liabilities designated at FVTPL
Financial assets and financial liabilities classified in this category are those that have been designated by EQB on
initial recognition. Financial assets are designated at FVTPL if doing so eliminates or significantly reduces an
accounting mismatch which would otherwise arise.
Financial liabilities are designated at FVTPL when one of the following criteria is met:
• The designation eliminates or significantly reduces an accounting mismatch which would otherwise arise; or
• The financial liability contains one or more embedded derivatives which significantly modify the cash flows
otherwise required.
Financial assets and financial liabilities designated at FVTPL are recorded in the Consolidated Balance Sheet at fair
value. For assets designated at FVTPL, changes in fair values are recognized in Non-interest revenue in the
Consolidated Statement of Income. For liabilities designated at FVTPL, all changes in fair value are recognized in
Non-interest revenue in the Consolidated Statement of Income, except for changes in fair value arising from
changes in EQB’s own credit risk which are recognized in OCI and are not subsequently reclassified to the
Consolidated Statement of Income upon derecognition/extinguishment of the liabilities.
iv. Financial liabilities
Financial liabilities are initially recognized at fair value and are subsequently measured at amortized cost, except
for liabilities mandatorily measured/designated as at FVTPL.
(ii) Impairment
Scope
EQB applies the three-stage approach to measure ACL, using the ECL approach as required under IFRS 9, for the
following categories of financial instruments that are not measured at FVTPL:
• Financial assets at AMC
• Debt securities as at FVOCI; and
• Off-balance sheet loan commitments
ECL is calculated based on the stage in which the financial instrument falls at the reporting date. Financial
instruments migrate through the three stages based on the change in their risk of default since initial recognition.
ECL model
EQB’s ACL calculation is an output of an ECL model with a number of underlying assumptions regarding the
choice of variable inputs and their interdependencies. The ECL model reflects the present value of all cash
shortfalls related to default events either (i) over the following twelve months or (ii) over the expected life of the
financial instrument, depending on credit deterioration of the instrument since its inception. The ACL calculated
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using the ECL model reflects an unbiased, probability-weighted credit loss which considers five macroeconomic
scenarios based on reasonable and supportable information about past events, current conditions, and forecasts
of future economic conditions. Forward-looking macroeconomic variables are explicitly incorporated into the
estimation of ECL.
Measurement of ECL
The ECL model measures credit losses using the following three-stage approach based on the extent of credit
deterioration of the financial asset since initial recognition:
•
Stage 1 – Where there has not been a significant increase in credit risk (SICR) since initial recognition of a
financial instrument, an amount equal to twelve months ECL is recorded. ECL is computed using a probability
of default (PD) occurring over the next twelve months. For those instruments with a remaining maturity of less
than twelve months, a PD corresponding to the remaining term to maturity is used.
•
Stage 2 – When a financial instrument experiences a SICR subsequent to initial recognition but is not
considered to be in default, it is included in Stage 2. This requires the computation of ECL based on the PD
over the remaining estimated life of the financial instrument.
•
Stage 3 – Financial instruments that are considered to be in default are included in this stage. Similar to Stage
2, the ACL captures lifetime ECL.
The PD, exposure at default (EAD), and loss given default (LGD) are inputs used to estimate ECL. PD and LGD are
modelled using forward-looking macroeconomic variables that are closely related with credit losses in the
relevant portfolios, and are probability-weighted using four macroeconomic scenarios (five macroeconomic
scenarios used until quarter 2 of 2024. Refer Note 2(d) above).
Details of these statistical parameters/inputs are as follows:
•
PD is an estimate of the likelihood of default over a given time horizon and is expressed as a percentage.
•
EAD is the expected exposure in the event of default at a future default date and is expressed as an amount.
•
LGD is an estimate of the loss arising in the event a default occurs at a given time and is based on the
difference between the contractual cash flows due and those that EQB would expect to receive, including from
the realization of any collateral. It is expressed as a percentage of the EAD.
Forward-looking macroeconomic variables
The measurement of ACL for each stage and the assessment of SICR considers information about past events and
current conditions as well as reasonable and supportable forecasts of future events and economic conditions. The
estimation and application of forward-looking macroeconomic variables requires significant judgment.
EQB relies on a broad range of forward-looking macroeconomic variables, such as expected GDP growth,
unemployment rates, house price indices, commercial property index, Canadian equity index, West Texas
intermediate oil price, and household income. The inputs used in the model for calculating ECL may not always
capture all characteristics of the market at the balance sheet date. To capture portfolio characteristics and risks,
qualitative adjustments are made using management’s experienced credit judgment.
Multiple forward-looking macroeconomic scenarios
EQB determines ECL using four probability-weighted forward-looking macroeconomic scenarios obtained on a
periodic basis from Moody’s Analytics economic forecasting services. These macroeconomic scenarios include a
‘base-case’ scenario which represents the most likely outcome and three additional macroeconomic scenarios
representing more optimistic and more pessimistic outcomes.
Assessment of significant increase in credit risk
The determination of whether ECL on a financial instrument is calculated on a 12 month period or lifetime basis is
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dependent on the stage the financial asset falls into at the reporting date. A financial instrument moves across
stages based on an increase or decrease in its risk of default at the reporting date compared to its risk of default
at initial recognition, as measured by changes to borrower level information and the macroeconomic outlook.
When determining whether the risk of default on a financial instrument has increased significantly since initial
recognition, EQB considers reasonable and supportable information that is relevant and available without undue
cost or effort. This includes both quantitative analysis and qualitative information, based on EQB’s historical
experience and experienced credit judgment, delinquency and monitoring, and forward-looking macroeconomic
variables. With regards to delinquency and monitoring, there is a rebuttable presumption that the risk of default
of the financial instrument has significantly increased since initial recognition when contractual payments are
more than 30 days past due. The estimation and application of the assessment of quantitative and qualitative
information for the assessment of SICR requires significant judgment.
Modified financial assets
The original terms of a financial asset may be renegotiated or otherwise modified, resulting in changes to the
contractual terms of the financial asset that affect the contractual cash flows.
If the terms of a financial asset are modified or an existing financial asset is replaced with a new one, an
assessment is made to determine if the modification is substantial. If the modification is substantial, the original
asset is derecognized and a new asset is recognized at fair value. The new financial asset is generally recorded in
Stage 1, unless it is determined to be credit-impaired at the time of the renegotiation. Where the modification
does not result in derecognition, the date of the origination continues to be used to determine the significant
increase in credit risk.
Definition of default
EQB considers a financial instrument to be in default when:
•
the borrower is unlikely to pay its credit obligations to EQB in full, without recourse by EQB to actions such as
realization of collateral (if any is held); or
•
the borrower is past due more than 90 days on any credit obligation to EQB, except for certain credit card
balances for which the default occurs when the payments are 180 days past due.
EQB classifies a loan receivable as impaired when, in the opinion of management, there is reasonable doubt as to
the timely collection, either in whole or in part, of principal or interest, or the loan is past due 90 days, or 180 days
for credit cards.
(iii) Determination of fair value of financial instruments
When a financial instrument is initially recognized, its fair value is the price that would be received
to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the
measurement date.
Subsequent to initial recognition, for financial instruments measured at fair value where active market prices are
available, bid prices are used for financial assets and ask prices for financial liabilities. For those financial
instruments measured at fair value where an active market is not available, fair value estimates are determined
using valuation methods which maximize the use of observable market data and include discounted cash flow
analysis and other commonly used valuation techniques. See Note 6 for the valuation methods and assumptions
used to estimate fair values of financial instruments.
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(iv) Derecognition of financial instruments
Financial assets
EQB derecognizes a financial asset when:
•
the contractual rights to receive the cash flows from the asset have expired; or
•
EQB has transferred its rights to receive future cash flows from the financial asset, or it retains the contractual
rights to receive the cash flows from the financial asset but assumes a contractual obligation to pay the cash
flows to one or more recipients and either:
o
EQB has transferred substantially all the risks and rewards of ownership of the financial asset; or
o
EQB has neither retained nor transferred substantially all the risks and rewards of ownership in the
financial asset, but has transferred control of the asset.
Any interest in transferred financial assets that qualify for derecognition that is created or retained by EQB is
recognized as a separate asset or liability in the Consolidated Balance Sheet. On derecognition of a financial asset,
the difference between the carrying amount of the asset (or the carrying amount allocated to the portion of the
asset transferred), and the sum of (i) the consideration received (including any new asset obtained less any new
liability assumed) and (ii) any cumulative gain or loss that had been recognized in OCI is recognized in the
Consolidated Statement of Income.
If the transfer of assets does not meet the criteria for derecognition, EQB continues to recognize the financial asset
and also recognizes a financial liability for the consideration received upon the transfer in the Consolidated Balance
Sheet.
The derecognition criteria is also applied to the transfer of part of an asset, rather than a whole, or to a group of
similar financial assets in their entirety, when applicable. When it is applied to part of an asset, the part comprises
of specifically identified cash flows, a fully proportionate share of the asset, or a fully proportionate share of a
specifically identified cash flow from the asset.
Financial liabilities
EQB derecognizes a financial liability when the obligation under the liability is discharged, cancelled or expires.
(v) Offsetting
Financial assets and liabilities are offset and the net amount presented in the Consolidated Balance
Sheet when EQB has a legal right to set off the recognized amounts and it intends either to settle on a net basis or
to realize the asset and settle the liability simultaneously. Income and expenses are presented on a net basis only
when permitted under IFRS or for gains and losses arising from a group of similar transactions.
(b) Investments
Investments are recognized on settlement date and initially measured at fair value and subsequently
measured depending upon their classification as follows:
•
Debt securities classified as AMC; these investments are subsequently measured at amortized cost using the
effective interest rate method;
•
Debt securities classified as at FVOCI; these investments are subsequently measured at fair value, with fair
value changes recorded in other comprehensive income and moved to the Consolidated Statement of Income
on derecognition;
•
Debt and Equity securities classified as at FVTPL; these investments are subsequently measured at fair value,
with fair value changes recorded in the Consolidated Statement of Income; and
•
Equity securities designated as at FVOCI; these investments are subsequently measured at fair value, with fair
value changes recorded in other comprehensive income and moved to retained earnings on derecognition.
For debt securities measured at FVOCI, gains and losses are recognized in OCI, except for the following, which are
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recognized in Consolidated Statement of Income in the same manner as financial assets measured at amortized
cost:
•
Interest revenue using the effective interest rate method; and
•
ACL and reversals.
When a debt security measured at FVOCI is derecognized, the cumulative gain or loss previously recognized in OCI
is reclassified from OCI to the Consolidated Statement of Income.
EQB elects to present changes in the fair value of certain investments in equity instruments through OCI when
they are not held for trading. The election is made on an instrument-by-instrument basis on initial recognition and
is irrevocable. Gains and losses on such equity instruments are never reclassified to Consolidated Statement of
Income and no impairment is recognized in Consolidated Statement of Income. Dividends are recognized in
Consolidated Statement of Income, unless they clearly represent a recovery of part of the cost of investment, in
which case they are recognized in OCI. Cumulative gains and losses recognized in OCI are transferred to retained
earnings on disposal of the investment.
(c) Loans receivable
Loans receivable measured at amortized cost
Loans are initially recognized at fair value and subsequently measured at amortized cost, plus accrued interest,
using the effective interest rate method, and are reported net of unamortized origination fees, commitment
income, premiums or discounts and an allowance for ECL. Net fees relating to loan origination are amortized to
income on an effective yield basis over the term of the loans to which they relate and are included in Interest
income – Loans in the Consolidated Statement of Income.
Loans receivable measured at FVTPL
Certain loans measured at FVTPL are carried at fair value with changes in fair value included in Non-interest
revenue – Net gains (losses) on securitization activities and derivatives in the Consolidated Statement of Income.
Net fees relating to loan origination are recognized in income as incurred and are included in Interest income –
Loans in the Consolidated Statement of Income.
(d) Cash and cash equivalents
Cash and cash equivalents consist of deposits with regulated financial institutions and highly liquid short-term
investments, including government guaranteed investments and other money market instruments, whose term to
maturity at the date of purchase are three months or less and are readily convertible to known amounts of cash
which are subject to an insignificant risk of changes in value. Interest earned on cash and cash equivalents is
included in Interest income – Other in the Consolidated Statement of Income.
(e) Securities purchased under reverse repurchase agreements
Securities purchased under reverse repurchase agreements represent purchases of Government of Canada
guaranteed debt securities and are treated as collateralized lending transactions as they represent the purchase
of securities with a simultaneous agreement to sell them back at a specified price on a specified future date,
which is generally short term. These receivables are classified and measured at amortized cost plus accrued
interest on the Consolidated Balance Sheet. The interest income earned from these investments is recorded on
an accrual basis using the effective interest rate method and is included in Interest income – Investments in the
Consolidated Statement of Income.
(f)
Securitizations
In the normal course of business, EQB securitizes insured residential loans through the Government of Canada’s
National Housing Act (NHA) Mortgage-Backed Securities (MBS) and Canada Mortgage Bond (CMB) programs,
which are facilitated by the Canada Mortgage and Housing Corporation (CMHC). EQB securitizes the loans through
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the creation of MBS and the ultimate sale of MBS to third party investors or the Canada Housing Trust (CHT).
EQB also securitizes uninsured residential loans by entering into an agreement to sell these loans into a program
sponsored by a major Schedule I Canadian bank.
Securitized loans and securitization liabilities
Insured loans in MBS that are sold to third parties and do not qualify for derecognition continue to be classified as
Loans receivable on the Consolidated Balance Sheet and they are measured at amortized cost, plus accrued
interest, and are reported net of unamortized origination fees, commitment income, premiums or discounts and
insurance costs. Net fees and any premium or discount relating to loan origination are amortized to income on an
effective yield basis over the term of the loans to which they relate and are included in Interest income – Loans in
the Consolidated Statement of Income.
Sale of uninsured residential loans do not qualify for derecognition and are classified as Loans receivable on the
Consolidated Balance Sheet. These loans are measured at amortized cost, plus accrued interest, and are reported
net of unamortized origination fees, commitment income, premiums or discounts. Net fees and any premium or
discount relating to loan origination are amortized to income on an effective yield basis over the term of the loans
to which they relate, and are included in Interest income – Loans in the Consolidated Statement of Income.
In addition, these transactions are considered secured financing and result in the recognition of securitization
liabilities. Securitization liabilities are measured at amortized cost, plus accrued interest, and are reported net of
any unamortized premiums or discounts and transaction costs incurred in obtaining the secured financing.
Interest expense is recognized over the expected term of borrowing by applying the effective interest rate to the
carrying amount of the liability.
Securitization retained interest and servicing liability
In certain securitization transactions that qualify for derecognition, EQB has a continuing involvement in the
securitized asset that is limited to retained rights in future excess interest and the liability associated with servicing
these assets. Under IFRS 9, the securitization retained interest is classified as AMC. The servicing liability is reported
as part of Other liabilities. During the life of the securitization, as cash is received, and servicing fees are paid, the
retained interests and the servicing liability are amortized and recognized in the Consolidated Statement of Income
under Gains on sale and income from retained interests.
Gains on securitization
When a sale results in derecognition, the related loans are removed from the Consolidated Balance Sheet and a
gain or loss is recognized in the Consolidated Statement of Income under Non-interest revenue – Net losses on
securitization activities and derivatives.
(g) Purchased loans
All purchased financial assets are initially measured at fair value on the date of acquisition. The fair value of loans
purchased is determined by estimating the principal and interest cash flows expected to be collected and
discounting those cash flows at a market rate of interest. The fair value adjustment set up for these loans on the
date of acquisition is amortized over the life of these loans and included in Interest income – Loans in the
Consolidated Statement of Income.
On the date of acquisition, purchased performing loans follow the same accounting treatment as originated
performing loans, and are included in Stage 1. As a result, immediately after the date of acquisition, a 12-month
allowance is recorded in provision for credit losses in the Consolidated Statement of Income. Subsequent to the
acquisition date, ACLs are estimated in a manner consistent with EQB’s impairment policy that is applied to loans
that are originated.
Purchased credit impaired loans are reflected in Stage 3 and are subject to lifetime allowance for credit losses.
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Any changes in expected cash flows since the date of acquisition are recorded as a charge/recovery in the
provision for credit losses in the Consolidated Statement of Income.
(h) Business combinations and goodwill
Business combinations are accounted for using the acquisition method. Goodwill represents the excess purchase
price paid over the fair value of identifiable assets acquired and liabilities assumed in a business combination on
the date of acquisition.
Goodwill is allocated to cash-generating units (CGUs) for the purpose of impairment testing, which is the lowest
level at which goodwill is monitored for internal management purposes. Impairment testing is performed at least
annually and when an event or change in circumstances indicates that the carrying amount may be impaired.
Goodwill is carried at cost less accumulated impairment losses and is included in Other assets on the
Consolidated Balance Sheet. Goodwill impairment testing is performed at least annually, by comparing the
carrying values and the recoverable amounts of the CGUs to which goodwill has been allocated to determine
whether the recoverable amount of each CGU is greater than its carrying value. If the carrying amount of the CGU
were to exceed its recoverable amount, an impairment calculation would be performed. The recoverable amount
of a CGU is higher of its fair value less costs to sell and value in use.
(i)
Foreign currency translation
On initial recognition, monetary assets and liabilities denominated in foreign currencies are translated into
Canadian Dollars at rates prevailing on the date of the transaction. At the balance sheet date, these foreign
currency monetary assets and liabilities are remeasured into Canadian Dollars at rates prevailing at the balance
sheet date. Foreign exchange gains and losses resulting from the translation on remeasurement or settlement of
these items are recognized in Fees and other income in the Consolidated Statement of Income.
(j)
Derivative financial instruments
EQB uses derivative financial instruments primarily to manage exposure to interest rate risk. Derivative
instruments that are typically used are interest rate swaps, bond forwards, total return swaps, and cross currency
swaps. Interest rate swaps are used to adjust exposure to interest rate risk by modifying the maturity
characteristics of existing assets and liabilities. Bond forwards are used to hedge interest rate exposures resulting
from changes in interest rates between the time EQB commits to funding a loan it intends to securitize through
the MBS and CMB programs, and the date of securitization. Total return swaps are used to hedge the risk of
changes in future cash flows related to EQB’s Restricted share unit (RSU), Performance share unit (PSU), Treasury
share unit (TSU), and Deferred share unit (DSU) plans. EQB also uses total return swaps to hedge the
reinvestment risk between the amortizing MBS and the bullet CMB related to its CMB activities.
Derivatives embedded in other financial instruments or host contracts are treated as separate derivatives when
the following conditions are met:
•
their economic characteristics and risks are not closely related to those of the host contract;
•
a separate instrument with the same terms as the embedded derivative would meet the definition of a
derivative; and
•
the combined contract is not held for trading or designated at fair value through profit or loss.
Separated embedded derivatives are presented with other derivative assets and liabilities in the Consolidated
Balance Sheet.
Cash flow hedges
In order for a derivative to qualify as an accounting hedge, the hedging relationship must be designated and
formally documented at its inception, detailing the particular risk management objective and strategy for the
hedge and the specific asset, liability, or cash flow being hedged, the hedging instrument, as well as how its
effectiveness is being assessed. Changes in the fair value of the derivative must be highly effective in offsetting
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changes in the amount of future cash flows being hedged.
Hedge effectiveness is evaluated at the inception of the hedging relationship and on an ongoing basis,
retrospectively and prospectively, primarily using quantitative statistical measures of correlation. The change in
the fair value of the hedging instrument will be recorded on the Consolidated Balance Sheet under AOCI as either
deferred gains or losses during the hedge term only to the extent of the effective portion of the hedges. Any
ineffectiveness in the hedging relationship, occurring as a result of mismatch in critical terms such as tenor and
timing of cash flows between hedging instruments and hedged items, is included in Non-interest revenue – Gains
on securitization activities and income from securitization retained interests in the Consolidated Statement of
Income as it occurs.
EQB’s cash flow hedges include hedges of anticipated highly probable cash flows on fixed rate liabilities arising
from accounting for securitization transactions as secured financing under IAS 39, Financial Instruments:
Recognition and Measurement. EQB enters into bond forwards (including certain embedded derivatives) to hedge
this cash flow risk and applies hedge accounting to these derivative financial instruments. EQB also enters into
interest rate swaps to hedge future cash flows related to its floating rate liabilities. To the extent that changes in
the fair value of the derivative do not exceed the changes in the fair value of the hedged item they are recorded in
OCI, net of tax. The cumulative amounts deferred in AOCI are reclassified to Interest expense – Securitization
liabilities in the Consolidated Statement of Income, over the term of the related hedged item.
EQB’s cash flow hedges also include Total return equity swap contracts (TRS) used to hedge the risk of changes in
future cash flows related to its RSU, PSU, and TSU plans. The value of RSUs, PSUs, and TSUs issued is linked to the
price of EQB’s common shares over the period the TRS is in effect. The fair value of the TRS is included in Other
assets and/or Other liabilities in the Consolidated Balance Sheet and the effective portion of the changes in fair
values of these TRS is recorded in OCI, net of tax. The cumulative amounts deferred in AOCI are reclassified to Non-
interest expense – Compensation and benefits in the Consolidated Statement of Income, over the vesting period of
the RSUs, PSUs or TSUs.
Fair value hedges
In order for a derivative to qualify as an accounting hedge, the hedging relationship must be designated and
formally documented at its inception, detailing the particular risk management objective and strategy for the
hedge and the specific asset, liability or cash flow being hedged, the hedging instrument, as well as how its
effectiveness is being assessed. Changes in the fair value of the derivative must be highly effective in offsetting
changes in the fair value of the hedged asset or liability.
Hedge effectiveness is evaluated at the inception of the hedging relationship and on an ongoing basis,
retrospectively and prospectively, primarily using quantitative statistical measures of correlation. Hedge
ineffectiveness, if any, are a result of differences in maturities and prepayment frequency between hedging
instruments and hedged items.
EQB enters into interest rate swap agreements to manage interest rate exposures on fixed rate deposits used to
fund floating rate loans. The fair values of these interest rate swap agreements are included in Other assets and/or
Other liabilities with changes in fair value recorded in Interest expense – Deposits. Changes in the fair value of
deposits attributable to the hedged risks are also included in Interest expense – Deposits. For most hedging
relationships, EQB has applied hedge accounting.
EQB enters into interest rate swap agreements to manage interest rate exposures on fixed rate securitization
liabilities. The fair value of these interest rate swap agreements is included in Other assets and/or Other liabilities
with changes in fair value recorded in Non-interest revenue – Net gains on securitization activities and derivatives.
Changes in fair value of the securitization liability attributable to the hedged risk, is also included in Non-interest
revenue – Gains on securitization activities and income from securitization retained interests. EQB applies hedge
accounting to these derivatives.
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EQB also enters into interest rate swap agreements to manage interest rate exposures on fixed rate loan assets.
The fair value of these interest rate swap agreements is included in Other assets and/or Other liabilities with
changes in fair value recorded in Interest income Loans – Personal and/or Loans – Commercial. Changes in fair
value of the loan assets attributable to the hedged risk, is also included in Interest income Loans – Personal
and/or Loans – Commercial. EQB applies hedge accounting to these derivatives.
EQB enters into interest rate swap agreements to manage interest rate exposures on its investment in fixed rate
provincial bonds. The fair value of these interest rate swap agreements is included in Other assets and/or Other
liabilities with changes in fair value recorded in Non-interest revenue – Net gain (loss) on investments. Changes in
fair value of the provincial bonds is attributable to the hedged risk and is also included in Non-interest revenue –
Net gain (loss) on investments. EQB applies hedge accounting to these derivatives.
EQB enters into cross currency interest rate swap agreements to manage interest rate and foreign exchange
exposures on fixed rate foreign currency covered bond liabilities. The fair value of these cross-currency interest
rate swap agreements is included in Other assets and/or Other liabilities with changes in fair value recorded in
Interest expense – Deposits. Changes in fair value of the foreign currency covered bond liabilities attributable to
the hedged risk, is also included in Interest expense – Deposits. EQB applies hedge accounting to these
derivatives.
EQB’s hedging activities are transacted with approved counterparties, which are limited to Canadian chartered
banks, their subsidiaries and other financial intermediaries.
Non hedge accounting
EQB uses TRSs to hedge the risk of changes in future cash flows related to its DSU plan. The value of the DSU is
linked to the price of EQB’s common shares over the period the TRS is in effect. The fair value of the TRS is
included in Other assets and/or Other liabilities in the Consolidated Balance Sheet and changes in fair value of
these TRSs being recorded in Non-interest expense – Compensation and benefits in the Consolidated Statement
of Income for the period in which the changes occur. EQB does not apply hedge accounting to these derivative
instruments.
EQB enters into bond forwards to manage interest rate exposures for certain loan commitments and funded
loans until the date they are securitized. The fair values of these bond forwards are included in Other assets
and/or Other liabilities with changes in fair value recorded in Non-interest revenue – Gains on sale and income
from retained interests. Changes in fair value of loans and loan commitments are also included in Non-interest
revenue – Gains on sale and income from retained interests. EQB does not apply hedge accounting to these
derivative instruments.
EQB also enters into foreign exchange forwards to manage foreign exchange exposures on certain foreign
currency liabilities. The fair value of these foreign exchange forwards is included in Other assets and/or Other
liabilities with changes in fair value recorded in Non-interest revenue – Fees and other income. Changes in foreign
currency translation of foreign currency liabilities are also included in Non-interest revenue – Fees and other
income. EQB does not apply hedge accounting to these derivative instruments.
(k) Leases
As a Lessor:
Identification of a lease
At the inception of each lease, EQB assesses if it is a finance lease or an operating lease. The assessment is based
on substantially transferring all the risks and rewards to the lessee. If substantially all of the risks and rewards
incidental to ownership are transferred to the lessee, the lease is considered a finance lease, otherwise it is
considered an operating lease.
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Recognition
At the lease commencement date, EQB includes assets held under a finance lease in Loans – Commercial, on its
Consolidated Balance Sheet at an amount equal to the net investment in equipment financing. The investment in a
finance lease is initially measured at the present value of the lease payments that are not received at the
commencement date, discounted using the interest rate implicit in the lease. The interest rate is adjusted for all
the initial direct costs associated with the origination of finance lease that are factored into the determination of
the interest rate implicit in the lease. Lease payments included in the measurement of investment in equipment
financing include fixed and variable lease payments.
Subsequent measurement
The net investment in equipment financing includes gross minimum lease payments receivable, less the
unamortized portion of unearned finance income, security deposits held, and the allowance for credit losses. The
finance income earned is included in Interest income – Commercial Loans in the Consolidated Statement of
Income on a basis that reflects a constant periodic rate of return on the gross investment in equipment financing
receivables.
As a Lessee:
Identification of a lease
At the inception of a contract, EQB assesses whether the contract is, or contains, a lease. A contract is, or contains,
a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange
for consideration. To assess if the contract conveys the right to control the use of an identified asset, EQB
assesses whether:
•
the contract involves the use of an identified asset – this may be specified explicitly or implicitly in the
contract and is physically distinct or represents substantially all of the capacity of a physically distinct asset. If
the supplier has a substantive substitution right, then the asset is not considered as identified;
•
EQB has the right to obtain substantially all of the economic benefits from the use of the asset throughout
the period of use; and
•
EQB has the right to direct the use of the asset. EQB has this right when it has the decision-making rights that
are most relevant to changing the purpose of the asset use throughout the period of use.
Recognition
EQB recognizes a Right-of-Use (ROU) asset and a lease liability at the lease commencement date. The ROU asset
is initially measured at cost, which comprises the initial amount of lease liability adjusted for any lease
payments made at or before the commencement date, plus any initial direct costs incurred, less any lease
incentives received.
The lease liability is initially measured at the present value of the lease payments that are not paid at the
commencement date, discounted using the interest rate implicit in the lease or, if the rate cannot be readily
determined, EQB’s incremental borrowing rate.
Subsequent measurement
The ROU asset is subsequently depreciated using the straight-line method from the commencement date to the
earlier of the end of the useful life of the ROU asset or the end on the lease term. In addition, the ROU asset is
periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.
The lease liability is measured at amortized cost using the effective interest rate method. The liability is
remeasured if there are changes to the lease rates, or changes to EQB’s assessment of whether it will exercise the
extension or termination options per the lease contracts.
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After the commencement date, if a lease is remeasured, an adjustment is made to the ROU asset. In the event
that the carrying amount of the ROU asset is reduced to zero and there is a further reduction in the measurement
of the lease liability, the remaining amount is recognized in the Consolidated Statement of Income.
The ROU assets and corresponding lease liabilities are included in Other Assets and Other Liabilities on EQB’s
Consolidated Balance Sheet.
Short-term leases and leases of low-value assets
EQB has elected not to recognize a ROU asset or lease liability for short-term leases that have a lease term of 12
months or less and leases of low-value assets. EQB recognizes the lease payments associated with these leases as
an expense on a straight-line basis over the lease term.
(l)
Compensation plans
EQB offers several benefit programs to eligible employees. These benefits include a deferred profit sharing plan,
employee stock purchase plan, annual bonuses, and compensation in the form of share-based payments.
(i) Short-term employee benefits
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as
the related service is provided. A liability is recognized for the amount expected to be paid under short-
term bonus plans if EQB has a present legal or constructive obligation to pay this amount as a result of
past service provided by the employee and the obligation can be estimated reliably.
(ii) Deferred profit sharing plan (DPSP)
EQB has a DPSP under which EQB pays fixed contributions to a separate entity and will have no legal or
constructive obligation to pay further amounts. Obligations for contributions are recognized as an
expense in income when they are due in respect of service rendered before the end of the reporting
period.
(iii) Stock-based compensation
Stock option plan
EQB has a stock option plan for eligible employees. Under this plan, options are periodically awarded to
participants to purchase common shares at prices equal to the closing market price of the shares or the
volume-weighted average closing price of EQB’s common shares on the TSX for the five consecutive
trading days immediately prior to the date the options were granted. EQB uses the fair value-based
method of accounting for stock options and recognizes compensation expense based on the fair value of
the options on the grant date, determined by using the Black-Scholes option pricing model. The fair value
of the options is recognized on a straight-line basis over the vesting period of the options granted as
compensation expense with a corresponding increase in Contributed surplus. The awards are delivered
in tranches; each tranche is considered a separate award and is valued and amortized separately.
Expected forfeitures are factored into determining the stock option expense and the estimates are
periodically adjusted in the event of actual forfeitures or for changes in expectations. The Contributed
surplus balance is reduced as the options are exercised and the amount initially recorded for the options
in Contributed surplus is reclassified to capital stock. Compensation expense related to the stock-based
compensation plan is included in Non-interest expense – Compensation and benefits in the Consolidated
Statement of Income.
Restricted share unit (RSU) plan
EQB has an RSU plan and may grant RSUs and/or Performance Share Units (PSUs) to eligible employees
on an annual basis. The expense related to the award of these units is included in Non-interest expense –
Compensation and benefits in the Consolidated Statement of Income over the vesting period and any
corresponding liability is included in Other liabilities in the Consolidated Balance Sheet. Since each RSU or
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PSU represents a notional common share, any changes in unit value and re-invested notional dividend
amounts are recognized in the Consolidated Statement of Income. Each RSU or PSU held at the end of
the vesting period including those acquired as dividend equivalents will be paid to the eligible employee
in cash, the value of which will be based on the volume-weighted average closing price of EQB’s common
shares on the TSX for the five consecutive trading days immediately prior to vesting. The value of PSUs
may be increased or decreased up to 25%, based on EQB’s relative total shareholder return compared to
a defined peer group of financial institutions in Canada, and the incremental expense or recovery on
those shares is recorded when EQB can reliably estimate the actual payout.
Deferred share unit (DSU) plan
EQB has a DSU plan for Directors. The obligation that results from the award of a DSU is recognized in
income upon the grant of the unit and the corresponding amount is included in Other liabilities in the
Consolidated Balance Sheet. A Director will be credited with additional DSUs whenever a cash dividend is
declared by EQB. The change in the obligation attributable to the change in stock price of EQB and
dividends paid on common shares is recognized in Non-interest expense – Other in the Consolidated
Statement of Income for the period in which the changes occur. The redemption value of each DSU is the
volume-weighted average trading price of the common shares of EQB on the TSX for the five trading days
immediately prior to the redemption date.
Treasury share unit (TSU) plan
EQB has a TSU plan for its eligible employees and may grant Treasury Performance Share Units (TPSUs),
under the TSU plan adopted in 2022, for a term of ten years. Under the plan, 50% of the TPSUs cliff vest
after 3 years, and the remaining 50% cliff vest after 4 years, subject to performance conditions. Under the
plan, each TPSU represents one notional common share and earns notional dividends, which are
reinvested into additional TPSUs when cash dividends are paid on EQB’s common shares. When the TPSUs
vest, the eligible employee can elect to settle in shares issued from treasury, or in cash. The expense related
to the award of these units is included in Non-interest expense – Compensation and benefits in the
Consolidated Statement of Income over the vesting period and any corresponding liability is included in
Other liabilities in the Consolidated Balance Sheet.
Employee stock purchase (ESP) plan
EQB has an ESP plan for eligible employees. Under this plan, employees have the option of directing a
portion of their gross salary towards the purchase of EQB’s common shares. EQB matches a fixed portion
of employee share purchases up to a specified maximum. Employer contributions are recognized in Non-
interest expense – Compensation and benefits in the period incurred.
(m) Income taxes
Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognized in income
except to the extent that it relates to items recognized directly in OCI or equity. Current tax is the expected tax
payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at
the reporting date, and any adjustment to tax payable in respect of previous years.
EQB follows the asset and liability method of accounting for income taxes. Under the asset and liability method,
deferred tax assets and liabilities represent the amount of tax applicable to temporary differences between the
carrying amounts of the assets and liabilities and their values for tax purposes. Deferred tax assets and liabilities
are measured using enacted or substantively enacted tax rates expected to apply to taxable income in the years
in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets
and liabilities of a change in tax rates is recognized in income in the years that include the date of enactment or
substantive enactment.
Current tax assets and liabilities are offset if there is a legally enforceable right to offset current tax assets against
current tax liabilities, usually in respect of income taxes levied by the same tax authority on the same taxable
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entity, and EQB intends to settle current tax liabilities and assets on a net basis or settle the tax assets and
liabilities simultaneously.
Deferred tax assets and liabilities are offset if EQB has a legally enforceable right to set off the deferred tax assets
and liabilities related to income taxes levied by the same tax authority on either the same taxable entity; or
different taxable entities, but the entities intend to settle current tax liabilities and assets on a net basis, or their
tax assets and liabilities will be realized simultaneously for each future period in which these differences reverse.
A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences to the
extent that it is probable that future taxable profits will be available against which they can be utilized. Deferred
tax assets are reviewed at each reporting date and are reduced to the extent it is no longer probable that the
related tax benefit will be realized.
(n) Capital assets
Capital assets are carried at cost less accumulated depreciation. Depreciation is calculated using a declining
balance method over the estimated useful lives of the assets at the following annual rates as this most closely
reflects the pattern of consumption of the future economic benefits:
Capital asset categories
Rate of depreciation
Furniture, fixtures and office equipment
10% to 20%
Computer hardware and software
20% to 33%
Leasehold improvements are depreciated on a straight-line basis over the lesser of the lease term and the
estimated useful life of the asset.
Depreciation methods, useful lives and residual values are reassessed at each financial year end and adjusted
appropriately.
(o) Intangible assets
Intangible assets are comprised of internally generated system, software development costs and core deposits
and Trust business relationships acquired. An intangible asset is recognized only when its cost can be reliably
measured and includes all directly attributable costs necessary to create the asset to be capable of operating in
the manner intended by management. Research costs are expensed and eligible development costs are
capitalized. Intangible assets are carried at cost less any accumulated amortization and accumulated impairment
losses, if any, in the Consolidated Balance Sheet. EQB’s intangible assets are amortized on a straight-line basis
over their expected useful lives, ranging from 3 to 12 years. The useful lives of intangible assets are reviewed
annually for any changes in circumstances that could impact the period over which the intangible assets are
amortized. Amortization expenses are included in Non-interest expenses – Other in the Consolidated Statement
of Income.
Intangible assets, including those under development are assessed for indicators of impairment at each reporting
period. If there’s an indication that impairment exists, EQB performs an impairment test by comparing the
carrying amount of the intangible asset to its recoverable amount. If the recoverable amount is less than its
carrying amount, the carrying amount is written down to its recoverable amount and an impairment loss is
recognized in the Consolidated Statement of Income.
(p) Investment in associates
An associate is an entity in which EQB has significant influence, but not control, over the operating and financial
policies of the entity.
Investments in associates are initially recognized at cost, which includes the purchase price and other costs
directly attributable to the purchase. Associates are subsequently accounted for using the equity method which
reflects EQB’s share of the increase or decrease of the post-acquisition earnings and other movements in the
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associate’s equity.
Investments in associates are evaluated for impairment at the end of each financial reporting period, or more
frequently if events or changes in circumstances indicate the existence of objective evidence of impairment.
For purposes of applying the equity method for an investment that has a different reporting period from EQB,
adjustments are made for the effects of any significant events or transactions that occur between the reporting
date of the investment and the reporting date of EQB.
(q) Assets held-for-sale
Non-current non-financial assets are classified as held-for-sale if their carrying amount will be recovered
principally through a sale transaction rather than through continuing use. These assets meet the criteria for
classification as held-for-sale if they are available for immediate sale in their present condition and their sale is
considered highly probable to occur within one year.
Non-current non-financial assets classified as held-for-sale are measured at the lower of their carrying amount
and fair value less costs to sell and are presented within other assets in the Consolidated Statement of Financial
Position. Any subsequent write-down to fair value less costs to sell is recognized in the Consolidated Statement of
Income, in Non-interest expenses - Others. Any subsequent increase in the fair value less costs to sell, to the
extent this does not exceed the cumulative write-down, is also recognized in Non-interest expenses - Others,
together with any realized gains or losses on disposal.
(r)
Deposits
Deposits are comprised of Guaranteed Investment Certificates (GIC), High Interest Savings Accounts (HISA),
institutional deposit notes and covered bonds. Deposits, with the exception of those designated as at fair value
through profit or loss, are recorded on the Consolidated Balance Sheet at amortized cost plus accrued interest,
using the effective interest rate method.
Deferred deposit agent commissions are accounted for as a component of deposits and are amortized on an
effective yield basis through Interest expense – Deposits. Commissions relating to deposits designated at fair
value through profit or loss are expensed as incurred.
(s) Covered bond
In the normal course of business, EQB sells uninsured residential loans to a separate guarantor entity, EQB
Covered Bond (Legislative) Guarantor Limited Partnership (Guarantor LP), established by EQB exclusively for its
Covered Bond Program (the Program). The sale of uninsured residential loans under the Program do not qualify
for derecognition and are classified as Loans receivable on the Consolidated Balance Sheet and are measured at
amortized cost, plus accrued interest, and are reported net of unamortized origination fees, commitment income,
premiums or discounts.
These sale transactions are considered secured funding and are recognized under Deposits on the Consolidated
Balance Sheet. These deposits are measured at amortized cost, plus accrued interest, and are reported net of any
unamortized premiums or discounts and transaction costs incurred in obtaining the secured funding. Interest
expense is recorded over the expected term of borrowing by applying the effective interest rate to the carrying
amount of the liability and is recorded under Interest expense – Deposits in the Consolidated Statement of
Income. The Guarantor LP is consolidated with EQB, as EQB has the decision-making power and ability to use that
power to affect EQB’s returns.
(t)
Obligations under repurchase agreements
Investments sold under repurchase agreements represent sales of Government of Canada guaranteed debt
securities by EQB effected with a simultaneous agreement to purchase the assets back at a specified price on a
specified future date, which is generally short term. Repurchase agreements are treated as borrowings and are
carried at amortized cost, plus accrued interest, using the effective interest rate method, recorded in the
Consolidated Balance Sheet at the respective prices at which the investments were originally sold plus accrued
interest. Interest expense relating to repurchase agreements is recorded in Interest expense – Other in the
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Consolidated Statement of Income.
(u) Funding facilities
Funding facilities include secured and unsecured credit facilities from various Schedule 1 banks and a Bearer
Deposit Notes program. Funding facilities are recorded in the Consolidated Balance Sheet at amortized cost and
interest expense is recorded using the effective interest rate method.
(v) Put option liability – non-controlling interest
EQB has entered into an arrangement as part of ACM’s acquisition, that grants the non-controlling interest (NCI)
holders a put option to sell their shares to EQB at a pre-agreed arrangement based on projected future EBITDA
multiples. EQB has recognized a put option liability at the date of acquisition based on the present value of
projected EBITDA multiples. The liability amount is recognized within Contributed surplus/deficit and is
presented in Other Liabilities. The liability is fair valued at period end based on the present value of the updated
EBITDA projections. The liability is classified as at Fair value through equity (FVEQ).
(w) Share capital Issuance costs
Incremental costs directly attributable to the issuance of an equity instrument are deducted from the initial
measurement of the equity instruments and are presented net of tax.
(x) Treasury preferred shares
Under the Normal course issuer bid (NCIB) program, EQB repurchases and cancels its issued preferred shares.
These repurchased preferred shares are deducted from the outstanding preferred shares under the
Shareholders’ Equity at cost. Any gain or loss arising on the difference between the carrying value and the
purchase consideration is recognized in Retained Earnings.
(y) Other equity instruments
EQB issues LRCN which are classified as equity instruments and form part of Equitable Bank’s additional Tier 1
capital. Incremental costs directly attributable to the issuance of LRCNs are deducted from the initial measurement
of the equity instrument and are presented net of tax. Distributions on the LRCNs are recognized as a reduction in
equity when payable.
(z) Earnings per share
Basic earnings per share is computed by dividing net income available to common shareholders by the weighted
average number of common shares outstanding for the year. Net income available to common shareholders is
determined by deducting the dividend entitlements of preferred shareholders from net income. Diluted earnings
per share reflects the potential dilution that could occur if additional common shares are assumed to be issued
under securities or contracts that entitle their holders to obtain common shares in the future. The number of
additional shares for inclusion in diluted earnings per share calculations is determined using the treasury stock
method. Under this method, stock options whose exercise price is less than the average market price of EQB’s
common shares are assumed to be exercised and the proceeds are used to repurchase common shares at the
average market price for the period. The incremental number of common shares issued under stock options and
repurchased from proceeds is included in the calculation of diluted earnings per share.
(aa) Interest
Interest income and interest expense are recognized in the Consolidated Statement of Income using the effective
interest rate method and the rate is applied to the gross carrying amount of the asset (when the asset is not credit
impaired) or to the amortized cost of the liability. The effective interest rate is the rate that exactly discounts the
estimated future cash flow payments and receipts through the expected life of the financial asset or liability (or,
where appropriate, a shorter period) to the carrying amount of the financial asset or liability. When calculating the
effective interest rate, management estimates future cash flows considering all contractual terms of the financial
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instrument, but not ECL. Under IFRS 9, for financial assets that become credit-impaired subsequent to initial
recognition, interest income is calculated by applying the effective interest rate to the amortized cost of the
financial asset. If the asset is no longer credit-impaired, the calculation of interest income reverts back to the
gross basis. The calculation of the effective interest rate includes all transaction costs and fees paid or received
that are an integral part of the effective interest rate. Transaction costs include incremental costs that are directly
attributable to the acquisition or issuance of a financial asset or financial liability.
(bb) Fees
Non-interest revenue includes some ancillary fees related to the administration and servicing of loan portfolios,
transaction fees, syndication and servicing fees, trustee administration fees, and advisory support, plan
administration and service fees from credit unions. These fees are measured based on the consideration
specified in the agreements with customers and are accrued and recognized as the related services are rendered.
Non-interest revenue also includes fee revenue generated from fund management and administration services
from contractual agreements for managing funds by ACM. The fee revenue is recognized on a monthly basis,
based on the contracted percentage of the net asset value of the funds managed or administered.
(cc) Provisions
A provision is recognized if, as a result of a past event, EQB has a present legal or constructive obligation that can
be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the
obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects
current market assessments of the time value of money.
(dd) Write-off
EQB writes off an impaired financial asset, either partially or in full, when there is no realistic prospect of recovery.
Where financial assets are secured, write-off is determined after giving consideration to the expected proceeds
from the realization of collateral. In subsequent periods, recoveries if any, against written off loans are credited to
the provision for credit losses in the Consolidated Statement of Income.
Note 4 – Risk Management
EQB, like other financial institutions, is exposed to the symptoms and effects of global economic conditions and
other factors that could adversely affect its business, financial condition and operating results, which may also
influence an investor to buy, sell or hold shares in EQB. Many of these risk factors are beyond EQB’s direct control.
The use of financial instruments exposes EQB to credit risk, liquidity risk, and market risk. Our risk management
practices and key measures for these risks have been included in the Risk Management section of EQB’s
Management’s Discussion and Analysis and where these risks are related to financial instruments, they have been
included in a yellow tint. These disclosures presented are an integral part of these consolidated financial
statements.
Note 5 – Business Combination
On December 14, 2023, EQB acquired 75% ownership in ACM which had $5 billion in assets under management.
ACM specializes in the creation, structuring, and management of pooled Canadian commercial mortgage funds.
ACM’s existing management team has retained a 25% ownership position in the organization. ACM will operate
independently as a majority-owned subsidiary of EQB and contribute to an increase in its fee-based revenue.
EQB paid $86,483 in total purchase consideration for acquiring 75% ownership in ACM. The purchase
consideration included EQB common shares of $11,000 and $75,483 in cash. The fair value of the 137,244 EQB
common shares issued as part of the consideration was measured using the five days volume weighted average
price prior to the deal close date. As at December 14, 2023, the acquisition contributed $2,970 of assets and
$1,472 of liabilities to EQB’s Consolidated Balance Sheet. The excess of consideration over the fair value of
identifiable net assets has been allocated to customer contracts intangible asset of $54,000, a deferred tax liability
of $12,420, and goodwill of $54,174. None of the goodwill recognized is expected to be deductible for income tax
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purposes. EQB also recognized a non-controlling interest of $10,769 based on the proportionate interest of non-
controlling shareholders in the identifiable net assets of ACM.
Goodwill recognized mainly pertains to access to a diversified new source of service revenue through the
mortgage funds management business and expected future business growth. Customer contracts intangible
asset of $54,000 pertains to existing customer contracts acquired as part of the acquisition that provides a long
term, stable source of service fee revenue. The valuation of the intangible asset requires management to make
significant judgments and estimates relating to customer retention, future cash flows and discount rates.
Transaction costs of $362 relating to the acquisition were expensed and included in non-interest expenses. From
the date of acquisition to October 31, 2024, ACM has contributed $18,317 of revenues and $6,321 to profit before
tax to EQB’s financial results. If the business combination had taken place on November 1, 2023, management
estimates that the revenue for EQB for the year would have been $1,258,103 and profit before tax would have
been $554,551.
Note 6 – Financial Instruments
EQB’s business activities result in a Consolidated Balance Sheet that consists primarily of financial instruments.
The majority of EQB’s net income is derived from gains, losses, income and expenses related to these financial
assets and liabilities.
(a) Valuation methods and assumptions
Valuation methods and assumptions used to estimate fair values of financial instruments are as follows:
(i)
Financial instruments whose cost or amortized cost approximates fair value
The fair value of Cash and cash equivalents and Restricted cash approximate their cost due to their short term
nature.
Securities purchased under reverse repurchase agreements, obligations under repurchase agreements, funding
facilities and certain other financial assets and liabilities are carried at cost or amortized cost, which approximates
fair value.
(ii) Financial instruments classified as at FVOCI, FVEQ and FVTPL
These financial assets and financial liabilities are measured on the Consolidated Balance Sheet at fair value. For
financial instruments measured at fair value where active market prices are available, bid prices are used for
financial assets and ask prices for financial liabilities. For those financial instruments measured at fair value that
are not traded in an active market, fair value estimates are determined using valuation methods which maximize
the use of observable market data and include discounted cash flow analysis and other commonly used valuation
techniques.
(iii) Loans receivable
The estimated fair value of loans receivable is determined using a discounted cash flow calculation and the
market interest rates offered for loans with similar terms and credit risks.
(iv) Deposits
The estimated fair value of deposits is determined by discounting expected future contractual cash flows using
observed market interest rates offered for deposits with similar terms. Deposit liabilities include GICs that are
measured at fair value through profit or loss and are guaranteed by Canada Deposit Insurance Corporation
(CDIC). This guarantee from CDIC is reflected in the fair value measurement of the deposit liabilities.
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(v) Securitization liabilities
The estimated fair value of securitization liabilities is determined by discounting expected future contractual cash
flows using market interest rates offered for similar terms.
(vi) Derivatives
Fair value estimates of derivative financial instruments are determined based on commonly used pricing
methodologies (primarily discounted cash flow models) that incorporate observable market data. Frequently
applied valuation techniques incorporate various inputs such as stock prices, bond prices, and interest rate curves
into present value calculations.
(vii) Other liabilities
The fair value of liabilities representing the right of certain third parties to tender their shares has been
determined using a discounted cash flow model which uses non-observable inputs to estimate the future
purchase price at the settlement date.
The following tables present the carrying values for each category of financial assets and liabilities and their
estimated fair values as at October 31, 2024 and October 31, 2023. The tables do not include assets and liabilities
that are not financial instruments.
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($000s)
October 31, 2024
FVTPL –
Mandatorily
FVOCI – Debt
instruments
FVOCI –
Equity
instruments
FVEQ -
Elected
Amortized
cost
Total
carrying
value
Fair value
Financial assets:
Cash and cash equivalents
-
-
-
-
591,641
591,641
591,641
Restricted cash
-
-
-
-
971,987
971,987
971,987
Securities purchased under
reverse repurchase
agreements
-
-
-
-
1,260,118
1,260,118
1,260,118
Investments
133,146
1,415,347
25,789
-
53,032
1,627,314
1,624,130
Loans – Personal
-
-
-
-
32,273,551
32,273,551
32,303,527
Loans – Commercial(1)
1,446,352
-
-
-
12,178,659
13,625,011
13,599,609
Securitization retained
interests
-
-
-
-
813,719
813,719
819,708
Other assets:
Derivative financial
instruments(2):
Cross-currency interest
rate swaps
158,027
-
-
-
-
158,027
158,027
Interest rates swaps
69,973
-
-
-
-
69,973
69,973
Total return swaps
16,974
-
-
-
-
16,974
16,974
Bond forwards
8,534
-
-
-
-
8,534
8,534
Foreign exchange
forwards
7,170
-
-
-
-
7,170
7,170
Loan commitments
73
-
-
-
-
73
73
Other
-
-
-
-
85,306
85,306
85,306
Total financial assets
1,840,249
1,415,347
25,789
-
48,228,013
51,509,398
51,516,777
Financial liabilities:
Deposits
-
-
-
-
33,739,612
33,739,612
33,877,053
Securitization liabilities
-
-
-
-
14,594,304
14,594,304
14,393,583
Obligations under
repurchase
agreements
-
-
-
-
-
-
-
Funding facilities
-
-
-
-
951,414
951,414
952,055
Other liabilities:
Derivative financial
instruments(2):
Interest rate swaps
84,317
-
-
-
-
84,317
84,317
Total return swaps
3,769
-
-
-
-
3,769
3,769
Bond forwards
2,372
-
-
-
-
2,372
2,372
Foreign exchange
forwards
656
-
-
-
-
656
656
Right-of-use liabilities
-
-
-
-
69,782
69,782
69,782
Other
-
-
-
30,613
428,213
458,826
459,090
Total financial liabilities
91,114
-
-
30,613
49,783,325
49,905,052
49,842,677
(1) Loans – Commercial does not include $1,135,356 (October 31, 2023 - $1,320,684) of equipment financing, as these are specifically excluded for
classification and measurement under IFRS 9. (2) Derivative financial instruments are non-trading, and include derivatives held in hedge accounting
relationships.
Page 115
($000s)
October 31, 2023
FVTPL –
Mandatorily
FVOCI – Debt
instruments
FVOCI – Equity
instruments
Amortized
cost
Total
carrying
value
Fair value
Financial assets:
Cash and cash equivalents
Restricted cash
Securities purchased
under reverse repurchase
agreements
Investments
Loans – Personal
Loans – Commercial(1)
Securitization retained
interests
Other assets:
Derivative financial
instruments(2):
Interest rate swaps
Cross-currency interest
rate swaps
Total return swaps
Bond forwards
Foreign exchange
forwards
Other
-
-
-
549,474
549,474
549,474
-
-
-
767,195
767,195
767,195
-
-
-
908,833 908,833
908,833
195,186
1,742,510 52,686 130,263
2,120,645
2,097,149
-
-
-
32,390,527
32,390,527
31,954,331
481,793
-
-
13,168,127
13,649,920
13,439,734
-
-
-
559,271 559,271
542,900
179,050
-
-
-
179,050
179,050
47,797
16,989
-
-
-
-
-
-
47,797
16,989
47,797
16,989
18,366
9,038
-
-
-
-
-
-
-
-
-
58,298
18,366
9,038
58,298
18,366
9,038
58,298
Total financial assets
948,219
1,742,510
52,686
48,531,988
51,275,403
50,589,154
Financial liabilities:
Deposits
Securitization liabilities
Obligations under
repurchase agreements
Funding facilities
Other liabilities:
Derivative financial
instruments(2):
Interest rate swaps
Cross-currency
interest rate swaps
Total return swaps
Bond forwards
Foreign exchange
forwards
Right-of-use liabilities
Loan commitments
Other
-
-
-
31,996,450
31,996,450
31,737,600
-
-
-
14,501,161
14,501,161
13,977,423
-
-
-
1,128,238
1,128,238
1,128,238
-
-
-
1,736,636
1,736,636
1,736,595
113,010
-
-
-
113,010
113,010
32,545
-
-
-
32,545
32,545
4,067
-
-
-
4,067
4,067
2,179
-
-
-
2,179
2,179
472
-
-
-
472
472
-
-
-
4,560
4,560
4,560
3,620
-
-
-
3,620
3,620
-
-
-
425,555
425,555
425,899
Total financial liabilities
155,893
-
-
49,792,600
49,948,493
49,166,208
(1) Loans - Commercial does not include $1,135,356 (October 31, 2023 - $1,320,684) of equipment financing, as these are specifically excluded for
classification and measurement under IFRS 9. (2) Derivative financial instruments are non-trading, and include derivatives held in hedge accounting
relationships.
Page 116
(b) Fair value of financial instruments
The calculation of fair value is based on market conditions at a specific point in time and therefore may not be reflective of
future fair values. EQB has controls and processes in place to ensure that the valuation of financial instruments is appropriately
determined. The following are the valuation techniques and inputs used for fair value measurements for the instruments that
are carried at fair values on the Consolidated Balance Sheet:
(i) Equity securities
The fair value of equity securities is based on unadjusted quoted prices in active markets, where available. Where equity
securities are less frequently traded, the most recent exchange-quoted pricing is used to determine fair value.
For private equity securities, where quoted prices in active markets are not readily available, the fair value is determined by
considering recent transaction prices, revenue multiples of comparable companies, and external valuations.
(ii) Private equity funds
The fair value of investment in private equity funds is based on net asset valuation statements received from third-parties.
(iii) Derivative financial instruments
Derivative financial instruments mainly include interest rate swaps, cross currency interest rate swaps, total returns swaps, put
options and foreign exchange forwards. Derivative products are valued using a valuation technique with market-observable
inputs including benchmark reference rates for calculating discount curves, and unobservable inputs including projected cash
flows.
(c) Fair value hierarchy
Financial instruments recorded at fair value on the Consolidated Balance Sheet are classified using a fair value hierarchy that
reflects the significance of the inputs used in making the measurements.
The fair value hierarchy has the following levels:
Level 1: valuation based on quoted prices (unadjusted) observed in active markets for identical assets and liabilities.
Level 2: valuation techniques based on inputs other than quoted prices included in Level 1 that are either directly or indirectly
observable for the asset or liability.
Level 3: valuation techniques with significant unobservable market inputs.
The fair value hierarchy requires the use of observable market inputs whenever such inputs exist. The objective of valuation
techniques is to arrive at a fair value determination that reflects the price of the financial instrument at the reporting date that
would have been determined by market participants acting at arm’s length. A financial instrument is classified to the lowest level
of the hierarchy for which a significant input has been considered in measuring fair value.
The following table presents the fair value hierarchy of all financial instruments, whether or not measured at fair value in the
Consolidated Balance Sheet, except for certain financial instruments whose carrying amount approximates their fair values due
to their short-term nature:
Page 117
($000s)
October 31, 2024
Level 1
Level 2
Level 3
Total financial
assets/financial
liabilities at fair
value
Financial assets:
Investments
Loans – Personal
Loans – Commercial
Securitization retained interests
Other assets:
Derivative financial instruments
(1):
Cross currency interest rate swaps
Interest rate swaps
Total return swaps
Bond forwards
Foreign exchange forwards
Loan commitments
Other
1,490,742
46,313
87,075
1,624,130
-
-
32,303,527
32,303,527
-
1,446,352
12,153,257
13,599,609
-
819,708
-
819,708
-
158,027
-
158,027
-
69,973
-
69,973
-
14,606
2,368
16,974
-
8,534
-
8,534
-
7,170
-
7,170
-
73
-
73
-
85,306
-
85,306
Total financial assets
1,490,742
2,656,062
44,546,227
48,693,031
Financial liabilities:
Deposits
-
33,877,053
-
33,877,053
Securitization liabilities
-
11,267,660
3,125,923
14,393,583
Funding facilities
-
952,055
-
952,055
Other liabilities:
Derivative financial instruments
(1):
Interest rate swaps
-
84,317
-
84,317
Total return swaps
-
-
3,769
3,769
Bond forwards
-
2,372
-
2,372
Foreign exchange forwards
-
656
-
656
Other
-
428,477
30,613
459,090
Total financial liabilities
-
46,612,590
3,160,305
49,772,895
(1) Derivative financial instruments are non-trading, and include derivatives held in hedge accounting relationships.
Page 118
($000s)
October 31, 2023
Level 1
Level 2
Level 3
Total financial
assets/financial
liabilities at fair
value
Financial assets:
Investments
Loans – Personal
Loans – Commercial
Securitization retained interests
Other assets:
Derivative financial instruments
(1):
Interest rate swaps
Cross currency interest rate swaps
Total return swaps
Bond forwards
Foreign exchange forwards
Other
2,022,784
-
74,365
2,097,149
-
-
31,954,331
31,954,331
-
481,793
12,957,941
13,439,734
-
542,900
-
542,900
-
-
179,050
47,797
-
-
179,050
47,797
-
632
16,357
16,989
-
-
-
18,366
9,038
58,298
-
-
-
18,366
9,038
58,298
Total financial assets
2,022,784 1,337,874 45,002,994
48,363,652
Financial liabilities:
Deposits
Securitization liabilities
Other liabilities:
Derivative financial instruments
(1):
Interest rate swaps
Cross-currency interest rate swaps
Total return swaps
Bond forwards
Foreign exchange forwards
Loan commitments
Funding facilities
Other
-
31,737,600
-
31,737,600
-
11,275,334
2,702,089
13,977,423
-
113,010
-
113,010
-
32,545
-
32,545
-
662
3,405
4,067
-
2,179
-
2,179
-
472
-
472
-
-
-
-
1,736,595
425,899
3,620
-
-
3,620
1,736,595
425,899
Total financial liabilities
-
45,324,296
2,709,114
48,033,410
(1) Derivative financial instruments are non-trading, and include derivatives held in hedge accounting relationships.
(d) Significant transfers
Significant transfers can occur between the fair value hierarchy levels when additional or new information regarding
valuation inputs and their refinement and observability becomes available. The Bank recognizes transfers between
levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.
The following significant transfers were made between the levels during the year:
-
Investments in debt securities of $46,313 were transferred out of Level 1 to Level 2 due to the level of activity in
the reference market (2023 – no transfers).
-
Investments in debt securities of $1,650 were transferred out of Level 2 to Level 3 due to
restructuring/modification of the instrument (2023 – No transfers).
Page 119
(e)
Level 3 instrument fair value changes
Financial instruments that are carried at fair value on the Consolidated Balance Sheet and categorized at Level 3 in the
fair value hierarchy comprised of Investments, Loans – Commercial, and some Derivative financial instruments. The
following table summarizes the changes in Level 3 instruments as at October 31, 2024 and October 31, 2023:
($000s)
October 31, 2024
Fair value
November
1, 2023
Gains/
(losses)
recorde
d in
income
Gains/
(losses)
recorded
in Other
equity
Purchases/
Issuances
Sales/
Settlements
Transfers
into/out
of Level 3
Fair value
October 31,
2024
Change in
unrealized
gains/
(losses)
recorded in
income(1)
Financial assets:
Investments
74,365
6,376
-
5,799 (1,115)
1,650
87,075
6,381
Derivative financial
instruments:
Total return swaps
16,357
5,125
-
- (19,114)
-
2,368
(4,403)
Total financial assets
90,722
11,501
-
5,799
(20,229)
1,650
89,443
1,978
Financial liabilities:
Other liabilities:
Derivative financial
instruments:
Total return swaps
(3405)
(980)
-
- 616
- (3,769)
(1,013)
Put option
-
- (30,613)
-
-
-
(30,613)
-
Loan commitments
(3,620)
-
-
-
3,620
-
-
-
Total financial liabilities
(7,025)
(980) (30,613)
-
4,236
-
(34,382)
(1,013)
($000s)
October 31, 2023
Fair value
January 1,
2023
Gains/
(losses)
recorded
in income
Gains/
(losses)
recorded
in OCI
Purchases/
Issuances
Sales/
Settlements
Transfers
into/out of
Level 3
Fair value
October
31, 2023
Change in
unrealized
gains/
(losses)
recorded in
income(1)
Financial assets:
Investments
61,499
(2,049)
(425)
15,521
(181)
-
74,365
(2,059)
Derivative financial
instruments:
Total return swaps
14,513
1,844
-
-
-
-
16,357
1,843
Total financial assets
76,012
(205)
(425)
15,521
(181)
-
90,722
(216)
Financial liabilities:
Other liabilities:
Derivative financial
instruments:
Total return swaps
(4,597)
1,192
-
-
-
-
(3,405)
1,192
Loan commitments
(935)
(2,685)
-
-
-
-
(3,620)
(2,685)
Total financial liabilities
(5,532)
(1,493)
-
-
-
-
(7,025)
(1,493)
(1) These amounts represent the gains and losses from fair value changes of Level 3 instruments still held at the end of the period that are recorded
in the Consolidated Statements of Income under Net gains (losses) on loans and investments.
Page 120
(f) Level 3 sensitivity analysis
($000s)
Level 3 Financial
Instruments
Valuation technique
Significant unobservable
inputs
Range of estimates
for unobservable
inputs
Changes in fair value
from reasonably
possible alternatives
Investments – Private
Equity
Market comparables
P/E multiples
1.6x to 10.5x
(740)/740
Investments – Private
Equity Funds
Partnership NAV
statements
Return on investments
-40% to 15%
(14,739)/10,182
Derivatives
Discounted cash
flows
Reinvestment spread
5bps to 30bps
(157)/624
Other liabilities – Put
option
Discounted cash
flows
Discount rate
EBITDA forecasts
15% to 18%
80% to 120%
(609)/1,616
6,123/(6,122)
EQB applies judgment in determining unobservable inputs used to calculate the fair value of Level 3 instruments. The
following are significant unobservable inputs for Level 3 instruments:
P/E multiples
P/E multiples are used to calculate private equity securities valuation, which is determined based on comparable
companies. Higher multiples equate to higher fair values.
Return on investments
Return on investments for private equity funds are based on historical fund returns. Higher returns equate to higher fair
values.
Reinvestment spread
The spread earned on reinvestment assets is estimated based on historical results adjusted for current market
conditions. Higher spreads equate to higher fair values.
Discount rate
The discount rate for the put option is based on the estimated cost of equity for the underlying shares. Higher discount
rates equate to lower fair values.
Forecast EBITDA
The forecast EBITDA for the share tender rights is based on management’s internal business plans. Higher EBITDA
equates to higher fair values.
Page 121
Note 7 – Cash and Cash Equivalents and Restricted Cash
($000s)
October 31, 2024
October 31, 2023
Deposits with regulated financial institutions
Highly liquid short-term investments
591,641
-
299,481
249,993
Cash and cash equivalents
591,641
549,474
Restricted cash – securitization
854,336
597,635
Restricted cash – interest rate swaps
11,571
61,175
Restricted cash – other programs
106,080
108,385
Restricted cash
971,987
767,195
Restricted cash – securitization represents deposits held in trust in connection with EQB’s securitization
activities. These deposits include cash accounts held at a major Schedule I Canadian Bank that hold principal
and interest payments collected from securitized loans awaiting payment to their respective investors, deposits
held as collateral by third parties for EQB’s securitization hedging activities and deposits held in interest
reinvestment accounts in connection with EQB’s participation in the CMB program.
Restricted cash – interest rate swaps represent deposits held as collateral by third parties for EQB’s interest
rate swap transactions. The terms and conditions of these arrangements with counterparties are governed by
the International Swaps and Derivatives Association, Inc. (ISDA) agreements.
Restricted cash – other programs represent deposits held as collateral in connection with EQB’s Home Equity
line of credit, servicing business, deposit and covered bond programs. These balances may be drawn upon
only in the event of insufficient cash flows from the underlying programs. These balances also include deposits
held in trust by third party originators for the use in funding loans on EQB’s behalf, and may be drawn upon
only in the event that the related origination and servicing agreements are terminated.
Note 8 – Securities Purchased Under Reverse Repurchase Agreements
As at October 31, 2024, the fair value of financial assets accepted as collateral that EQB is permitted to sell or
repledge in the absence of default is $1,265,640 (October 31, 2023 – $907,808). EQB is obliged to return
equivalent securities at the repurchase date, and EQB did not sell or repledge any of the collateral as at the
year ended October 31, 2024.
Note 9 – Investments
Carrying value of investments is as follows:
($000s)
October 31, 2024
October 31, 2023
Equity securities measured at FVOCI
25,789
52,686
Equity securities measured at FVTPL
20,845
17,629
Debt securities measured at FVOCI
1,415,347
1,742,510
Debt securities measured at FVTPL
112,301
177,557
Debt securities measured at AMC
53,032
130,263
1,627,314
2,120,645
During the year EQB sold certain debt securities measured at AMC of $30,838 (2023 - $nil) recognizing a
loss on sale of $209 (2023 -$nil).
EQB has elected to designate certain Equity securities to be measured at FVOCI as these investments are
expected to be held for the long term. For the year ended October 31, 2024, EQB earned dividends of $1,848
(2023 − $30,805) on these Equity securities. During the year, EQB sold/redeemed Equity securities of $28,083
Page 122
(2023 − $23,853) and recognized a loss on sale of $31,588 (2023 – loss on sale of $11,042) in Retained earnings.
These investments were disposed for liquidity management purposes.
Net unrealized gains (losses) on investments measured at FVOCI and FVTPL are as follows:
($000s)
2024
2023
Equity securities measured at FVOCI
1,537
(23,723)
Equity securities measured at FVTPL
2,574
(202)
Debt securities measured at FVOCI
18,522
(455)
Debt securities measured at FVTPL
14,559
(6,657)
Note 10 – Loans Receivable
(a) Loans receivable
($000s)
October 31, 2024
Gross
amount
Allowance for credit losses
Net amount
Stage 1
Stage 2
Stage 3
Total
Loans – Personal
Loans – Commercial
32,325,379
27,242
17,371
7,215
51,828
32,273,551
14,872,960
37,985
25,978
48,630
112,593
14,760,367
47,198,339
65,227
43,349
55,845
164,421
47,033,918
($000s)
October 31, 2023
Gross amount
Allowance for credit losses
Net amount
Stage 1
Stage 2
Stage 3
Total
Loans – Personal
Loans – Commercial
32,445,945
29,947 21,758
3,713 55,418
32,390,527
15,034,341
27,503 21,953
14,281 63,737
14,970,604
47,480,286
57,450 43,711
17,994 119,155
47,361,131
Loans – Personal include certain uninsured residential loans with a carrying value of $2,776,775 (October 31,
2023 – $2,382,931) that have been sold but are not derecognized. EQB issues Euro denominated covered bonds
in Europe by securitizing uninsured residential loans on properties in Canada. These uninsured residential
loans are sold and held in a separate guarantor entity i.e. EQB Covered Bond (Legislative) Guarantor Limited
Partnership (Guarantor LP), established by EQB exclusively for the Covered Bonds Program (the Program). The
legal title on the uninsured residential loans that are secured under the Program are held by the Guarantor LP.
The residential loans sold to the Guarantor LP under the Program do not qualify for derecognition as EQB
continues to be exposed to substantially all of the risks and rewards associated with the transferred assets and
retains control of the assets. A key risk associated with transferred loans to which EQB remains exposed after
the transfer to the Program, is the risk of prepayment. As a result, the loans continue to be recognized on
EQB’s Consolidated Balance Sheet at amortized cost and are accounted for as collateral for the secured funding
arrangement, with the corresponding liability presented under Deposits.
Loans – Commercial include certain loans measured at FVTPL that are held for securitization activities. As at
October 31, 2024, the carrying value of these loans was $1,445,660 (October 31, 2023 – $481,037) and included
fair value adjustment of ($5,097) (October 31, 2023 – ($8,614)).
Loans – Commercial also include certain loans that are designated and measured at FVTPL. As at October 31,
2024, the carrying amount of these loans was $692 (October 31, 2023 – $756) and included fair value
adjustment of ($34) (October 31, 2023 – ($87)).
Page 123
The impact of changes in fair value for loans measured at fair value through profit or loss is as follows:
($000s)
2024
2023
Net gains (losses) in fair values for loans measured at FVTPL included in gains on
securitization activities
3,517
(6,059)
Net losses in fair values for loans measured at FVTPL and recognized in net gain (loss) on
loans and investments
-
(6)
Loans – Commercial include loans of $987,652 (October 31, 2023 – $852,440) invested in certain asset- backed
structured entities. EQB holds a senior position in these investments and the maximum exposure to loss is
limited to the carrying value of the investment. EQB does not have the ability to direct the relevant activities of
these structured entities and has no exposure to their variable returns, other than the right to receive interest
income from these investments. Consequently, EQB does not control these structured entities and has not
consolidated them.
Loans – Commercial also include EQB’s net investment in equipment financing of $1,135,356 (October 31,
2023 – $1,320,684). The following table shows the maturity analysis of undiscounted minimum financing
payments reconciled to the net investment in equipment financing:
($000s)
October 31, 2024
October 31, 2023
Minimum financing payments:
Less than 1 year
542,493
575,378
1 year to less than 2 years
403,543
453,655
2 years to less than 3 years
245,270
308,662
3 years to less than 4 years
112,437
149,400
4 years to less than 5 years
36,191
49,576
More than 5 years
7,784
9,941
Non performing leases – net
21,199
10,666
Total undiscounted financing payments receivable
1,368,917
1,557,278
Less:
Fair value on acquisition
(2,722)
(3,904)
Security deposits held
(3,044)
(4,433)
Unearned finance income
(170,461)
(198,988)
Allowance for credit losses
(57,334)
(29,269)
Net investment in equipment financing
1,135,356
1,320,684
For the year ended October 31, 2024, EQB earned finance income of $121,878 (October 31, 2023 –
$94,928) from its investment in equipment financing. As at October 31, 2024, all of EQB’s equipment financing
is fixed rate financing with terms ranging from one to seven years, and approximately 73% of EQB’s
equipment financing is concentrated in the following five industry segments:
October 31, 2024
October 31, 2023
Transportation – Long Haul
37.6%
44.4%
Transportation – Vocational
15.0%
15.5%
Construction
10.9%
8.9%
Esthetics
5.3%
4.8%
Agriculture, forestry, fishing and hunting
4.3%
3.9%
Page 124
(b) Impaired and past due loans
Outstanding impaired loans, net of specific allowances are as follows:
($000s)
October 31, 2024
October 31,
2023
Gross
(1)
Allowance for
credit losses
Net
Net
Loans – Personal
305,492
7,215
298,277
118,077
Loans – Commercial – Conventional and Insured
299,877
31,130
268,747
212,830
Loans – Commercial – Equipment financing
74,159
17,500
56,659
30,689
679,528
55,845
623,683
361,596
(1) Gross balances include loans amounting to $18,295 (October 31, 2023 - $9,962) that are insured.
Outstanding loans that are past due but not classified as impaired are as follows:
($000s)
October 31, 2024
30 − 59 days
60 − 89 days
90 days or more(1)
Total
Loans – Personal
218,238
73,789
-
292,027
Loans – Commercial – Conventional and
Insured
92,028
6,232
-
98,260
Loans – Commercial – Equipment financing
18,896
10,977
-
29,873
329,162
90,998
-
420,160
($000s)
October 31, 2023
30 − 59 days
60 − 89 days
90 days or more(1)
Total
Loans – Personal
154,744
73,277
3,764
231,785
Loans – Commercial – Conventional and
Insured
68,726
35,994
-
104,720
Loans – Commercial – Equipment financing
29,198
14,077
-
43,275
252,668
123,348
3,764
379,780
(1) Includes balances of $nil (October 31, 2023 - $3,764) relating to credit card customers that are past 89 days and less than 180 days.
Page 125
(c) Allowance for credit losses
($000s)
October 31, 2024
12 months ECL
Lifetime non-
credit impaired
Lifetime credit
impaired
Loans – Personal
Stage 1
Stage 2
Stage 3
Total
Balance, beginning of year
29,947
21,758
3,713
55,418
Provision for credit losses:
Transfers to (from) Stage 1
8,858
(8,136)
(722)
-
Transfers to (from) Stage 2
(6,302)
7,459
(1,157)
-
Transfers to (from) Stage 3
(296)
(989)
1,285
-
Re-measurement
(1)
(9,691)
1,969
16,580
8,858
Originations
9,557
-
-
9,557
Discharges
(4,831)
(4,690)
(6,342)
(15,863)
Write-off
-
-
(1,551)
(1,551)
Realized losses
-
-
(5,255)
(5,255)
Recoveries
-
-
664
664
Balance, end of year
(2)(3)
27,242
17,371
7,215
51,828
($000s)
October 31, 2024
12 months ECL
Lifetime non-
credit impaired
Lifetime credit
impaired
Loans – Commercial
Stage 1
Stage 2
Stage 3
Total
Balance, beginning of year
27,503
21,953
14,281
63,737
Provision for credit losses:
Transfers to (from) Stage 1
22,947
(20,773)
(2,174)
-
Transfers to (from) Stage 2
(12,906)
14,800
(1,894)
-
Transfers to (from) Stage 3
(1,511)
(16,893)
18,404
-
Re-measurement
(1)
(7,095)
33,772
80,552
107,229
Originations
15,997
-
-
15,997
Discharges
(6,950)
(6,881)
(4,300)
(18,131)
Write-off
-
-
(53,847)
(53,847)
Realized losses
-
-
(2,410)
(2,410)
Recoveries
-
-
18
18
Balance, end of year
(2)(3)
37,985
25,978
48,630
112,593
(1) Includes movement as a result of significant increase or decrease in credit risk and changes in credit risk due to model
inputs/assumptions that did not result in a transfer between stages (2) The allowance for credit losses includes allowance on loan
commitments amounting to $1,689 (October 31, 2023 - $1,722). (3) Guarantees of $15,451 (October 31, 2023 - $14,089) relating to the
consumer credit portfolio has not been netted-off.
Page 126
($000s)
October 31, 2023
12 months ECL
Lifetime non-
credit impaired
Lifetime credit
impaired
Loans – Personal
Stage 1
Stage 2
Stage 3
Total
Balance, beginning of year
28,303
13,432
2,997
44,732
Provision for credit losses:
Transfers to (from) Stage 1
4,182
(3,914)
(268)
-
Transfers to (from) Stage 2
(9,325)
10,497
(1,172)
-
Transfers to (from) Stage 3
(2,166)
(10,752)
12,918
-
Re-measurement
(1)
3,958
15,618
8,059
27,635
Originations
9,998
-
- 9,998
Discharges
(5,003)
(3,123)
(17,072) (25,198)
Write-off
-
-
(1,691)
(1,691)
Realized losses
-
-
(968) (968)
Recoveries
-
-
910 910
Balance, end of year
(2)(3)
29,947
21,758
3,713
55,418
($000s)
October 31, 2023
12 months ECL
Lifetime non-credit
impaired
Lifetime credit
impaired
Loans – Commercial
Stage 1
Stage 2
Stage 3
Total
Balance, beginning of year
23,430
24,766
3,854
52,050
Provision for credit losses:
Transfers to (from) Stage 1
19,114
(19,038)
(76)
-
Transfers to (from) Stage 2
(7,331)
7,417
(86)
-
Transfers to (from) Stage 3
(774)
(2,569)
3,343
-
Re-measurement
(1)
(13,813)
15,535
23,128
24,850
Originations
10,623
-
- 10,623
Discharges
(3,746)
(4,158)
(420)
(8,324)
Write-off
-
-
(17,821) (17,821)
Realized losses
-
-
- -
Recoveries
-
-
2,359
2,359
Balance, end of year
(2)(3)
27,503
21,953
14,281
63,737
(1) Includes movement as a result of significant increase or decrease in credit risk and changes in credit risk due to model
inputs/assumptions that did not result in a transfer between stages (2) The allowance for credit losses includes allowance on loan
commitments amounting to $1,689 (October 31, 2023 - $1,722). (3) Guarantees of $15,451 (October 31, 2023 - $14,089) relating to the
consumer credit portfolio has not been netted-off.
Page 127
(d) Key inputs, assumptions and model techniques
EQB’s allowance for credit losses is estimated using statistical models that involve a number of inputs and
assumptions. The key drivers of changes in ECL include the following:
•
Transfers between stages, due to significant changes in credit risk;
•
Changes in forward-looking macroeconomic variables, specifically the macroeconomic variables
to which the ECL models are calibrated, which are closely correlated with the credit losses in the
relevant portfolios; and
•
Changes to the probability weights assigned with each scenario.
In addition, these elements are also subject to a high degree of judgment which could have a significant
impact on the level of ACL recognized. The inputs and models used for calculating ECL may not always
capture all characteristics of the market. Qualitative adjustments may be made by management for
certain portfolios as temporary adjustments in circumstances where the assumptions and/or modelling
techniques do not capture all relevant risk factors.
In considering the assumptions for calculating ECL, EQB has also considered ongoing geopolitical
unrest, the current interest rate environment, low growth and high unemployment. EQB has
applied experienced credit judgment in the assessment of underlying credit deterioration and migration of
balances to progressive stages.
(e) Forward-looking macroeconomic scenarios
EQB subscribes to Moody’s Analytics economic forecasting services and leverages its forward-looking
macroeconomic information to model ECL. As explained in Note 2 (d) above, effective third quarter this
year EQB has started using four macroeconomic scenarios instead of five: a base- case scenario, one
upside and two downside scenarios. EQB has eliminated the use of its least severe downside scenario.
Each macroeconomic scenario is assigned a probability weighting with the base-case scenario receiving
the highest weight. The probability-weighted macroeconomic scenarios are incorporated into both
measurement of ECL and assessment of whether the credit risk of an instrument has increased
significantly since its initial recognition.
The following table provides the primary macroeconomic variables used in models to estimate ECL on
various performing loan portfolios:
October 31, 2024
Base-Case
Scenario
Upside Scenario
Downside Scenarios
Scenario 1
Scenario 2
Next 12
months
2 to 5
years
Next 12
months
2 to 5
years
Next 12
months
2 to 5
years
Next 12
months
2 to 5
years
Unemployment rate (%)
6.8
6.3
6.5
5.8
8.3
8.2
8.7
9.9
Real GDP growth rate (%)
1.9
2.0
3.0
2.4
(0.9)
2.0
(2.0)
1.6
Home Price Index growth rate (%) (1)
(0.0)
1.5
0.3
2.0
(4.5)
(0.6)
(4.9)
(2.8)
Commercial Property Index growth rate (%)
0.2
2.1
1.0
2.6
(3.8)
0.5
(4.6)
(1.2)
Household income growth rate (%)
(2.3)
(0.2)
(2.2)
0.1
(2.3)
(0.7)
(2.3)
(1.1)
Canadian Equity index %
(2.3)
14.0
2.9
17.0
(31.8)
31.7
(42.4)
42.5
West Texas Intermediate oil price %
0.2
0.2
6.2
(1.4)
(26.4)
10.3
(39.6)
22.9
(1) The Home Price Index growth rate % used by EQB is the Moody's Analytics Home and Land Price Index
Page 128
October 31, 2023
Base-Case
Scenario
Upside Scenario
Downside Scenarios
Scenario 1
Scenario 2
Scenario 3
Next 12
months
2 to 5
years
Next 12
months
2 to 5
years
Next 12
months
2 to 5
years
Next 12
months
2 to 5
years
Next 12
months
2 to 5
years
Unemployment rate %
5.7
5.6
4.6
5.1
6.9
5.9
8.2
6.3 9.7
7.2
Real GDP growth rate %(1)
0.7
2.0
1.5 2.5
(0.4)
1.9 (1.0)
1.6
(2.0)
1.3
Home Price Index growth
rate %(2)
(2.7)
(0.2)
(0.6)
3.7
(3.9)
(1.5)
(10.8)
(1.1) (15.9)
(7.2)
Commercial Property Index
growth rate %
(0.7)
2.8
2.0
4.3
(2.6)
2.2
(9.2)
3.9 (14.5)
1.1
Household income growth
rate %
(1.5)
(1.8)
0.8
2.4
(2.2)
1.3
(3.6)
0.4 (5.0)
(1.1)
Canadian Equity index %
1.5
14.5
8.8
(3.1)
(9.2)
6.5
(22.9)
12.5
(39.7)
35.6
West Texas Intermediate
oil price %
5.2
(2.9)
11.2
9.8
(18.9)
14.2
(33.8)
23.0 (40.5)
36.2
(1) Beginning October 31, 2023, the Real GDP is being presented as the average growth rate over the period. (2) The Home Price Index growth rate
% used by EQB is the Moody's Analytics Home and Land Price Index
(f)
Sensitivity of allowance for credit losses
ECL is sensitive to the inputs used in internally developed models, macroeconomic variables in the
forward-looking forecasts, the probability weightings of the five macroeconomic scenarios, and other
factors considered when applying experienced credit judgment. Changes in these inputs, assumptions,
models, and judgments would have an impact on the assessment of credit risk and the measurement of
ECLs.
Impact of probability-weighting on ACL
The following table presents a comparison of EQB’s ACL using only the base-case scenario and downside
scenario 2 instead of the four probability-weighted macroeconomic scenarios for performing loans:
($000s)
October 31, 2024
October 31, 2023(1)
ACL – Four probability-weighted macroeconomic scenarios
(actual)
ACL – Base-case scenario only
ACL – Downside scenario 2 only
108,576
84,349
245,601
101,161
85,231
221,284
Difference – Actual versus base-case scenario only
24,227
15,930
Difference – Actual versus downside scenario 2 only
(137,025)
(120,123)
(1) Effective this year, the Management has started using four probability-weighted macroeconomic scenarios instead of five used previously. Refer note 2
(d). The comparative information is not restated.
Page 129
Impact of staging on ACL
The following table illustrates the impact of staging on EQB’s ACL by comparing the allowance if all performing
loans were in Stage 1, with other assumptions held constant, to the actual ACL recorded:
($000s)
October 31, 2024
October 31, 2023
ACL – Loans in Stage 1 and Stage 2 (actual)
ACL – Assuming all loans in Stage 1
108,576
100,817
101,161
85,302
Lifetime ACL impact
7,759
15,859
Note 11 – Derecognition of Financial Assets
In the normal course of business, EQB enters into transactions that result in the transfer of financial assets.
Transferred financial assets are recognized in their entirety or derecognized in their entirety, subject to the
extent of EQB’s continuing involvement. EQB transfers its financial assets through sale and repurchase
agreements and its securitization activities.
(a) Transferred financial assets that are not derecognized in their entirety
Obligations under repurchase agreements
Obligations under repurchase agreements are transactions in which EQB sells a security and simultaneously
agrees to repurchase it at a fixed price on a future date. EQB continues to recognize the securities in their
entirety on the Consolidated Balance Sheet because it retains substantially all the risks and rewards of
ownership. The cash consideration received is recognized as a financial asset and the obligation to pay the
repurchase price is recognized as a financial liability.
Securitizations
EQB securitizes insured residential loans by selling its issued MBS to third party investors including to the
CMHC sponsored CHT under the CMB program. EQB may also retain certain issued MBS as part of its liquidity
management strategy, as well as to manage interest rate risk associated with EQB’s participation in the CMB
program. The CHT periodically issues CMB, which are guaranteed by the government, and sells them to third
party investors. Proceeds from the CMB issuances are used by the CHT to purchase MBS from eligible MBS
issuers who participate in the issuance of a particular CMB series.
Not all securitization transactions qualify for derecognition as EQB may continue to be exposed to substantially
all of the risks and rewards associated with the transferred assets or it neither transfers nor retains
substantially all the risks and rewards and retains control of the assets. A key risk associated with transferred
loans to which EQB remains exposed after the transfer in such securitization transactions is the risk of
prepayment. As a result, the loans continue to be recognized on the Consolidated Balance Sheet at amortized
cost and are accounted for as secured financing transactions, with the loans transferred pledged as collateral
for these securitization liabilities.
EQB’s securitization activities include selling uninsured loans by entering into an agreement with other
Schedule I banks and participating in a securitization program sponsored by those banks. Under this
agreement, EQB sells the loans to the program and they remain in the program until maturity. The bank that
sponsors the securitization program retains all of the refinancing risks related to the program. The sale of these
loans does not qualify for derecognition as EQB continues to be exposed to substantially all of the risks and
rewards associated with the transferred assets. As a result, the loans continue to be recognized on the
Consolidated Balance Sheet at amortized cost and the proceeds received are recognized under securitization
liabilities. The loans transferred are pledged as collateral for these securitization liabilities.
Page 130
i)
MBS securitizations
For MBS securitization liabilities, principal payments collected from the underlying loans are passed on to the
MBS investors, reducing the amount of the liability outstanding on a monthly basis. Interest on the MBS
securitization liability is calculated at the MBS coupon rate and is paid monthly to the MBS investors.
ii)
CMB securitizations
As part of a CMB transaction, EQB may enter into total return swaps with highly rated counterparties,
exchanging the cash flows of the CMB for those of the MBS transferred to CHT. Any excess or shortfall in these
cash flows is absorbed by EQB. For transactions that fail derecognition, these swaps are not recognized on
EQB’s Consolidated Balance Sheet as the underlying cash flows of these derivatives are captured through the
continued recognition of the loans and their associated CMB securitization liabilities. Accordingly, these swaps
are recognized on an accrual basis and are not fair valued through EQB’s Consolidated Statement of Income. As
at October 31, 2024, the notional amount of these swaps was $1,810,921(October 31, 2023– $2,566,319).
CMB securitization liabilities are non-amortizing bond liabilities with fixed maturity dates. Principal payments
collected from the loans underlying the MBS sold to the CHT are held in trust for the CHT and invested in
eligible investments until the maturity of the bond. To the extent that these eligible investments are not EQB’s
own issued MBS, the investments are recorded on EQB’s Consolidated Balance Sheet under Investments –
Canada Housing Trust re-investment accounts. Interest on the CMB securitization liabilities is calculated at the
CMB coupon rate and is paid to the CMB holders on a monthly, quarterly, or semi-annual basis.
The following table provides information on the carrying amount and the fair values related to transferred
financial assets that are not derecognized in their entirety and the associated liabilities:
($000s)
October 31, 2024
October 31, 2023
Securitized
assets
Assets sold
under repurchase
agreements
Securitized
assets
Assets sold under
repurchase
agreements
Carrying amount of assets
15,081,453
-
15,138,612
1,128,238
Carrying amount of associated liability
14,594,304
-
14,501,161
1,128,238
Carrying value, net position
487,149
-
637,451
-
Fair value of assets
14,996,769
-
14,648,752
1,128,238
Fair value of associated liability
14,393,583
-
13,977,423
1,128,238
Fair value, net position
603,186
-
671,329
-
Page 131
EQB estimates that the principal amount of securitization liabilities will be paid as follows:
($000s)
MBS Liabilities
CMB Liabilities
Other Securitization
Liabilities
Total Liabilities
2025
3,470,757
293,312
1,958,976
5,723,045
2026
2,784,010
511,728
786,866
4,082,604
2027
1,308,591
327,305
283,370
1,919,266
2028
1,205,935
352,767
46,498
1,605,200
2029
468,546
111,607
40,384
620,537
Thereafter
368,186
438,938
1,052
808,176
9,606,025
2,035,657
3,117,146
14,758,828
(b) Transfers that are derecognized in their entirety
Certain securitization transactions undertaken by EQB result in EQB derecognizing the transferred assets in
their entirety. This is the case where EQB has securitized and sold pools of residential loans with no
prepayment option to third parties. EQB does not retain substantially all the risks and rewards of ownership
and transfers control over the assets. EQB retains some continuing involvement in the transaction which is
represented by the retained interests and the associated servicing liabilities. There is no credit risk associated
with the securitization retained interest as the derecognized loans are insured.
EQB also achieves derecognition on the securitization and sale of certain pools of residential loans with a
prepayment option. In these transactions, EQB securitizes and sells pools of residential loans and then
engages in a transaction to transfer its rights in the excess interest spread and/or any prepayment risk,
thereby transferring substantially all the risks and rewards of ownership in the asset and derecognizing the
asset in its entirety. During the year EQB derecognized $6,440,384 (2023 – $4,668,215) of multi-unit residential
loans with prepayment option.
The following table provides quantitative information of EQB’s securitization activities and transfers that are
derecognized in their entirety during the year:
($000s)
2024
2023
Loans securitized and sold
7,071,949
5,244,786
Carrying value of Securitization retained interests
383,770
258,591
Carrying value of Securitized loan servicing liability
38,494
34,713
Gains on loans securitized and sold
66,348
46,948
Income from securitization activities and retained interests
22,672
9,436
The expected undiscounted cash flows payable to the investors on EQB’s securitization activities and transfers
that are derecognized in their entirety are as follows:
($000s)
Securitization Liabilities
2025
2,046,087
2026
2,101,919
2027
1,921,140
2028
3,377,592
2029
4,186,383
Thereafter
9,828,630
23,461,751
Page 132
Note 12 – Derivative Financial Instruments
(a) Hedge instruments
Cash flow hedges
EQB’s securitization activities are subject to interest rate risk, which represents the potential for changes in
interest rates between the time EQB commits to funding a loan it intends to securitize through the issuance
of a securitization liability, and the time the liability is actually issued. EQB utilizes derivative financial
instruments in the form of bond forwards and interest rate swaps to hedge this exposure, with the intent to
manage the change in cash flows of the future interest payments on the highly probable forecasted issuance
of the securitization liability. EQB applies hedge accounting to these derivative financial instruments to
minimize the volatility in income caused by changes in interest rates.
EQB also uses bond forwards to hedge changes in future cash flows from changes in interest rates
attributable to highly probable forecasted issuance of fixed rate liabilities. EQB applies hedge accounting to
these derivative financial instruments to minimize the volatility in income caused by changes in interest rates.
EQB hedges the risk of changes in future cash flows related to its floating rate securitization liabilities by
entering into interest rate swaps. EQB applies hedge accounting to these derivative financial instruments to
minimize the volatility in income caused by changes in interest rates.
EQB also hedges the risk of changes in future cash flows related to its RSU plan by entering into total return
equity swap contracts with third parties, the value of which is linked to the price of EQB’s common shares.
Changes in the fair value of these derivative financial instruments offset the compensation expense related to
the change in share price, over the period in which the swap is in effect. EQB applies hedge accounting to
these derivative financial instruments to minimize the volatility in income caused by changes in EQB’s share
price.
EQB hedges the risk of changes in future cash flows related to its TSU plan by entering into a total return
equity swap with third parties with values linked to the price of EQB’s common shares. Changes in the fair
value of these derivative financial instruments offset the compensation expense related to the change in
share price, over the period in which the swap is in effect. EQB applies hedge accounting to these derivative
financial instruments to minimize the volatility in income caused by changes in EQB’s share price.
EQB also hedges the risk of changes in future cash flows related to its DSU plan by entering into a total return
equity swap contract with a third party. The value of this derivative financial instrument is linked to the price
of EQB’s common shares. Changes in fair value of the derivative offsets Non-interest expense – other related
to the change in share price, over the period in which the swap is in effect. EQB does not apply hedge
accounting to this derivative financial instrument.
Fair value hedges
EQB enters into hedging transactions to manage interest rate exposures on loan commitments and certain
deposits used to fund floating rate loans. The hedging instruments used to manage these exposures are
interest rate swaps and bond forwards. EQB does not apply hedge accounting to these hedging relationships.
EQB enters into hedging transactions to manage interest rate exposure on certain loan assets, securitization
liabilities, and deposit liabilities. EQB also enters into interest rate swap agreements to manage interest rate
exposures on its investment in fixed rate provincial bonds. EQB applies hedge accounting to all these
relationships.
EQB enters into cross currency interest rate swap agreements to manage interest and foreign exchange
exposures on fixed rate foreign currency covered bond liabilities. EQB applies hedge accounting to these
relationships.
Page 133
EQB also enters into hedging transactions to manage foreign exchange exposure on certain foreign currency
liabilities. EQB does not apply hedge accounting to these hedging relationships.
(b) Other derivatives
Total return swaps
As part of its CMB activities, EQB may assume reinvestment risk between the amortizing MBS and the bullet CMB
for securitized loans which are derecognized. EQB assumes this risk by entering into total return swaps with
highly rated counterparties and exchanging the cash flows of the CMB for those of the MBS transferred to the
CHT. These swaps are recognized on EQB’s consolidated balances sheets and fair valued through EQB’s
Consolidated Statement of Income.
As part of covered bond activities to manage cash flows between Equitable Bank and its subsidiary Guarantor
LP, Equitable Bank and Guarantor LP each enter into an interest rate (total return) swap agreement with a
third party interest rate swap provider. These two swaps are offsetting, with the net effect that Equitable
Bank pays cash flows based on Canadian floating rate to Guarantor LP, and receives Guarantor LP’s cash
flows from the collateral assets. Interest rate swap provider earns an intermediation fee.
These swaps are recognized on EQB’s Consolidated Balance Sheet and fair valued through EQB’s Consolidated
Statement of Income.
(c) Financial impact of derivatives
The fair values and notional amounts of derivatives outstanding are as follows:
Page 134
(1) Average rate or average price are on initiation of the derivatives, and refer to the average bond forward rate, the average rate on the fixed-leg of an interest rate swap, and
the average share price of the total return swap. These rates/prices are applicable to derivatives in hedge accounting relationships only. (2) Positive
current replacement cost represents the cost of replacing all contracts that have a positive fair value, using current market rates. It reflects the
unrealized gains on derivative instruments. (3) Credit risk equivalent represents the total replacement cost plus an amount representing the potential
future credit exposure, as outlined in OSFI’s Capital Adequacy Requirements Guideline. (4) Risk-weighted balance is determined by applying the
standardized approach for counterparty credit risk to the credit equivalent amount, as prescribed by OSFI. (5) Derivative financial assets are included in
Other assets (Note 14) and derivative financial liabilities are included in Other liabilities (Note 18).
($000’s, except percentages)
October 31, 2024
Derivative instrument and term (years)
Notional
amount
Average
Rate/
Price
(1)
Positive
current
replacement
cost
(2)
Credit
equivalent
amount
(3)
Risk-
weighted
balance
(4)
Fair Value
Assets Liabilities
Net
(5)
Cash flow hedges: Bond
forwards – hedge accounting
1 or less
72,100
3.51%
385
214
160
638
(11)
627
Interest rate swaps – hedge accounting
1 or less
157,000
4.05%
-
1,144
229
-
(3,587)
(3,587)
Total return swaps – hedge accounting
1 or less
17,843
81.57
-
23
5
5,673
-
5,673
1 to 5
10,583
67.04
-
14
3
6,351
-
6,351
Total return swaps –
non-hedge accounting
1 or less
9,438
N/A
-
12
2
2,582
-
2,582
Fair value hedges:
Interest rate swaps – hedge accounting
Fair value hedges:
1 or less
3,010,035
4.41%
1,610
2,883
576
13,877
(1,793)
12,084
1 to 5
4,737,584
3.32%
2,719
28,667
5,574
17,302
(35,035)
(17,733)
5 and above
341,290
3.28%
9
3,800
760
219
(5,024)
(4,805)
Cross-currency
Interest rate swaps – hedge accounting
1 or less
734,830
2.22%
92,740
145,135
29,027
92,740
-
92,740
1 to 5
1,172,170
3.64%
65,287
176,693
93,393
65,287
-
65,287
Interest rate swaps – non-hedge
accounting
1 or less
528,000
4.37%
913
2,297
531
3,210
(2,132)
1,078
1 to 5
407,681
3.42%
6,117
8,082
1,828
6,653
(4,966)
1,687
5 and above
116,334
3.01%
912
5,791
1,343
1,113
(2,662)
(1,549)
Bond forwards – non-hedge
accounting
1 or less
1,108,628
N/A
3,142
1,605
1,013
7,896
(2,361)
5,535
Foreign exchange forwards -
non-hedge accounting
1 or less
417,857
N/A
1,600
1,711
382
7,170
(656)
6,514
Other derivatives:
Total return swaps
1 or less
407,954
N/A
-
11
2
-
(18)
(18)
1 to 5
1,011,530
N/A
930
667
133
355
(760)
(405)
5 and above
657,092
N/A
4,139
1,479
296
2,013
(2,991)
(978)
Interest rate swaps 1 to 5
6,140,683
N/A
940
833
167
27,599
(29,118)
(1,519)
21,058,632
181,443
381,061
135,424
260,678
(91,114)
169,564
Page 135
(1) Average rate or average price are on initiation of the derivatives, and refer to the average bond forward rate, the average rate on the fixed-leg of an
interest rate swap, and the average share price of the total return swap. These rates/prices are applicable to derivatives in hedge accounting relationships
only. (2) Positive current replacement cost represents the cost of replacing all contracts that have a positive fair value, using current market rates. It
reflects the unrealized gains on derivative instruments. (3) Credit risk equivalent represents the total replacement cost plus an amount representing the
potential future credit exposure, as outlined in OSFI’s Capital Adequacy Requirements Guideline. (4) Risk-weighted balance is determined by applying the
standardized approach for counterparty credit risk to the credit equivalent amount, as prescribed by OSFI. (5) Derivative financial assets are included in
Other assets (Note 14) and derivative financial liabilities are included in Other liabilities (Note 18).
($000’s, except percentages)
October 31, 2023
Derivative instrument and term (years)
Notional
amount
Average
Rate/
Price
(1)
Positive
current
replacement
cost
(2)
Credit
equivalent
amount
(3)
Risk-
weighted
balance
(4)
Fair Value
Assets
Liabilities
Net
(5)
Cash flow hedges: Bond
forwards – hedge accounting
1 or less
252,600
4.09%
5,624
4,582
2,951
9,281
(160)
9,121
Interest rate swaps – hedge accounting
1 or less
30,000
0.64%
361
180
36
1,377
-
1,377
1 to 5
453,000
2.94%
4,774
2,811
562
20,892
(158)
20,734
Total return swaps – hedge accounting
1 or less
3,311
68.60
-
42
8
-
(49)
(49)
1 to 5
17,503
69.80
166
224
45
115
(613)
(498)
Total return swaps –
non-hedge accounting
1 or less
9,056
N/A
55
116
23
517
-
517
Fair value hedges:
Interest rate swaps – hedge accounting
Fair value hedges:
1 or less
5,246,527
4.72%
1,075
31,070
6,214
7,337
(20,675)
(13,338)
1 to 5
2,947,963
3.76%
14,529
24,895
4,978
64,705
(12,811)
51,894
5 and above
791,110
3.42%
4,487
5,304
1,061
33,678
(7,827)
25,851
Cross-currency
Interest rate swaps – hedge accounting
1 or less
524,300
0.01%
-
25,527
5,105
-
(32,545)
(32,545)
1 to 5
1,171,450
2.83%
28,647
99,554
30,122
47,797
-
47,797
Interest rate swaps – non-hedge
accounting
1 or less
2,770,000
0.30%
1,450
24,661
4,932
8,481
(14,572)
(6,091)
1 to 5
733,094
3.89%
6,123
19,565
3,913
11,487
(10,341)
1,146
5 and above
334,048
1.19%
6,029
13,836
2,767
10,730
(24,800)
(14,070)
Bond forwards – non-hedge
accounting
1 or less
628,810
N/A
1,803
8,593
4,018
9,085
(2,019)
7,066
Foreign exchange forwards -
non-hedge accounting
1 or less
330,435
N/A
1,025
3,307
662
9,038
(472)
8,566
Other derivatives:
Total return swaps
1 or less
551,049
N/A
74
247
32
172
(15)
157
1 to 5
2,491,947
N/A
2,012
1,247
249
3,330
(1,101)
2,229
5 and above
2,138,793
N/A
4,946
1,158
232
12,855
(2,289)
10,566
Interest rate swaps 1 to 5
4,811,627
N/A
20,363
33,042
6,608
20,363
(21,826)
(1,463)
26,236,623
103,543
299,961
74,518
271,240
(152,273)
118,967
Page 136
Cash flow hedges:
The following table presents the effects of cash flow hedges on EQB’s Consolidated Statement of Income:
($000s)
2024
Gains (losses) on
hedging instrument
Gains (losses) on
hedged Item
Hedge ineffectiveness
recognized in income
Hedging gain or loss
recognized in OCI
Cash flow hedges:
Interest rate risk:
Bond forwards
(24,300)
24,205
(1,080)
(23,220)
Interest rate swaps
(13,506)
13,506
-
(13,506)
Equity price risk:
Total return swaps
13,928
(13,928)
-
13,928
(23,878)
23,783
(1,080)
(22,798)
($000s)
2023
Gains (losses) on
hedging instrument
Gains (losses) on
hedged Item
Hedge ineffectiveness
recognized in income
Hedging gain or loss
recognized in OCI
Cash flow hedges:
Interest rate risk:
Bond forwards
39,260
(36,006)
4,563
34,697
Interest rate swaps
4,595
(4,595)
-
4,595
Equity price risk:
Total return swaps
1,659
(1,659)
-
1,659
45,514
(42,260)
4,563
40,951
The following table presents the effects of cash flow hedges on EQB’s Consolidated Statement of Comprehensive
Income on a pre-tax basis:
($000s)
2024
AOCI as at
November 1,
2023
Net gains
(losses)
recognized
in OCI
Amount
reclassified
to income as
the hedged
item affects
income
AOCI as at
October
31, 2024
Balance in cash flow
hedge AOCI
Active
hedges
Discontinued
hedges
Cash flow hedges:
Interest rate risk:
Bond forwards
13,254
(23,220)
16,761
6,795
604
6,191
Interest rate swaps
45,757
(13,506)
(15,682)
16,569
(3,587)
20,156
Equity price risk:
Total return swaps
(158)
13,928
(8,456)
5,314
5,314
-
58,853
(22,798)
(7,377)
28,678
2,331
26,347
Page 137
($000s)
2023
AOCI as at
January 1,
2023
Net gains
(losses)
recognized
in OCI
Amount
reclassified
to income as
the hedged
item affects
income
AOCI as at
October
31, 2023
Balance in cash flow
hedge AOCI
Active
hedges
Discontinued
hedges
Cash flow hedges:
Interest rate risk:
Bond forwards
9,901
34,697
(31,344)
13,254
8,829
4,425
Interest rate swaps
48,004
4,595
(6,842)
45,757
22,110
23,647
Equity price risk:
Total return swaps
(1,273)
1,659
(544)
(158)
(158)
-
56,632
40,951
(38,730)
58,853
30,781
28,072
Fair value hedges:
The following table presents the effects of fair value hedges on EQB’s Consolidated Balance Sheet and the
Consolidated Statement of Income:
($000s)
2024
Hedge ineffectiveness
Carrying amounts for
hedged items
(1)
Accumulated amount of
fair value hedge gains
(losses) on the hedged item
Gains (losses)
on hedging
instrument
Gains (losses)
on hedged
item
Total
Active
hedges
Discontinued
hedges
Active
hedges
Discontinued
hedges
Fair value hedges:
Interest rate risk:
Loans
(65,309)
70,932 5,623 1,968,137
4,498,564
24,987
(19,956)
Deposits
43,809
(48,150) (4,341) (5,059,146)
(1,767,221)
(22,646)
(2,783)
Securitization
liabilities
9,593
(9,754)
(161)
(83,652)
(331,275)
(985)
(1,417)
Bonds
(53,917)
54,122
205 1,071,864
-
11,892
-
Interest rate and
foreign exchange
risk:
Covered bonds
132,505
(126,981) 5,524
5,524
(2,040,137)
-
(133,137)
66,681
(59,831)
6,850 (2,097,273)
359,931
13,248
(157,293)
Page 138
($000s)
2023
Hedge ineffectiveness
Carrying amounts for
hedged items(1)
Accumulated amount of fair
value hedge gains (losses) on
the hedged item
Gains (losses)
on hedging
instrument
Gains (losses)
on hedged
item
Total
Active
hedges
Discontinued
hedges
Active
hedges
Discontinued
hedges
Fair value hedges:
Interest rate risk:
Loans
50,290
(45,083)
5,207
2,026,974
2,401,343
(43,035)
(54,875)
Deposits
21,662
(23,405) (1,743) (5,436,680)
(3,554,367)
16,103
13,318
Securitization
liabilities
(3,242)
3,558
316
(99,745)
(300,142)
8,194
1,390
Bonds
32,518
(32,057)
461
1,225,872
256,642
(44,456)
(3,358)
Interest rate and
foreign exchange
risk:
Covered bonds
24,210
(23,526)
684 (1,732,332)
-
(6,156)
-
125,438
(120,513)
4,925 (4,015,911)
(1,196,524)
(69,350)
(43,525)
(1) Represents the carrying value of hedged items designated in qualifying hedging relationships.
Note 13 – Offsetting Financial Assets and Financial Liabilities
The disclosures in the table below include financial assets and financial liabilities that may or may not be offset
in the consolidated financial statements but are subject to agreements with netting arrangements which covers
similar financial instruments irrespective of whether they are offset in the consolidated financial statements.
Such agreements include derivative agreements, collateral support agreements and repurchase agreements.
Financial instruments include derivatives, securities purchased under reverse repurchase agreements and
obligations under repurchase agreements.
EQB’s derivative transactions are entered into under ISDA master agreements. In general, amounts owed by
each counterparty under an agreement are aggregated into a single net amount being payable by one party to
the other. In certain cases all outstanding transactions under an agreement may be terminated and a single net
amount including pledges is due or payable in settlement of these transactions.
EQB’s securities purchased under reverse repurchase agreements and obligations under repurchase
agreements are covered by industry standard master agreements, which include netting provisions.
EQB pledges and in certain cases receives collateral in the form of cash or securities in respect of the financial
instruments. Such collateral is subject to the credit support agreement associated with ISDA
agreements, or subject to global master repurchase agreements. Under these agreements, cash or securities
pledged/received as collateral can be sold during the term of the transaction but must be returned when the
collateral is no longer required and/or on maturity. The terms also give each counterparty the right to terminate
the related transactions upon the counterparty’s failure to post collateral.
As of October 31, 2024, the approximate market value of cash and securities collateral pledged by EQB that are
subject to credit support agreements was $145,442 (October 31, 2023 − $1,333,652).
As of October 31, 2024, the approximate market value of cash and securities collateral accepted that may be
sold or repledged by EQB was $1,313,144 (October 31, 2023 − $1,019,444). There was no collateral sold or
repledged in 2024 and 2023.
Page 139
Financial assets subject to offsetting, enforceable master netting arrangements and similar agreements:
($000s)
October 31, 2024
Types of financial
assets
Gross
amounts of
recognized
financial
assets
Gross
amounts of
recognized
financial
liabilities
offset on the
consolidated
balance
sheet
Net amounts
of financial
assets
presented
on the
consolidated
balance
sheet
Related amounts
not offset on the
consolidated balance
sheet
Net amount
Financial
instruments
Financial
collateral
(including
cash
collateral
received)
Derivatives held for risk
management:
Cross-currency
Interest rate swaps
158,027
-
158,027
-
-
158,027
Interest rate swaps
69,973
-
69,973
-
(56,694)
13,279
Total return swaps
16,974
-
16,974
-
(14,140)
2,834
Foreign exchange
forwards
7,170
-
7,170
-
(2,221)
4,949
Securities purchased
under reverse
repurchase agreements
1,260,118
-
1,260,118
- (1,260,118)
-
1,512,262
-
1,512,262
- (1,333,173)
179,089
Financial liabilities subject to offsetting, enforceable master netting arrangements and similar agreements:
($000s)
October 31, 2024
Types of financial
liabilities
Gross
amounts of
recognized
financial
liabilities
Gross
amounts of
recognized
financial
assets offset
on the
consolidated
balance
sheet
Net amounts
of financial
liabilities
presented
on the
consolidated
balance
sheet
Related amounts
not offset on the
consolidated balance
sheet
Net amount
Financial
instruments
Financial
collateral
(including
cash
collateral
received)
Derivatives held for risk
management:
Interest rate swaps
84,317
-
84,317
-
(38,831)
45,486
Total return swaps
3,769
-
3,769
-
(222)
3,547
Foreign exchange
forwards
656
-
656
-
-
656
88,742
-
88,742
-
(39,053)
49,689
Page 140
Financial assets subject to offsetting, enforceable master netting arrangements and similar agreements:
($000s)
October 31, 2023
Types of financial
assets
Gross
amounts of
recognized
financial
assets
Gross
amounts of
recognized
financial
liabilities
offset on the
consolidated
balance
sheet
Net amounts
of financial
assets
presented
on the
consolidated
balance
sheet
Related amounts
not offset on the
consolidated balance
sheet
Net amount
Financial
instruments
Financial
collateral
(including
cash
collateral
received)
Derivatives held for risk
management:
Interest rate swaps
179,050
-
179,050
- (126,972)
52,078
Total return swaps
16,989
-
16,989
- (16,831)
158
Cross-currency
interest rate swaps
47,797
-
47,797
-
-
47,797
Foreign exchange
forwards
9,038
-
9,038
- (8,580)
458
Securities purchased
under reverse
repurchase agreements
908,833
-
908,833
- (908,833)
-
1,161,707
-
1,161,707
- (1,061,216)
100,491
Financial liabilities subject to offsetting, enforceable master netting arrangements and similar agreements:
($000s)
October 31, 2023
Types of financial
liabilities
Gross
amounts of
recognized
financial
liabilities
Gross
amounts of
recognized
financial
assets offset
on the
consolidated
balance
sheet
Net amounts
of financial
liabilities
presented
on the
consolidated
balance
sheet
Related amounts
not offset on the
consolidated balance
sheet
Net amount
Financial
instruments
Financial
collateral
(including
cash
collateral
received)
Derivatives held for risk
management:
Interest rate swaps
113,010
-
113,010
- (87,584)
25,426
Total return swaps
4,067
-
4,067
- (229)
3,838
Cross-currency
interest rate swaps
32,545
-
32,545
-
-
32,545
Foreign exchange
forwards
472
-
472
- -
472
Obligations
under repurchase
agreements
1,128,238
-
1,128,238 (1,128,159)
-
79
1,278,332
-
1,278,332 (1,128,159) (87,813)
62,360
Page 141
Note 14 – Other Assets
($000s)
October 31, 2024
October 31, 2023
Intangible assets
198,640
154,250
Goodwill
110,580
57,595
Prepaid expenses and other
102,532
75,904
Right-of-use assets
66,705
3,688
Property and equipment
51,984
31,521
Investment in associate
50,046
-
Assets held-for-sale
38,525
18,053
Accrued interest and dividends on non-loan assets
12,610
12,407
Income taxes receivable
3,756
27,124
Receivable relating to securitization activities
2,991
893
Loan commitments
73
-
Derivative financial instruments:
Interest rate swaps
228,000
226,847
Total return swaps
16,974
16,989
Bond forwards
8,534
18,366
Foreign exchange forwards
7,170
9,038
899,120
652,675
Page 142
(a) Intangible assets
Intangible assets include system software development costs relating to EQB’s information systems, core
customer deposits, customer contracts and Trust business relationships.
($000s)
Software
Development
costs
Others
Total
Cost
Balance at January 1, 2023
17,969
180,661
23,000
221,630
Additions
3,145
32,111
-
35,256
Disposals
(992)
-
-
(992)
Balance at October 31, 2023
20,122
212,772
23,000
255,894
Additions
3,237
25,761
-
28,998
Acquired in business combination
-
-
54,000
54,000
Disposals/retirements
(1,074)
-
(3,200)
(4,274)
Balance at October 31, 2024
22,285
238,533
73,800
334,618
Accumulated depreciation
Balance at January 1, 2023
13,306
62,831
-
76,137
Amortization
1,896
21,061
3,542
26,499
Disposals
(992)
-
-
(992)
Balance at October 31, 2023
14,210
83,892
3,542
101,644
Amortization
1,607
27,180
2,933
31,720
Disposals/retirements
(586)
-
3,200
2,614
Balance at October 31, 2024
15,231
111,072
9,675
135,978
Net book value
Balance at October 31, 2023
5,912
128,880
19,458
154,250
Balance at October 31, 2024
7,054
127,461
64,125
198,640
(b) Goodwill
For the purpose of impairment testing, goodwill is allocated to the Cash Generating Units (CGU) as
follows:
($000s)
October 31, 2024
October 31, 2023
Equitable Bank
38,371
39,560
Bennington Financial Services
18,035
18,035
ACM
54,174
-
110,580
57,595
Page 143
No impairment losses on goodwill were recognized during the year ended October 31, 2024 (October 31, 2023 –
$nil).
The recoverable amounts for the above CGUs are calculated based on the value in use, determined by
discounting three to ten-years future cash flows expected to be generated from the continuing use of the CGUs’
assets and their perpetual terminal cash flows. No impairment losses were recognized during the year ended
October 31, 2024 and October 31, 2023 because the recoverable amounts of these CGUs were determined to be
higher than their carrying amounts.
The key assumptions used in the calculation of value in use are for the CGUs are listed in the table below. The
values assigned to the key assumptions represent management’s assessment of future trends and is based on
historical data from both external and internal sources, and best estimates.
(%)
October 31, 2024
October 31, 2023
Discount rate
11.5% to 16.5%
13.2% to 18%
Terminal value growth rate
0% to 3%
0% to 3%
(c) Right-of-use assets
EQB has recognized right-of-use assets for its leased office premises located in Toronto, Oakville, Calgary,
Montreal, Regina, Surrey and Vancouver, and for its leased data centres as follows:
($000s)
October 31, 2024
October 31, 2023
Carrying amount of right-of-use assets
66,705
3,688
Additions to right-of-use assets
66,368
2,455
Depreciation charge for right-of-use assets
3,498
3,285
Cash outflows for lease liabilities
2,751
4,192
Interest expense on lease liabilities
1,767
257
During the year, EQB derecognized $290 (2023 – $2,817) of right-of-use assets, and $505 (2023 – $2,778) of
related right-of-use liabilities as a result of exiting certain leases. This transaction resulted in a loss of $215
(2023 – gain of $907) inclusive of exit costs being recognized within Non-interest expenses in the Consolidated
Statement of Income.
Page 144
(d) Property and equipment
($000s)
Furniture and
fixtures
Computer
equipment
Land and
building
Leasehold
improvements
Under
construction
Total
Cost
Balance at January 1, 2023
10,005 26,365 14,202
14,596 11,003 76,171
Additions
615 1,796 20
14 4,974 7,419
Disposals
-
-
-
-
-
-
Balance at October 31, 2023
10,620 28,161 14,222
14,610 15,977 83,590
Additions
390 1,729 130
659 21,445 24,353
Acquisition
- 26
-
2
- 28
Disposals
-
-
-
-
-
-
Balance at October 31, 2024
11,010 29,916 14,352
15,271 37,422 107,971
Accumulated depreciation
Balance at January 1, 2023
8,530
20,965
6,077
12,953
- 48,525
Depreciation
522
1,573
506
943
- 3,544
Disposals
-
-
-
-
-
-
Balance at October 31, 2023
9,052
22,538
6,583
13,896
- 52,069
Depreciation
406
2,458
504
550
- 3,918
Disposals
-
-
-
-
-
-
Balance at October 31, 2024
9,458 24,996
7,087
14,446
- 55,987
Net book value
Balance at October 31, 2023
1,568 5,623 7,639 714
15,977 31,521
Balance at October 31, 2024
1,552 4,920 7,265 825
37,422 51,984
(e) Investment in associate
The carrying value of EQB’s investments in associates was $50,046 as at October 31, 2024. EQB exercises
significant influence over the associate through its ability to participate in the financial and operating policy-making
decisions through a combination of EQB’s ownership and board representation. EQB’s share of the net income
from its investment in associate was immaterial for the year ended October 31, 2024. There was no unrecognized
share of losses of the associate.
Note 15 – Deposits
($000s)
October 31, 2024
October 31, 2023
Term and other deposits
33,163,974
31,577,150
Fair value on acquisition
(26,512)
(67,110)
Accrued interest
646,182
524,703
Deferred deposit agent commissions
(44,032)
(38,293)
33,739,612
31,996,450
Deposits also include $2,059,695 (October 31, 2023 – $1,709,181) of funding from the covered bond program.
This funding is secured against $2,779,938 (October 31, 2023 – $2,385,035) of residential loans reported on the
Consolidated Balance Sheet under Loans – Personal.
Fair value on acquisition includes the unamortized fair value adjustments on acquisition of Concentra on
November 1, 2022. These fair value balances are amortized over the life of the acquired deposits under Interest
expense – Deposits in the Consolidated Statement of Income.
Page 145
Note 16 – Income Taxes
(a) Income tax provision:
($000s)
2024
2023
Current tax expense:
Current year
Adjustments for prior years
115,100
19,153
83,559
507
134,253
84,066
Deferred tax expense:
Reversal of temporary differences
37,715
48,744
Adjustments for prior years
(20,304)
(2,517)
Changes in tax rates
994
182
18,405
46,409
Total provision for income taxes in the Consolidated Statement
of Income
152,658
130,475
Provision for income taxes in the Consolidated Statement of Changes in Shareholders’ Equity:
($000s)
2024
2023
Current income tax
Deferred tax
(3,828)
9,218
(8,579)
(4,879)
5,390
(13,458)
Reported in:
Other comprehensive income
(4,111)
(8,579)
Retained earnings
12,307
-
Other equity instruments
(2,806)
(4,879)
Total provision for income taxes in the Consolidated Statement of
Changes in Shareholders’ Equity
5,390
(13,458)
Total provision for income taxes
158,048
117,017
The provision for income taxes shown in the Consolidated Statement of Income differs from that obtained by
applying statutory income tax rates to income before provision for income taxes due to the following reasons:
($000s)
2024
2023
Canadian statutory income tax rate
26.9%
27.2%
Increase (decrease) resulting from:
Tax-exempt income
0.3%
(1.0%)
Future tax rate changes
0.2%
0.1%
Non-deductible expenses and other
0.1%
(0.3%)
Effective income tax rate
27.5%
26.0%
Page 146
(b) Deferred tax:
Net deferred income tax liabilities are comprised of:
($000s)
October 31, 2024
October 31, 2023
Deferred income tax assets:
Tax losses(1)
33,088
11,148
Allowance for credit losses
15,961
18,072
Leasing activities
8,312
7,535
Share issue expenses
4,341
3,768
Equipment financing(2)
23,364
Net loan fees
-
317
Other
10,218
13,315
95,284
54,155
Deferred income tax liabilities:
Securitization activities
195,637
132,186
Equipment financing activities(2)
-
7,821
Net mortgage fees
1,553
Deposit agent commissions
7,199
7,005
Intangible costs
32,724
21,349
237,113
168,361
Net deferred income tax liabilities(3)
141,829
114,206
(1) Deferred tax asset pertains to income tax losses of approximately $127,789 from Equitable Trust (2023 – $43,259). (2) The deferred
tax asset relating to equipment financing activities pertains to the temporary difference resulting from difference in accounting treatment
versus tax treatment for equipment financing receivable. (3) Certain taxable temporary differences associated with investments in
subsidiaries did not result in the recognition of deferred tax liabilities as at October 31, 2024. The total amount of these temporary
differences was $1.796 billion as at October 31, 2024 (October 31, 2023 – $1.793 billion).
Deferred income tax assets and liabilities are reflected on the Consolidated Balance Sheet as follows:
($000s)
October 31, 2024
October 31, 2023
Deferred tax assets
36,104
14,230
Deferred tax liabilities
177,933
128,436
Net deferred tax liabilities
141,829
114,206
The major changes to net deferred taxes were as follows:
($000s)
2024
2023
Balance at beginning of year
114,206
72,676
Deferred tax expense for the year recorded in income
18,405
46,409
Deferred tax expense (benefit) for the year recorded in equity
9,218
(4,879)
Net deferred tax liabilities
141,829
114,206
Note 17 – Funding Facilities
(a) Secured funding facilities:
EQB has two credit facilities totaling $1,600,000 (October 31, 2023 – $1,600,000) with major Schedule I Canadian
banks to finance residential loans prior to securitization. Equitable Bank also has access to liquidity facilities
sponsored by the Government of Canada, namely the Bank of Canada’s Standing Term Liquidity Facility and
Emergency Lending Assistance program. As at October 31, 2024, EQB had an outstanding balance of $403,138
(October 31, 2023 – $1,058,619) on facilities from the Schedule I Canadian banks. The facilities from Schedule I
Canadian banks carry interest rates at CORRA plus 0.80% to 1.15%. These term facilities expire between June
Page 147
and September 2025.
Concentra Bank maintains $50,000 (October 31, 2023 – $100,000) secured line of credit with SaskCentral which
is used primarily for settlement and clearing purposes. The line of credit carries interest rates at Prime less
0.50%. and there was no balance outstanding as at October 31, 2024 (October 31, 2023 – $nil).
(b) Unsecured funding facilities:
EQB has a funding agreement with a consortium of Schedule I banks for senior unsecured funding facilities
comprising of a revolving facility (Revolving Facility) of up to $200,000 and a term loan facility (Term Loan) of up
to $120,000 (October 31, 2023 – $275,000). As at October 31, 2024, EQB had an outstanding balance of
$119,849 (October 31, 2023 – $372,619) on the above facilities including deferred cost of $178 (October 31,
2023 – $486), and accrued interest of $26 (October 31, 2023 – prepaid interest of $1,912). The Revolving and
Term Loan facilities carry interest rates at CORRA plus applicable margins.
Equitable Bank has established a Bearer Deposit Notes (BDN) program through which it issues short-term
unsecured notes. As at October 31, 2024 the outstanding balance of the notes issued under the program was
$423,969 (October 31, 2023 – $300,349) including deferred costs of $49 (October 31, 2023 – $25) and discounts
of $4,257 (October 31, 2023 – $2,626). The interest rates on the outstanding BDN ranges from 3.65% to 5.72%.
EQB’s other subsidiary maintains a $1,000 (October 31, 2023 - $nil) operating line of credit to support day to day
liquidity management. The line of credit carries interest at Prime plus 1.00% and there was no amount
outstanding at October 31, 2024 (October 31, 2023 - $nil).
Note 18 – Other Liabilities
($000s)
October 31, 2024
October 31, 2023
Accounts payable and accrued liabilities
307,435
317,997
Securitized loan servicing liability
100,503
81,150
Right-of-use liabilities
69,782
4,561
Loan realty taxes
19,998
21,292
Income taxes payable
15,000
2,847
Unearned revenue
2,486
18,299
Loan commitments
-
3,620
Derivative financial instruments:
Interest rate swaps
84,317
145,555
Put option
30,613
-
Total return swaps
3,769
4,067
Bond forwards
2,372
2,179
Foreign exchange forwards
656
472
636,931
602,039
Page 148
Note 19 – Shareholders’ Equity
(a) Capital stock:
Authorized:
Unlimited number of non-cumulative 5-year rate reset preferred shares, Series 1, par value $25.00 per share
Unlimited number of non-cumulative floating rate preferred shares, Series 2, par value $25.00 per share
Unlimited number of non-cumulative 5-year rate reset preferred shares, Series 3, par value $25.00 per share
Unlimited number of non-cumulative floating rate preferred shares, Series 4, par value $25.00 per share
Unlimited number of non-voting Class A Series 1 and 2 preferred shares without par value
Unlimited number of common shares, no par value
Issued and outstanding shares:
($000’s, except shares and per share amounts)
October 31, 2024
October 31, 2023
Number of
shares
Amount
Dividends
paid per
share
Number of
shares
Amount
Dividends
paid per
share
Preferred Shares, Series 3:
Balance, beginning of year
2,911,800
70,424
2,911,800
70,424
Redemptions
(2,911,800)
(70,424)
-
-
Balance, end of year
-
-
1.49
2,911,800
70,424
1.12
Class A Series 1:
Redemption
3,888,500
(3,888,500)
97,212
(97,212)
3,888,500
-
97,212
-
Balance, end of year
-
-
0.75
3,888,500
97,212
0.75
Class A Series 2:
Redemption
551,000
(551,000)
13,775
(13,775)
551,000
-
13,775
-
Balance, end of year
-
-
1.62
551,000
13,775
1.52
Common shares:
Balance, beginning of year
37,879,352
471,014
37,564,114
462,561
New shares issued
137,244
11,000
-
-
Issuance on exercise of stock
options
375,565
15,376
227,896
7,362
Issuance under DRIP
57,743
4,915
87,342
5,799
Issuance costs – net of tax
-
-
-
(6,230)
Transferred from contributed
surplus relating to the exercise
of stock options
-
3,571
-
1,522
Balance, end of year
38,449,904
505,876
1.74
37,879,352
471,014
1.10
(b) Preferred shares:
Series 3 – 5-year rate reset preferred shares
Holders of Series 3 preferred shares were entitled to receive a fixed quarterly non-cumulative preferential
cash dividend, as and when declared by the Board of Directors, at a per annum rate of 6.35% per share for an
initial 5-year period ended September 30, 2019. Thereafter, the dividend rate was reset at a level of 4.78% per
share over the then five-year Government of Canada bond yield. The rate was reset to 5.969% per share per
annum on September 30, 2019. Series 3 preferred shares are redeemable in cash at EQB’s option, subject to
prior regulatory approval, on September 30 every five years thereafter, in whole or in part, at a price of $25.00
per share plus all declared and unpaid dividends at the date fixed for redemption. Series 3 preferred shares
are convertible at the holder’s option to non-cumulative floating rate preferred shares, Series 4 (Series 4
preferred shares), subject to certain conditions, on September 30 every five years thereafter.
Page 149
EQB redeemed all its outstanding Series 3 preferred shares on September 30, 2024 at a redemption price of
$25 per share for a total consideration of $72,795 plus any declared and unpaid dividends.
Series 4 – floating rate preferred shares
Holders of the Series 4 preferred shares will be entitled to receive a floating rate quarterly non-cumulative
preferential cash dividend equal to the 90-day Canadian Treasury Bill Rate plus 4.78%, as and when declared
by the Board of Directors. Series 4 preferred shares are redeemable in cash at EQB’s option, subject to prior
regulatory approval, on (i) September 30, 2024 and on September 30 every five years thereafter, in whole or in
part, at a price of $25.00 per share plus all declared and unpaid dividends at the date fixed for redemption; or
(ii) $25.50 plus all declared and unpaid dividends to the date fixed for redemption in the case of redemptions
on any other date on or after September 30, 2019. Series 4 preferred shares are convertible at the holder’s
option to non-cumulative 5-year rate reset preferred shares, Series 3 (Series 3 preferred shares), subject to
certain conditions, on September 30, 2024 and on September 30 every five years thereafter.
Class A – Series 1 preferred shares
Holders of Class A – Series 1 preferred shares, issued by Concentra Bank, are entitled to an annual, non-
cumulative fixed dividend of $0.99 per share, with the dividend rate resetting every five years equal to the
Government of Canada five-year bond yield plus 3.59%. The Series 1 dividend rate was last reset on January
31, 2021.
Class A – Series 2 preferred shares
Holders of Class A – Series 2 preferred shares, issued by Concentra Bank, are entitled to a non-cumulative
floating quarterly dividend at a rate equal to the 90-day Canadian treasury bill rate plus 3.59%.
Subject to a minimum number of shares remaining outstanding in each of the Class A shares, holders of Class
A – Series 1 preferred shares have the right to exchange their shares for an equal amount of Class A – Series 2
preferred shares, or vice-versa, every 5 years following the expiration of the initial period ended January 31,
2021.
Upon occurrence of a Non-Viability Contingent Capital (NVCC) trigger event, the Class A – Series 1 and Series 2
preferred shares will immediately be cancelled for no consideration and the stated capital in respect of these
classes of shares will immediately be reduced to $nil. From and after such date, the Class A – Series 1 and
Series 2 shareholders shall have no right to receive or assert a claim for any amount in respect of dividends or
any payment upon a distribution of assets in the event of the liquidation, dissolution or winding-up.
The Class A – Series 1 and Series 2 preferred shares of Concentra Bank were redeemable at the option of EQB
for $25 per share subject to the approval of OSFI as required by the Bank Act (Canada). On July 30, 2024, EQB
issued a notice to all its Class A Series 1 and Series 2 preferred shareholders indicating its intent to redeem all
outstanding preferred shares as of August 31, 2024 at a price of $25 per share for a total consideration of
$110,987. All these outstanding shares were redeemed on August 31, 2024.
Class B preferred shares
Class B preferred shares, issued by Concentra Bank are entitled to preferential dividends as and when
declared by the Board. The Class B preferred shares may be issued at any time or from time to time in one or
more series provided each series of Class B preferred shares ranks in parity with every other series of Class B
preferred shares with respect to dividends and return of capital. Before issuance of a series, the Board shall fix
the number of shares that will form such series and determine the designation, rights, privileges, restrictions
and conditions specific to that series, subject to any limitations set out in the Bank Act (Canada) and the
approval of OSFI. There are currently no series of Class B preferred shares approved for issuance.
(c) Other equity instruments
On July 16, 2024, EQB issued $150,000, 8%, 5-year fixed rate reset Limited Recourse Capital Notes - Series 1
(LRCN or Notes), at a par value of $1,000 per Note. Interest on these Notes is non-deferrable and is paid semi-
annually in arrears on April 30 and October 31 of each year, with the first interest payment on October 31,
2024.
Page 150
In connection with the LRCN, EQB issued $150,000 of non-cumulative 5-year fixed rate reset preferred shares
(Series 5) at $1,000 per share to EQB LRCN Limited Recourse Trust, to be held as trust assets in connection
with the LRCN structure. This entire LRCN structure is replicated back-to-back with Equitable Bank (the Bank),
whereby the Bank has issued the same number and amount of Notes to EQB, and same number and amount
of non-cumulative 5-year fixed rate reset perpetual Non-Viability Contingent Capital (NVCC) preferred shares
to Equitable Bank LRCN Limited Recourse Trust as trust assets. This back-to-back arrangement is eliminated
on consolidation.
Per contractual provisions contained in EQB’s LRCN offering document, EQB LRCN Limited Recourse Trust
shall deliver to the investors of LRCN, all Trust assets in an event of a recourse. The following shall constitute a
recourse event (a) non-payment of the principal and interest on the maturity date in cash; (b) failure to make a
coupon payment in cash within five business days of the scheduled payment date; (c) failure to pay the
principal and interest amount due in cash following a redemption; (d) EQB becomes bankrupt, insolvent or is
liquidated; (e) Equitable Bank’s LRCN experiences any of the similar recourse events as above; and/or (f) NVCC
trigger event occurs for the Bank as defined in Chapter 2 of OSFI’s Guideline for Capital Adequacy
Requirements (CAR).
LRCN are scheduled to mature on October 31, 2084, and may be redeemed at the sole discretion of EQB in
whole or in part on not less than 10 nor more than 60 days prior notice to the investors during the first
interest rate reset period ending October 31, 2029, and subsequently every fifth year thereafter, subject of
receipt of all necessary regulatory approvals relating to the redemption of the Bank’s LRCN notes.
(d) Dividend reinvestment plan:
EQB had activated a dividend reinvestment plan in Q1 2019 and later suspended it in Q1 2021. In Q1 2022,
EQB reactivated the plan and in Q4 2024 suspended it again. Participation in the plan was optional and under
the terms of the plan, cash dividends on common shares were used to purchase additional common shares at
the volume weighted average trading price of the common shares on the TSX for the five trading days
immediately preceding the dividend payment date, adjusted with discount. At the option of EQB, the common
shares may have been issued from EQB’s treasury or acquired from the open market at market prices.
(e) Dividend restrictions:
EQB’s subsidiary, Equitable Bank, is subject to minimum capital requirements, as prescribed by OSFI under the
Bank Act (Canada). EQB must notify OSFI prior to the declaration of any dividend and must ensure that any
such dividend declaration is done in accordance with the provisions of the Bank Act (Canada), and those OSFI
guidelines relating to capital adequacy and liquidity.
(f)
Normal course issuer bid (NCIB):
On December 21, 2020, the EQB announced that the Toronto Stock Exchange has approved a NCIB pursuant to
which EQB may repurchase for cancellation up to 2,288,490 of its common shares and 297,250 of its Series 3 –
5-year rate reset preferred shares, representing 10% of its public float of each class of shares. On December 21,
2022, the NCIB was renewed and approved by the Toronto Stock Exchange, pursuant to which EQB may repurchase
for cancellation up to 3,025,798 of its common shares and 288,680 of its Series 3 – 5-year rate reset preferred
shares, representing 10% of its public float of each class of shares. EQB only intends to purchase a maximum of
1,150,000 common shares under the terms of the NCIB. The actual number of preferred shares purchased
under the NCIB and the timing of any such purchases will be at EQB’s discretion. As at October 31, 2024, EQB
had repurchased and cancelled 88,200 Series 3 – 5-year rate reset preferred shares at a volume weighted
average price of $25.91. No common shares have been purchased and cancelled under the NCIB.
Page 151
Note 20 – Stock-based Compensation
(a) Stock-based compensation plan:
Under EQB’s stock option plan, options on common shares are periodically granted to eligible participants for
terms of seven or ten years and vest over a four-year period. At October 31, 2024, the maximum number
of common shares available for issuance under the plan was 5,150,000 (October 31, 2023 − 4,000,000). The
outstanding options expire on various dates to October 2033. A summary of EQB’s stock option activity and
related information for the year ended October 31, 2024 and October 31, 2023 is as follows:
($000’s, except share, per share and stock option amounts)
October 31, 2024
October 31, 2023
Number of
stock options
Weighted average
exercise price
Number of stock
options
Weighted average
exercise price
Outstanding, beginning of year
1,173,719
54.82
1,229,851
49.03
Granted
224,198
84.93
209,037
67.33
Exercised
(375,565)
40.94
(227,896)
32.30
Forfeited/cancelled
(62,473)
72.64
(37,273)
71.64
Outstanding, end of year
959,879
66.11
1,173,719
54.82
Exercisable, end of year
464,646
55.55
641,645
44.19
Page 152
The following table summarizes information relating to stock options outstanding and exercisable as at October
31, 2024:
Options outstanding
Options exercisable
Exercise price ($)
Number outstanding
Weighted average remaining
contractual life (years)
Number exercisable
27.83
21,402
0.4
21,402
33.89
74,745
1.4
74,745
45.48
117,662
2.3
117,662
46.96
25,000
3.0
18,750
62.85
3,000
3.3
2,250
69.16
139,136
3.3
98,511
76.77
3,000
3.8
2,250
79.01
3,000
4.0
1,500
80.86
1,500
4.1
-
68.78
2,500
4.1
-
75.72
171,528
4.3
82,085
72.21
4,250
4.4
1,500
54.09
4,000
4.5
2,000
57.32
12,000
4.8
6,000
67.12
155,434
8.3
32,716
62.88
1,875
8.5
-
73.50
8,100
9.0
2,025
67.60
5,000
9.0
1,250
83.85
138,644
9.1
-
83.85
39,301
9.1
-
85.04
2,020
9.4
-
82.94
2,380
9.4
-
83.62
2,500
9.4
-
88.38
4,750
9.5
-
87.47
3,351
9.6
-
95.04
7,500
9.7
-
95.08
1,425
9.9
-
105.39
2,376
10.0
-
107.27
2,500
10.0
-
Under the fair value-based method of accounting for stock options, EQB recorded compensation expense in
the amount of $4,015 (2023 − $2,872) related to grants of options under the stock option plan. This amount
was credited to Contributed surplus. The fair value of options granted during 2024 was estimated at the date
of grant using the Black-Scholes valuation model, with the following assumptions:
(Percentages, except per share amount and number of years)
2024
2023
Risk-free rate
3.6%
3.1%
Expected option life (years)
5.5
5.5
Expected volatility
31.0%
31.1%
Expected dividends
2.2%
2.2%
Weighted average fair value of each option granted
23.51
18.24
Page 153
(b) Employee share purchase plan:
EQB has an ESP plan for eligible employees. Under the plan, eligible employees can contribute between
1% and 10% of their annual base salary towards the purchase of common shares of EQB. For each eligible
contribution, EQB contributes 50% of the employee’s contribution to purchase common shares of EQB up to a
certain maximum per employee. During the year, EQB expensed $2,476 (2023 − $1,737) under this plan.
(c) Deferred share unit plan:
EQB has a DSU plan for Directors. Under the plan, notional units are allocated to a Director from time to time
by the Board of Directors and the units vest at the time of the grant. Directors can elect, on a one-time annual
basis, to receive up to 100% of their annual compensation in the form of DSUs, allocated at each quarter and
on a pro-rata basis. A Director will be credited with additional DSUs whenever a cash dividend is declared by
EQB. When an individual ceases to be a Director (the Separation Date) the individual may elect up to two
separate redemption dates to be paid out the value of the DSUs. The redemption date elected by the
participant is a date after the Separation Date and no later than December 15 of the first calendar year
commencing after the Separation Date. The redemption value of each DSU redeemable by a Director is the
volume-weighted average trading price of the common shares of EQB on the TSX for the five trading days
immediately prior to the redemption date.
In the event of any stock dividend, stock split, reverse stock split, consolidation, subdivision, reclassification, or
any other change in the capital of EQB affecting its common shares, EQB will make, with respect to the
number of DSUs outstanding under the DSU Plan, any proportionate adjustment as it considers appropriate to
reflect that change. The DSU plan is administered by the Board or a committee thereof.
EQB hedges the risk of change in future cash flows related to the DSU plan. Please refer to Note 12 –
Derivative Financial Instruments for further details.
A summary of EQB’s DSU activity for the years ended October 31, 2024 and October 31, 2023 is as follows:
October 31, 2024
October 31, 2023
Number of DSUs
Number of DSUs
Outstanding, beginning of year
143,789
145,695
Granted
12,485
16,502
Dividend Reinvested
2,076
1,920
Paid out
(49,511)
(20,328)
Outstanding, end of year
108,839
143,789
During the year 49,511 DSUs were paid out (2023 – 20,328). Compensation expense, including offsetting
hedges, relating to DSUs outstanding during the year ended October 31, 2024 amounted to $1,662 (2023 –
$1,400). The liability associated with DSUs outstanding as at October 31, 2024 was $11,889 (October 31, 2023 –
$9,718) and was included in other liabilities on the Consolidated Balance Sheet.
(d) Restricted share unit plan:
EQB has a RSU plan for eligible employees. Under the plan, RSUs or PSUs are awarded by the Board to eligible
employees during the annual compensation process and vest at the end of three years (cliff vest). Under the
plan, each RSU or PSU represents one notional common share and earns notional dividends, which are re-
invested into additional RSUs or PSUs when cash dividends are paid on EQB’s common shares. Each RSU or
PSU held at the end of the vesting period, including those acquired as dividend equivalents, will be paid to the
eligible employees in cash, the value of which will be based on the volume-weighted average trading price of
EQB’s common shares on the TSX for the five consecutive trading days immediately prior to, and including the
vesting date. The value of PSUs may be increased or decreased up to 25%, based on EQB’s relative total
shareholder return compared to a defined peer group of financial institutions in Canada.
EQB hedges the risk of change in future cash flows related to the RSU and PSU plans. Please refer to Note 12 –
Page 154
Derivative Financial Instruments for further details.
A summary of EQB’s RSU and PSU activity for the year ended October 31, 2024 and October 31, 2023 is as
follows:
October 31, 2024
October 31, 2023
Number of RSUs and PSUs
Number of RSUs and PSUs
Outstanding, beginning of year
251,887
132,179
Granted
121,543
138,542
Dividend reinvested
5,981
4,375
Vested and paid out
(52,424)
(5,446)
Forfeited/cancelled
(34,411)
(17,763)
Outstanding, end of year
292,576
251,887
During the year, 52,424 (2023 – 5446) RSUs and PSUs were vested and paid out for a total value of $4,911 (2023
– $355). Compensation expense, including offsetting hedges, relating to RSUs and PSUs outstanding during the
year amounted to $7,905 (2023 – $4,487). The liability associated with RSUs and PSUs outstanding as at
October 31, 2024 was $17,881 (October 31, 2023 – $8,271) and was included in other liabilities on the
Consolidated Balance Sheet.
(e) Treasury share unit plan:
Effective January 1, 2023, EQB granted Treasury Share Units (TSUs) to eligible employees in the form of
Treasury Performance Share Units (TPSUs), under the TSU plan adopted in 2022, for a term of ten years.
Under the plan, 50% of the TPSUs cliff vest after 3 years, and the remaining 50% cliff vest after 4 years, subject
to performance conditions. Under the plan, each TPSU represents one notional common share and earns
notional dividends, which are reinvested into additional TPSUs when cash dividends are paid on EQB’s
common shares. When the TPSUs vest, the eligible employee can elect to settle in shares issued from treasury,
or in cash.
As at October 31, 2024, the maximum number of common shares available for issuance under the TSU plan
was 500,000. The outstanding TPSUs expire in February 2033.
Under EQB's TSU plan, the activity for the year ended October 31, 2024 and October 31, 2023 is as follows:
October 31, 2024
October 31, 2023
Number of
TPSUs
Number of
TPSUs
Outstanding, beginning of year
45,043
-
Granted
42,358
47,936
Dividend reinvested
1,653
783
Paid out
(976)
-
Forfeited/cancelled
(4,024)
(3,676)
Outstanding, end of year
84,054
45,043
Compensation expense, including offsetting hedges, relating to TPSUs outstanding for the year amounted to
$1,948 (2023 – $639). The liability associated with TPSUs outstanding as at October 31, 2024 was $3,469 (October
31, 2023 – $626) and is included in other liabilities on the Consolidated Balance Sheet.
Page 155
Note 21 – Fees and other income
($000s)
2024
2023
Service and other fees
46,750
34,509
Portfolio management fees
18,177
-
Trust fees
13,538
10,163
Foreign exchange gains
1,839
976
Other income
783
1,247
81,087
46,895
Note 22 – Non-interest Expenses - Other
($000s)
2024
2023
Product costs
89,046
66,542
Technology and system costs
82,374
61,662
Marketing and corporate expenses
77,849
49,133
Regulatory, legal and professional fees
55,631
43,159
Premises
16,853
14,495
321,753
234,991
Note 23 – Earnings Per Share
Diluted earnings per share is calculated based on net income available to common shareholders divided by
the weighted average number of common shares outstanding during the year, taking into account the dilution
effect of stock options using the treasury stock method.
($000’s, except share, per share and stock option amounts)
2024
2023
Net income available to common shareholders
389,836
364,592
Weighted average basic number of common shares
outstanding
38,238,719
37,708,123
Earnings per common share − basic
10.19
9.67
Earnings per common share − diluted:
Net income available to common shareholders
389,836
364,592
Weighted average basic number of common shares outstanding
38,238,719
37,708,123
Adjustment to weighted average number of common shares
outstanding:
Stock options
310,581
305,600
Weighted average diluted number of common shares
outstanding
38,549,300
38,013,723
Earnings per common share − diluted
10.11
9.59
For the year ended October 31, 2024, the calculation of the diluted earnings per share excluded 127,881 (2023
– 543,754) average options outstanding with a weighted average exercise price of $84.01 (2023 − $71.08) as the
exercise price of these options was greater than the average price of EQB’s common shares.
Note 24 – Capital Management
Equitable Bank manages its capital in accordance with guidelines established by OSFI, based on standards
issued by the Bank for International Settlements’ Basel Committee on Banking Supervision. OSFI’s Capital
Adequacy Requirements (CAR) Guideline details how Basel III rules apply to Canadian banks. OSFI has
mandated that all Canadian-regulated financial institutions meet target Capital Ratios: those being a CET1 Ratio
of 7.0%, a Tier 1 Capital Ratio of 8.5%, and a Total Capital Ratio of 10.5%. In order to govern the quality and
Page 156
quantity of capital necessary based on EQB’s inherent risks, Equitable Bank utilizes an Internal Capital Adequacy
Assessment Process (ICAAP).
Equitable Bank’s CET1 Ratio was 14.3% as at October 31, 2024, while Tier 1 Capital and Total Capital Ratios were
15.0% and 15.6%, respectively. EQB’s Capital Ratios as at October 31, 2024 exceeded the regulatory minimums.
During the year, EQB complied with all external capital requirements.
Regulatory capital (relating solely to Equitable Bank) is as follows:
($000s)
October 31, 2024
October 31, 2023
Common Equity Tier 1 Capital:
Common shares
Contributed surplus
Retained earnings
Accumulated other comprehensive loss
(1)
Less: Regulatory adjustments
Revised Base III(1)
933,749
14,330
2,028,450
(14,239)
(182,039)
Revised Base III(1)
930,178
13,886
2,057,262
(49,956)
(187,870)
Common Equity Tier 1 Capital
2,780,251
2,763,500
Additional Tier 1 Capital:
Non-cumulative preferred shares
-
72,554
Other qualifying additional tier 1 instruments
147,458
-
Additional Tier 1 capital issued by a subsidiary to third parties
-
57,628
Tier 1 Capital
2,927,709
2,893,682
Tier 2 Capital:
Eligible stage 1 and 2 allowance
108,574
101,162
Additional Tier 1 capital issued by a subsidiary to third parties
(amount allowed in Tier 2)
-
6,719
Tier 2 Capital
108,574
107,881
Total Capital
3,036,283
3,001,563
(1) As prescribed by OSFI (under Basel III rules), AOCI is part of CET1 in its entirety, however, the amount of cash flow hedge reserves that relates to the hedging of
items that are not fair valued is excluded.
Note 25 – Commitments and Contingencies
(a) Lease commitments:
($000s)
October 31, 2024
October 31, 2023
Less than 1 year
1-5 years
Greater than 5 years
3,422
3,092
3,136
938
37,360
84,820
9,650
123,118
In addition to these minimum lease payments for premises rental, EQB pays its share of common area
maintenance and realty taxes over the terms of the leases. Lease expense recognized in the Consolidated
Statement of Income for 2024 amounted to $10,072 (2023 − $8,571). EQB also has a commitment of $24,390
relating to the lease property renovations project.
(b) Credit commitments:
As at October 31, 2024, EQB had outstanding commitments to fund $6,263,018 (October 31, 2023 −
$5,780,730) of loans and investments in the ordinary course of business. Of these commitments, $1,881,922
Page 157
(October 31, 2023 − $2,437,509) are expected to be funded within 1 year and $4,381,096 (October 31, 2023
− $3,343,221) after 1 year.
EQB has issued standby letters of credit which represent assurances that EQB will make payments in the event
that a borrower cannot meet its obligations to a third party. Letter of credits in the amount of $32,619 were
outstanding as at October 31, 2024 (October 31, 2023 − $65,538).
(c) Contingencies:
EQB is subject to various other claims and litigation arising from time to time in the ordinary course of
business. Management has determined that the aggregate liability, if any, which may result from other various
outstanding legal proceedings would not be material and no other provisions have been recorded in these
consolidated financial statements.
Note 26 – Related Party Transactions
Parties are considered to be related if one party has the ability to directly or indirectly control the other party
or exercise significant influence over the other party in making financial or operational decisions. EQB’s
related parties include key management personnel, close family members of key management personnel
and entities which are controlled, significantly influenced by, or for which significant voting power is held by
key management personnel or their close family members. Key management personnel are those persons
having authority and responsibility for planning, directing and controlling the activities of EQB directly and
indirectly. EQB considers the members of the Board of Directors, the CEO, CFO and the CRO as part of key
management personnel.
These financial statements present the consolidated results of EQB and all its subsidiaries, therefore
transactions with the subsidiaries are not reported as related party transactions.
(a) Key management personnel compensation table
($000s)
2024
2023
Short-term employee benefits
3,998
3,802
Post-employment benefits
46
53
Termination benefits
683
1,043
Share-based payments (net)
4,086
3,095
8,813
7,993
(b) Share transactions, shareholdings and options of key management personnel and related parties:
As at October 31, 2024, key management personnel held 558,240 (October 31, 2023 – 587,980) common shares
and no preferred shares (October 31, 2023 – 6,000). These shareholdings include common shares of 7,498
(October 31, 2023 – 9,291) that were beneficially owned by the non-management Directors or held by related
party entities whose controlling shareholders are Directors of EQB. In addition, key management personnel
held 242,947 (October 31, 2023 – 378,910) options to purchase common shares of EQB at prices ranging from
$33.89 to $83.85.
(c) Other transactions:
As at October 31, 2024, deposits of $917 (October 31, 2023 – $835) were held by key management personnel and
related party entities whose controlling shareholders are Directors of EQB and trusts beneficially owned by the
Directors.
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Note 27 – Interest Rate Sensitivity
The following table shows EQB’s position with regard to interest rate sensitivity of assets, liabilities and equity
on the date of the earlier of contractual maturity or re-pricing date, as at October 31, 2024.
($000’s, except percentages)
Floating
rate
0 to 3
months
4 months to
1 year
Total
within 1
year
1 year to 5
years
Greater
than 5
years
Non-
interest
sensitive(1)
Total
Assets:
Cash and cash equivalents
40,000
-
1,479,566
-
-
84,062
1,563,628
1,439,566
and restricted cash
Effective interest rate
4.06%
6.02%
-
4.11%
-
-
0.00%
3.89%
Securities purchased
under reverse purchase
agreements
1,260,118
-
-
1,260,118
-
-
-
1,260,118
Effective interest rate
3.81%
-
-
3.81%
-
-
-
3.81%
Investments
102,177
51,427
201,855
355,459
945,747
325,965
143
1,627,314
Effective interest rate
4.46%
4.8%
2.64%
3.48%
2.22%
2.19%
0.00%
2.49%
Loan receivable – Personal
3,930,731
3,373,151
11,542,993
18,846,875
12,771,191
54,200
601,285
32,273,551
Effective interest rate
6.80%
6.38%
5.75%
6.08%
5.58%
13,74%
0.00%
5.78%
Loan receivable –
Commercial
6,886,893
646,646
1,051,807
8,585,346
3,708,627
2,299,597
166,797 14,760,367
Effective interest rate
7.10%
5.25%
6.34%
6.87%
5.02%
3.70%
0.00%
5.83%
Securitized Retained
Interest
-
-
-
-
-
-
813,719
813,719
Other assets
-
-
-
-
-
-
935,224
935,224
Total assets
13,619,485
4,111,224
12,796,655
30,527,364
17,425,565
2,679,762
2,601,230 53,233,921
Liabilities:
Deposits(2)
2,635,338
9,534,563
10,746,072
22,915,973
10,038,454
24,408
760,777
33,739,612
Effective interest rate
0.90%
3.96%
4.51%
3.87%
4.16%
3.90%
0.00%
3.87%
Securitization liabilities
1,593,412
1,133,388
3,726,016
6,452,816
7,142,189
827,361
171,938
14,594,304
Effective interest rate
2.82%
2.68%
2.51%
2.61%
2.99%
2.92%
0.00%
2.78%
Funding Facilities
403,138
406,123
142,000
951,261
-
-
(4,305)
946,956
Effective Interest rate
4.14%
4.80%
4.46%
4.47%
-
-
-
4.49%
Other liabilities and
deferred taxes
-
-
-
-
-
-
814,864
814,864
Shareholders' equity
-
-
-
-
150,000
-
2,988,185
3,138,185
Effective Interest rate
-
-
-
-
8.00%
-
-
0.38%
Total liabilities and
shareholders’ equity
4,631,888 11,074,074
14,614,088
30,320,050
17,330,643
851,769
4,731,459 53,233,921
Off-balance sheet items(3)
(2,122,122)
(153,189)
1,920,676
(354,635)
1,606,242 (1,251,607)
-
-
Excess (deficiency) of
assets over liabilities,
shareholders’ equity and
off-balance sheet items
6,865,475 (7,116,039)
103,243
(147,321)
1,701,164
576,386
(2,130,229)
-
(1) Accrued interest is included in “Non-interest sensitive” assets and liabilities. (2) Cashable GIC deposits are included in the “0 to 3 months” as these are
cashable by the depositor upon demand after 30 days from the date of issuance. (3) Off-balance sheet items include EQB’s interest rate swaps, hedges on
funded assets, as well as loan rate commitments that are not specifically hedged. Loan rate commitments that are specifically hedged, along with their
respective hedges, are assumed to substantially offset.
Page 159
($000’s, except percentages)
Floating rate
0 to 3
months
4 months to
1 year
Total
within 1
year
1 year to 5
years
Greater
than 5
years
Non-
interest
sensitive(1)
Total
Total assets − 2023
12,362,153
4,220,696
11,059,280
27,642,129
21,243,978
2,449,429
1,597,918 52,933,454
Total liabilities and
shareholders’ equity
− 2023
1,081,440
15,451,871
13,989,285
30,522,596
17,637,118
1,102,710
3,671,030 52,933,454
Off-balance sheet items
− 2023(2)
-
(2,104,332)
4,535,023
2,430,691
(1,683,417)
(747,274)
-
-
Excess (deficiency) of
assets over liabilities,
shareholders’ equity
and off-balance sheet
items
– 2023
11,280,713 (13,335,507)
1,605,018
(449,776)
1,923,443
599,445
(2,073,112)
-
(1) Accrued interest is included in “Non-interest sensitive” assets and liabilities. (2) Off-balance sheet items include EQB’s interest rate swaps, hedges on
funded assets, as well as loan rate commitments that are not specifically hedged. Loan rate commitments that are specifically hedged, along with their
respective hedges, are assumed to substantially offset.
Page 160
Directors and executive officers
Directors
Michael Emory
Founder and Executive Chair
of the Board of Trustees,
Allied Properties REIT
Susan Ericksen
Corporate Director
Kishore Kapoor
Corporate Director
Yongah Kim
Associate Professor of
Strategic Management,
Rotman School of Business
Marcos Lopez
Chief Executive Officer, CreditApp,
a fintech company
Andrew Moor
President and Chief Executive Officer
of EQB Inc. and Equitable Bank
Rowan Saunders
President and Chief Executive
Officer, Definity Financial
Corporation
Carolyn Schuetz
Corporate Director
Vincenza Sera
Chair of the Board of EQB Inc.
and Equitable Bank, and
Corporate Director
Michael Stramaglia
Corporate Director and
President and Founder of
Matrisc Advisory Group Inc.,
a risk management consulting
firm
Andrew Moor
President and Chief
Executive Officer
Chadwick Westlake
Senior Vice-President and
Chief Financial Officer
Marlene Lenarduzzi
Senior Vice-President and
Chief Risk Officer
Dan Broten
Senior Vice-President and
Chief Technology Officer
Darren Lorimer
Senior Vice-President and Group Head,
Commercial Banking
Mahima Poddar
Senior Vice-President and Group Head,
Personal Banking
Gavin Stanley
Senior Vice-President and
Chief Human Resources Officer
Page 161
Shareholder and corporate information
Corporate Head Office
Equitable Bank Tower
30 St. Clair Avenue West, Suite 700
Toronto, Ontario, Canada, M4V 3A1
Regional Offices:
Calgary
906 – 12th Ave S.W, Suite 700
Calgary, Alberta, Canada, T2R 1K7
Vancouver
777 Hornby Street, Suite 1240
Vancouver, British Columbia,
Canada, V6Z 1S4
Halifax
1959 Upper Water Street,
Suite 1300
Halifax, Nova Scotia, Canada,
B3J 3N2
Montreal
1411 Peel Street, Suite 501
Montreal, Quebec
Canada, H3A 1S5
Regina
4561 Parliament Ave, Suite 300
Regina, Saskatchewan
Canada, S4W 0G3
Saskatoon
333 3rd Ave N
Saskatoon, Saskatchewan
Canada, S7K 2M2
Websites
eqb.investorroom.com
equitablebank.ca
eqbank.ca
Toronto Stock Exchange Listings
Common Shares: EQB
Analyst Conference Call and
Webcast
Thursday, December 5, 2024,
10:30 a.m. EST
Live: 416.945.7677
Replay and
archive: eqb.investorroom.com
Investor Relations
Mike Rizvanovic
Managing Director, Investor
Relations and ESG Strategy
investor_enquiry@eqb.com
More comprehensive investor
information including
supplemental financial reports,
quarterly news releases, and
investor presentations is available
in the Investor Relations section at
eqb.investorroom.com
Transfer Agent and Registrar
Odyssey Trust Company
Trader’s Bank Building
67 Yonge Street, Suite 702
Toronto, Ontario, Canada, M5E 1J8
1.888.290.1175
shareholders@odysseytrust.com
Annual Meeting of Shareholders
Wednesday, April 9, 2025
10:00 a.m. (Eastern)
351 King Street East, Suite 200
Toronto, Ontario, Canada
M5A 0N1
Equitable Bank’s Responsibility
Report and Public Accountability
Statement 2024 will be available in
Q2-2025 at eqb.investorroom.com
Eligible dividends
EQB designates all common and
preferred share dividends paid to
Canadian residents as “eligible
dividends” as defined in the
Income Tax Act (Canada), unless
otherwise indicated.
Online
For product, corporate, financial
and shareholder information:
eqb.investorroom.com