EQB Inc.

Thanks, [Indiscernible]. Your hosts for the call this afternoon are Andrew Moor, President and Chief Executive Officer, and Chadwick Westlake, Chief Financial Officer.

For those on the phone-lines only, we encourage you to log on to our webcast as well to see our company's slide deck. Certain statements we make during this call, that are not statements of historical facts, constitute forward-looking information.

These statements are based on management's current expectations and are subject to risks, uncertainties, and other factors that could cause our actual results to differ from historical results, and are from our forecasts. In addition, certain non - IFRS financial measures may be discussed on this call.

References to non - IFRS financial measures are only provided to assist you in understanding our results and performance trends, and may not be appropriate for any other purpose. For further discussion on these matters, please refer to Pages 2 and 3 of the accompanying slide deck and our other public disclosures.

All Concentra bank figures refer to today are as at November 30, 2021, unless otherwise noted, while Equitable’ s figures are as at December 31, 2021. Please note there will be no question-and-answer period on this call, due to the concurrent subscription receipt offering that we also announced shown here today.

It's now my pleasure to turn the call over to Andrew.

Good afternoon, everyone. And thank you for joining us on short notice.

The top, we announced two significant milestones in the evolution of Canada's Challenger Bank. First, we reported our best ever quarterly earnings.

Q4 earnings were over $80 billion, and ROE was 17%. We maintained our strong capital position and grew book value per share at 18% year-over-year.

Once again, our formula for managing onto a consistently high ROE acceptable dividend that will increased by 51% in Q1 And on current spending focused on reinvesting the majority of earnings back into the bank, where they create future value for our shareholders, paid off in record results for all 2021 as well. Equitable’ s formula for growth is entrenched in our rigorous capital allocation strategy.

And that brings me to our second milestone. We're delighted to announce that Equitable Bank has entered into a definitive [Indiscernible] agreement to acquire Concentra Bank, Canada's 13th largest Schedule I bank.

From its 84% majority owners, Saskatchewan. We will turn struck support agreements with minority shareholders, enabling a clear path to acquire a 100% of Concentra shortly after closing.

By any standard, this is one of the most important inconsequential transactions in Equitable’ s 50-plus-year history. Simply put, it delivers on our clear and consistent strategy as Canada's Challenger Bank.

cement rules longer-term follow-up, making a surprised by the move to acquire and for good reason. Since joining the bank in 2007 and with the support of our board, my approach is organic growth and has proven to be a very successful way to build stakeholder value.

Until now, Bennington Financial was our only meaningful acquisition. In the 3 years that Bennington joined, we realized substantial benefits as we've successfully built our new -- other new and accretive business vertical for Equitable and equipment leasing by [Indiscernible] balancing both organically and our ending our risk managed way.

Despite our fight for organic growth, when the chance to acquire Concentra came up, it was just too compelling to ignore. Concentra is an exceptional opportunity, with added value in all the areas managed by us as a bank, quality people, a good culture of Risk and Compliance, strong business partners, commercial logic, return on capital, and a remarkable [Indiscernible] asset classes that we understand and find attractive.

Once we bring our institutions together, rest assured that we will pursue organic growth as a priority building stakeholder value. In other words, we will not abandon our capital allocation preference for home growth.

There are few foundational regions pursuing this acquisition. Their story starts with growth that will be realized on our high margin conventional portfolios, including single-family alternative reverse mortgages, commercial lending and equipment leasing.

These are the engines that grow earnings. We had used also revenue, including fee-based business and new funding sources.

This comes from Concentra being the wholesale banking and truck solutions provider to over 200 Canadian credit unions and then more than 5 million members. Our profile potential solutions in a few moments to meet and stop Concentra 's trust company services to credit unions.

A highly attractive area is a [Indiscernible] to Equitable going forward. I speak frequently about involved of partnerships to us and our support of fintech innovation.

Concentra shares all our values for innovation and change and is also a leading bank to fintech. Combined, we broaden our reach and capability to foster and enable more positive change in Canadian banking.

We're excited to have the opportunity to work with these many new partners. What I'm most excited about is expanding what I always refer to as our greatest asset, our talent.

Concentra has approximately 400 employees across Canada and it will take tight labor market for the skills these people have, with some excited about how we can work together effectively. Even with our combined workforce, Equitable will be small and nimble in relation to Canada's Big 6.

But we will have the additional [Indiscernible] in our areas of focus and the ability to leverage our technology leadership, and the talents of our team to bring skill and passion to our purpose of driving change to Canada banking to enrich people's lives. Our entire team is looking forward to welcoming Concentra employees to Equitable.

I'm also proud to share that by combining our institutions, we expect Equitable to accomplish [Indiscernible] of its independent Canadian bank by assets. Truly carving our significance in scale, in an institution where we collectively share a [Indiscernible] deep of service and community building.

For channels this confirmative acquisition is expected to live up mid-single-digit adjusted EPS accretion in the first full year of ownership. Looking at financial terms, this is an all-cash transaction, priced at a premium of $35.7 million to Concentra's book value of common equity at the time of closing, which we expect to be in the second half of 2022.

Using Concentra's book value of November 30th, this would imply total acquisition value of approximately $470 million or 1.08 times book value. The final purchase price will be subject to customary adjustments.

The acquisition is fully financed to ensure Equitable Bank maintain its strong capital ratios and liquidity closing. Finance sales comprised of a $200 million bought deal, offering a subscription receipts and a fully committed term facility.

This funding will be invested to increase the outstanding capital of Equitable Bank, which will in turn use the proceeds to fund the acquisition. Since the Bolt deal is in the market as we speak, we will not be able to take your questions on this call.

This is not ideal, but we will do our best to share key information in our prepared remarks. We're making this acquisition from position of strength as you see from our Q4 results.

With the support of our board [Indiscernible] dependable, we're accelerating the scheduled timing of financial reporting to present these numbers now rather than on February 17th. Just to give you a clear picture of the fact that we ended 2021 with strong momentum as growth in our loans and deposits exceed our ambitious targets for the year.

And ROE has the top end of our guidance in Q4. I'm now going to offer more rationale as deal that Chadwick Westlake context on the financing on our 2021 results, including the bold decision to increase Equitable common share dividend by 51% of Q1.

This acts in the cap job and resumption of our previous dividend growth commitments following last November's renewable above fees pandemic related capital deployed restrictions on all banks. Before we get started, our sincere thanks to the team at Concentra SaskCentral for making this deal happen.

We worked closely with Shawn Good, CEO SaskCentral, and Don Coulter, the CEO of Concentra, for many months now in the development deep understanding of Concentra's business and appreciation for the critical role it plays in the credit union system. At [Indiscernible] press release, they chose Equitable because of our challenge bank commitment to delivering innovative products and services to credit unions.

And our focus on employees, customers, community partners, and driving change in Canadian Banking to enrich people's lives. [Indiscernible] Concentra business.

We're short of rights on the trade name with financial consented to the largest and only chartered bank focused on providing wholesale of banking idling across services to credit unions. Consensus with presence, the story is impressive.

They trace a couple ancestry to 1952 and proclamation about a promise is captured to form the Cooperative Trust of Canada. Of that day the organization changes corporate call and grew the column kind of sourcing [Indiscernible] one bank with total assets of $11.3 billion.

Of others [Indiscernible] corporate movement, Concentra has expanded beyond the prairies, become the lead wholesale bank to over 200 credit unions and their 5 million members. By the numbers this acquisition adds up, like Equitable Concentra's branchless, [Indiscernible], it is a public [Indiscernible] and also residential mortgages, robust mortgages, and engages in commercial lending and leasing.

By business slide, it is a perfect fit with Equitable personal and commercial banking guidance, Adding significant scale to both. We have valued the differences between our organizations, Concentra Trust Company the seventh largest company in Canada has 31.8 billion in assets under administration and provides Croft e-services, direct suppliers, corporate people process, and states and is part of Canadian Wealth Advisors providing fiduciary services to a national client base.

Concentra offers credit union specific product and liquidity management in clean lines of credit. An overnight account, and mortgage syndication service that enables credit unions to sell commercial loans to other credit unions.

Credit unions also pay excess funds of their liquidity deposits with Concentra Bank. Together, Concentra's wholesale trust solutions enhance their credit unions and the success of their members.

That's a call Canada's Challenger Bank can very much get behind and the comparative modest way already do by propriety services to several credit unions. As noted at the outset, this acquisition is strongly aligned with our bank strategic focus.

Concentra increases Equitable proforma personal banking asset base by approximately 33%, creating meaningful scale. This expansion particularly noteworthy in conventional lending, and everyone favor for its risk return characteristics.

A key part of rationale in the acquisition [Indiscernible] and half of Equitable’ s competitiveness in the [Indiscernible] market, as well as our scale. Our worldwide residential mortgage book grows by some $2.5 billion on a proforma basis.

A rapid accelerating [Indiscernible] with mortgage business, which grew 325% last year, it also gained scale growing from $247 million at year-end, to about $507 million based on Concentra's November reverse mortgage assets. The bunch of additional scale weighted to conventional loans is also true in our commercial bank lines, [Indiscernible] where we add $1.6 billion in commercial loans, including $200 billion added to our current leasing business.

I will pull up here the highlights, the most compelling advantage from both the growth and risk management perspective, and I think it's really important we stopped there and think about this. We understand all of the asset classes that Concentra brings to Equitable because we lend where they do.

Our asset focus overlaps to an extraordinary degree, including focus on secured lending products. This means we know the dynamics and risks in these markets, and we hope to learn even more by working with the Concentra team.

As [Indiscernible], we have complementary geographic alignment as well. While Equitable on the strong positioning come back, Concentra is bigger in the Prairie, what as we would expect, has its deep roots in those markets, and a couple of each other in Ontario.

Despite that profile, the very positive impact Concentra will have on Equitable’ s net interest income. Net interest, and total revenue alike.

Proforma and Interest revenue increases by approximately 38%, while total growth over revenues increased by approximately 23% with additional upside potential as we pursue new opportunities in Trust estate and consulting services for credit unions. Concentra as a digital platform that we paired with EQ accruals such as EQ Bank will be the sole brand going forward.

And total proforma revenue increased by a $145 million to $788 million or 11% of that from known interest sources. On deposit property acquisition brings further strength and diversification to Equitable.

Concentra adds $6.4 billion of retail and commercial deposits, an entirely new deposit channels by serving credit unions. This includes $3.1 billion in credit union deposits and several hundred million dollars in commercial deposits, both new and attractive funding channels for Equitable.

By giving all deposits competitive rates and great value, they can trust we gain access to additional funding sources. We also added $3.7 billion of securitization funding to Equitable’ s 11.4 billion securitization liability, a 33% increase to support the short mortgage lending across the country.

Also very important based on Concentra's portfolio, we have gained about $600 million of additional covered bond capacity, allowing us to increase and accelerate future issuances, starting this year. As you know, we launched a highly successful -- an overall €350 million above issuance was part of our $2 billion covenant bond program last September.

This is Equitable’ s most cost-effective source of funding. Total portfolio funding growth was $44.6 billion, was substantially more about diversification cost effectively [Indiscernible] logical folio and accelerate growth across new and existing channels.

Looking to the future, it's time about the combination of banks is our key priority and extends our reach as Canada's Challenger Bank, driving change in Canadian banking to enrich people's lives. In this regard, supporting the growth of credit union [Indiscernible] at the top priority.

We view credit into the fundamental, both financial health and prosperity of Canadians, an important area diversity within the financial services of the ecosystem. We will form a credit union advisory committee with the goal of strengthening our ties to the industry and innovative ways that will enhance credit union services for their members and the competitiveness of these vital financial institutions.

I think we gain [Indiscernible], edge [Indiscernible] cover kind of Challenger Bank. Equitable culture though, is aligned with the competitive spirit of the credit union movement.

But certainly, we will benefit from the deep knowledge, trust, and relationships enjoyed by the talented team at Concentra. In total, this is big news for our small bank.

And I'll ask Chadwick to provide more information. Chadwick?

Thank you, Andrew. And good afternoon, everyone.

Today is a truly proud day for Equitable. And we appreciate you joining this call on short notice.

With the additional scale and distribution capacity provided by this acquisition, we will build on Equitable’ s long-term track record as Canada's Challenger Bank. This track record further improved in 2021 as we surpassed our ambitious growth plans and ended Q4 with substantial momentum.

Our Q4 earnings press release and MD&A issued today contain all the details. And we have posted our customary quarterly investor presentation to our website.

I will hit a few brief points now on these strong results then offer more comments on the acquisition announcement. Total loan growth in 2021 was 16%, landing well above our 8% to 12% guidance.

We shape the portfolio as planned with a bias to conventional lending, which increased by 31% in 2021. This is Equitable earnings engine and one that will be further fueled by the addition of Concentra.

A big story line was the growth in Equitable’ s alternative single-family business. That loan portfolio balance grew 30% year-over-year to $14.4 billion, surpassing 2021 growth guidance of 12 to 15% by a wide margin.

This portfolio maintained strong momentum in Q4, with assets plus 9% or plus 1.1 billion in attrition rates moving towards historical norms. Another significant outcome in our personal bank is the continued growth in a Wealth Decumulation business, it expanded 249% or $211 million, led by 325% growth in reverse mortgages.

We continue to really [Indiscernible] our prospects here because of recent gains in share and Canada's growing population of seniors, many of whom will choose to age at home with the help of a reverse mortgage. Equitable is quickly taking a larger piece of this segment in Canada, as evidenced by growing origination's, adding Concentra's reverse mortgage business will further improve our competitiveness.

Our commercial banking segment with 5 distinct business lines, now serves over 18 thousand business customers and remained in high-growth mode that favored conventional loan assets. The overall portfolio expanded 19% or 1.6 billion to $10.5 billion.

All commercial business lines met or exceeded our ambitious 2021 guidance. On deposit side, we ended the year at approximately $7 billion in EQ Bank deposits.

Well that was consistent with Q3, at 53% growth for 2021, we surpassed our guidance for the year of 30% to 50%. It's important to know that a consistent deposit level in Q4 over Q3 was on par with our strategic choices for this funding source.

We have been successful in diversifying our funding stack over the past couple of years and now have more flexibility in our options to manage our low cost of funds. We have a foundational brand promise that we stick to for EQ Bank customers, and our next leg of growth in the digital bank is frame particularly around the launch of our EQ Bank payment card in the second half of 2022 and many other new enhancements in our pipeline.

We are going to shed more light on these exciting developments at our in-person 2022 Investor Day on June 13th. The bottom line here is Q4 was our best quarter ever at $80 million of earnings, and we landed at the top end of our ROE North Star target at 17%.

That translated to an overall ROE of 16.7% for 2021. [Indiscernible] a strong risk managed precisely within our long and proven track record and highly profitable.

On a full-year basis, NII was 17% higher year-over-year at a record $583 million, did a 10% growth in average assets and an 11 basis point increasing manner. For Q4, NII was up 19% year-over-year, mainly driven by 14% growth in our average asset balances, and a 7 basis point increase in our NIM.

As expected, the big driver of NIM growth, in both Q4 and for all of 2021, was a planned shift in asset mix toward our higher yielding conventional loans. Non-interest revenue was also very strong in Q4 due to benefits from strategic investments.

As we've been discussing each quarter, while lower year-over-year non-interest revenue climbed again quarter-over-quarter, our track record of risk management remains clear. PCL with a net benefit of $7.7 million in 2021, including a Q4 benefit of $1.4 million as future expected losses recorded in Q1 and Q2 of 2020 were released.

Net impaired loans declined to 0.27% of total loan assets at December 31, 2021 compared to 0.40% a year ago, reflecting a reduction of $29.6 million year-over-year. Net impaired loans were higher than at the end of Q3 2021 by $16.4 million due to the addition of a $24 million commercial loan in BC, where no losses are expected.

Equitable remains well-reserved for credit losses with allowances as a percentage of total loan assets equaling 15 basis points at December 31, compared to 23 basis points a year ago and 14 basis points at December 31, 2019, prior to the pandemic. Realized loss, it's remained low at three basis points of total loan assets, or $9.6 million at December 31, 2021, in line with the bank's successful 10-year performance.

With these strong results, and as Andrew stated, we're very pleased that our Board of Directors declared a 51% increase in our quarterly dividend for Q1, effective with the next payment in March, to shareholders of record, March 15th, 2022. Like other banks, we had to hold back on dividend increases until OSFI removed it's moratorium, and this announcement makes clear.

We made up for the wait dispositions or payer ratio on target at about 12%. Importantly, also, we ended 2021 with a CET1 ratio of 13.3%, comfortably above our target.

Now for a few more comments on our agreement to acquire Concentra. First, I'll reiterate we're making this acquisition from a position of strength.

And today we are reaffirming the guidance we previously provided for 2022, which includes 15% plus ROE. I'll refer you to our Q4 MD&A for more details.

Once the acquisition closes, we will update our guidance to incorporate the addition of Concentra. Anyone familiar with the process of a bank acquiring other bank, will know there are accounting changes that may transpire in the closing process, plus associated transaction and integration costs.

We will introduce adjusted earnings, as of Q1 to reflect these considerations. This is a financially compelling transaction with meaningful expected accretion.

In year one following close, we expect mid-single-digit adjusted EPS accretion and increasing from there. Through the combination, we expect to realize greater than $30 million of run-rate synergies by the second full year of ownership and have estimated integration cost to be in the neighborhood of 45 million to 50 million, largely in the same time frame.

These synergies reflect Concentra operating at a higher efficiency ratio than Equitable today. Combined, we believe we can align this more to Equitable’ s best-in-class productivity.

These synergies reflect the opportunity for us to scale our combined businesses over time. For example, the additional covered bond capacity.

At a prior issuance pricing, this higher capacity cut over $3 million a year in annual funding cost savings. We believe there are excellent opportunities for us to expand services to Concentra's credit union customers over time, and we're excited to pursue this upside potential.

This is a fully financed all-cash transaction. A core focus on our financing is to maintain our strong consistent capital with a goal of 13% or greater [Indiscernible] at close.

The estimated $470 million transaction volume is subject to customary closing adjustments and will be financed in two ways. First, a $200 million bought deal offering in the form of subscription receipts, each subscription receipt will entitle the owner to receive one common share of Equitable Group Inc, inclusive of dividend rights upon closing of the acquisition.

Gross proceeds will be held in escrow until the acquisition date and returned if the transaction doesn't close, this will also promote even greater liquidity for Equitable stock. The offering is expected to close February 16th, 2022, subject to customary closing conditions, including approval of the Toronto Stock Exchange.

Secondly, we've arranged a committed term facility at favorable terms for Equitable, the amount of this facility will be set at closing. As outlined in our press release, we have a share purchase agreement in place with SaskCentral for their 84% interest.

We also have supported agreements with minority shareholders who account for the majority of the remaining ownership, which will enable us to acquire the additional 16% for complete ownership at a meeting we will call shortly after closing. The terms for the minority shareholders are the same as those received by [Indiscernible] Central and inclusive of the $35.7 million premium to the 1.08 times book value at times of closing.

We expect to amalgamate Equitable Bank with Concentra Bank. And leave Concentra Trust, as a subsidiary of the merged banks.

Deal completion is subject to customary posing conditions and regulatory approval. And we anticipate this will occur in the second half of 2022.

To summarize, 2021 was another year of record earnings reputable that ended with meaningful growth momentum. Today's agreement to acquire Concentra, is a milestone for our bank in its addition.

We'll be transformative, reputable scale, and very good for all stakeholders. Concentra brings significant growth, exceptional diversification, trusted and value relationships with Credit Unions, Wealth Advisors and [Indiscernible] and advances our products, people, process and platforms.

It broadens our reach so that we can directly and indirectly serve more than 5 million Canadians when combined with Equitable’ s customers. It gives us access to Concentra's task or work force with which we share a dedication for great customer service and high-integrity business practices based on ESG excellence, and it's accretive to our shareholders and endorsed by SaaS Central's board as being good for all sellers.

As Canada's Challenger Bank, Equitable prides itself on driving change in Canadian banking that enriches people's lives. This is most certainly an enriching change, and we look forward to making it happen.

A preliminary perspective in connection with the bought deal offering will be filed on SEDAR February 9th. Thank you for listening today on short notice.

Have a great evening and goodbye for now.

Thank you, sir. Ladies and gentlemen, this does conclude your conference call for today.

Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines.