Good morning, ladies and gentlemen. Welcome to EQB Inc.'s earnings call for the fourth quarter of 2022, being held on Friday, February 17, 2023. At this time, you are in listen-only mode. later, we will conduct a Q&A session for analysts, and instructions will be provided at that time on how to queue up. It is now my pleasure to turn the call over to Richard Gill, Vice President, Corporate Development and Investor Relations EQB Inc. please go ahead, sir. Thanks, Michelle. Your hosts today are Andrew Moor, President and Chief Executive Officer, Chadwick Westlake, Chief Financial Officer, and Ron Trac, Chief Risk Officer. For those on the phone lines only, we encourage you to log on to our webcast as well to review our accompanying quarterly investor presentation. The presentation includes on slide two, EQB's caution regarding forward-looking statements, as well as slide three, outlining the use of non-IFRS measures on this call. All figures referenced today are adjusted where applicable or otherwise noted. It's now my pleasure to turn the call over to Andrew. Thanks, Richard, and good morning, everyone. Given the accounting complexities involved in reporting on an acquisition, I'm going to keep my remarks very brief to allow Chadwick to help investors and analysts on our call assess the various one-time impacts adjusted in our Q4 results. That said, a lot of great things have happened since our Q3 results call in November, and we'll cover those highlights today. To my mind, it is the long-term consistency of performance that really matters to us and to fellow shareholders, and it's what EQB has proudly delivered for the past 18 years. Each and every year during that period, we've grown EPS, including in 2022, with an ROE average over that period of 16.4%. EQB's value creation method, which we have again outlined in our MD&A, applied with discipline and executed with excellence, provided these differentiated and industry-leading results. Speaking to the here and now, what EQB demonstrated in Q4 is solid margin expansion year-over-year and very low realized loan losses. Based on our consistent and effective risk management processes and practices, we should emerge from this period of central bank tightening without unusual credit losses. You can see our confidence reflected in the 2023 guidance we released in November and are reaffirming today. As for the addition of Concentra Bank, the acquisition added complementary asset growth, diversified our sources of revenue and funding, and provided greater distribution capabilities across Canada. For me, the takeaways this quarter are, with the substantially increased scale and our integration plans taking flight, we're on track to realize the synergies we projected. Our engagement with credit union partners is getting off to a good start with progress across a number of initiatives. We've succeeded in bringing great talent to Equitable Bank. It's been an absolute pleasure seeing teams come together and collaborations take shape. Most importantly, we know we have much more to accomplish, and we have the people to do it. With underlying momentum as well as the advantages of enhanced scale and business positioning, I feel more optimistic about our future than ever for three reasons: our opportunities to grow with diversification, the market presence and capabilities of EQ Bank, and third, our bench strength. Taking each in turn, we have a wide range of incredibly valuable opportunities ready to serve Canadians across our diversified commercial and personal banking operations. It's important when I make that statement for everyone to appreciate the level of diversification, scale, and significance of our commercial banking business lines, which collectively represent about half of the bank's earnings. I encourage you to consult our updated MD&A for details. In our personal banking operations, there are many reasons for optimism, as well as including with EQ Bank, which to my mind has reached a tipping point in broader consumer acceptance. I think The Globe and Mail's Rob Carrick captured in his recent column about the EQB card, bank's card offering entitled, "This practical new spin on a savings account might just peel you away from your big bank." Frankly, I see no reason why it shouldn't peel you away from a traditional bank, old line bank now, and our team is certainly focused on making that headline a reality for more and more Canadians. It's taken seven years of immense progress to establish our market presence as a top digital bank in Canada. We've done that by enriching people's lives with innovative digital solutions at every turn. The story continued in December with the launch of EQ Bank in Quebec, and in January with the introduction of the EQ Bank Card. Both are game changers, and we are seeing this in new account sign-ups and product usage as more Canadians choose to make bank with us. If you're not one of the nearly 35,000 customers who have already subscribed to the no-fee EQ Bank Card over the past month, I encourage you to do so as it translates all of the Savings Plus Account benefits into an everyday payment solution that works on a fee-free basis from any ATM with no charges on foreign exchange purchases, plus cashback on all purchases. If you're traveling internationally this year, there is simply no better way to pay and save than with the EQ Bank Card. We have a deep understanding of how technology is changing banking, and EQB is uniquely positioned to take advantage of that in the Canadian market with a true cloud-native digital platform. This platform positions us to wow customers with faster delivery of new services. You will see us capitalize on and accelerate our investment in this advantage as we move forward. A team of us recently visited Microsoft headquarters in Redmond, Washington, to understand how we can best utilize their technology stack for competitive advantage. We all came away confident that we are on the right track with many opportunities for value creation ahead. Most of all, my optimism comes from working with almost 1,700 challengers across Canada, who not only delivered in 2022, but are absolutely capable of tackling even more ambitious challenges in the year ahead. We've recruited great talent, nurtured great talent within, have dedicated programs in place to develop our raw talent. As a consequence, EQB has both tremendous bench strength and the means to advance next generation thinking and innovation. Together, we will approach all of our opportunities with a clear-eyed focus on customer service and in full alignment to our value creation method. Speaking of great talent, it's now my pleasure to turn the call over to Chadwick, whose contributions to our success have been many, and include developing a first-rate team of professionals who worked incredibly hard to bring you today's integrated financial information. I think our shareholders deserve to know how good that team is, and I sincerely thank them for their efforts. Chadwick. Thanks much, Andrew. Well, 2022 marked another consecutive year of EQB setting clear guidance delivering the results. We say it every quarter and will again, our North Star in capital allocation priority is return on equity, we delivered 15.9% in Q4 to round out the full year at 15.7% compared to guidance of 15%+. It's a great outcome, even in the context of our outstanding track record. Considering we added incremental common equity in Q4 to fund the Concentra Bank acquisition. Today, I'll jump right into four key themes. First, the impact of closing Concentra in Q4, 2, margins and revenue, credit risk management, last, 2023 guidance. As we talked about in past quarters, including on the Q3 investor call in November, we booked several one-time adjustments to our reported results in Q4. There are no surprises here for us, and more than a third of the adjustments are related to required accounting for credit loss provisions, noise created by closing the Concentra Bank acquisition. Our adjusted earnings achieved guidance, including book value per share and capital, which are not adjusted. Book value per share grew 13.4% year-over-year, after accounting for the 6% increase in weighted average common shares outstanding in Q4, reflecting the conversion of the subscription receipts. That average share count will increase further in Q1 to fully account for the sub receipts. I'll unpack a few points on the one-time charges and the CAD 1.27 per share difference in reported versus adjusted diluted EPS for Q4. 30% of the total difference is the Day 2 and acquisition-related ECL from closing Concentra, which does not impact our total capital. Under IFRS, we are required to establish an ECL after having eliminated Concentra's as part of their fair valuing of their assets and liabilities upon closing. The provision for losses was booked as stage one performing on the entire Concentra portfolio, followed by any migration from stage one to stage two. After this quarter, provisioning will follow our normal, robust process. About another 30% of the difference in Q4 is software-related write-offs and write-downs, with this decisions are mostly driven by the acquisition and some consolidation in vendors we have decided to no longer work with as an outcome. 20% is from planned severance, with significant changes that were completed in the first 60 days following closing as part of our synergy planning. The remaining 20% of the difference was tax and other in integration- related costs. These points are in our MD&A. We do not expect any further material one-time charges related to the integration of Concentra, but there will be some more spend here. We will continue to report adjusted results. When we announced the acquisition in February 2022, we estimated integration costs in the range CAD 45 million to CAD 50 million, and we remain on track. That excludes the accounting-based impact from the Day 2 and acquisition-related ECL and the interest costs that were booked as an offset to interest income prior to conversion of the subscription receipts to common shares. At announcement, we also stated that our anticipated annual run rate synergies should be in the range of CAD 30 million, and that they would be substantially achieved by the second full year of ownership. Overall, our expectation has been mid-single digit adjusted EPS accretion in the first full year post-closing, increasing thereafter. I can confirm we're on track to achieve this guidance. Now I'll move over to point number 2, context on our strong revenue growth driven by margin strength and stability. Our guidance for 2022 was flat to moderate expansion from the 1.81% NIM in 2021, and we delivered 1.87% ahead of guidance. Going forward, we will not publish standalone financial statements for Concentra or a separate contribution of Concentra to EQB, especially as we continue to integrate the banks. However, you see net new disclosures in the EQB MD&A, including average yield on consumer lending assets, plus points like disclosures on credit union deposits. What I can say is that in Q4, if we had not acquired Concentra, EQB NIM would have continued to expand sequentially from 1.94% in Q3. The consolidated margin of 1.87% we reported for Q4 positions us well for momentum into 2023. We highlighted last quarter that with our diversified funding mix and our flagship EQ Bank deposit base, we manage a lower deposit beta with funding costs moving up at a lower velocity than Bank of Canada increases. This advantage has continued to strengthen. Our EQ Bank customers are winning with a very high everyday rate of 2.5% plus new offerings, including in Quebec and with our EQ Bank Card that Andrew referenced, which further scales up our customer engagement. With Concentra, we add more diversification here, and we expect to continue our covered bond program with another issuance in 2023. We announced that at the end of November, we have more tailwind in funding costs due to the benefits of achieving a credit rating upgrade to investment grade for Equitable Bank by DBRS Morningstar. It's a historic milestone in the growth of the bank, and we have conviction that there is more upside with our rating still not reflecting our operating model, diversification, capital, and liquidity. Over to credit risk management. I noted the one-time provision for credit losses in Q4 due to Concentra, which was about CAD 19 million. If we excluded this, our PCL book for Q4 would have been approximately CAD 7.8 million or a 7 basis points ratio, which is moderately elevated from the CAD 5.4 million or 6 basis points ratio in Q3. This is higher than Q3 as expected because of a couple key factors. While delinquencies are stable, there was broad deterioration in macroeconomic variable forecasts compared to forecasts at the end of Q3, including unemployment, GDP, HPI, and the commercial price index. These forecasts triggered model-driven changes with Stage One to Stage Two migration, which represented nearly three-quarters of the Q4 PCL, excluding the one-time items. With Concentra, we added some new assets with a different risk profile, but also higher yield, including nearly CAD 900 million in diverse consumer lending assets, which you now see as part of the personal banking portfolio. We added more than a quarter billion dollars in additional prime quality equipment financing assets to the commercial banking portfolio. These respective asset classes generate a higher yield but also a higher probability of default and loss-given default factors and a corresponding higher ACL. This was reflected in our net ACL as a percentage of lending assets increasing from 15 to 18 basis points sequentially. Again, these translate to higher earnings and higher ROE creation. Our gross impaired loans increased CAD 50.6 million, or 58% sequentially in Q4. Last quarter, we referenced that over 25% of impaired loans related to one loan that we expected to fully recover. That was true, and we did. Similarly, in Q4, about CAD 43 million, or around one-third of our net impaired loan assets relate to one loan in Quebec. We expect to fully recover our exposure. In the coming quarters, we are prepared to see an increase in our impaired loans in this economic cycle, we continue to expect to recover these positions if and as they transpire. A few other reminders on credit risk that you will find referenced in our financial statements in the supplementary pack. Nearly all assets are secured and we only take first lien positions. Our average uninsured single-family residential portfolio LTV is 65%. The average Beacon score in uninsured single-family residential is a strong 713. 44% of on-balance sheet commercial loans are insured. We won't look at new commercial mortgages above 75% LTVs unless they are insured. Fundamentally, nothing in our results indicates increasing credit impairment. The risks are real and present in the economy, but we always actively manage to our principle, lend and not lose money. Moving to 2023, we're reaffirming the guidance we provided in November, with our focus remaining on our adjusted 15%+ ROE North Star. For the full year 2023, this includes diluted adjusted EPS growth of 10%-15%. The respective guidance by metric and asset class is in our Q4 MD&A. We expect portfolio growth will be more muted in the first half of 2023, increasing towards these targets in the second half of the year. Note this is 12 months guidance and we will end up calibrating it to account for the change we announced to move our financial reporting year from ending December 31st to a fiscal year ending October 31st. That means November 1st, 2023 will be the start of our fiscal 2024. Aligned with industry practice for Canadian banks, our board of directors has approved this change to improve the timing and comparability of our bank in Canada. More details will follow at our AGM in May. In closing, we believe our value creation method and impact on enriching people's lives will continue and broaden momentum. Consistent long-term performance is validating our challenger bank strategy. We have proven expert credit risk management, increasing diversification in sources and uses of capital, strong diversified personal commercial banking business lines, the top digital bank in the country, and scale and distribution tailwinds. We'd be pleased to take your questions. Michelle, can you please open the line up for analysts? Your first question will be from Meny Grauman of Scotiabank. Please go ahead. Good morning. I want to start with a question on the loss on loans and investments, about CAD 6 million, a little bit more than I expected. We've talked about this in the past, you know, starting in Q2. Is this just the same dynamic that we've been seeing for most of this year in terms of those fintech investments being marked down? Or is there anything else in that number this quarter? That's exactly it, Meny. We are certainly hoping we're sort of at the end or close to the end of that, but that's. We think that'll be a bit of a, as Chabot would say, a tailwind going forward that we wouldn't expect this to repeat in 2023 as a whole. Although of course, there could always be a few little ones, but it's, it seems like we might have borne most of the pain on that. Got it. Just another, sort of more detailed question. Relatively small portfolio, the insurance lending portfolio. You talk about repayment activity being impacted by increase in prime interest rates. I'm wondering if you could just provide a little bit more detail on what the dynamic is there. I see that the expectation for 2023 is pretty strong in terms of growth. Just wondering how you see the rate picture impacting that business next year or this year in 2023 as well. Thanks, Meny. As a reminder that the insurance lending business is part of our broader play on a decumulation business, where we have this thesis that retired Canadians are not particularly well-served by the major Canadian banks. This is an important plank in that. Though we do compete with the big insurance companies in providing policy loans. As rates moved up, we found that their offering of rates didn't move up as fast as we would think it should have done with the underlying rates. In general, they're priced above us, and we would expect this year that would... What happened to some of the assets we had moved back to the insurance companies because they were offering a more competitive rate. That shouldn't be for regulatory reasons, the kind of long-term position. We're quite optimistic that this year that it will revert to a position normal, so you might see a little bit of higher growth in that portfolio. I would say it's still a fairly small portfolio. I'm very excited about the potential of the business, but I think we've still got to unpack that a little bit and get it to the level of efficiency that we need to be truly successful over the long term. Thanks, Andrew. A little bit bigger picture, questions in terms of competitive dynamics that you're seeing? You know, the larger banks are dealing with higher capital requirements, and maybe that is going to go up. Obviously, that doesn't impact you directly, but wondering if you're seeing any or expect to see any impact, indirect, especially on the commercial side of your business in terms of competitiveness? Is there any opportunity there for EQB in this kind of environment? Certainly. We really respect the skills of the treasury teams and the big banks and how they would try to price loans to yield the right returns for investors. Presumably as they need more equity on their balance sheet, to, you know, for regulatory reasons, there'll be a bit of price push through there, which might at the margin make us a little more competitive. I think the broader issue for us, though, generally in competing with the Big Six is that we're not an AIRB bank yet. We continue to be, aggressively pursuing that program, that will be helpful to us once we get there. As we've noted before, that's, you know, a couple of years away. Thanks. Thanks, Meny. Our next question comes from Etienne Ricard of BMO Capital Markets. Please go ahead. Good morning. On the EQ Bank deposit growth guidance, how much of the 20%-30% growth do you expect to come from, first, new customer acquisition, whether that be in Quebec or in other markets? I presume the second part is, how much will come from existing customers depositing more as a result of your recent initiatives? It's virtually all coming from new customers, so we're not expecting the average balance per customer to go up, which, you know, just to give you some sort of sense, is about CAD 25,000 per customer, so somewhere in around that CAD 20,000 to CAD 30,000. We're not expecting that to move very much. In fact, as we acquire more customers who are using EQ Bank as an everyday bank, depositing their payroll, using the payment card to make their payments, if anything, the average might sneak down a bit. We are seeing very strong customer acquisition now with the use of our Make Bank campaign that, you know, the broader value proposition with the payment card. The problem we've been trying to solve with the payment card is that if you have your payroll deposited in EQ Bank, historically you wouldn't be able to go to a point of sale, say, the grocery store, and spend that money. Now we've solved for that. We're really optimistic about it becoming more and more an everyday bank solution. that is going to be the message for the year, and we're really optimistic that we can drive that message home and really deliver, you know, a new level of available functionality in the Canadian market. How is the launch in Quebec progressing relative to your plan? Très bien. It's very good, Etienne. Yeah, no, What we know about the Quebec market is it's particularly more inclined than the rest of Canada around sort of digital solutions. we're, you know, we're making good progress. Now, just to be clear, in order to deliver great service, we launched with a slightly limited, more limited product set in Quebec, just to make sure that we didn't have any sort of flaws with the stack and everything that we offered was working well, which is the case. Now we are going to roll out the full product suite in Quebec, but that's a project that's gonna take much of the year. As we sort of ramp up that functionality, we would expect to see more gain and more traction in the market. I'm very encouraged with the start we've had, and I think all of our market research that suggests this is a particularly good market for digital bank has proven to be true so far. Understood. Lastly, how should we think about the mix of credit union deposits as a% of your overall deposit structure now that Concentra is closed? Could you remind us how the cost of those deposits compare to other sources? We wouldn't expect material growth in the credit union deposits as a part of our funding stack right now. Actually, I'd say it's early days and we have some positive early momentum with our credit union partners and figuring out how to offer them the best solutions. The rates, we have not disclosed those credit union deposit rates, but you could say they're on par with some of our benchmark nominee board rates. It sort of depends on the campaigns at a certain period of time. But just look at it for now as it's added a new great ingredient into our funding stack into the diversification. Probably over the next few quarters, we'll get a better sense of the real opportunity for us. That is how we see it. Yeah. We just to be clear, you know, we really didn't have the chance to reach out to the credit union system, though we would've liked to before the deal closed. Now we have, you know, I think we'll have a better. We'll probably be able to answer that question even better in the next couple of quarters as we have more and more conversations with those important partners of ours. We're really trying to be really helpful to credit union system and solutions we can offer if we can do that. Clearly, you know, I think more deposits will come with it. But it's a holistic, really learning how to work with a really important part of the Canadian financial ecosystem. That's right. Like, remember too, I guess just on the close up point, while we reported CAD 2.4 billion from credit union deposits, remember the whole market in Canada is about CAD 400 billion. We need to figure out what makes the most sense as we serve the credit unions and their members. Thank you very much. Thank you, Etienne. Your next question comes from Lemar Persaud of Cormark Securities. Please go ahead. Yeah, absolutely Lamar. Yeah. Okay, perfect. I dropped off there for a little bit. I probably need a new headset. Apologize if one of my questions have been asked and answered already. I just want to come back to the consolidated NIM next quarter, given the full impact of Concentra. Should we expect it to increase sequentially, just given the momentum in the underlying business net of the drag from Concentra? I think I heard you mention, Chadwick, that margins ex-Concentra moved higher, and that jives with my crude estimate, but I'm really trying to figure out what the Q1 baseline should be. Yeah, that's fair, Lemar. Good morning. It's one way to think about it is we had 2 months of impact from Concentra, and we were open about the fact that we were bringing in a lower margin business and going to integrate it into our business. It takes a little bit of time to see that margin increase. That 2 months will go to 3 months in Q1. There's a potential for a little bit more dilution, but we would still expect to see some consistency and potential expansion from our consolidated NIM at the end of 2022 overall by the end of 2023. Look at it a bit of a curve through the year. Would you say then- Does that make sense? Well, I'm just trying to gauge it relative to Q4. Like, should I expect, you know, in Q1 for it to move up just, you know? No, I'd say it's down a little bit, Lamar. I because we didn't have the full impact of Concentra in Q4, there's a full 3 months of impact of that margin and then in Q1. You could see all things equal, where we still see that consistency in the overall EQB business. Just you'll have the full impact of Concentra. It takes a little bit of time, and then I'd say some expansion by more in the second half of 2023 is the way I would think about it. That's helpful. I want to move on to your portfolio growth targets here. I want to focus in on the Alt-A mortgages. 3%-5% for 2023 seems a really, you know, quite light relative to what I would expect. Like, is it Bank intentionally slowing growth in that portfolio? I mean, Royal talks about mid-single digit growth in their portfolio, which is prime, for 2023. You know, I was under the impression that with the pressure from higher rates, the pool for Alt-A borrowers should move higher. I guess kind of why the lower target on the Alt-A mortgage growth? I think it's a bit of a tough one for us to be precise about, and we do tend to want to underpromise and overdeliver. You know, clearly we've got a housing market that's, you know, quite slow as we speak. I'd be fairly optimistic, frankly, over the next three to four months, it's gonna, you know, come to life once people have got kind of comfortable the interest rates have peaked. Even to get to that, to get to the kind of numbers to figure out what you want to communicate to the market, you really need to sort of have some views on how the housing market's gonna move. We're certainly expecting a much stronger second half of the year and the first half of the year. I'm, you know, pleasantly surprised by the level of activity on the underwriting floor, as it were today, especially in Western Canada. You know, there's maybe an opportunity to exceed that. I think we're couched in fairly conservative terms, viewing that a slowing housing market is gonna be, you know, still a bit of a march uphill rather than a tailwind for sure. There may be opportunity, and it'll be interesting to see how, you know, the old market changes vis-a-vis the prime market for sure, as you point out. I'll just add two points, Lamar. One is growth out there. You mentioned RBC's prime, uninsured portfolio. Sure, there's growth and there's growth in the Alt market, but we're not gonna chase growth. We're gonna stick to growth that fits our risk appetite framework and fits our consistent business operating model. In this environment, we're being very consistent where others may or may not. Two, I'd say as well, a reminder that we just closed Concentra a couple months ago, right? That increased the asset base as well. We also changed our perspective of relative growth. The whole portfolio is bigger, but that will look different for a few quarters, given the layer on of that portfolio. Thanks. The final one for me, just want to revisit the synergies discussion for Chadwick. I think last quarter you said you'd provide some updates there. Now that Concentra has been under the belt for a little over two months, how are you feeling relative to that CAD 30 million initial guidance? Do you think it's going to be easy to achieve? You know, is that frankly the low watermark with potential upside from there? I'd say nothing is easy to achieve in banking. But no, we're working very hard. As Andrew had commented on, we're pleased with the progress out of the gate. It is still early days. I would say is we have great velocity. You saw that in some of our Q4 results. I'd say our optimism has increased that we will achieve those synergy targets, and I do think there's some upside potential. Remember that CAD 30 million was cost synergies, and there we may be able to explore some more here on the top line as well. We will continue to update you on that quarter by quarter, but it's looking pretty good. What is it on the cost synergies? Is it like systems transformations, systems consolidation? Like what is that? Yeah. All of that that you saw on the one-time charges, Lemar. The software integration and contract terminations, severances, real estate, it's all those standard, you know, there is really a combination of people, process, and technology costs. Thanks, thanks for the time. Thank you, Lamar. Appreciate it. Your next question will come from Graham Ryding of TD Securities. Please go ahead. Good Morning, Graham. Sorry, I had to turn off my mute there. Maybe we could talk about the NIM first, just what actually was it that drove the higher NIM in 2022 for you relative to your original forecast? Just wanna figure out whether it's deposit cost inflation was maybe less than expected, or was it more asset mix? I think it's mostly, Graham, related to, or a significant contributor was the lower beta than we expected on the EQ Bank deposits. Coming into last year when we were giving you guidance, it wasn't as clear to us that the Bank of Canada would be moving aggressively on the prime rates on the short overnight rates. We gained a bit through deposit beta there. You know, I think our treasury team are particularly astute and clever about balance, you know, hedging the risks, making sure we've got a match book across the rest of the asset liability matching process. You know, unlike others, we didn't see, you know, the broader NIMs getting squished through that, through, you know, rapid moves in interest rates upward tend to be things that slightly less tightly managed balance sheets. You see a margin detraction. We didn't observe that. A combination of great treasury management plus the beta from EQ Bank, I think is, you know, both of those things were not quite what we forecast in giving guidance. The last thing I'll just note for back to even the investor day, Graham. Remember the ROE calculator and our focus on ROE, and Andrew's the pioneer here, right? Of creating this. We stick to that ROE calculator that he designed with the team 15, 16 years ago, and that's continued to play out. That plays out right in a quarter like this as well. That those funding benefits in the ROE calculator, you see translated in that margin. Okay. Understood. You know, I hear your message about some dilution to NIM in Q1, as you get a full quarter of Concentra, I think you're suggesting there should be some NIM expansion in the second half of 2023. What is it that's driving that? Is it, maybe some color there? There's a combination of factors, right? There's, we've been looking at the pricing on the asset side of the portfolio, and then also leveraging the pricing capabilities on our funding stack are two elements to consider in terms of what will improve the margin over time. It's just there's been, you know, as we manage our book a little bit differently from a treasury perspective, some of that just takes some time to cycle through as well. Yeah. You know, there's some sort of nuances. For example, some of what we think of as variable bi-rate liabilities are actually CDOR. They've got. Yeah. They've got a, you know, one or three-month term. As we move to a CORRA-driven swaps, which are more of an overnight rate, you'll see less of that. In general, that's gonna help with margin expansion as, you know, CDOR booked historically rolls off. Yeah. Okay. Then maybe just on the credit side, you know, there was some migration higher in arrears. It was, I wouldn't call it alarming, but we saw some push higher, both in the single-family and the commercial side. Maybe just some color on what do you think it is that's driving the higher arrears on the single-family side. Is it the housing market is not as liquid right now and people aren't able to sort of get out of default situations as easily, or is it just employment? Maybe just some color there first. Well, the increase that we've seen in arrears, I would note that the 30 to 80, 90, or in the 80, 90-day category, we've seen the trajectory of that increase reduced a fair bit in the quarter. That's very encouraging as we look forward. The increase in actual impairments is a situation where the prior quarters increase in delinquency roll through. What we're seeing with respect to that, I think there's a little bit less liquidity in the market when it comes to the opportunity to refinance out. We know that certainly some of the mix and whatnot have a little bit less liquidity. I think that's the dynamic you're seeing on the impairments. With respect to that near-term delinquency, it's difficult to pinpoint because we're at levels now that are just returning to historical norms. As you'll recall there, they've increased from what were historical lows coming out of the pandemic. Because of that, we aren't seeing anything really unusual like the three or four different factors that you just referenced that we could point to as causation for increase at this point. Clearly unemployment is not part of this. We typically see a seasonal, you know, seasonally towards the end of the year, arrears a little higher. It looks pretty good. We're not seeing, in terms of losses at least, you know, our view, and we sort of do a deep dive, it's much easier on the commercial side to take each loan and look at them loan by loan. You know, we continue to believe that losses are gonna be, you know, well, not gonna be particularly elevated even with this higher interest rate scenario. Okay. Helpful. Maybe if I could just finish on that then the commercial loan that you flagged. What's the nature of that CAD 43 million commercial loan? Like, what kind of asset is it? What's the loan to value? Why do you expect that you won't have any any losses here? Yeah, it's a multi-family building. It's got a large B note behind it with a partner that we've worked with for a long time. It's part of a broader issue with it, which I think almost every bank in the country is involved in the CCAA. When we look at loan to value coverage, we're very well covered. We won't realize a loss here. Whether it will get resolved before the end of this quarter is another matter, so you might still see it roll through in Q1, but at the end of Q1. I'm extremely confident. Looked at the loan file in some detail, and I'm extremely confident we won't have a loss. If I could just add on what Andrew said there. It's the asset that we have ourselves is a solid asset. The issues causing the CCAA are more at the sponsor level at the top of the house. That's why we can assert real confidence in our asset working its way through. I think you could just generally think about that in terms of arrears. Sometimes we're lending on a very good asset, say a cash flow multi, to a group that's got other, say, development activities. Now you may end up with the group itself running into some challenges, but don't forget we've got a first lien on the cash flow multi. You know, the loan to values we lend at, you know, generally you can work your way out of those things with no loss, but it can look like a bit of an arrear for a while. Okay. That's it for me. Thank you. Thank you. Our next question comes from Jaeme Gloyn of National Bank Financial. Please go ahead. Yeah, thanks. First question, maybe for Andrew, just in terms of the Concentra Bank business and its portfolio of loans after 2 months of getting your arms wrapped around it, are there any, are there any portfolios or types of loans that you like more or like less than originally expected and are looking to maybe shift or push further into or pull back? Are there any comments on that? I say thanks, Jaime. I mean, we'd already identified a few loans, a few little parts of the portfolio that we weren't concerned about from a credit loss perspective, I think. We don't want to continue to be in those businesses. Deliberate strategic decision. You know, that continues to be our position on those things. We haven't really seen anything that's more attractive as a result of looking at it deeper. You know, we're still looking away. It takes a long while to really get your arms around a loan book, seeing nothing negative at this point, pretty much right what we expected. I think there was a number we looked at, like 30,000 documents or something crazy before we actually put the bid in on this asset. I think that investment in time early on is really paying off in terms of us actually having a pretty good view on this portfolio. I would say in general, no surprises. Okay. Sorry, I missed the first part of that answer. Did you say there were some portfolios that you would look to maybe exit or diminish? Did I understand correctly? Yes,[Cross talk] There were some that we determined before we bought Concentra we wouldn't be continuing. One is what they call their high yield portfolio. It's lending to some commercial entities. Each asset looks fine to us at this point, but it's not a business we want to be into. We don't believe we can scale it safely. There are a modest number of hotel loans. We generally don't have a good, you know, understanding of hospitality vertical. It's not something that we think as strategic direction we want to be putting more capital into those, that kind of business. Those two are both... You know, we'll still work, just to be clear, in case some of those customers are listening, we will continue to support customers of Concentra Bank. We're not somebody that switches and changes, but those are not, you know, businesses that we want to lean into to expand from here. Yeah, understood. If I look at the consumer lending portfolio, nice yield, 9%. That's been pretty consistent from Concentra going back in their years, their financials as well. You know, maybe, if you can provide us a little bit more color as to what's behind those loans, and the potential growth trajectory for consumer lending. I think it should grow quite nicely. Mostly, you know, a big chunk of that is home improvement loans and equipment like that. You know, it seems to be working with good partners. Pretty comfortable with it. Again, you know, it's one we I think we're excited about the portfolio in a positive way. I wouldn't like to give you too much projection for growth until we have a deeper understanding of those partners and really, you know, I think we're getting there. Just another couple of quarters, we'll have more comfort around those portfolios. Our general view on them is very positive at this point. Okay, understood. Last one for me, maybe more of a question for Ron Trac. Just thinking about the credit provisions and your closest peer talked about higher renewal rates or higher mortgage rates for renewed mortgages as being a driver of higher provisions this quarter. Not looking for your comment on what they've done, but more just philosophically, like how would a higher rate on a renewed mortgage impact how you think about expected credit losses and a provision that might be taken on that renewed mortgage? Any color on that? Sorry, I didn't hear the Royal Bank talking about that on their call. You know, certainly it's a valid question in terms of what higher rates mean for our book. I don't know, Ron, if you could address that more generally. Well, look, I mean, obviously we have a very strong handle on it. You know, with respect to any of our competitors, I mean, we look at our own book in the context of our own risk appetite. That we've asserted for many, many quarters the quality of our book, the strength by evidenced by LTVs, the Beacon scores, et cetera, et cetera. It's actually a relatively small number of loans where you would be into areas of, you know, total debt service that are, you know, exceeding, say, 50%. Those loans also have very strong payment histories to date. When you take all those in context, in terms of the number of loans, the quality of the book, where our risk appetite is played, Chadwick talked about how we are designed to go through cycles and the book is positioned to take you through a cycle. I'm quite confident that the provisions that you see today are reflected in what would be, you know, in the next six months, the renewal cycle. It's reflected in that we have taken nominally or marginally higher reserves incrementally as the economic outlook has changed. I certainly would not expect to see any increase in provisions specifically for that factor over and above what we have on the books today. If I understand correctly, the, you know, where there are loans that maybe have a total debt service ratio exceeding 50%, that by itself might be a reason to maybe increase provisions from an expected credit loss perspective. Given the LTVs, given the payment history, given the underlying, I guess maybe FICO or quality of the forward, those are all offsets where a provision, you know, you can sort of tweak that down a little bit. Is that... Did I summarize that fairly? I guess that's entirely the right way to think about it. Let's not forget, you know, in those EDS, TDS numbers, it doesn't include any assets outside of the house. For example, you could have money in a savings account in your RSP. That's not even, you know, that's not, doesn't help alleviate EDS, TDS. Presumably, you're probably likely to have a relatively high Beacon Score if you've got, you know, if you've got those kind of funds put away. I think many of the way we think about these metrics doesn't reflect the complexity of what really happens when people take a mortgage, you know. There are family supports here that, you know, the teenagers can go and can take a job on Saturday morning. These are family enterprises to maintain the family home, right? You know, that's certainly how we think about it, and that's what we observe in our loan book. Not to say it doesn't put stress on our borrowers, and we have, you know, lots of empathy for our customers, obviously, with this unexpected increase in rates. Many of them have the intellectual resources to sort of figure out how to work their way through this. Great. Got it. Thank you very much. Your next question will come from Stephen Boland of Raymond James. Please go ahead. Morning. Andrew, just wondering if your thoughts on the competitive environment, if Mr. Smith is successful in acquiring Home Capital. Do you believe this is positive for Equitable or negative? I think it's neutral, Stephen, right? I mean, the Home Capital has a sort of rational management team doing sensible things, and we compete with them fairly and, you know, we all do our own thing. Stephen obviously is a very much a rational competitive businessman. I mean, he didn't build the businesses he has without that. Things will be pretty much as they were before. I guess one thing we won't benefit is seeing their results in public, so that's a bit of a disappointment for me. Other than that, I don't think much changes. Okay. You, you've had a very good partnership with First National for many years. Mr. Smith is, you know, one of your largest shareholders. Has there been any discussion in terms of a change in that relationship with First National going forward? I think we wouldn't expect any, Steve. You know, I mean, Stephen's also sort of one of my best pals. We do a lot of stuff together. Cycle, bike, ski and stuff together. Certainly the conversations I have with him doesn't suggest that there's gonna be any change in that relationship. You know, probably as I'm making this call now, we've probably got 5 phone lines open, our people with First National people talking about various elements of the business we do together. You know, I'm expecting that will continue. Okay. Thanks very much. Thanks, Steve. Mr. Moor, there are no further questions, so back to you for closing comments, sir. Thank you, Michelle. Thank you, everyone, for attending today. We look forward to reporting our Q1 progress on May 2 and hosting our virtual annual general meeting on May 17. As a final thought, I'd invite everyone listening today to sign up to receive the EQ Bank Card. Not only do I think you'll like it, also from a research perspective, it's a great way to get to know Canada's Challenger Bank. The value we're creating in the consumer marketplace, why we are so positive about our digital future. Thank you for participating. Have a great day and weekend.