AGM 2015

May 13, 2015

Good afternoon, ladies and gentlemen. It is my pleasure to welcome you to our 2015 Annual Meeting of Shareholders, which I now call to order. My name is David LeGresley, I am Chair of the Board and a Director of Equitable Group and Equitable Bank. On the dais with me are Andrew Moor, our President and Chief Executive Officer, and Tim Wilson, our Chief Financial Officer. Later in the meeting, Tim and Andrew will present a progress report, including their thoughts on the current state of the bank, the way forward, and the key details of the financial record performance delivered in 2014 and in the first quarter of 2015. To preface their remarks and from a board perspective, I would say we are very pleased with Equitable's continued growth and development over the past year. Since the AGM last year, book value per share is up 15%. Earnings per share are up 16%, and return on equity remains strong at over 17%. Under Andrew's leadership, and with the very capable support and talents of over 400 employees, considerable value has been created for shareholders and consumers. On the shareholder side, this value creation is manifested in several ways. In each of the past three years, Equitable has been the best-performing bank stock on the TSX with a total return of 174%, compared to an average of 60% for Canada's Big Six banks. Strong long-term performance has translated into substantial growth in market capitalization, which has increased by 2 and a half times since 2010 from CAD 375 million to well over CAD 900 million today. During that period, the number of shares outstanding has increased by less than 3%. Shareholder value has also been created by providing a reliable and growing stream of dividends. While funding high return growth initiatives largely through internally generated funds, the board has nonetheless raised the common share dividend six times over the past four years. Our annualized common share dividend has grown from CAD 0.45 per share in 2011 to CAD 0.76 now, a 69% increase over that period. Meantime, in the consumer marketplace, we take mortgage assets and savings deposits as proxies for the bank's ability to offer our customers value. Both of these metrics have grown substantially in 2014 and over the long run. On behalf of the board, I would like to congratulate all Equitable employees and the management team for these outstanding results. Your board also plays a very important role in the development of the business. First and foremost, I can assure you that your directors are committed to corporate governance excellence. They bring a wealth of business, banking, financial, and risk management experience to bear on Equitable's board level deliberations. They are deeply engaged in ensuring Equitable's continuing success, and they are passionate about doing what is right for the business. Experience, expertise, and engagement are the qualities we all want in directors, and I am very proud to serve with individuals who epitomize these qualities. We have had a couple changes to our board in the past few months. Katherine Rethy, who has served as an Equitable director for over the past seven years, has decided to retire. During her tenure, Cathy was very active on the board and was a very effective chair of our human resources and compensation committee. On behalf of all of us at Equitable, I thank Cathy for her many contributions. We are also very pleased to welcome Johanne Brossard to our board. Joanne was appointed in February and is well known and respected in Canadian and international banking circles. Most recently, she served as President and CEO of Bank West, a subsidiary of Desjardins, and as Desjardins' Vice President of National Online Banking Development. Before that, she was President and CEO of ResMor Trust, and she also spent 14 years at ING Direct, where she was President and CEO of the Canadian subsidiary, not to mention her time with ING in France and Japan. Joanne truly brings a fantastic wealth of financial services knowledge to your board of directors. Let me introduce the other members of our board. Eric Beutel, Vice President, Oakwest Corporation, an investment holding company. Michael Emory, where's Mike? Michael Emory, President and CEO of Allied Properties REIT. Eric Kirzner, Professor of Finance, Rotman School of Management, University of Toronto. Lynn McDonald, Corporate Director. Rowan Saunders, President and CEO of Royal & SunAlliance Insurance Company of Canada. Vincenza Sera, Corporate Director, and Michael Stramaglia, Corporate Director, President and Founder of Matrisc Advisory Group and a risk management consulting firm. I'd like to make one other introduction today, although this Equitable legend hardly needs an introduction, and that is Austin Beutel, who is our Honorary Chairman. Unfortunately, Austin was unable to be here with us today. As you recall, Austin retired as Chair of our board last year after 15 years. We're very pleased that Austin has agreed to stay involved with Equitable during 2014 in his new role as Honorary Chair, and I'm pleased to report to you that Austin has graciously agreed to stay on in this role for another year. We'll now move to the more formal agenda, which is shown on the screen. With your approval, I've appointed Linda Dwyer, Equitable Bank's Corporate Secretary, to act as secretary of the meeting. I've also appointed Florence Smith and Josette Koffieberg of Computershare Investor Services, the company's register and transfer agent, to act as scrutineers. We've received an affidavit from Computershare confirming that all materials that all materials in respect of this meeting of shareholders were mailed to shareholders of record on April 17, 2015, in compliance with applicable securities regulations. I would ask that the secretary ensure that this affidavit attaching copies of the documents mailed to the shareholders be kept with the minutes of the meeting. I've also received a scrutineer's report on attendance, which states that 9,847,530 of the company's common shares are represented today in person or by proxy, which represents over 63.7% of the outstanding common shares. This percentage exceeds the minimum requirement for quorum, and I therefore declare this meeting is duly constituted for the transaction of business. The scrutineer's report also confirms that the votes represented by proxy at this meeting are sufficient to pass all resolutions to be voted on today. As a result, and unless otherwise requested, voting will be done by a show of hands. I will announce the final proxy voting results following the completion of the business of the meeting. In advance of today's meeting, the company has asked certain persons to propose or second motions. These individuals are proxy holders and employees of the company's wholly owned subsidiary, Equitable Bank. I would remind you that only shareholders or proxy holders can vote on the resolutions to be put forward at the meeting. The consolidated financial statements of the company for the year ending December 31, 2014, were mailed to shareholders as part of the company's annual report and can be found starting on page 79 with the independent auditors' report to the shareholders on these financial statements found on page 78. It is not required nor proposed to ask the shareholders to approve these statements, which have been laid before the meeting. I would ask that any questions on financial statements be deferred until we have dealt with the formal business of the meeting and have heard the remarks to be given by management. We will now proceed with the election of directors. The bylaws of the company state that the minimum number of directors to be elected shall be three, with a maximum of 12. The board has fixed the number of directors to be elected today at 10, and I confirm that all director nominees are eligible for election. May we please have a motion for the election of the directors? Mr. Chairman, my name is Violet Zosija, and I am a proxy holder and an employee of Equitable Bank. I nominate each of the following persons to be a director of the company until the close of the next annual meeting of shareholders or until his or her successor is elected or appointed: Eric Bussieres, Johanne Brossard, Michael Emory, Eric Kirzner, David Liberale, Lynn McDonald, Andrew Moor, Rowan Saunders, Vincenza Sera, and Michael Stramaglia. Thank you, Mr. Chairman. Thank you, Violet. Are there any further nominations? Being none, I declare the nominations closed. I now call upon Jacqueline Choi to second the motion. Mr. Chairman, my name is Jacqueline Choi, and I'm a proxy holder and an employee of Equitable Bank. I second the motion. Thank you, Jacqueline. I now put the motion to a vote. All those in favor of the motion, please raise your hand. Those opposed? Okay. The motion is carried, and I declare all those nominated as directors to have been so elected. The next item of business is the appointment of auditors. The board recommends that KPMG LLP be reappointed the auditors of the company until the close of the next annual meeting of the shareholders. May I have a motion? Mr. Chairman, my name is Nicole Higgin, and I'm a proxy holder and employee of Equitable Bank. I move that KPMG LLP be appointed the auditors accountable for the company's records until the close of the next annual meeting of shareholders and that the directors be authorized to fix their remuneration. Thank you. Thank you, Nicole. I now call upon John Ahmad to second the motion. Mr. Chairman, my name is John Ahmad, and I am a proxy holder and an employee of Equitable Bank. I second the motion. Perfect. Thank you, John. I will now put the motion to the meeting. All those in favor, please raise your hand. Those opposed? I declare the motion carried. That concludes the business of the meeting. I will now announce the results of the proxy votes provided to me by the scrutineers before the meeting. With respect to the election of the directors, each of the 10 nominees for election received at least 99% of the votes in favor, and results with respect to the appointment of auditors are 100% voted in favor of KPMG LLP. We will be issuing a press release announcing these results as required by the Toronto Stock Exchange and will post these results on the company's website. In a few minutes, following management's presentation, we will have an opportunity for a question and answer session. May we please have a motion to terminate the formal part of the meeting? Mr. Chairman, my name is Debra Campbell. I am a proxy holder and employee of Equitable Bank. I move that we formally terminate this meeting. Thank you, Debra. I now call upon Judy Smiley to second the motion. Mr. Chairman, my name is Judy Smiley, and I'm a proxy holder and an employee of Equitable Bank. I second the motion. Thank you, Judy. All those in favor of the motion, please raise your hand. Opposed? Okay, I declare the formal part of this meeting is now terminated. Before management presentations, I'm required to remind you that certain information today will contain forward-looking statements. These statements are not guarantees of performance and are subject to risks and uncertainties contained in our filings with securities administrators. You are cautioned not to place undue reliance on such statements, which are made as of today's date. It's now time to hear from our CEO. Andrew? Thank you, David. Good afternoon, ladies and gentlemen. It's an honor to be here to report on the state of our company. Since our last annual meeting, our bank has built a broader, more diversified platform to serve customers and generate value for shareholders. This expansion has been accompanied by record-setting annual earnings on a characteristically high return on equity. Many people are responsible for this progress, including our very experienced board and senior management team, and more than 400 dedicated employees, some of whom are here with us today. To each of you, I offer my thanks for all the work you do. Special thanks to David for his wise counsel as chair, and to Katherine Rethy for her many contributions as a director. I'd also like to extend a personal welcome to Johanne Brossard. We are delighted that Johanne Brossard has joined our board to share her experience as a leader in banking generally and digital banking specifically. Together, our board and management team are very enthusiastic about the bank's future. I would like you to be as well. So during my presentation, I plan to share insights into what we, as people involved in the day-to-day running of the bank, consider to be Equitable's potential as a growing bank, and how our team collectively is looking after your interests as fellow shareholders. To set the stage, I think it is important first to acknowledge that banking is important. Banks play a formative role in the development of the Canadian economy and more broadly, as one of the enduring features of a civil society. On the one hand, they are trusted guardians of their depositors' savings. On the other, they provide capital that enables families to buy homes and allows businesses to expand and create employment. This is why we think of banks as institutions and treat them differently than other businesses. Equitable and our other medium-sized peers provide important services for an increasing number of new Canadians and small to medium-sized commercial borrowers. We are the bank that they depend on to realize their objectives. We provide alternatives to the services provided by the Big Six banks that dominate the Canadian financial services landscape. I know our customers appreciate having a bank that understands their unique needs as borrowers or provides better returns on their GICs if they are savers. A bank's fundamental place in society makes bank shares a staple for many investment portfolios. That does not mean all banks are equal in their business model effectiveness, performance or prospects. That brings me to Equitable and our bank's potential. I think about this constantly, often at the beginning of the day when I am walking the dog. That is meant to be some image of that. You can see there are things going on here. While she thinks about other important things, I think about what our track record of value creation is sustained can yield for us as shareholders down the road. There are two important outcomes from thinking about this process. The first provides a clear mental model as to how shareholder value is created in our business, expressed through a couple of equations. Unfortunately, this really shows how engineers think, which may explain a lot to many of you. More simply, the rate of change of EPS and book value for share is a function of two things. Our return on equity and how much you pay out as dividends. The equation goes like this. Equitable has exhibited a consistent track record of generating annual ROE in the range of 17%-18%. We pay out about 10% of what we earn, or call it 2% of book value equity in common share dividends each year. The result is that book value grows by 15% a year. The incremental capital is retained. What we retain is what fuels our potential for growth as it provides the funds required by the regulators to support growth in the banking book. If we can continue to reinvest the earnings retained at a 17%-18% ROE, EPS grows by 15% per annum. Extrapolate this math over the next five years using 2014 as a base shows the outcome of our value creation process on both book value per share and EPS is extremely positive. I think we can all agree that shareholders will be well-served if the bank did achieve financial results or even close to those on the screen. My equation may seem outlandish, but if you look back on the actual results over the past four years, when Equitable delivered average annual growth and book value of over 16%, EPS growth of 17.5%, it doesn't seem so outlandish at all. In fact, it's something that can be achieved. While it's a stress, it's in no way a forecast, it's not wholly implausible either. The second implication of the dog walking process is that strangely the dog seems to be completely untrained and untrainable. Fortunately, there's only one stakeholder or shareholder that cares about that, and that's my wife, so it's a pretty limited audience. Nonetheless, an important one to me. Of course, in order to deliver anything close to these results, we need a fairly long runway for growth in both our savings and lending businesses. In fact, due to some complexity about how risk-weighted assets are calculated, we might have to grow them both more quickly than the 15% compound rate that I used in my equation. That brings me from our bigger picture goals to our current focus on effective execution of business lines. I'll start with recent efforts to better serve Canadian savers and diversify the bank's funding sources. As you know, Equitable enjoys a significant advantage over other financial institutions as a result of our branchless business model. This advantage manifests itself in several ways, including in the bank's ability to offer savers a higher rate of return than they can find at Canada's Big Six banks. We're using that advantage in new ways called the Equitable Bank High Interest Savings Account, or HISA. Launched in late 2013, it now sits alongside our GICs as a trusted savings vehicle for thousands of Canadians. Introducing a product of this nature required us to enhance our system to connect to what's known as Fundserv, a national electronic platform that investment brokers use to order financial products for customers. We also needed to develop an entirely new set of relationships because our traditional GIC distribution partners do not distribute HISAs for us. With these hurdles overcome, we set an ambitious 2014 goal for our HISA, attract CAD 150 million of new savings. We surpassed our goal by more than two times, with year-end 2014 balances almost CAD 350 million, climbing now to over CAD 500 million. Its presence has helped us to grow our savings business to over CAD 7.5 billion of deposits. Our HISA is a great success story for Equitable, but also for Canadians who need a more competitive place to grow their savings for the future. This is only part of the story. Last year, as part of the same diversification efforts, the bank chose to become a deposit note issuer. Deposit notes are our investments purchased by institutional investors. On two successive issuances, one for CAD 150 million in 2014, and one for CAD 85 million completed in late March this year, the bank's deposit notes have proven to offer value to the institutional market and value to Equitable as another source of cost-competitive funding. Looking to the future, the next stage in growth and development of Equitable Bank is intended to take our savings business to a whole new level. I am referring to the upcoming introduction of digital banking capabilities. We have a dedicated digital banking team that will begin beta testing the technology infrastructure for our offering this summer. I will not preempt this pending launch, but I can tell you that in its initial form, our digital capabilities will provide Equitable Bank savers with innovation and convenience offered by modern banking technology. It will help us to reach more financially savvy consumers, and over time, will act as a platform to bring other services to the market in a cost-effective manner. Stay tuned. Diversification was also the watchword for our lending businesses. As you know, Equitable Bank operates broadly in two lending markets, single family and commercial. We allocate the bank's capital between these two businesses in a disciplined manner that helps us to produce the consistently high ROE that Equitable has delivered over the years. Equitable's roots actually lie in commercial lending. With over CAD 2 billion of assets, this continues to be a great business for the bank. We really like small and medium-sized enterprise lending, where we help entrepreneurs realize their business and ownership goals, and where our skills are relatively hard to replicate. Because of the need to deal with large numbers of small commercial loans, it is necessary to have scale in servicing and process efficiency, to have wide broker distribution networks, and skilled business development managers and underwriters who understand this specialized form of credit. These capabilities and efficiencies certainly help drive our returns. David Downie has long been the visible face of the commercial market. There you see his visible face at the top. Silvia Carvalho and Jim Bosam are in newly expanded roles, and we are very confident that we have the right leaders for a really good business. Our large commercial business also continues to develop as we broaden the number of partnerships that we work with to originate transactions. This business requires constant vigilance and agility to identify opportunities that fit within the bank's relatively conservative risk appetite in a market where credit and loan pricing approaches are constantly shifting. Under the capable leadership of Vince Faustini, who is here today from Montreal on the origination side, and Kasey Chauhan, looking after credit adjudication, large commercial provides plenty of opportunity for the bank. Turning to single family, our diversification efforts last year resulted in the creation of an entirely new lending line. More specifically, we launched our single family prime mortgage business, which now sits alongside our alternative single family mortgage operations. We entered the prime lending market as a result of recent changes to the way CMHC allocates volumes under its MBS securitization program. These changes gave us access to a fixed pie of low-cost funding on equal footing with the Big Six banks. While the decision was opportunistic, there are very sound strategic reasons for the bank to be in this space, including the fact that we can better serve mortgage brokers and borrowers, and leverage those relationships for growth. We have got the nucleus of a great prime team under the leadership of Martin Beaudry, and ambitious growth plans for the next five years. It will take time and considerable effort to build the systems and processes necessary to achieve our objectives. Again, stay tuned. I want to pause here briefly to explain. Although our marketing team has done a bang-up job in creating a prime brand, our offerings are not substantially different from any other bank. We're differentiating ourselves in this lending market and others based on service excellence, doing the things well customers care about, such as responding quickly, accurately, and respectfully to their needs every time out. More than anything, service is what will attract ever higher mortgage assets. As for our alternative single family lending business, you may recall that we got serious about turning Equitable into a recognized leader in this market 6 years ago. I'm pleased to say that today, as a result of these long-term efforts, the bank is now one of the top 2 competitors in all of Canada. When I say all of Canada, I'm referring to the fact that we recently brought our single family lending services to urban markets in Quebec, New Brunswick, P.E.I., and Newfoundland, marking the completion of our provincial expansion that began when we decided to grow beyond Ontario. Over the past decade, we've added coverage in 12 cities, and I'm pleased that Equitable Bank is now a true coast-to-coast alternative single family lender. Our national presence makes Equitable more attractive to national mortgage brokerages that want to work with a lender offering similar coverage, and better positions us for ever-changing migration and immigration patterns, and adds to our runway for growth. Brian Leland and Kim Kucheryus, who you can see pictured here, are the bank's 2 Vice Presidents that have been responsible for building our market position in this important market for us. Beyond geographically diversifying our single family operation, we've sought to further enhance our offering with the Equitable Bank Home Equity Line of Credit. We launched our HELOC in late 2013, and since then have continued to refine it based on feedback from mortgage brokers and borrowers, and are seeing steady incremental growth in its usage. This is an exceptionally easy and convenient method of borrowing, comes with a no annual fee Equitable Bank Visa Gold access card. We packed a lot of value into this product and designed it to appeal to SME and business-for-self borrowers in particular, who are the primary customer groups that we target in this area. As a result of developing our brand, our product suites, and our profile, single family is our fastest-growing business, now accounts for 39% of our total mortgage book, up from 12% in 2009. Last year, and again in the first quarter, we have set new records for origination. So far, I've talked about expansion, development, and diversification of the bank's services, products, and territories, and touched on some of the ways they're going to support my starting maths. But there is another. Over the past year, and really the past 5, we've put considerable effort into growing and developing our people on the belief that engaged and talented employees will give us the horsepower we need to deliver growth and high rates of ROE. In developing our team, we add and promote individuals with diverse skills, experience, and languages, but who share a similar passion for service. This was deliberate on our part because of our conviction that service is the place where we can compete and win, and because we just feel good about looking after our customers properly. I believe the bank's significant increase in market share in the alternative channel over the past year, and the consistent growth of our assets over the past five years validate our approach. We continue to learn and adopt best service practices in order to sustain these gains. As a result of some of our unique cultural and people-orientated programs, Equitable appeared in the Globe and Mail as one of Canada's top 100 small to medium-sized employers for 2015. External accolades like this are nice, but it's engagement, satisfaction, and retention that we care about. On all fronts, Equitable is progressing. I'd like to make a call out here to Jody Sperling, our Vice President of Human Resources, and her incredible team that have really been added tremendous amount to getting us this far in this area. As part of building our team and rewarding excellence, several deserving individuals have graduated into higher positions of authority. This includes Ron Tratch, who assumed the position of Vice President and Chief Risk Officer at the beginning of the year. I introduced Ron at our 2011 annual meeting when he joined Equitable as Vice President Commercial Credit following a 20-year career serving in part as SVP at GE Capital Canada. Ron did a terrific job of managing our commercial credit team. By promoting him upon the planned retirement of Bill Evans, who I know this has already also hit this afternoon, who served with distinction for almost eight years, we achieved a continuity of approach that is so important in this role. Having a strong team, making smart decisions with an approved and risk management system makes me very confident in the quality of our book as we head into what may be a somewhat more volatile period of growth in parts of the Canadian economy. Overall, the team has the experience, expertise, and engagement we need to manage our broader platforms, to assess ongoing opportunities to introduce new capabilities and services in future periods, and to sustain the bank's economic model for shareholder and customer value creation. What will the future look like? My comments are safe to conclude Equitable will be a diversified bank operating in service areas where we have demonstrated strengths and skills. In all of our recent organic expansion activities, we have entered markets to launch products that fit well with our existing platforms. This adjacency strategy is important for a variety of reasons, including risk management, and has made the bank's diversification efforts more cost-effective and more rewarding. The future will also look a lot like today when it comes to devotion to service, the mortgage broker channel, and our branchless business model. These attributes are meaningful differentiators for the bank and will help us to sustain our track record. Clearly, we've moved the bank forward, and with much more to offer, we plan to enhance the bank's profile in consumer markets and continue to reinforce our high levels of customer service. In 2015, this will include spending an extra CAD 3 million-CAD 5 million on increasing our brand awareness, which in turn will draw more consumers and therefore more savings and assets. This brings me full circle to my main mission today, and that was to show you why we're enthusiastic about the future. I believe we have a lot going for us as Equitable shareholders. We share in the ownership of a branchless and soon-to-be digital bank that is nimble and cost-effective. We have a disciplined and proven value creation process that has the potential to generate outstanding returns over the next five years and certainly justifies continued reinvestment. We own a company that plays a formative role in society. That last point is key because it's not just us as fellow shareholders that will win if Equitable delivers on its potential. It will be all of us, our savers, borrowers, employees, and the Canadian economy at large. As we move forward with our business, no doubt there will be seen and unforeseen challenges that will influence our results along the way, but hopefully some positive surprises as well. Either way, we will never lose sight of our role as a bank in creating what can be best described as a virtuous circle for all stakeholders. I'd now like Tim to tell us more about the financial results. Tim? Thank you, Andrew, and good afternoon, everyone. From a financial perspective, Equitable opened 2015 the same way we closed 2014, and that's with record performance. During my remarks, I'll discuss the quarter, but so not to be accused of short-termism, that's actually a word, I'll begin to look at last year and how it fit with the bank's long-term track record. The most telling metric for any bank is ROE, a metric that is supported by growth in assets and earnings and by capital ratios that exceed regulatory requirements. On all fronts, the bank posted 2014 results that were in keeping with our performance trends of the past. Reflecting the bank's status as one of the best value creators in the financial sector, ROE was 17.4%. Our consistently high rate of return, averaging 17.5% over the past five years, continues to justify our strategy of reserving and redeploying the vast majority of our earnings, about 90% of them, within the business to fuel future growth. The remainder has been used to fund higher common share dividends, as David reminded us. That ROE performance drove book value up by 16%. This is higher than the average annual growth rate that we've achieved since 2010 of 14% and reflects the increasing value creation engine of our franchise. Mortgages under management reached CAD 13.8 billion at year-end 2014, representing 14% year-over-year growth. Our mortgage book remained well-diversified and reflective of our long-term efforts to grow single-family mortgage principal, which stood at a record CAD 5.4 billion, up 31% year-over-year. The financial impact of this strong growth has been very positive. Equitable drove annual 2014 earnings over the CAD 100 million mark for the first time in our history on growth of 14%. 14% isn't a one-off result. It's also the average annual increase that we've achieved in diluted EPS over the past five years. In all, a great year. Last night, we were pleased to report that in Q1, the bank added to its track record of growth and shareholder value creation. In terms of assets, mortgages under management grew 18% year-over-year to CAD 14.4 billion at March 31st. This was driven by a 31% increase in single-family mortgage principal, which stood at a record CAD 5.7 billion, pushed higher by record first quarter originations of CAD 568 million. Although commercial mortgage principal was down 2%, reflecting our pricing discipline, our commercial team did a great job with new originations, which were up 65% over the first quarter of last year. Securitization financing mortgages under management amounted to CAD 6.4 billion at quarter end, up 16% and driven by our successful entry into the prime single-family business. Looking again at the earnings impact of our growth, first quarter diluted earnings per share were up 16% year-over-year, a mark well above what our industry achieved on average in Q1. ROE was 17.9%, another consistently strong performance. With that, book value per common share increased 15%, more than CAD 5.50 year-over-year. At yesterday's board meeting, our board responded to the strong earnings performance and our positive outlook by increasing our common share dividend. Effective with the July 3rd payment, Equitable's dividends will rise to CAD 0.19 per quarter or CAD 0.76 per annum, 12% higher than last year at this time. This is the sixth increase in the common share dividend in four years, which illustrates the board's view that consistently growing our dividend is an important part of our long-term value creation strategy. As we've grown, we've also continued to keep our capital ratios well above most industry benchmarks and higher than regulatory minimums. This graph shows three measures. The bar on the left, leverage ratio, is a new disclosure this year introduced by OSFI, and I can tell you that Equitable was fully compliant with the target, which is set on a confidential institution-by-institution basis. To this analysis, I'd also add two other metrics. One is net realized loan losses. Being an alternative and commercial mortgage lender, it often surprises investors to know that Equitable has performed better on this ratio than the Big Six banks and some of our other direct competitors over a full decade. Our performance also continued to be stellar on this metric in the first quarter. On a related note, arrears rates have also been relatively stable. With respect to the Western provinces, we expect the arrears rates to increase in later quarters, but our conservative underwriting approach, our robust workout process, and our focus on lending in urban centers with diversified public and private employment sources means that we do not expect to incur significant losses in either province. The other metric to consider is our efficiency ratio. Andrew Moor spoke about the cost advantages that we achieve as a branchless bank. Our efficiency ratio illustrates this point by showing how much it costs Equitable to generate every dollar of revenue. In the first quarter, our efficiency ratio was 32.4%, indicating that we remain more efficient than our banking peers. As Andrew said, we will and we have invested in support of strategic initiatives and service excellence. By maintaining our branchless model as we grow, we intend to sustain our significant cost advantages and to share the resulting benefits with our customers and with our shareholders. In terms of the remainder of 2015, we published a detailed outlook that accompanied our first quarter MD&A, and it is available online at equitablebank.ca. Overall, we expect that our strategies, including our disciplined approach to capital allocation, will continue to deliver high returns on shareholders' equity throughout the year. Now, I will turn the meeting back to David. Thank you, Tim, and thank you, Andrew. We would now like to open the meeting to your questions. We have a mic here, and I think there is a floating mic around. So if you have any questions, will you please make your way to one of the microphones provided. Oh, that is a departure. Okay. As there are no questions, the directors and management of Equitable thank you very much for your attendance and wish you a pleasant evening. Thanks very much.