Equitable Group Reports Record First Quarter 2012 Results

    




 TORONTO, May 9, 2012 /CNW/ - Equitable Group Inc.   ("Equitable" or the "Company") today reported its financial results  for the three months ended March 31, 2012 - a period of significant  growth and momentum that supports a confident outlook for the year. 

 FIRST QUARTER RESULTS 




        --  Diluted earnings per share ("EPS") increased 13% to $1.13
            compared to $1.00 in the first quarter of 2011;
        --  Net income increased 12% to $17.9 million from $16.1 million in
            2011;
        --  Net interest income increased 17% to $36.5 million from $31.2
            million in 2011;
        --  Net interest margin ("NIM") was 1.45%, up marginally from 1.44%
            a year ago on growth in NIM on non-securitized assets (2.57%
            versus 2.52% a year ago);
        --  Return on equity ("ROE") was 17.7%, up from 17.3% in Q4 2011
            and compared to 18.0% a year ago;
        --  Book value per share increased 13% to $26.26 from $23.32 a year
            ago;
        --  Total assets were $10.5 billion at period end, up 14% or $1.3
            billion from March 31, 2011;
        --  Mortgage principal outstanding in the Company's Core Lending
            business (Single Family and Commercial) grew 23% to $4.4
            billion from $3.6 billion a year ago;
        --  Single Family principal outstanding grew by 35% year-over-year,
            and now represents 51% of Core Lending balances;
        --  Equitable Trust's period-end total capital ratio was a solid
            15.8% (including collective allowance).




 "This was a strong opening to 2012 for Equitable as we surpassed our  previous first quarter earnings record and added to the very positive  momentum we've created in our Core Lending businesses where principal  outstanding increased 23% year over year," said Andrew Moor, President  and Chief Executive Officer. "We're delighted with these results as  they were achieved during the traditionally slow season in Canadian  real estate activity. Despite our substantial growth, we continued to  build our portfolio with an absolute focus on credit quality." 

 Reflecting the Company's strategies, the growth leader in the quarter  was the Single Family segment in which "we exceeded our own  expectations on the strength of a 35% year-over-year increase in  mortgage principal balances on 51% growth in originations," added Mr.  Moor. 

 DIVIDEND DECLARATIONS 

 The Company's Board of Directors today declared a quarterly dividend in  the amount of $0.12 per common share, payable on July 5, 2012, to  common shareholders of record at the close of business on June, 15,  2012.   The Board also declared a quarterly dividend in the amount of  $0.453125 per preferred share, payable on June 30, 2012, to preferred  shareholders of record at the close of business on June 15, 2012. 

 CORE LENDING BUSINESSES 

 Equitable's Single Family and Commercial Lending businesses are  collectively referred to as Equitable's "Core Lending" business.   Within the Core Lending business in Q1 2012: 




        --  Single Family Lending Services mortgage principal amounted to a
            record $2.3 billion at March 31, 2012, $589 million higher than
            at March 31, 2011. During the most recent quarter, production
            amounted to $327 million, up $111 million from the same period
            in 2011;
        --  Commercial Lending Services mortgage principal at March 31,
            2012 was $2.2 billion, $245 million higher than at the end of
            the first quarter of 2011. First quarter production was $120
            million compared to $183 million a year ago.




 These Core Lending businesses represented 46% of the Company's mortgage  portfolio compared to 42% a year ago, reflecting Equitable's emphasis  on optimizing returns adjusted for risk and its capital plan of  maintaining strong capital ratios as its grows. 

 SECURITIZATION FINANCING BUSINESS 

 Equitable's Securitization Financing business originates insured  mortgages with the intention of subsequently securitizing those assets.  Approximately 92% of securitized mortgages at period end were secured  by multi-unit residential properties and were underwritten by the  Company's commercial credit team.  The remaining 8% were represented by  insured, single family residential mortgages, some of which were  securitized after residing in the Company's Core Lending portfolio. 

 During the first quarter: 




        --  Securitization Financing mortgage principal outstanding at
            March 31, 2012 was $5.2 billion, 6% or $297 million higher than
            a year ago;
        --  Securitization Financing production was $115 million, $139
            million lower than a year ago, reflecting a planned shift in
            emphasis toward Core Lending activities.




 CREDIT QUALITY 

 Equitable maintained its exemplary track record of low realized loan  losses during the first quarter ($0.5 million, net of recoveries).  Solid key credit metrics were also posted: 




        --  Mortgage principal in arrears 90 days or more was 0.25% of
            total mortgage principal outstanding, an improvement from 0.33%
            a year ago;
        --  Net impaired mortgages were 0.28% of total mortgage assets
            compared to 0.35% a year ago as workout activities continue to
            yield positive results.




 Management remains comfortable that allowances for credit losses (0.22%  of total mortgage assets versus 0.24% a year ago) adequately provide  for the risk of loss. 

 LOOKING AHEAD 

 "Equitable built on and in some cases accelerated its momentum during  the first quarter and this supports our plan and expectations of  ongoing earnings growth and a solid ROE, backstopped by the maintenance  of very healthy capital levels," said Mr. Moor. "The markets we choose  to serve continue to benefit from a combination of population trends  and economic stability, giving us an attractive foundation for growth.  Our 2012 agenda is custom made for today's market realities and  includes growth in mortgage assets that best suit our hurdle rates and  credit risk tolerances, expansion of our national presence with  emphasis on niches that are positioned to benefit from secular trends  and, most importantly, an ongoing focus on broker and customer service  excellence, which is generating tremendous results for us. By  single-mindedly pursuing our service agenda while maintaining highly  cost-effective operations, we will drive ever-improving results for our  shareholders." 

 The Company is also monitoring recently announced changes in the  regulatory environment, including CMHC's decision to curtail its  portfolio insurance activities. This change is expected to have little  direct impact on Equitable and could indirectly benefit the Company  should competitors change their lending or pricing practices.   Equitable is also currently reviewing OSFI's "Draft Guideline B-20 - Residential Mortgage Underwriting Practices and  Procedures" and, while management expects some revisions to the proposal,  recognizes that the outcome of the process continues to be uncertain. 

 Q1 CONFERENCE CALL 

 The Company will hold its first quarter conference call and webcast at  10:00 a.m. ET Thursday May 10, 2012. To access the call live, please  dial in five minutes prior to 416-644-3414. To access a listen-only  version of the webcast, please log on to www.equitabletrust.com under  Investor Relations. 

 A replay of the call will be available until May 17, 2012 and it can be  accessed by dialing 416-640-1917 and entering passcode 4530347 followed  by the number sign. Alternatively, the call will be archived on the  Company's website for three months. 

  

 INTERIM CONSOLIDATED FINANCIAL STATEMENTS 

 CONSOLIDATED BALANCE SHEETS (unaudited) AS AT MARCH 31, 2012 With comparative figures as at December 31, 2011 and March 31, 2011  ($ THOUSANDS) 





                                                                 

                           March 31, 2012 December 31, 2011 March 31, 2011

                                                                          

    Assets                                                                

    Cash and cash          $      239,517   $       170,845   $    177,251
    equivalents

    Restricted cash                90,246            83,156         36,404

    Securities purchased           39,922             9,967         24,993
    under reverse
    repurchase agreements

    Investments                   389,497           390,340        360,137

    Mortgages receivable        4,476,637         4,262,147      3,683,777

    Mortgages receivable -      5,211,241         5,314,940      4,876,631
    securitized

    Other assets                   23,178            25,618         13,788

                           $   10,470,238   $    10,257,013   $  9,172,981

                                                                          

    Liabilities and                                                       
    Shareholders' Equity

    Liabilities:                                                          

      Deposits             $    4,860,547   $     4,627,904   $  4,032,391

      Securitization            5,069,853         5,100,921      4,653,482
      liabilities

      Deferred tax                  6,608             7,790          7,318
      liabilities

      Other liabilities            24,602            28,587         17,298

      Bank term loans              12,500            12,500         12,500

      Subordinated                 52,671            52,671         52,671
      debentures

                               10,026,781         9,830,373      8,775,660

                                                                          

    Shareholders' equity:                                                 

      Preferred shares             48,494            48,494         48,494

      Common shares               130,251           129,771        128,369

      Contributed surplus           4,813             4,718          4,169

      Retained earnings           269,235           254,006        215,700

      Accumulated other           (9,336)          (10,349)            589
      comprehensive (loss)
      income

                                  443,457           426,640        397,321

                                                                          

                           $   10,470,238   $    10,257,013   $  9,172,981

                                                               






  

  

  

 CONSOLIDATED STATEMENTS OF INCOME (unaudited) FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2012   With comparative figures for the three month period ended March 31, 2011 ($ THOUSANDS, EXCEPT PER SHARE AMOUNTS) 





                                                                           

                                                     Three months ended

                                            March 31, 2012   March 31, 2011

                                                                           

    Interest income:                                                       

      Mortgages                             $       57,187   $       47,849

      Mortgages - securitized                       54,459           52,152

      Investments                                    2,248            2,279

      Other                                          1,226            1,025

                                                   115,120          103,305

    Interest expense:                                                      

      Deposits                                      30,350           26,741

      Securitization liabilities                    47,174           44,268

      Bank term loans                                  202              200

      Subordinated debentures                          869              862

      Other                                              1               29

                                                    78,596           72,100

    Net interest income                             36,524           31,205

    Provision for credit losses                      2,227            1,938

    Net interest income after provision for                   
    credit losses                                   34,297           29,267

    Other income:                                                          

      Fees and other income                          1,005              854

      Net gain on investments                          249              298

                                                     1,254            1,152

    Net interest and other income                   35,551           30,419

    Non-interest expenses:                                                 

      Compensation and benefits                      6,570            5,473

      Other                                          5,339            3,643

                                                    11,909            9,116

    Income before income taxes and fair                       
    value gain                                      23,642           21,303

    Fair value gain on derivative financial                   
    instruments
    - securitization activities                         51              319

    Income before income taxes                      23,693           21,622

    Income taxes:                                                          

      Current                                        6,935            5,327

      Deferred                                     (1,182)              232

                                                     5,753            5,559

    Net income                              $       17,940   $       16,063

                                                                           

    Earnings per share:                                                    

      Basic                                 $         1.13   $         1.01

      Diluted                               $         1.13   $         1.00

                                                                






  

  

  

 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)  FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2012 With comparative figures for the three month period ended March 31, 2011   ($ THOUSANDS) 





                                                                          

                                                     Three months ended

                                              March31, 2012 March 31, 2011

                                                                          

    Net income                                $      17,940 $       16,063

                                                                          

    Other comprehensive income:                                           

                                                                          

    Available for sale investments:                                       

    Net unrealized gains from change in fair            833          1,143
    value

    Reclassification of net gains to income         (1,082)          (265)

                                                      (249)            878

    Income tax                                           65          (246)

                                                      (184)            632

                                                                          

    Cash flow hedges                                                      

    Net unrealized gains from change in fair          1,028          1,665
    value

    Reclassification of net losses (gains) to           592           (18)
    income

                                                      1,620          1,647

    Income tax                                        (423)          (461)

                                                      1,197          1,186

    Total other comprehensive income                  1,013          1,818

    Total comprehensive income                $      18,953 $       17,881

                                                                          






  

 CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (unaudited) FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2012 With comparative figures for the three month period ended March 31, 2011 ($ THOUSANDS) 





                                                                                   

                                                              Accumulated
                                                                    other
    March 31,     Preferred    Common Contributed  Retained comprehensive
    2012             shares    shares     surplus  earnings income (loss)     Total

                                                                                   

    Balance,      $  48,494 $ 129,771 $     4,718 $ 254,006 $    (10,349) $ 426,640
    beginning of
    period

    Net income            -         -           -    17,940             -    17,940

    Other                 -         -           -         -         1,013     1,013
    comprehensive
    income, net
    of tax

    Contributions         -       188           -         -             -       188
    from
    reinvestment
    of dividends

    Contributions         -       237           -         -             -       237
    from exercise
    of stock
    options

    Dividends:                                                                     

      Preferred           -         -           -     (906)             -     (906)
      shares

      Common              -         -           -   (1,805)             -   (1,805)
      shares

    Stock-based           -         -         150         -             -       150
    compensation

    Transfer              -        55        (55)         -             -         -
    relating to
    the exercise
    of stock
    options

    Balance, end  $  48,494 $ 130,251 $     4,813 $ 269,235 $     (9,336) $ 443,457
    of period

                                                                                   

                                                              Accumulated
                                                                    other
    March 31,     Preferred    Common Contributed  Retained comprehensive
    2011             shares    shares     surplus  earnings income (loss)     Total

                                                                                   

    Balance,      $  48,494 $ 128,068 $     3,935 $ 202,187 $     (1,229) $ 381,455
    beginning of
    period

    Net income            -         -           -    16,063             -    16,063

    Other                 -         -           -         -         1,818     1,818
    comprehensive
    income, net
    of tax

    Contributions         -       127           -                       -       127
    from
    reinvestment
    of dividends

    Contributions         -       144           -         -             -       144
    from exercise
    of stock
    options

    Dividends:                                                                     

      Preferred           -         -           -     (906)             -     (906)
      shares

      Common              -         -           -   (1,644)             -   (1,644)
      shares

    Stock-based           -         -         264         -             -       264
    compensation

    Transfer              -        30        (30)         -             -         -
    relating to
    the exercise
    of stock
    options

    Balance, end  $  48,494 $ 128,369 $     4,169 $ 215,700 $         589 $ 397,321
    of period

     






  

 CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)  FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2012 With comparative figures for the three month period ended March 31, 2011   ($ THOUSANDS) 





                                                                           

                                                      Three months ended

                                             March 31,2012   March 31, 2011

    CASH FLOWS FROM OPERATING ACTIVITIES                                   

    Net income for the period                $      17,940   $       16,063

    Adjustments to determine cash flows                                    
    relating to operating activities:

      Financial instruments at fair value            1,836               99
      through income

      Depreciation of capital assets                   231               63

      Provision for credit losses                    2,227            1,938

      Net gain on sale or redemption of              (249)            (298)
      investments

      Income taxes                                   5,825            5,559

      Income taxes paid                            (4,801)          (4,771)

      Stock-based compensation                         150              264

      Amortization of premiums/discount on             784              785
      investments

      Net increase in mortgages receivable       (113,976)        (345,787)

      Net increase in deposits                     232,643          153,538

      Net change in securitization                (31,068)          121,802
      liabilities

      Net interest income, excluding              (54,751)         (47,713)
      non-cash items

      Interest paid                               (63,692)         (58,179)

      Other assets                                   (191)          (1,430)

      Other liabilities                            (3,260)          (2,342)

      Interest received                            115,934          103,542

      Dividends received                             2,509            2,350

    Cash flows from (used in) operating            108,091         (54,517)
    activities

    CASH FLOWS FROM FINANCING ACTIVITIES                                   

      Dividends paid on preferred shares             (906)            (906)

      Dividends paid on common shares              (1,614)          (1,367)

      Proceeds from issuance of common                 237              144
      shares

    Cash flows used in financing activities        (2,283)          (2,129)

    CASH FLOWS FROM INVESTING ACTIVITIES                                   

      Purchase of investments                     (20,000)         (39,651)

      Proceeds on sale or redemption of             46,730           20,943
      investments

      Net change in Canada Housing Trust          (26,671)          (2,638)
      re-investment accounts

      Purchase of securities under reverse        (39,922)         (24,993)
      repurchase agreements

      Proceeds on sale or redemption of              9,967           74,908
      securities under reverse repurchase
      agreements

      Change in restricted cash                    (7,090)           50,166

      Purchase of capital assets                     (150)             (80)

    Cash flows (used in) from investing           (37,136)           78,655
    activities

    Net increase in cash and cash                   68,672           22,009
    equivalents

    Cash and cash equivalents, beginning of        170,845          155,242
    period

    Cash and cash equivalents, end of period $     239,517   $      177,251






  

 ABOUT EQUITABLE GROUP INC.  Equitable Group Inc. is a niche mortgage lender. Our primary business is  first charge mortgage financing, which we offer through our wholly  owned subsidiary, The Equitable Trust Company. Founded in 1970,  Equitable Trust is a federally incorporated trust company. It serves  single family, small and large commercial borrowers and their mortgage  advisors. It also serves the investing public as a provider of  Guaranteed Investment Certificates. Equitable is active in providing  GICs across all Canadian provinces and territories. We actively  originate mortgages across Canada, with offices in Ontario, Alberta and  Quebec. Equitable Group's shares are traded on the Toronto Stock  Exchange under the symbols ETC and ETC.PR.A, respectively. Visit the  Company on line at www.equitabletrust.com and click on Investor Relations. 

 CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS Statements made by the Company in the sections of this report including  those entitled "Credit Quality" and "Looking Ahead", in other filings  with Canadian securities regulators and in other communications include  forward-looking statements within the meaning of applicable securities  laws ("forward-looking statements"). These statements include, but are  not limited to, statements about the Company's objectives, strategies  and initiatives, financial result expectations and other statements  made herein, whether with respect to the Company's businesses or the  Canadian economy. Generally, forward-looking statements can be  identified by the use of forward-looking terminology such as "plans",  "expects" or "does not expect", "is expected", "budget", "scheduled",  "planned", "estimates", "forecasts", "intends", "anticipates" or "does  not anticipate", or "believes", or variations of such words and phrases  which state that certain actions, events or results "may" , "could",  "would", "might" or "will be taken", "occur" or "be achieved."  Forward-looking statements are subject to known and unknown risks,  uncertainties and other factors that may cause the actual results,  level of activity, closing of transactions, performance or achievements  of the Company to be materially different from those expressed or  implied by such forward-looking statements, including but not limited  to risks related to capital markets and additional funding  requirements, fluctuating interest rates and general economic  conditions, legislative and regulatory developments, the nature of our  customers and rates of default, and competition as well as those  factors discussed under the heading "Risk Management" in the  Management's Discussion and Analysis and in the Company's documents  filed on SEDAR at www.sedar.com. All material assumptions used in making forward-looking statements are  based on management's knowledge of current business conditions and  expectations of future business conditions and trends, including their  knowledge of the current credit, interest rate and liquidity conditions  affecting the Company and the Canadian economy. Although the Company  believes the assumptions used to make such statements are reasonable at  this time and has attempted to identify in its continuous disclosure  documents important factors that could cause actual results to differ  materially from those contained in forward-looking statements, there  may be other factors that cause results not to be as anticipated,  estimated or intended.  Certain material assumptions are applied by the  Company in making forward-looking statements, including without  limitation, assumptions regarding its continued ability to fund its  mortgage business at current levels, a continuation of the current  level of economic uncertainty that affects real estate market  conditions, continued acceptance of its products in the marketplace, as  well as no material changes in its operating cost structure and the  current tax regime. There can be no assurance that such statements will  prove to be accurate, as actual results and future events could differ  materially from those anticipated in such statements. Accordingly,  readers should not place undue reliance on forward-looking statements.  The Company does not undertake to update any forward-looking statements  that are contained herein, except in accordance with applicable  securities laws. 

   

Equitable Group Inc.


CONTACT:  Andrew MoorPresident and CEO416-515-7000Tim WilsonChief Financial Officer416-515-7000 


    

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