- RECORD QUARTERLY EARNINGS
- FUNDINGS UP 77.5%
- SECURITIZATIONS CONTINUE WITH HIGHER SPREADSTSX Symbol: ETC
TORONTO, May 7 /CNW/ - Equitable Group Inc. ("Equitable" or the
"Company") today reported record earnings for the three months ended March 31,
2009 and ongoing progress in enhancing investment return potential from its
mortgage portfolio.FIRST QUARTER RESULTS
- Net income increased 23.3% to a record $11.9 million compared to
$9.7 million in the same period a year ago.
- Diluted earnings per share increased 8.1% to $0.80 per share compared
to $0.74 per share a year ago.
- Return on equity was 17.8% compared to 11.8% and 18.8% in the fourth
and first quarters of 2008, respectively.
- Tangible common equity ratio, a key measure of capital strength, was
10.8% at the end of the first quarter, which is particularly strong
in comparison to Canada's chartered banks.
- Productivity ratio on a taxable equivalent basis - a measure of
efficiency - improved to 24.3% from 26.0% in the same period of 2008.
- Net impaired mortgages were 0.94% of total mortgage assets at the end
of the first quarter of 2009 - an improvement over 1.21% at the end
of the fourth quarter of 2008.
- Book value was $18.90 compared to $17.75 per share at year end and
$16.35 at March 31, 2008.DIVIDEND
The Company's Board of Directors declared a quarterly dividend in the
amount of $0.10 per share, payable on July 3, 2009, to shareholders of record
at the close of business on June 15, 2009.
MANAGEMENT COMMENTARY
"Equitable's record-setting performance in the first quarter reflected
the significant benefits accruing from our business model, market position and
risk management processes, as well as the substantial progress we're making in
applying our operational strategies to offset turbulent economic conditions
and enhance investment returns," said Andrew Moor, President and CEO. "In
combination, these factors allowed us to drive quarterly earnings to their
highest level ever while also further fortifying our capital and positioning
Equitable for ongoing success this year. We are particularly pleased that our
strategies allowed us to improve net interest margin compared to the fourth
quarter - despite another three Prime Rate decreases in the opening months of
2009 - and that we've grown our securitized mortgage portfolio to over $3.2
billion with improved spreads. The recurring cash flows from this securitized
portfolio will make a healthy contribution in future quarters and will
complement the interest from our $2.9 billion on-balance sheet mortgage
assets."FIRST QUARTER OPERATING HIGHLIGHTS
- Mortgage fundings in the first quarter increased 77.5% to
$532.1 million from $299.8 million in the first quarter of 2008 on
growth in CMHC-insured multi-unit residential mortgage production.
- Equitable securitized and sold $407.6 million of CMHC-insured
mortgages - at improved spreads - compared to $281.0 million in the
fourth quarter of 2008 and $165.0 million in the first quarter of
2008.
- Mortgage principal increased $92.9 million or 3.3% compared to the
first quarter of 2008, reflecting growth in single family and mixed-
use originations, offset by securitizations of CMHC-insured
multi-residential and single family mortgages as well as natural
amortization and payout of the portfolio.
- Floating rate mortgages that have interest rate floors in place
represented 12.0% of the mortgage portfolio at quarter end compared
to 10.6% at December 31, 2008.
- Floating rate mortgages represented 47.6% of the total mortgage
portfolio at March 31, 2009 compared to 50.1% at year end.CREDIT QUALITY AND PROVISION
Net impaired mortgages were 0.94% of total mortgage principal outstanding
at the end of the first quarter of 2009 compared to 1.21% at the end of the
fourth quarter of 2008. The improvement in ratios reflects the health of the
Company's mortgage portfolio and its success in dealing with one problem
borrower connection in western Canada. Management was successful in its
efforts to take control of and sell several key assets that related to this
one problem borrower connection. Losses of $2.5 million incurred during the
first quarter primarily related to these loan workout activities. In order to
reflect the impact of changes in current economic conditions and real estate
values, the Company recorded additional provisions for credit losses of $1.9
million during the quarter ended March 31, 2009. Allowance for credit losses
as a percentage of total mortgage principal was 0.48% at March 31, 2009,
consistent with December 31, 2008.
Generally, the level of defaults and losses that the Company has
experienced in the last few quarters has been manageable and reflect
management's focus on protecting its portfolio.
CONCLUSION
"We are confident that Equitable will remain resilient this year in the
face of ongoing economic turbulence and the threat of further real estate
market declines," said Mr. Moor. "While compression in net interest margin
will remain a factor in the second quarter, the actions we have taken to
significantly enhance pricing for new and renewing mortgages, the interest
rate floors added to variable rate mortgage business and the recent
improvement in market dynamics that are easing overall deposit costs give us
reasons for cautious optimism. The Bank of Canada's recent decision to leave
its benchmark interest rate at current levels into 2010 also provides an
important measure of predictability. Overall, our immediate focus will remain
on safeguarding the future health of our portfolio and improving returns
without taking excessive risk."
John Ayanoglou, Chief Financial Officer, said: "We continue to closely
monitor the landscape and while it remains volatile, there are some signs of
general improvement. Regardless, quality lending opportunities continue to
exist in our markets and we are focused on identifying and originating these
within the parameters of our disciplined risk management processes and
investment return objectives. We expect to be able to continue to originate
strong insured funding volumes for securitization this year, which will add to
earnings potential. And with a strong balance sheet, we're ready to combat
short-term challenges and capitalize on future business opportunities that
will arise."
FIRST QUARTER WEBCAST
Management will discuss Equitable's results during a conference call
beginning at 10 a.m. ET today. To listen to the audio webcast, log on to
www.equitablegroupinc.com. To participate in the call, please dial
416-644-3431.
MD&A
The Company will post its MD&A for the three months ended March 31, 2009
on its website (www.equitablegroupinc.com) this morning. This document will
also be archived on the site.
ABOUT EQUITABLE GROUP INC.
Equitable Group Inc. is a niche mortgage lender. Our core 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 in Ontario, Alberta and Manitoba. Equitable
Group's shares are traded on the Toronto Stock Exchange under the symbol ETC.
Visit the Company online at www.equitablegroupinc.com or
www.equitabletrust.com.INTERIM CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS (unaudited)
AS AT MARCH 31, 2009
With comparative figures as at December 31, 2008 and March 31, 2008
(In thousands of dollars)
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March 31, December 31, March 31,
2009 2008 2008
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Assets
Cash and cash equivalents $17,236 $50,121 $12,582
Restricted cash 6,300 8,422 5,000
Investments purchased under
reverse repurchase agreements 540,693 698,276 275,074
Investments 270,269 170,321 195,499
Securitization retained interests 122,734 101,806 57,046
Mortgages receivable 2,895,085 3,023,015 2,810,856
Other assets 36,183 35,590 12,314
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$3,888,500 $4,087,551 $3,368,371
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Liabilities and Shareholders' Equity
Liabilities:
Customer deposits $3,471,953 $3,692,569 $3,057,746
Future income taxes 20,196 17,839 9,157
Other liabilities 38,532 36,433 12,968
Bank term loans 44,595 44,595 44,595
Subordinated debentures 31,969 31,969 31,969
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3,607,245 3,823,405 3,156,435
Shareholders' equity:
Capital stock 126,993 126,993 87,257
Contributed surplus 2,872 2,553 1,961
Retained earnings 159,821 149,365 124,714
Accumulated other comprehensive loss (8,431) (14,765) (1,996)
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281,255 264,146 211,936
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$3,888,500 $4,087,551 $3,368,371
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CONSOLIDATED STATEMENTS OF INCOME (unaudited)
FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2009
With comparative figures for the three month period ended March 31, 2008
(In thousands of dollars, except share and per share amounts)
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Three months ended
March 31, March 31,
2009 2008
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Interest income:
Mortgages $41,014 $45,692
Investments 2,465 2,176
Other 1,825 3,723
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45,304 51,591
Interest expense:
Customer deposits 27,297 30,709
Deposit agent commissions 1,684 1,942
Bank term loans 738 746
Subordinated debentures 579 584
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30,298 33,981
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Net interest income 15,006 17,610
Provision for credit losses 1,850 300
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Net interest income after provision for
credit losses 13,156 17,310
Other income:
Fees and other income 753 360
Net gain on investments 36 181
Gains on securitization activities and income
from retained interests 9,334 681
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10,123 1,222
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Net interest income and other income 23,279 18,532
Non-interest expenses:
Compensation and benefits 3,964 3,027
Other 2,307 2,121
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6,271 5,148
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Income before income taxes 17,008 13,384
Income taxes:
Current 2,707 3,604
Future 2,357 95
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5,064 3,699
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Net income $11,944 $9,685
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Earnings per share:
Basic $0.80 $0.75
Diluted $0.80 $0.74
Weighted average number of shares outstanding:
Basic 14,882,710 12,955,897
Diluted 14,882,710 13,018,567
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CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (unaudited)
FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2009
With comparative figures for the three month period ended March 31, 2008
(In thousands of dollars)
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Three months ended
March 31, March 31,
2009 2008
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Capital stock:
Balance, beginning of period $126,993 $87,062
Common shares issued
Proceeds from exercise of stock options - 175
Transfer from contributed surplus relating
to the exercise of stock options - 20
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Balance, end of period 126,993 87,257
Contributed surplus:
Balance, beginning of period 2,553 1,778
Stock-based compensation 319 203
Transfer to common shares relating to the
exercise of stock options - (20)
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Balance, end of period 2,872 1,961
Retained earnings:
Balance, beginning of period 149,365 116,325
Net income 11,944 9,685
Dividends (1,488) (1,296)
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Balance, end of period 159,821 124,714
Accumulated other comprehensive income (loss),
net of tax:
Balance, beginning of period (14,765) (1,995)
Other comprehensive income (loss) 6,334 (1)
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Balance, end of period (8,431) (1,996)
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Total retained earnings and accumulated other
comprehensive income (loss) 154,262 122,718
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Total shareholders' equity $281,255 $211,936
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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)
FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2009
With comparative figures for the three month period ended March 31, 2008
(In thousands of dollars)
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Three months ended
March 31, March 31,
2009 2008
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Net income $11,944 $9,685
Other comprehensive income (loss), net of tax:
Available for sale investments:
Net unrealized gains (losses) from change
in fair value 7,440 (87)
Reclassification of net (gains)
losses to income (1,106) 86
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Other comprehensive income (loss) 6,334 (1)
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Comprehensive income $18,278 $9,684
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CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2009
With comparative figures for the three month period ended March 31, 2008
(In thousands of dollars)
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Three months ended
March 31, March 31,
2009 2008
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Cash provided by (used in):
Operating activities:
Net income $11,944 $9,685
Non-cash items:
Financial instruments - fair value adjustments (5,594) (1,132)
Securitizations - (gains) losses on
securitization activities (7,619) 42
Amortization of capital assets 141 185
Provision for credit losses 1,850 300
Net gain on investments (84) (179)
Future income taxes 2,357 95
Stock-based compensation 319 203
Amortization of premiums on investments, net 204 549
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3,518 9,748
Changes in operating assets and liabilities:
Other assets 212 982
Other liabilities (4,693) (3,770)
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(963) 6,960
Financing activities:
Increase in customer deposits (219,157) (47,679)
Dividends paid on common shares (1,488) (1,296)
Issuance of common shares - 175
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(220,645) (48,800)
Investing activities:
Proceeds on sale or redemption of investments 4,459 23,750
Purchase of investments purchased under
reverse repurchase agreements (540,693) (275,074)
Proceeds on sale or redemption of investments
purchased under reverse repurchase agreements 698,276 232,120
Change in restricted cash 2,122 -
Increase in mortgages receivable (811,716) (376,012)
Mortgage principal repayments 419,292 267,478
Proceeds from loan securitizations 411,179 163,091
Securitization retained interests 5,919 3,204
Purchase of capital assets (115) (62)
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188,723 38,495
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Decrease in cash and cash equivalents (32,885) (3,345)
Cash and cash equivalents, beginning of period 50,121 15,927
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Cash and cash equivalents, end of period $17,236 $12,582
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Supplemental cash flow information:
Interest paid $22,986 $27,221
Income taxes paid 1,373 1,724
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For further information: John Ayanoglou, Chief Financial Officer, (416)
515-7000
