Equitable Group Reports Annual and Fourth Quarter 2008 Results



    
    -   ALL FINANCIAL AND STRATEGIC GOALS MET OR EXCEEDED
    -   CAPITAL AND LIQUIDITY POSITIONS STRONGER THAN EVER

    TSX Symbol: ETC
    

    TORONTO, Feb. 26 /CNW/ - Equitable Group Inc. ("Equitable" or the
"Company") today reported its financial results for the three and 12 months
ended December 31, 2008, including the strongest capital ratio and liquidity
positions for its wholly-owned subsidiary, The Equitable Trust Company
("Equitable Trust"), in Equitable's history as a public company.

    
    2008 Results

    -   Net income increased 23.9% to a record $38.6 million from $31.2
        million a year ago - well ahead of the Company's earnings growth
        target for the year of 16% to 20%.
    -   Diluted earnings grew 13.9% to a record $2.78 per share, on more
        shares outstanding, compared to $2.44 per share in 2007.
    -   Return on equity was 16.6%, in line with Equitable's 2008 objective
        of 16% to 18%.
    -   Equitable Trust's total capital ratio (inclusive of general
        allowance) grew to 13.5% - its strongest capital position since the
        Company was taken public - much improved over the 11.0% ratio of
        January 1, 2008 and ahead of the Company's 13.0% objective for the
        year.
    -   Productivity ratio on a Taxable Equivalent Basis - a measure of
        efficiency - improved to 27.4% from 29.2% a year ago.
    -   Realized loan loss of only $36 thousand.
    -   Book value was $17.75 per share compared to $15.69 per share at
        December 31, 2007.

    Fourth Quarter Results

    -   Net income increased 14.2% to $7.9 million from $6.9 million a year
        ago.
    -   Diluted earnings were $0.53 per share, the same as in the fourth
        quarter of 2007 despite more shares outstanding.
    -   Return on equity was 11.8% compared to 13.7% a year ago.
    -   Total assets were $4.1 billion - a new milestone - and 19.9% higher
        than the December 31, 2007 asset base of $3.4 billion.

    Dividend
    
    The Company's Board of Directors declared a dividend of $0.10 per share
payable on April 3, 2009, to shareholders of record at the close of business
on March 13, 2009.

    Credit Quality and Allowances

    Despite weaker economic conditions, the Company's mortgage portfolio
continued to perform well and within expectations. Total realized loan loss in
2008 was just $36 thousand. Although net impaired mortgages were 1.21% of
total mortgage principal compared to 0.30% a year ago, the majority of the
Company's impaired mortgage balance related to one borrower connection that is
being actively managed. Excluding this one connection, net impaired mortgages
would have been 0.38% of total mortgage principal. As a prudent measure to
provide for potential losses on impaired mortgages, the Company recorded a
$2.8 million ($0.13 per share basic and diluted) charge for specific
allowances in 2008. Management continues to believe that adequate collateral
is available to support the value of Equitable's mortgage portfolio.

    
    Fourth Quarter Operating Highlights

    -   Single Family Lending Services mortgage originations increased 7.8%
        to $102.5 million from $95.1 million in the fourth quarter of last
        year - and Single Family represented 13.0% of total mortgage
        production, compared with 16.3% a year earlier.
    -   Commercial Mortgage - Broker Services production decreased to $16.8
        million compared to $81.5 million in the fourth quarter of 2007.
    -   Commercial Lending Services production increased to $671.7 million
        from $406.1 million a year ago - and consistent with the Company's
        focus on generating attractive risk-weighted returns, $260.2 million
        of 2008 fourth quarter production related to CMHC-insured multi-unit
        residential mortgages that were originated for the purpose of
        securitization and sale.
    -   Total mortgage principal increased on a net basis by $158.7 million
        or 5.5% from a year ago.
    -   The Company securitized and sold $281.0 million of CMHC-insured
        mortgages in the fourth quarter of 2008, compared to $92.6 million in
        the corresponding quarter of 2007.

    Management Commentary
    
    "Equitable achieved record results in 2008 and achieved the operating
objectives we set for the year, which is a reflection of the strength of our
business, especially in light of today's challenging economic, credit and real
estate environments," said Andrew Moor, President and Chief Executive Officer.
"Despite the impact that six consecutive decreases in the Bank of Canada's
lending rate - and our decision to increase liquidity - had on our interest
margin in 2008, net income still grew by almost 24% over 2007 - itself a
record year. We also increased gains on securitization activities by $8.8
million over the prior year, by securitizing and selling a record $1.3 billion
in CMHC-insured multi-unit and single-family residential mortgages. Despite
increasing total assets by some $670 million to more than $4.0 billion, we
kept our long and successful track record of credit quality firmly intact and
built our capital and liquidity positions to record levels as a public
company. For these reasons, we are pleased with Equitable's performance and
satisfied that the strategic and capital plans we introduced at the beginning
of last year are working to capitalize on our advantages, offset heightened
risk and position us for improvements in the future."

    Outlook and Objectives

    "Long term, Equitable is focused on achieving growth by identifying and
investing in the development of mortgage products and geographic markets that
will deliver strong returns on capital for our shareholders," said Mr. Moor.
"Short term, we believe quality lending opportunities continue to exist in our
markets and we are identifying and capitalizing on these but in the context of
an approach that is weighted to earning sustainable returns and protecting
shareholder capital. We believe that by maintaining strict credit risk
practices, continually improving our operating efficiencies, and preserving
our strong regulatory capital and liquidity positions, we will manage
successfully through this economic turbulence and emerge in an even stronger
position to capitalize on growth opportunities."
    John Ayanoglou, Chief Financial Officer, said: "While our risk management
policies will have the effect of tempering origination volumes until better
economic conditions emerge, the impact on fee income and earnings related to
this effect is expected to be marginal because the majority of our earnings
and cash flows are generated from interest earned on our $3.0 billion mortgage
portfolio. Furthermore, we stand to benefit substantially from the recurring
cash flows we generate from our $2.8 billion securitized mortgage portfolio,
which we intend to grow considerably in 2009."

    Fourth 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
416-644-3414.

    MD&A

    The Company will post its MD&A for the three months and year ended
December 31, 2008 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 leading niche financial institution focused on
single-family dwelling mortgage lending, Commercial Mortgage - Broker
Services, a business line that funds loans on a variety of properties
including mixed-use, apartment, commercial and industrial buildings, and
commercial lending in partnership with mortgage banking organizations.
Equitable is a nationally-licensed deposit-taking institution. It conducts
business through its wholly-owned subsidiary, The Equitable Trust Company,
which was founded in 1970. Equitable's non-branch business model, valued
relationships with independent mortgage professionals and deposit-taking
agents, and disciplined lending practices have allowed the Company to grow
profitably and efficiently for many years.
    The common shares of Equitable Group Inc. are listed on the Toronto Stock
Exchange under the trading symbol of "ETC". For more information, visit
www.equitablegroupinc.com.



    
    EQUITABLE GROUP INC.
    Consolidated Balance Sheets
    (In thousands of dollars)

    As at December 31, 2008 and 2007

    -------------------------------------------------------------------------
                                                          2008          2007
    -------------------------------------------------------------------------

    Assets
    Cash and cash equivalents                          $50,121       $15,927
    Restricted cash                                      8,422         5,000
    Investments purchased under
     reverse repurchase agreements                     698,276       232,120
    Investments                                        170,321       220,697
    Securitization retained interests                  101,806        51,214
    Mortgages receivable                             3,023,015     2,874,241
    Other assets                                        35,590        10,427
    -------------------------------------------------------------------------
                                                    $4,087,551    $3,409,626
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities and Shareholders' Equity
    Liabilities:
      Customer deposits                             $3,692,569    $3,104,524
      Future income taxes                               17,839         7,945
      Other liabilities                                 36,433        17,423
      Bank term loans                                   44,595        44,595
      Subordinated debentures                           31,969        31,969
    -------------------------------------------------------------------------
                                                     3,823,405     3,206,456

    Shareholders' equity
      Capital stock                                    126,993        87,062
      Contributed surplus                                2,553         1,778
      Retained earnings                                149,365       116,325
      Accumulated other comprehensive loss             (14,765)       (1,995)
    -------------------------------------------------------------------------
                                                       264,146       203,170

    Commitments and contingencies

    -------------------------------------------------------------------------
                                                    $4,087,551    $3,409,626
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    EQUITABLE GROUP INC.
    Consolidated Statements of Income
    (In thousands of dollars, except per share amounts)

    Years ended December 31, 2008 and 2007

    -------------------------------------------------------------------------
                                                          2008          2007
    -------------------------------------------------------------------------

    Interest income:
      Mortgages                                       $186,519      $164,631
      Investments                                        8,180        12,180
      Other                                             17,255         8,833
    -------------------------------------------------------------------------
                                                       211,954       185,644
    Interest expense:
      Customer deposits                                133,770       112,017
      Deposit agent commissions                          8,468         6,729
      Bank term loans                                    3,025         2,952
      Subordinated debentures                            2,348         2,367
    -------------------------------------------------------------------------
                                                       147,611       124,065
    -------------------------------------------------------------------------
    Net interest income                                 64,343        61,579
    Provision for credit losses                          3,450           900
    -------------------------------------------------------------------------
    Net interest income after provision
     for credit losses                                  60,893        60,679
    Other income:
      Fees and other income                              1,832         1,275
      Net loss on investments                             (295)       (5,170)
      Gains on securitization activities and
       income from retained interests                   13,275         4,184
    -------------------------------------------------------------------------
                                                        14,812           289
    -------------------------------------------------------------------------
    Net interest income and other income                75,705        60,968
    Non-interest expenses:
      Compensation and benefits                         13,253        11,340
      Other                                              9,438         8,628
    -------------------------------------------------------------------------
                                                        22,691        19,968
    -------------------------------------------------------------------------
    Income before income taxes                          53,014        41,000
    Income taxes:
      Current                                            4,929         5,063
      Future                                             9,474         4,766
    -------------------------------------------------------------------------
                                                        14,403         9,829
    -------------------------------------------------------------------------
    Net income                                         $38,611       $31,171
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings per share:
      Basic                                              $2.79         $2.47
      Diluted                                            $2.78         $2.44

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    EQUITABLE GROUP INC.
    Consolidated Statements of Changes in Shareholders' Equity
    (In thousands of dollars)

    Years ended December 31, 2008 and 2007

    -------------------------------------------------------------------------
                                                          2008          2007
    -------------------------------------------------------------------------

    Capital stock:
      Balance, beginning of year                       $87,062       $57,849
      Common shares issued:
        Gross proceeds of equity issue                  40,850        25,000
        Issue expenses, net of tax recovery
         of $698 (2007 - $497)                          (1,510)         (953)
        Proceeds from exercise of stock options            525         4,587
        Transfer from contributed surplus relating
         to the exercise of stock options                   66           579
    -------------------------------------------------------------------------
      Balance, end of year                             126,993        87,062
    -------------------------------------------------------------------------

    Contributed surplus:
      Balance, beginning of year                         1,778         1,539
      Stock-based compensation                             841           818
      Transfer to common shares relating
       to the exercise of stock options                    (66)         (579)
    -------------------------------------------------------------------------
      Balance, end of year                               2,553         1,778
    -------------------------------------------------------------------------

    Retained earnings:
      Balance, beginning of year                       116,325        90,348
      Transition adjustment -
       financial instruments                                 -          (113)
      Net income                                        38,611        31,171
      Dividends                                         (5,571)       (5,081)
    -------------------------------------------------------------------------
      Balance, end of year                             149,365       116,325
    -------------------------------------------------------------------------

    Accumulated other comprehensive income (loss):
      Balance, beginning of year                        (1,995)            -
      Transition adjustment -
       financial instruments                                 -           302
      Other comprehensive loss                         (12,770)       (2,297)
    -------------------------------------------------------------------------
      Balance, end of year                             (14,765)       (1,995)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Total retained earnings and accumulated
     other comprehensive income (loss)                 134,600       114,330
    -------------------------------------------------------------------------
    Total shareholders' equity                        $264,146      $203,170
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Consolidated Statements of Comprehensive Income
    (In thousands of dollars)

    Years ended December 31, 2008 and 2007

    -------------------------------------------------------------------------
                                                          2008          2007
    -------------------------------------------------------------------------

    Net income                                         $38,611       $31,171
    Other comprehensive income (loss), net of tax:
      Available for sale investments:
        Net unrealized losses from
         change in fair value                          (12,483)       (3,660)
        Reclassification of net
         (gains) losses to income                         (287)        1,363
    -------------------------------------------------------------------------
    Other comprehensive loss                           (12,770)       (2,297)
    -------------------------------------------------------------------------
    Comprehensive income                               $25,841       $28,874
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    EQUITABLE GROUP INC.
    Consolidated Statements of Cash Flows
    (In thousands of dollars)

    Years ended December 31, 2008 and 2007

    -------------------------------------------------------------------------
                                                          2008          2007
    -------------------------------------------------------------------------

    Cash provided by (used in):
    Operating activities:
      Net income                                       $38,611       $31,171
      Non-cash items:
        Financial instruments - fair value
         adjustments and reclassifications             (10,023)         (604)
        Loan securitizations - gains on
         securitization activities                     (10,076)       (1,277)
        Amortization of capital assets                     779           694
        Provision for credit losses                      3,450           900
        Net loss on investments                             39         5,170
        Future income taxes                              9,475         4,766
        Stock-based compensation                           841           818
        Amortization of premiums
         on investments, net                             1,344         3,864
    -------------------------------------------------------------------------
                                                        34,440        45,502

      Change in operating assets and liabilities:
        Other assets                                    (3,586)        5,432
        Other liabilities                                  511        (6,985)
    -------------------------------------------------------------------------
                                                        31,365        43,949

    Financing activities:
      Increase in customer deposits                    582,665       714,989
      Issuance of bank term loan                             -        12,500
      Repayment of bank term loan                            -        (2,655)
      Issuance of subordinated debentures                    -         9,450
      Redemption of subordinated debentures                  -        (2,731)
      Dividends paid on common shares                   (5,571)       (5,081)
      Issuance of common shares                         39,167        28,137
    -------------------------------------------------------------------------
                                                       616,261       754,609

    Investing activities:
      Purchase of investments                           (5,000)     (126,919)
      Proceeds on sale or
       redemption of investments                       104,538       211,849
      Purchase of investments purchased under
       reverse repurchase agreements                (2,133,537)     (232,120)
      Proceeds on sale or redemption
       of investments purchased under
       reverse repurchase agreements                 1,667,381             -
      Change in restricted cash                         (3,422)       (5,000)
      Increase in mortgages receivable              (3,135,352)   (2,735,737)
      Mortgage principal repayments                  1,581,808     1,716,441
      Proceeds from loan securitizations             1,291,679       269,209
      Securitization retained interests                 18,931        13,092
      Purchase of capital assets                          (458)       (1,288)
    -------------------------------------------------------------------------
                                                      (613,432)     (890,473)

    -------------------------------------------------------------------------
    Increase (decrease) in cash
     and cash equivalents                               34,194       (91,915)

    Cash and cash equivalents, beginning of year        15,927       107,842
    -------------------------------------------------------------------------
    Cash and cash equivalents, end of year             $50,121       $15,927
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Certain forward-looking statements are made in this news release,
including statements found in the Outlook and Objectives section, above,
regarding possible future business. Investors are cautioned that such
forward-looking statements involve risks and uncertainties detailed from time
to time in the Company's periodic reports filed with Canadian regulatory
authorities. 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. Many factors could cause actual results,
performance or achievements to be materially different from any future
results, performance or achievements that may be expressed or implied by these
assumptions and the related forward-looking statements. Equitable does not
undertake to update any forward-looking statements, oral or written, made by
itself or on its behalf except in accordance with applicable securities laws.
See the MD&A for further information on forward-looking statements.





For further information:

For further information: John Ayanoglou, Chief Financial Officer, (416)
513-3535


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