Equitable Group reports record first quarter 2009 results



    
    -   RECORD QUARTERLY EARNINGS
    -   FUNDINGS UP 77.5%
    -   SECURITIZATIONS CONTINUE WITH HIGHER SPREADS
    

    TSX 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)

    -------------------------------------------------------------------------
                                          March 31, December 31,    March 31,
                                              2009         2008         2008
    -------------------------------------------------------------------------

    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
    -------------------------------------------------------------------------
                                        $3,888,500   $4,087,551   $3,368,371
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    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
    -------------------------------------------------------------------------
                                         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)
    -------------------------------------------------------------------------
                                           281,255      264,146      211,936

    -------------------------------------------------------------------------
                                        $3,888,500   $4,087,551   $3,368,371
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    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)

    -------------------------------------------------------------------------
                                                        Three months ended
                                                       March 31,    March 31,
                                                           2009         2008
    -------------------------------------------------------------------------

    Interest income:
      Mortgages                                         $41,014      $45,692
      Investments                                         2,465        2,176
      Other                                               1,825        3,723
    -------------------------------------------------------------------------
                                                         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
    -------------------------------------------------------------------------
                                                         30,298       33,981
    -------------------------------------------------------------------------
    Net interest income                                  15,006       17,610
    Provision for credit losses                           1,850          300
    -------------------------------------------------------------------------
    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
    -------------------------------------------------------------------------
                                                         10,123        1,222
    -------------------------------------------------------------------------
    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
    -------------------------------------------------------------------------
                                                          6,271        5,148
    -------------------------------------------------------------------------
    Income before income taxes                           17,008       13,384
    Income taxes:
      Current                                             2,707        3,604
      Future                                              2,357           95
    -------------------------------------------------------------------------
                                                          5,064        3,699

    -------------------------------------------------------------------------
    Net income                                          $11,944       $9,685
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    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

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



    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)

    -------------------------------------------------------------------------
                                                        Three months ended
                                                       March 31,    March 31,
                                                           2009         2008
    -------------------------------------------------------------------------

    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
    -------------------------------------------------------------------------
      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)
    -------------------------------------------------------------------------
      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)
    -------------------------------------------------------------------------
      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)
    -------------------------------------------------------------------------
      Balance, end of period                             (8,431)      (1,996)
    -------------------------------------------------------------------------
    Total retained earnings and accumulated other
     comprehensive income (loss)                        154,262      122,718
    -------------------------------------------------------------------------
    Total shareholders' equity                         $281,255     $211,936
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    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)

    -------------------------------------------------------------------------
                                                        Three months ended
                                                       March 31,    March 31,
                                                           2009         2008
    -------------------------------------------------------------------------

    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
    -------------------------------------------------------------------------
    Other comprehensive income (loss)                     6,334           (1)
    -------------------------------------------------------------------------
    Comprehensive income                                $18,278       $9,684
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    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)

    -------------------------------------------------------------------------
                                                        Three months ended
                                                       March 31,    March 31,
                                                           2009         2008
    -------------------------------------------------------------------------

    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
    -------------------------------------------------------------------------
                                                          3,518        9,748

      Changes in operating assets and liabilities:
        Other assets                                        212          982
        Other liabilities                                (4,693)      (3,770)
    -------------------------------------------------------------------------
                                                           (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
    -------------------------------------------------------------------------
                                                       (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)
    -------------------------------------------------------------------------
                                                        188,723       38,495

    -------------------------------------------------------------------------
    Decrease in cash and cash equivalents               (32,885)      (3,345)
    Cash and cash equivalents, beginning of period       50,121       15,927
    -------------------------------------------------------------------------
    Cash and cash equivalents, end of period            $17,236      $12,582
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Supplemental cash flow information:
      Interest paid                                     $22,986      $27,221
      Income taxes paid                                   1,373        1,724
    -------------------------------------------------------------------------
    





For further information:

For further information: John Ayanoglou, Chief Financial Officer, (416)
515-7000


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