TORONTO, Aug. 9, 2012 /CNW/ - Equitable Group Inc. ("Equitable" or
the "Company") today reported record financial performance for the
six months ended June 30, 2012 and announced a 17% increase in its
common share dividend in recognition of its strong growth prospects
and capital position. As a result of strong long-term growth, the
Company also noted that its mortgage portfolio has doubled in size
in the past five years, reaching the $10 billion milestone at June
30, 2012. SECOND QUARTER HIGHLIGHTS -- Net income increased 40% to
$22.1 million from $15.7 million in the second quarter of 2011 --
Diluted earnings per share ("EPS") increased 43% to $1.40 from
$0.98 in the second quarter of 2011 -- Return on equity ("ROE")
increased to 21.1% from 16.8% a year ago -- Equitable Trust's
period-end total capital ratio was 15.6% "Equitable's outstanding
performance in the second quarter reflected our growing marketplace
advantages as a national, service-oriented mortgage lender," said
Andrew Moor, President and Chief Executive Officer. "Once again, we
grew mortgage principal in every one of our lending businesses
compared to a year ago, led by a 37% increase in Single Family,
which also generated 65% growth in production in the quarter year
over year. Our ability to expand at low cost without compromising
credit quality is a demonstration of the strength of our value
creation strategies and great execution by our dedicated team."
Consistent with previous disclosures, results in the second quarter
of 2012 included a $0.24 per share [diluted] gain related to one of
the Company's securities portfolio holdings. The gain was reflected
in a lower effective tax rate of 13.1% in the second quarter.
Adjusted for this gain, second quarter net income increased 17% to
$18.5 million from $15.7 million a year ago, EPS increased 18% to
$1.16 from $0.98 a year ago and ROE increased to 17.5% from 16.8% a
year ago. OTHER SECOND QUARTER HIGHLIGHTS Equitable continued to
capitalize on its strong competitive position and expanding
national presence to drive growth in mortgage balances across its
lending lines: -- Single Family Lending Services mortgage principal
was a record $2.5 billion at June 30, up 37% from a year earlier --
Single Family Lending Services second quarter production of $483
million was up 65% or $189 million from a year ago, reflecting the
strength of Equitable's relationships with its mortgage broker
network, strong activity in real estate markets and changes in the
competitive environment -- Commercial Lending Services mortgage
principal was $2.2 billion at June 30, $224 million or 12% higher
than at the end of the second quarter of 2011. Second quarter
production was $157 million, up 32% or $38 million from a year ago
-- Securitization Financing mortgage principal increased $261
million or 5% year over year to $5.2 billion at June 30, a rate of
growth that reflects the Company's focus on achieving attractive
risk-adjusted returns from Core Lending activities and placing less
emphasis on securitized multi-unit residential mortgages As a
result of the rigorous application of its underwriting policies and
the availability of high quality lending opportunities, Equitable
posted excellent credit metrics in the second quarter: -- Mortgage
principal in arrears 90 days or more was 0.22% of total mortgage
principal, an improvement from 0.27% a year ago -- Net impaired
mortgages improved to 0.27% of total mortgage assets from 0.29% a
year ago The Company also recognized a net recovery of $20 thousand
during the second quarter of 2012, continuing a long-term trend of
realizing minimal or no loan losses. DIVIDEND DECLARATIONS The
Company's Board of Directors today declared a quarterly dividend in
the amount of $0.14 per common share, payable October 4, 2012, to
common shareholders of record at the close of business on September
15, 2012. This represents a 17% increase in the Company's quarterly
common share dividend - the third dividend increase since the
beginning of 2011. The Board also declared a quarterly
dividend in the amount of $0.453125 per preferred share, payable
September 30, 2012, to preferred shareholders of record at the
close of business on September 15, 2012. SIX MONTH HIGHLIGHTS --
Net income increased 26% to $40.0 million from $31.8 million in the
first six months of 2011 -- EPS increased 27% to $2.52 from $1.99
in the same period of 2011 -- ROE increased to 19.4% from 17.4% a
year ago -- Book value per share increased 14% to $27.46 from
$24.05 at June 30, 2011 LOOKING AHEAD Equitable's positive outlook
includes expectations of strong earnings and ROE, healthy capital
levels in the second half of 2012, and continued consumer demand
for its mortgage solutions. "We hope to set new earnings records in
2012 and have calibrated our strategies to ensure we capitalize on
our recent momentum without deviating from our underwriting comfort
zone," said Mr. Moor. "We are cognizant of heightened marketplace
risk but by continuing to channel our expansion into real estate
property types in urban centres that are backstopped by strong
fundamentals, including population growth and diversified economic
drivers, we believe we can grow at a very attractive pace while
maintaining our traditional risk profile and exceptionally low
arrears. All things considered, the future has never looked
brighter for Equitable." Included in the Company's immediate term
outlook are expectations that net interest margins (1.49% in the
second quarter) will remain stable this year, its productivity
ratio (30.6% in the second quarter) will continue to reflect
efficient operations, and that recent marketplace developments may
create opportunities for growing the business and expanding
interest rate spreads in the single family business. Management is
also hopeful that new transaction structures under discussion will
allow the Company to increase its multi-unit residential
originations well beyond current levels. "The Company is well
capitalized and we believe our earnings in future periods will
generate adequate capital to support our strategic objectives
including ongoing expansion of mortgage principal. The
Company will remain open to raising non-dilutive capital in the
future to replace maturing obligations and to fund incremental
growth opportunities if they arise, and our recent investment grade
debt rating from DBRS would help us to do so at a lower cost," said
Tim Wilson, Vice President and CFO. Q2 CONFERENCE CALL The Company
will hold its second quarter conference call and webcast at 10:00
a.m. ET Friday August 10, 2012. To access the call live, please
dial in five minutes prior to 416-644-3418. 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 August 17, 2012 and it can be accessed by dialing
416-640-1917 and entering passcode 4551299 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 JUNE 30, 2012 With
comparative figures as at December 31, 2011, June 30, 2011 ($
THOUSANDS) June 30, 2012 December 31, 2011 June 30, 2011 Assets
Cash and cash $ 305,037 $ 170,845 $ 264,724 equivalents Restricted
cash 66,537 83,156 48,346 Securities 101,351 9,967 5,115 purchased
under reverse repurchase agreements Investments 391,169 390,340
372,045 Mortgages 4,723,293 4,262,147 3,865,669 receivable
Mortgages 5,255,425 5,314,940 4,998,688 receivable - securitized
Other assets 24,719 25,618 12,768 $ 10,867,531 $ 10,257,013 $
9,567,355 Liabilities and Shareholders' Equity Liabilities:
Deposits $ 5,231,603 $ 4,627,904 $ 4,254,271 Securitization
5,076,323 5,100,921 4,776,241 liabilities Obligations 1,515 - -
related to securities sold short Obligations - - 34,298 related to
securities sold under repurchase agreements Deferred tax 5,666
7,790 7,457 liabilities Other liabilities 24,780 28,587 21,202 Bank
term loans 12,500 12,500 12,500 Subordinated 52,671 52,671 52,671
debentures 10,405,058 9,830,373 9,158,640 Shareholders' equity:
Preferred shares 48,494 48,494 48,494 Common shares 131,045 129,771
129,054 Contributed 4,913 4,718 4,292 surplus Retained earnings
288,596 254,006 228,881 Accumulated other (10,575) (10,349) (2,006)
comprehensive loss 462,473 426,640 408,715 $ 10,867,531 $
10,257,013 $ 9,567,355 CONSOLIDATED STATEMENTS OF INCOME
(unaudited) FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2012
With comparative figures for the three and six month periods ended
June 30, 2011 ($ THOUSANDS, EXCEPT PER SHARE AMOUNTS) Three months
ended Six months ended June 30, June 30, June 30, June 30, 2011
2012 2011 2012 Interest income: Mortgages $ 58,973 $ 50,474 $
116,160 $ 98,323 Mortgages - 53,598 52,610 108,057 104,762
securitized Investments 2,878 2,648 5,126 4,927 Other 1,340 1,242
2,566 2,267 116,789 106,974 231,909 210,279 Interest expense:
Deposits 31,589 28,251 61,939 54,991 Securitization 45,675 45,111
92,849 89,380 liabilities Bank term 202 203 404 403 loans
Subordinated 868 870 1,737 1,732 debentures Other 4 78 5 107 78,338
74,513 156,934 146,613 Net interest 38,451 32,461 74,975 63,666
income Provision for 1,693 2,217 3,920 4,155 credit losses Net
interest 36,758 30,244 71,055 59,511 income after provision for
credit losses Other income: Fees and other 981 790 1,986 1,644
income Net gain 54 (311) 303 (13) (loss) on investments 1,035 479
2,289 1,631 Net interest and 37,793 30,723 73,344 61,142 other
income Non-interest expenses: Compensation 6,965 5,540 13,535
11,013 and benefits Other 5,354 4,208 10,693 7,850 12,319 9,748
24,228 18,863 Income before 25,474 20,975 49,116 42,279 income
taxes and the undernotedfair value (loss) gain Fair value (85) 48
(34) 367 (loss) gain on derivative financial instruments -
securitization activities Income before 25,389 21,023 49,082 42,646
income taxes Income taxes: Current 4,258 5,149 11,193 10,476
Deferred (942) 139 (2,124) 371 3,316 5,288 9,069 10,847 Net income
$ 22,073 $ 15,735 $ 40,013 $ 31,799 Earnings per share: Basic $
1.41 $ 0.99 $ 2.54 $ 2.00 Diluted $ 1.40 $ 0.98 $ 2.52 $ 1.99
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited) FOR THE
THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2012 With comparative
figures for the three and six month periods ended June 30, 2011 ($
THOUSANDS) Three months ended Six months ended June 30, June 30,
June 30, 2012 June 30, 2011 2012 2011 Net income $ 22,073 $ 15,735
$ 40,013 $ 31,799 Other comprehensive loss: Available for sale
investments: Net unrealized (782) 1,255 51 2,399 (losses) gains
from change in fair value Reclassification (55) 275 (1,137) 10 of
net (gains) losses to income (837) 1,530 (1,086) 2,409 Income tax
219 (429) 284 (676) (618) 1,101 (802) 1,733 Cash flow hedges (Note
8) Net unrealized (1,387) (5,143) (359) (3,476) losses from change
in fair value Reclassification 547 6 1,139 (13) of net losses
(gains) to income (840) (5,137) 780 (3,489) Income tax 219 1,441
(204) 979 (621) (3,696) 576 (2,510) Total other (1,239) (2,595)
(226) (777) comprehensive loss Total $ 20,834 $ 13,140 $ 39,787 $
31,022 comprehensive income CONSOLIDATED STATEMENTS OF CHANGES IN
SHAREHOLDERS' EQUITY (unaudited) FOR THE THREE MONTH PERIOD ENDED
JUNE 30, 2012 With comparative figures for the three month period
ended June 30, 2011 ($ THOUSANDS) Accumulated other Preferred
Common Contributed Retained comprehensive June 30, 2012 shares
shares surplus earnings income (loss) Total Balance, $ 48,494 $
130,251 $ 4,813 $ 269,235 $ (9,336) $ 443,457 beginning of period
Net income - - - 22,073 - 22,073 Other - - - - (1,239) (1,239)
comprehensive loss, net of tax Reinvestment - 190 - - - 190 of
dividends Exercise of - 491 - - - 491 stock options Dividends:
Preferred - - - (906) - (906) shares Common - - - (1,806) - (1,806)
shares Stock-based - - 213 - - 213 compensation Transfer - 113
(113) - - - relating to the exercise of stock options Balance, end
$ 48,494 $ 131,045 $ 4,913 $ 288,596 $ (10,575) $ 462,473 of period
Accumulated other Preferred Common Contributed Retained
comprehensive June 30, 2011 shares shares surplus earnings income
(loss) Total Balance, $ 48,494 $ 128,369 $ 4,169 $ 215,700 $ 589 $
397,321 beginning of period Net income - - - 15,735 - 15,735 Other
- - - - (2,595) (2,595) comprehensive loss, net of tax Reinvestment
- 149 - - - 149 of dividends Exercise of - 455 - - - 455 stock
options Dividends: Preferred - - - (906) - (906) shares Common - -
- (1,648) - (1,648) shares Stock-based - - 204 - - 204 compensation
Transfer - 81 (81) - - - relating to the exercise of stock options
Balance, end $ 48,494 $ 129,054 $ 4,292 $ 228,881 $ (2,006) $
408,715 of period CONSOLIDATED STATEMENTS OF CHANGES IN
SHAREHOLDERS' EQUITY (unaudited) FOR THE SIX MONTH PERIOD ENDED
JUNE 30, 2012 With comparative figures for the six month period
ended June 30, 2011 ($ THOUSANDS) Accumulated other Preferred
Common Contributed Retained comprehensive June 30, 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 - - - 40,013 - 40,013 Other - - - - (226) (226)
comprehensive loss, net of tax Reinvestment - 378 - - - 378 of
dividends Exercise of - 728 - - - 728 stock options Dividends:
Preferred - - - (1,812) - (1,812) shares Common - - - (3,611) -
(3,611) shares Stock-based - - 363 - - 363 compensation Transfer -
168 (168) - - - relating to the exercise of stock options Balance,
end $ 48,494 $ 131,045 $ 4,913 $ 288,596 $ (10,575) $ 462,473 of
period Accumulated other Preferred Common Contributed Retained
comprehensive June 30, 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 - - - 31,799 -
31,799 Other - - - - (777) (777) comprehensive loss, net of tax
Reinvestment - 276 - - - 276 of dividends Exercise of - 599 - - -
599 stock options Dividends: Preferred - - - (1,812) - (1,812)
shares Common - - - (3,293) - (3,293) shares Stock-based - - 468 -
- 468 compensation Transfer - 111 (111) - - - relating to the
exercise of stock options Balance, end $ 48,494 $ 129,054 $ 4,292 $
228,881 $ (2,006) $ 408,715 of period CONSOLIDATED STATEMENTS OF
CASH FLOWS (unaudited) FOR THE THREE AND SIX MONTH PERIODS ENDED
JUNE 30, 2012 With comparative figures for the three and six month
periods ended June 30, 2011 ($ THOUSANDS) Three months ended Six
months ended June 30, June 30, June 30, June 30, 2011 2012 2011
2012 CASH FLOWS FROM OPERATING ACTIVITIES Net income for the $
22,073 $ 15,735 $ 40,013 $ 31,798 period Adjustments to determine
cash flows relating to operating activities: Financial 12,153 1,000
13,989 1,099 instruments at fair value through income Depreciation
of 238 173 469 237 capital assets Provision for 1,693 2,217 3,920
4,155 credit losses Net loss (gain) (11) 311 (260) 13 on sale or
redemption of investments Income taxes 3,315 5,288 9,140 10,847
Income taxes paid (5,454) (4,770) (10,255) (9,541) Stock-based 213
204 363 468 compensation Amortization of (108) 887 676 1,672
premiums/discount on investments Net increase in (291,926)
(304,697) (405,903) (650,482) mortgages receivable Net increase in
371,056 221,880 603,699 375,418 deposits Change in 1,515 - 1,515 -
obligations related to securities sold Change in - 34,298 - 34,298
obligations related to securities under repurchase agreements Net
change in 6,471 122,759 (24,597) 244,561 securitization liabilities
Net interest (52,573) (43,732) (107,324) (90,975) income, excluding
non-cash items Interest paid (78,947) (62,371) (142,639) (118,161)
Other assets 250 (3,663) 59 (5,093) Other liabilities (601) 2,158
(3,856) (35) Interest received 115,493 103,570 231,427 204,253
Dividends 16,027 2,533 18,536 4,883 received Cash flows from
120,877 93,780 228,972 39,415 operating activities CASH FLOWS FROM
FINANCING ACTIVITIES Dividends paid on (906) (906) (1,812) (1,812)
preferred shares Dividends paid on (1,616) (1,499) (3,233) (3,018)
common shares Proceeds from 491 455 728 599 issuance of common
shares Cash flows used in (2,031) (1,950) (4,317) (4,231) financing
activities CASH FLOWS FROM INVESTING ACTIVITIES Purchase of
(47,532) (20,071) (67,532) (59,722) investments Proceeds on sale
12,789 13,406 59,519 34,349 or redemption of investments Net change
in 19,227 (4,893) (7,444) (7,531) Canada Housing Trust
re-investment accounts Purchase of (101,351) (5,115) (141,273)
(30,108) securities under reverse repurchase agreements Proceeds on
sale 39,922 24,993 49,889 99,901 or redemption of securities under
reverse repurchase agreements Change in 23,710 (11,942) 16,619
38,224 restricted cash Purchase of (91) (735) (241) (815) capital
assets Cash flows (used (53,326) (4,357) (90,463) 74,298 in) from
investing activities Net increase in 65,520 87,473 134,192 109,482
cash and cash equivalents Cash and cash 239,517 177,251 170,845
155,242 equivalents, beginning of period Cash and cash $ 305,037 $
264,724 $ 305,037 $ 264,724 equivalents, end of period 2011 ANNUAL
REPORT The Company wishes to clarify and correct the figure
reported in its 2011 Annual Report, on page 25, Table 1: Selected
Financial Information where Total liquid assets for 2011 were
reported as "84,386" and the figure should have been "784,386".
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 actively originates mortgages across
Canada. It serves single family, small and large commercial
borrowers and their mortgage advisors. It also serves the investing
public as a provider of insured Guaranteed Investment Certificates.
Equitable Trust is active in providing GICs across all Canadian
provinces and territories. 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 "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 CEO416-513-7000Tim WilsonVice President and
CFO416-513-7000
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