TORONTO, Feb. 28, 2012 /CNW/ - Equitable Group Inc. ("Equitable" or
the "Company") today reported its financial results for the three
and 12 months ended December 31, 2011, including solid earnings
performance on strong growth in its conventional single family
mortgage portfolio. ANNUAL RESULTS -- Diluted earnings per share
("EPS") increased 11.5% to $3.88 compared to $3.48 in 2010; --
Adjusted EPS, excluding a third quarter 2011 operational provision
(the "provision") was $4.15 compared to $3.83 in 2010; -- Adjusted
net income was $62.7 million, or $66.3 million excluding the
provision, compared to $61.1 million in 2010; -- Net interest
income was $133.8 million, 11.5% higher than the $119.9 million
achieved in 2010, with net interest margin ("NIM") at 2.5% on
non-securitized assets and 0.5% on securitized assets; -- Total
mortgage assets were a record $9.6 billion at year end, up 16.5%
from December 31, 2010; -- Conventional mortgage principal
increased 22.9% year over year to $4.3 billion, inclusive of a
33.4% increase in single family mortgage principal; -- Mortgage
production increased 15.3% to $2.8 billion, inclusive of record
conventional single family mortgage production of $1.2 billion
(20.6% higher than in 2010); -- Return on equity ("ROE") was 16.5%
(16.6% on an adjusted basis, 17.5% excluding the provision)
compared to 17.0% (18.6% adjusted) in 2010; -- Productivity ratio
on a taxable equivalent basis ("TEB") was 32.4% (28.8% excluding
the provision) compared to 26.1% in 2010; -- Equitable Trust's
year-end total capital ratio was 15.8% (including its collective
allowance); -- Book value per share of $25.18 grew 13.0% from
$22.28 at December 31, 2010; -- Equitable declared $0.45 in
dividends per common share in 2011, up 12.5% from $0.40 in 2010,
reflecting increases the Board announced in the first and third
quarters of 2011. "Equitable achieved exactly what we set out to do
in 2011," said Andrew Moor, President and Chief Executive Officer,
"grow our conventional mortgage book with emphasis on single
family, expand our national presence, deliver excellent customer
service, sustain credit quality and translate these advancements
into solid earnings for our shareholders. It is clear to us that
our current strategy, including the alignment realized between our
mortgage production activities and our goal of optimizing
risk-adjusted returns, will serve our shareholders very well going
forward." DIVIDEND DECLARATIONS The Company's Board of Directors
declared a quarterly common share dividend of $0.12 per share,
payable on April 4, 2012, to common shareholders of record at the
close of business on March 15, 2012. This amount is consistent with
the dividend of $0.12 per share declared in the previous quarter,
and on an annualized basis represents a 6.7% increase over the
dividends declared in 2011. The Board also declared a quarterly
dividend in the amount of $0.453125 per preferred share, payable on
March 31, 2012, to preferred shareholders of record at the close of
business on March 15, 2012. FOURTH QUARTER RESULTS Equitable's
results in the fourth quarter were strong and demonstrated the
fundamental operating strength of the business, particularly in the
single family residential mortgage segment. Results in the
quarter were fuelled by growth in the Company's mortgage book
combined with its stable NIM. Consistent with its annual results,
comparatives to 2010 were impacted by several non-recurring items
that augmented the Company's performance in Q4 of the prior year,
the majority of which are only visible under new IFRS accounting
standards. Specifically, Q4 2010 benefitted from a lower
effective tax rate, $4.1 million of higher than normal prepayment
charge income from two discharged mortgages, and $5.8 million of
fair value gains on derivatives. In the fourth quarter: -- Diluted
EPS was $1.07 compared to $0.82 in the third quarter of 2011 and
$1.54 in the fourth quarter of 2010; -- Adjusted EPS on a diluted
basis was $1.10 compared to $0.84 in the third quarter and $1.28 in
the fourth quarter a year ago; -- Adjusted net income was $17.5
million compared to $13.6 million in the third quarter of 2011, and
$20.1 million in the fourth quarter of 2010; -- Adjusted net income
available to common shareholders was $16.6 million compared to
$12.7 million in the third quarter and $23.2 million in the fourth
quarter a year ago; -- Net interest income was $35.3 million (1.4%
NIM) compared to $34.8 million (1.4% NIM) in the third quarter of
2011 and $32.8 million (1.6% NIM) in the fourth quarter a year ago,
and was higher in 2011 even with the $4.3 million of additional
prepayment income in 2010, which is included in net interest
income; -- Adjusted ROE was 17.4% compared to 14.0% in the third
quarter of 2011 (17.3% excluding the provision) and 23.8% in the
fourth quarter of 2010; -- Productivity ratio - TEB was 29.7%
compared to 42.8% in the third quarter of 2011 (29.2% excluding the
provision) and 25.2% in the fourth quarter of 2010. In commenting
on fourth quarter performance, Mr. Moor said: "This was a solid
finish to a record year, and our strong and growing mortgage book
provide Equitable with very positive momentum for 2012."
CONVENTIONAL MORTGAGE PORTFOLIO -- Single Family Lending Services
mortgage principal amounted to a record $2.1 billion at year end,
33.4% higher than at the end of 2010 on growth in production in
each quarter of 2011. During the fourth quarter, this business line
originated $345.6 million of conventional mortgages, 19.7% higher
than in the fourth quarter of 2010; -- Commercial Mortgage - Broker
Services conventional mortgage principal at year end was a record
$1.0 billion, 20.8% higher than at the end of 2010, as it
originated $72.2 million in the fourth quarter compared to $67.2
million in the same quarter of 2010; -- Commercial Lending Services
conventional mortgage principal at year end was $1.2 billion, 9.3%
higher than at the end of 2010, as it originated $120.3 million of
conventional mortgages in the fourth quarter compared to $37.4
million in Q4 2010. Overall, conventional mortgage principal
outstanding amounted to 44.7% of total mortgage principal at year
end, compared to 42.5% at year-end 2010. SECURITIZED MORTGAGES
During the fourth quarter of 2011, production of CMHC-insured
mortgages amounted to $105.6 million compared to $246.2 million in
the fourth quarter of 2010, consistent with the Company's plan to
substantially reduce securitization activity in line with its
emphasis on conventional mortgage asset growth. At the end of the
year, securitized mortgage assets represented 55.3% of mortgage
principal outstanding ($5.3 billion) compared to 57.5% ($4.7
billion) at year-end 2010. CREDIT QUALITY Equitable sustained its
track record of low realized loan losses during 2011 and in the
fourth quarter saw improvements in key credit metrics: -- Mortgage
principal in arrears 90 days or more was 0.22% compared to 0.46% at
December 31, 2010; -- Net impaired mortgages were 0.24% of total
mortgage principal at year-end 2011, compared to 0.42% at year-end
2010. Management remains comfortable that provisions taken to date
adequately provide for the risk of loss. REGIONAL DIVERSIFICATION
Over the past five years, while remaining focused on its core
niches, the Company has increased its presence in western Canada
and Quebec to complement its solid leadership position in other
urban Canadian markets. As a result, 58.3% of the Company's
mortgages were secured on properties located in Ontario,
14.9% were located in Alberta, 13.1% of were located in Quebec,
5.8% in British Columbia, 1.5% were located in Manitoba, and the
balance in other selected regions of Canada. LOOKING AHEAD
"Industry forecasts suggest that Canadian real estate prices will
be stable in 2012," said Mr. Moor, "nonetheless we are prepared for
the possibility of a soft landing for the market as a result of our
proactive, risk-sensitive lending practices. In the context of our
own outlook, we intend to continue prudently growing conventional
mortgage production in chosen markets over the coming year.
Combined with our already sizeable mortgage portfolio balances, and
the activities taken to strengthen our business, we are confident
in our ability to grow earnings, maintain our strong capital
position and keep our credit metrics well within an acceptable
range. On balance, our outlook is very positive and we will
continue to position Equitable as the lender of choice for Canada's
mortgage broker community, business-for-self Canadians and
newcomers to our country." In commenting on interest rate margins,
Equitable's Vice President and Chief Financial Officer Tim Wilson
said: "Our expectation is that the Company's net interest margin
will remain stable in 2012, reflecting Bank of Canada policy
decisions that appear to favour a hold-the-line approach to rates
and steady funding markets. Our NIM outlook also takes into account
the fact that we intend to maintain liquidity at approximately the
same levels as in 2011. While this marginally dampens NIM growth,
it ensures we are well-positioned to manage any unforeseen events
in Canadian and international capital markets." ADJUSTING FOR
ACCOUNTING CHANGES Results for both reporting periods were prepared
using International Financial Reporting Standards ("IFRS"), with a
transition date of January 1, 2010. As a result, prior period
comparative information in this news release reflects conversion
from previous Canadian Generally Accepted Accounting Principles
("GAAP") to IFRS. In addition to being affected by differences in
the method of accounting for securitized assets, the restatement of
the Company's financial results from previous Canadian GAAP to IFRS
is affected by differences in the method of accounting for the
related derivatives that are within its securitization activities,
including the activities it undertakes to hedge interest rate risk
associated with mortgage commitments and mortgages issued but
awaiting securitization, as well as the interest rate risk
associated with the respective securitization liabilities. In order
to help readers, the Company analyzes its 2011 performance by
comparing it to 2010 on an adjusted basis, which removes gains and
losses associated with unmatched derivative measurement accounting.
Adjusted figures are non-GAAP financial measures and do not remove
the operational provision taken in the third quarter. Non-GAAP
measures are not calculated in accordance with GAAP, are not
defined by GAAP, and do not have standardized meanings that would
ensure consistency and comparability between companies using these
measures. For further information on Non-GAAP measures used in this
report can be found under the Non-GAAP Financial Measures section
of the Company's Management's Discussion and Analysis for the three
months and year ended December 31, 2011. Q4 CONFERENCE CALL The
Company will hold its fourth quarter conference call and webcast at
10:00 a.m. ET Wednesday February 29, 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 March 7, 2012 and it can be accessed
by dialing 416-640-1917 and entering passcode 4508034 followed by
the number sign. Alternatively, the call will be archived on the
Company's website for three months. CONSOLIDATED FINANCIAL
STATEMENTS CONSOLIDATED BALANCE SHEETS ($ THOUSANDS) December
31,2011 December 31, 2010 January 1, 2010 Assets Cash and cash $ $
$ equivalents 170,845 155,242 389,170 Restricted cash 83,156 86,570
25,372 Investments 400,307 413,330 302,292 Mortgages receivable
4,262,147 3,468,507 2,763,020 Mortgages receivable - securitized
5,314,940 4,748,794 4,137,247 Other assets 25,618 11,686 15,191 $
10,257,013 $ 8,884,129 $ 7,632,292 Liabilities and Shareholders'
Equity Liabilities: Deposits $ 4,627,904 $ 3,878,853 $ 3,332,319
Securitization liabilities 5,100,921 4,531,680 3,885,187 Deferred
tax liabilities 7,790 7,086 5,191 Other liabilities 28,587 19,884
14,959 Bank term loans 12,500 12,500 27,500 Subordinated debentures
52,671 52,671 37,671 9,830,373 8,502,674 7,302,827 Shareholders'
equity: Preferred shares 48,494 48,494 48,494 Common shares 129,771
128,068 127,336 Contributed surplus 4,718 3,935 3,267 Retained
earnings 254,006 202,187 155,890 Accumulated other comprehensive
loss (10,349) (1,229) (5,522) 426,640 381,455 329,465 $ 10,257,013
$ 8,884,129 $ 7,632,292 CONSOLIDATED STATEMENTS OF INCOME ($
THOUSANDS, EXCEPT PER SHARE AMOUNTS) . Years ended December 31 2011
2010 Interest income: Mortgages $ 206,987 $ 178,114 Mortgages -
securitized 213,604 199,980 Investments 10,307 8,683 Other 4,403
3,235 435,301 390,012 Interest expense: Deposits 115,314 96,462
Securitization liabilities 181,694 168,796 Bank term loans 812
2,059 Subordinated debentures 3,493 2,626 Other 217 120 301,530
270,063 Net interest income 133,771 119,949 Provision for credit
losses 7,183 9,748 Net interest income after provision for credit
losses 126,588 110,201 Other income: Fees and other income 3,545
3,003 Net gain on investments 144 230 3,689 3,233 Net interest and
other income 130,277 113,434 Non-interest expenses: Compensation
and benefits 22,856 18,632 Other 22,858 14,918 45,714 33,550 Income
before income taxes and fair value loss 84,563 79,884 Fair value
loss on derivative financial instruments - securitization
activities (648) (7,544) Income before income taxes 83,915 72,340
Income taxes: Current 21,026 16,004 Deferred 703 443 21,729 16,447
Net income $ 62,186 $ 55,893 Earnings per share: Basic $ 3.91 $
3.50 Diluted $ 3.88 $ 3.48 CONSOLIDATED STATEMENTS OF COMPREHENSIVE
INCOME ($ THOUSANDS) Years ended December 31 2011 2010 Net income $
62,186 $ 55,893 Other comprehensive (loss) income: Available for
sale investments: Net unrealized gains from change in fair value
1,470 4,854 Reclassification of net (gains) losses to income (385)
1,328 1,085 6,182 Income tax expense (304) (1,889) 781 4,293 Cash
flow hedges: Net unrealized losses from change in fair value
(13,684) - Reclassification of net gains to income (77) - (13,761)
- Income tax recovery 3,860 - (9,901) - Total other comprehensive
(loss) income (9,120) 4,293 Total comprehensive income $ 53,066 $
60,186 CONSOLIDATED STATEMENTS OFCHANGES IN SHAREHOLDERS' EQUITY ($
THOUSANDS) Accumulated other Preferred Common Contributed Retained
comprehensive 2011 shares shares surplus earnings income (loss)
Total Balance, beginning of year $ 48,494 $ 128,068 $ 3,935 $
202,187 $ (1,229) $ 381,455 Net income - - - 62,186 - 62,186 Other
comprehensive loss, net of tax - - - - (9,120) (9,120)
Contributions from reinvestment of dividends - 582 - - - 582
Contributions from exercise of stock options - 943 - - - 943
Dividends: Preferred shares - - - (3,625) - (3,625) Common shares -
- - (6,742) - (6,742) Stock-based compensation - - 961 - - 961
Transfer relating to the exercise of stock options - 178 (178) - -
- Balance, end of year $ 48,494 $ 129,771 $ 4,718 $ 254,006 $
(10,349) $ 426,640 Accumulated other Preferred Common Contributed
Retained comprehensive 2010 shares shares surplus earnings income
(loss) Total Balance, beginning of year $ 48,494 $ 127,336 $ 3,267
$ 155,890 $ (5,522) $ 329,465 Net income - - - 55,893 - 55,893
Other comprehensive income, net of tax - - - - 4,293 4,293
Contributions from reinvestment of dividends - 357 - - - 357
Contributions from exercise of stock options - 318 - - - 318
Dividends: Preferred shares - - - (3,625) - (3,625) Common shares -
- - (5,971) - (5,971) Stock-based compensation - - 725 - - 725
Transfer relating to the exercise of stock options - 57 (57) - - -
Balance, end of year $ 48,494 $ 128,068 $ 3,935 $ 202,187 $ (1,229)
$ 381,455 CONSOLIDATED STATEMENTSOF CASH FLOWS ($ THOUSANDS) Years
ended December 31 2011 2010 CASH FLOWS FROM OPERATING ACTIVITIES
Net income for the year $ 62,186 $ 55,893 Adjustments to determine
cash flows relating to operating activities: Financial instruments
at fair value through income 2,857 1,875 Depreciation of capital
assets 712 609 Provision for credit losses 7,183 9,748 Net (gain)
loss on sale or redemption of investments (144) 2,504 Income taxes
21,729 16,447 Income taxes paid (18,280) (16,329) Stock-based
compensation 961 725 Amortization of premiums/discounts on
investments 3,273 1,980 Net increase in mortgages receivable
(1,363,900) (1,326,268) Net increase in deposits 749,051 546,534
Net change in securitization liability 569,241 646,493 Net interest
income, excluding non-cash items (176,923) (151,571) Interest paid
(264,312) (237,976) Other assets (28,756) (417) Other liabilities
5,981 5,701 Interest received 431,207 380,042 Dividends received
10,028 9,505 Cash flows from (used in) operating activities 12,094
(54,505) CASH FLOWS FROM FINANCING ACTIVITIES Repayment of bank
term loan - (15,000) Issuance of subordinated debentures - 20,000
Redemption of subordinated debentures - (5,000) Dividends paid on
preferred shares (3,625) (3,625) Dividends paid on common shares
(5,853) (5,610) Proceeds from issuance of common shares 943 318
Cash flows used in financing activities (8,535) (8,917) CASH FLOWS
FROM INVESTING ACTIVITIES Purchase of investments (138,934)
(524,988) Proceeds on sale or redemption of investments 105,730
371,777 Net change in Canada Housing Trust re-investment accounts
(20,762) (10,381) Purchase of investments under reverse repurchase
agreements (191,343) (364,189) Proceeds on sale or redemption of
investments purchased under reverse repurchase agreements 256,284
419,002 Change in restricted cash 3,414 (61,198) Purchase of
capital assets (2,345) (529) Cash flows from (used in) investing
activities 12,044 (170,506) Net increase (decrease) in cash and
cash equivalents 15,603 (233,928) Cash and cash equivalents,
beginning of year 155,242 389,170 Cash and cash equivalents, end of
year $ 170,845 $ 155,242 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 ("GICs"). 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 common and preferred
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 entitled "Annual Results", "Fourth Quarter
Results", "Securitized Mortgages", "Credit Quality", "Looking
Ahead" and "Adjusting For Accounting Changes", of this report, 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 performance 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",
"should", "might" or "will be taken", "occur", be achieved", or
other similar expressions of future or conditional verbs.
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,
changes in accounting standards, the nature of our customers and
rates of default, and competition as well as those factors
discussed under the heading "Risk Management" 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. The Company's continuous disclosure materials,
including interim filings, annual Management's Discussion and
Analysis and Consolidated Financial Statements, Annual Information
Form, Notice of Annual Meeting of Shareholders and Proxy Circular
are available on the Company's website at www.equitabletrust.com
and on SEDAR at www.sedar.com. Equitable Group Inc.
CONTACT: Tim WilsonVice President and Chief Financial
Officer416-515-7000
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