TORONTO,
May 9, 2013 /CNW/ - Equitable Group
Inc. (TSX: ETC and ETC.PR.A) ("Equitable" or the "Company")
today reported record first quarter earnings for the three months
ended March 31, 2013.
HIGHLIGHTS
- Net income increased 17% to a first quarter record of
$20.9 million from $17.9 million in 2012
- Diluted earnings per share ("EPS") increased 15% to
$1.30 from $1.13 in 2012
- Return on Equity ("ROE") was 17.5% compared to 17.3% in the
fourth quarter of 2012 and 17.7% a year ago
- Book value per share increased 18% to $31.07 from $26.26
at March 31, 2012 and was up 4% from
December 31, 2012
- The Board of Directors announced a common share dividend
increase of 7.1% to $0.15 cents per
quarter from$0.14 cents effective with the next payment in
July
"Equitable delivered outstanding results in the
first quarter, even in the context of what appears to be a
softer Canadian housing market and despite adjusting our
business to accommodate the new B-20 mortgage lending guidelines,"
said Andrew Moor, President and CEO.
"Through a combination of solid Core Lending production and strong
mortgage renewal rates, we were able to grow mortgage assets by
$1.0 billion or 11% year over year
and register an ROE performance that was above our five-year
average of 17.2%. This performance provides yet another example of
the value-creation capabilities of our business across different
market cycles and illustrates the benefits of our diversified
mortgage portfolio."
FIRST QUARTER OPERATING HIGHLIGHTS
- Core Lending mortgage principal (comprised of Single
Family and Commercial Lending) amounted to $5.4 billion, up 20% or $0.9 billion year over year- while first quarter
Core Lending production increased 13% year over year to
$458 million
- Single Family Lending Services mortgage principal grew
39% or $892 million to a record
$3.2 billion on production of
$285 million and strong mortgage
renewal rates
- Commercial Lending Services mortgage principal was
$2.2 billion, the same as a year ago,
while production increased 46% year over year to $173 million
- Securitization Financing mortgage principal increased 3%
or $149 million to $5.4 billion on production of $166 million compared to $111 million a year ago. Also in the
quarter, the Company securitized and derecognized $118 million of mortgages on which it earned
$1.1 million of gains on sale.
Equitable's strategies of employing best in class underwriting
and collection efforts allowed the Company to maintain its low-risk
profile. For the first quarter:
- Realized net loan losses were just $0.02
million compared to $0.5
million a year ago
- Early-stage delinquencies were 0.27% of total principal, an
improvement from 0.39% at March 31,
2012 and 0.31% in the fourth quarter of 2012
- Mortgages in arrears 90 days or more were 0.36% of total
principal outstanding at quarter end, in line with historical norms
but above 0.25% a year ago and 0.32% in the fourth quarter of
2012.
DIVIDEND DECLARATIONS
The Company's Board of Directors today declared
a quarterly dividend in the amount of $0.15 per common share, payable July 4, 2013, to common shareholders of record at
the close of business June 14, 2013.
This amount is $0.01 higher than the
dividends declared in the prior quarter and is 25% higher than the
dividends declared in the first quarter of 2012.
The Board declared a quarterly dividend in the
amount of $0.453125 per preferred
share, payable June 28, 2013, to
preferred shareholders of record at the close of business
June 14, 2013.
CAPITAL
All of Equitable's capital ratios, including the
newly prescribed Common Equity Tier 1 ("CET1") ratio, continued to
exceed minimum regulatory standards at March
31, 2013:
- CET1 was 12.2%, well ahead of Basel III guidelines of 7.0% and
most competitive benchmarks
- Total capital ratio was 16.4% compared to 15.3% at March 31, 2012 due to the net effect of a
$65 million Series 10 subordinated
debenture issuance in the fourth quarter of 2012 and $38 million of subordinated debenture redemptions
in the first quarter of 2013
LOOKING AHEAD
The Company expects to generate attractive
earnings and ROE in 2013, anticipates that net interest margin
("NIM") will remain relatively stable and that arrears and loan
losses will remain low.
"We believe Equitable is well positioned to
achieve our performance objectives for the year," said Mr. Moor,
"although we will face challenges along the way. While not unique
to Equitable, one of those challenges is activity levels in
Canadian housing markets. On this front, we expect to remain
relatively less affected than many other Canadian lenders due to
our competitive positioning and the specialized nature of our
products. Our continued success with mortgage renewals should also
help our overall balances to grow at double digit rates even though
single family production growth may remain low compared to record
2012 levels. As well, the reaction of policymakers to
developments in the Canadian mortgage market could also impact our
business."
With respect to profitability, the Company
incurred, as expected, approximately $0.8
million of extra interest expense in the first quarter due
to the early repayment of debt. "We will not incur these expenses
in subsequent quarters," said Tim
Wilson, Vice President and CFO, "and this will benefit
earnings per share and NIM. We will also continue to manage
our expense growth prudently given the uncertainty around growth of
the Canadian housing market."
Q1 CONFERENCE CALL
The Company will hold its first quarter conference call and
webcast at 10:00 a.m. ET Friday, May 10,
2013. To access the call live, please dial in five minutes
prior to 416-644-3414.
To access a listen-only version of the webcast, please log on to
www.equitabletrust.com under Investor Relations. A replay of the
call will be available until May 17,
2013 and it can be accessed by dialing 416-640-1917 and
entering passcode 4611882 followed by the number sign. The webcast
will also be archived on the Company's website for three
months.
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
(unaudited) |
|
|
|
|
|
|
AS AT MARCH 31, 2013 |
|
|
|
|
|
|
With comparative figures as at
December 31, 2012 and March 31, 2012 |
($ THOUSANDS) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2013 |
December 31, 2012 |
March 31, 2012 |
|
|
|
|
|
|
|
Assets: |
|
|
|
|
|
|
Cash and cash equivalents |
$ |
265,131 |
$ |
379,447 |
$ |
239,517 |
Restricted cash |
|
97,486 |
|
63,601 |
|
90,246 |
Securities purchased under reverse
repurchase agreements |
|
84,681 |
|
78,551 |
|
39,922 |
Investments |
|
380,141 |
|
439,480 |
|
389,497 |
Mortgages receivable - Core
Lending |
|
5,348,498 |
|
5,154,943 |
|
4,443,162 |
Mortgages receivable - Securitization
Financing |
|
5,389,111 |
|
5,454,529 |
|
5,244,716 |
Securitization retained interests |
|
11,954 |
|
7,263 |
|
- |
Other assets |
|
25,291 |
|
23,626 |
|
23,178 |
|
$ |
11,602,293 |
$ |
11,601,440 |
$ |
10,470,238 |
|
|
|
|
|
|
|
Liabilities and Shareholders'
Equity |
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
Deposits |
$ |
5,648,679 |
$ |
5,651,717 |
$ |
4,860,547 |
|
Securitization liabilities |
|
5,289,174 |
|
5,261,670 |
|
5,069,853 |
|
Obligations under repurchase agreements |
|
6,992 |
|
9,882 |
|
- |
|
Deferred tax liabilities |
|
8,097 |
|
5,498 |
|
6,608 |
|
Other liabilities |
|
35,039 |
|
40,931 |
|
24,602 |
|
Bank term loans |
|
- |
|
12,500 |
|
12,500 |
|
Debentures |
|
92,483 |
|
117,671 |
|
52,671 |
|
|
11,080,464 |
|
11,099,869 |
|
10,026,781 |
|
|
|
|
|
|
|
Shareholders' equity: |
|
|
|
|
|
|
|
Preferred shares |
|
48,494 |
|
48,494 |
|
48,494 |
|
Common shares |
|
135,408 |
|
134,224 |
|
130,251 |
|
Contributed surplus |
|
5,028 |
|
5,003 |
|
4,813 |
|
Retained earnings |
|
341,614 |
|
323,737 |
|
269,235 |
|
Accumulated other comprehensive loss |
|
(8,715) |
|
(9,887) |
|
(9,336) |
|
|
521,829 |
|
501,571 |
|
443,457 |
|
|
|
|
|
|
|
|
$ |
11,602,293 |
$ |
11,601,440 |
$ |
10,470,238 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONSOLIDATED STATEMENTS OF INCOME
(unaudited) |
FOR THE THREE MONTH PERIOD ENDED MARCH
31, 2013 |
With comparative figures for the
three month period ended March 31, 2012 |
($ THOUSANDS, EXCEPT PER SHARE
AMOUNTS) |
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
March 31, 2013 |
March 31, 2012 |
|
|
|
|
|
Interest income: |
|
|
|
|
|
Mortgages - Core Lending |
$ |
64,651 |
$ |
57,108 |
|
Mortgages - Securitization Financing |
|
52,986 |
|
54,538 |
|
Investments |
|
2,035 |
|
2,248 |
|
Other |
|
1,856 |
|
1,226 |
|
|
121,528 |
|
115,120 |
Interest expense: |
|
|
|
|
|
Deposits |
|
33,714 |
|
30,350 |
|
Securitization liabilities |
|
45,249 |
|
47,174 |
|
Bank term loans |
|
7 |
|
202 |
|
Debentures |
|
2,373 |
|
869 |
|
Other |
|
23 |
|
1 |
|
|
81,366 |
|
78,596 |
Net interest income |
|
40,162 |
|
36,524 |
Provision for credit losses |
|
2,100 |
|
2,227 |
Net interest income after provision
for credit losses |
|
38,062 |
|
34,297 |
Other income: |
|
|
|
|
|
Fees and other income |
|
1,457 |
|
1,005 |
|
Net gain on investments |
|
645 |
|
249 |
|
Gains on securitization activities and income from
securitization retained interests |
|
881 |
|
51 |
|
|
2,983 |
|
1,305 |
Net interest and other income |
|
41,045 |
|
35,602 |
Non-interest expenses: |
|
|
|
|
|
Compensation and benefits |
|
7,727 |
|
6,570 |
|
Other |
|
5,509 |
|
5,339 |
|
|
13,236 |
|
11,909 |
Income before income taxes |
|
27,809 |
|
23,693 |
Income taxes: |
|
|
|
|
|
Current |
|
7,324 |
|
6,935 |
|
Deferred |
|
(429) |
|
(1,182) |
|
|
6,895 |
|
5,753 |
Net income |
$ |
20,914 |
$ |
17,940 |
|
|
|
|
|
Earnings per share: |
|
|
|
|
|
Basic |
$ |
1.32 |
$ |
1.13 |
|
Diluted |
$ |
1.30 |
$ |
1.13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME (unaudited) |
FOR THE THREE MONTH PERIOD ENDED MARCH 31,
2013 |
|
|
|
|
With comparative figures for the
three month period ended March 31, 2012 |
($ THOUSANDS) |
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
March 31, 2013 |
March 31, 2012 |
|
|
|
|
|
Net income |
$ |
20,914 |
$ |
17,940 |
|
|
|
|
|
Other comprehensive income |
|
|
|
|
Items that may be reclassified subsequently to
profit or loss: |
|
|
|
|
|
|
|
|
|
Available for sale investments: |
|
|
|
|
Net unrealized gains from change in fair
value |
|
2,557 |
|
833 |
Reclassification of net gains to income |
|
(847) |
|
(1,082) |
|
|
1,710 |
|
(249) |
Income tax (expense) recovery |
|
(450) |
|
65 |
|
|
1,260 |
|
(184) |
|
|
|
|
|
Cash flow hedges: |
|
|
|
|
Net unrealized (losses) gains from change in fair
value |
|
(767) |
|
1,028 |
Reclassification of net losses to income |
|
647 |
|
592 |
|
|
(120) |
|
1,620 |
Income tax recovery (expense) |
|
32 |
|
(423) |
|
|
(88) |
|
1,197 |
Total other comprehensive income |
|
1,172 |
|
1,013 |
Total comprehensive income |
$ |
22,086 |
$ |
18,953 |
|
|
|
|
|
CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS' EQUITY (unaudited) |
|
|
|
|
FOR THE THREE MONTH PERIOD ENDED MARCH
31, 2013 |
|
|
|
|
|
|
With comparative figures for the
three month period ended March 31, 2012 |
|
|
|
|
|
|
($ THOUSANDS) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
2013 |
Preferred
shares |
Common
shares |
Contributed
surplus |
Retained
earnings |
Accumulated
other
comprehensive
income (loss) |
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of period |
$ |
48,494 |
$ |
134,224 |
$ |
5,003 |
$ |
323,737 |
$ |
(9,887) |
$ |
501,571 |
Net income |
|
- |
|
- |
|
- |
|
20,914 |
|
- |
|
20,914 |
Other comprehensive income, net of
tax |
|
- |
|
- |
|
- |
|
- |
|
1,172 |
|
1,172 |
Reinvestment of dividends |
|
- |
|
252 |
|
- |
|
- |
|
- |
|
252 |
Exercise of stock options |
|
- |
|
756 |
|
- |
|
- |
|
- |
|
756 |
Dividends: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred shares |
|
- |
|
- |
|
- |
|
(906) |
|
- |
|
(906) |
|
Common shares |
|
- |
|
- |
|
- |
|
(2,131) |
|
- |
|
(2,131) |
Stock-based compensation |
|
- |
|
- |
|
201 |
|
- |
|
- |
|
201 |
Transfer relating to the exercise of
stock options |
|
- |
|
176 |
|
(176) |
|
- |
|
- |
|
- |
Balance, end of period |
$ |
48,494 |
$ |
135,408 |
$ |
5,028 |
$ |
341,614 |
$ |
(8,715) |
$ |
521,829 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2012 |
Preferred
shares |
Common
shares |
Contributed
surplus |
Retained
earnings |
Accumulated
other
comprehensive
income (loss) |
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of period |
$ |
48,494 |
$ |
129,771 |
$ |
4,718 |
$ |
254,006 |
$ |
(10,349) |
$ |
426,640 |
Net income |
|
- |
|
- |
|
- |
|
17,940 |
|
- |
|
17,940 |
Other comprehensive income, net of
tax |
|
- |
|
- |
|
- |
|
- |
|
1,013 |
|
1,013 |
Reinvestment of dividends |
|
- |
|
188 |
|
- |
|
- |
|
- |
|
188 |
Exercise of stock options |
|
- |
|
237 |
|
- |
|
- |
|
- |
|
237 |
Dividends: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred shares |
|
- |
|
- |
|
- |
|
(906) |
|
- |
|
(906) |
|
Common shares |
|
- |
|
- |
|
- |
|
(1,805) |
|
- |
|
(1,805) |
Stock-based compensation |
|
- |
|
- |
|
150 |
|
- |
|
- |
|
150 |
Transfer relating to the exercise of
stock options |
|
- |
|
55 |
|
(55) |
|
- |
|
- |
|
- |
Balance, end of period |
$ |
48,494 |
$ |
130,251 |
$ |
4,813 |
$ |
269,235 |
$ |
(9,336) |
$ |
443,457
|
CONSOLIDATED STATEMENTS OF CASH
FLOWS (unaudited) |
FOR THE THREE MONTH PERIOD ENDED MARCH
31, 2013 |
With comparative figures for the
three month period ended March 31, 2012 |
($ THOUSANDS) |
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
March 31, 2013 |
March 31, 2012 |
CASH FLOWS FROM OPERATING
ACTIVITIES |
|
|
|
|
Net income for the period |
$ |
20,914 |
$ |
17,940 |
Adjustments to determine cash flows
relating to operating activities: |
|
|
|
|
|
Financial instruments at fair value through
income |
|
1,441 |
|
1,836 |
|
Securitization gains |
|
(1,126) |
|
- |
|
Depreciation of capital assets |
|
242 |
|
231 |
|
Provision for credit losses |
|
2,100 |
|
2,227 |
|
Net gain on sale or redemption of investments |
|
(531) |
|
(249) |
|
Income taxes |
|
6,895 |
|
5,825 |
|
Income taxes paid |
|
(10,867) |
|
(4,801) |
|
Stock-based compensation |
|
201 |
|
150 |
|
Amortization of premiums/discount on
investments |
|
509 |
|
784 |
|
Net increase in mortgages receivable |
|
(251,378) |
|
(113,976) |
|
Net increase in deposits |
|
(3,038) |
|
232,643 |
|
Change in obligations related to investments sold
under repurchase agreements |
|
(2,890) |
|
- |
|
Net change in securities purchased and sold under
reverse repurchase agreements |
|
78,551 |
|
9,967 |
|
Net change in securitization liability |
|
27,504 |
|
(31,068) |
|
Purchase of investments under reverse repurchase
agreements |
|
(84,681) |
|
(39,922) |
|
Change in restricted cash |
|
(33,885) |
|
(7,090) |
|
Proceeds from loan securitization |
|
118,543 |
|
- |
|
Securitization retained interest |
|
332 |
|
- |
|
Net interest income, excluding non-cash items |
|
(45,278) |
|
(54,751) |
|
Interest received |
|
122,191 |
|
115,934 |
|
Interest paid |
|
(78,388) |
|
(63,692) |
|
Other assets |
|
165 |
|
(191) |
|
Other liabilities |
|
(4,593) |
|
(3,260) |
|
Dividends received |
|
1,475 |
|
2,509 |
Cash flows (used in) from operating
activities |
|
(135,592) |
|
71,046 |
CASH FLOWS FROM FINANCING
ACTIVITIES |
|
|
|
|
|
Repayment of bank term loan |
|
(12,500) |
|
- |
|
Redemption of debentures |
|
(25,188) |
|
- |
|
Dividends paid on preferred shares |
|
(906) |
|
(906) |
|
Dividends paid on common shares |
|
(1,874) |
|
(1,614) |
|
Proceeds from issuance of common shares |
|
756 |
|
237 |
Cash flows used in financing
activities |
|
(39,712) |
|
(2,283) |
CASH FLOWS FROM INVESTING
ACTIVITIES |
|
|
|
|
|
Purchase of investments |
|
(2,420) |
|
(20,000) |
|
Proceeds on sale or redemption of investments |
|
64,138 |
|
46,730 |
|
Net change in Canada Housing Trust re-investment
accounts |
|
(429) |
|
(26,671) |
|
Purchase of capital assets |
|
(301) |
|
(150) |
Cash flows from (used in) investing
activities |
|
60,988 |
|
(91) |
Net (decrease) increase in cash and
cash equivalents |
|
(114,316) |
|
68,672 |
Cash and cash equivalents, beginning
of period |
|
379,447 |
|
170,845 |
Cash and cash equivalents, end of
period |
$ |
265,131 |
$ |
239,517 |
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 press release 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 (including the proposal
to convert Equitable Trust into a Schedule I Bank), 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.
SOURCE Equitable Group Inc.