News
Equitable Group reports record 2008 second quarter results
- EPS Growth of 33.9% to a Record $0.79 Per Share
- 37.4% Net Income Growth
- Sharp Increase In Single-Family Mortgage Lending
TSX Symbol: ETC
TORONTO, July 31 /CNW/ - Equitable Group Inc. ("Equitable" or the
"Company") today reported record financial performance for the three and six
months ended June 30, 2008 as well as excellent progress in building both its
Single-Family Lending Services business and its total regulatory capital.
Second Quarter Financial Highlights
- Net income increased 37.4% to a record $10.3 million from
$7.5 million a year ago.
- Diluted earnings per share grew 33.9% to a record $0.79 per share
compared to $0.59 per share diluted in the second quarter of 2007.
- Return on equity was 19.1%, compared to 17.0% a year ago.
- Productivity ratio on a Taxable Equivalent Basis improved to 26.8%
from 29.6% in the second quarter a year ago.
- Net impaired mortgages improved to 0.16% of total mortgage assets at
June 30, 2008 from 0.29% at the end of the prior quarter. Total
realized loan losses were $36 thousand on total mortgages receivable
of $2.9 billion at June 30, 2008.
Six Month Financial Highlights
- Net income increased 29.0% to a record $20.0 million from
$15.5 million a year ago - surpassing the Company's target growth
rate of 16% to 20% for all of 2008.
- Diluted earnings per share grew 23.4% to a record $1.53 per share
compared to $1.24 per share in the same period of 2007.
- Return on equity was 18.9%, compared to Equitable's 2008 objective of
16% to 18%.
- Productivity ratio on a Taxable Equivalent Basis improved to 26.4%
from 28.0% in the first half of 2007 - and remained ahead of the
Company's target of 27% to 30% for all of 2008.
- Total capital ratio, including general allowance, improved to 12.0%
at June 30, 2008 compared to 11.0% at January 1, 2008 and 11.4% at
March 31, 2008.
Operational Highlights
- Equitable funded $969.8 million of mortgages during the second
quarter, an increase of 38.2% or $267.9 million over second quarter
of fiscal 2007.
- Consistent with management's focus, the fastest rate of growth in
fundings was achieved in Single-Family Lending Services where
production increased 169.9% to $225.2 million (23.2% of total
mortgage principal funded) compared to $83.5 million (11.9 % of total
mortgage principal funded) at June 30, 2007.
- Equitable capitalized on credit market dynamics to securitize
$410.0 million of CMHC-insured mortgages at profit margins that were
in excess of historical levels.
- Total mortgage principal increased on a net basis by $48.1 million or
1.7% since December 31, 2007, reflecting management's focus on
slowing the pace of growth in Commercial Lending Services to improve
overall investment returns.Dividend
The Company's Board of Directors has declared a dividend of $0.10 per
share payable on October 3, 2008 to shareholders of record at the close of
business on September 12, 2008.
Management Commentary
"Equitable made significant headway in the first half of 2008 against our
annual financial and operating plan," said Andrew Moor, President and Chief
Executive Officer. "While delivering record earnings in both the first and
second quarters at a pace of growth that significantly exceeded our target for
the year, our team continued to improve the two fundamentals that are crucial
to ongoing performance: our total capital ratio and investment returns on a
risk-weighted basis. Consistent with our focus on risk-weighted returns, we
substantially increased our origination of single-family business in the
second quarter. Also as planned, we became more selective in Commercial
Lending Services and placed more emphasis on the origination of CMHC-insured
mortgages on multi-family apartment buildings. As a result, we reduced total
Commercial Lending Services production to 70.7% of total fundings from 78.9% a
year ago.
In the context of this shift in our mortgage portfolio, the impact on our
net interest margin of three Prime Rate decreases earlier this year and
volatile markets, Equitable's progress is outstanding."
Outlook
"Equitable's performance to date and the current strength of demand for
financing in our niches gives us a good deal of momentum heading into the last
half of the year and confidence in our ability to achieve our objectives,"
said Mr. Moor. "Unquestionably, we are operating in an economic environment
that is very different than prior years, given heightened risk of credit
market volatility. This validates the plan we adopted at the beginning of
2008, with its focus on investment returns, risk management and balance sheet
improvement. As such, we will continue to pursue all elements of our plan
vigorously in the coming quarters. "
John Ayanoglou, Chief Financial Officer said: "Through the successful
completion of a secondary offering of common shares that closed in July
(subsequent to quarter end), we are now ahead of our capital plan with a pro
forma total capital ratio of 13.4%, had the proceeds of the offering been
invested prior to June 30, 2008. This $37.9 million equity investment gives us
additional strength to support strategic growth in our single-family mortgage
portfolio and the means to further enhance our value creation potential for
the future."
Second 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
416-644-3415.
MD&A
The Company will post its MD&A for the three and six months ended June
30, 2008 on its website www.equitablegroupinc.com this morning. This document
will also be archived on the site.CONSOLIDATED BALANCE SHEET
AS AT JUNE 30, 2008 - UNAUDITED
With comparative figures as at December 31, 2007 and June 30, 2007
(In thousands of dollars)
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June 30, December June 30,
2008 31, 2007 2007
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Assets
Cash and cash
equivalents $ 248,139 $ 15,927 $ 164,232
Restricted cash 5,000 5,000 5,000
Investments purchased under reverse
repurchase agreements 412,004 232,120 -
Investments 149,214 220,697 357,888
Loan securitizations - retained
interests 67,469 51,214 46,491
Mortgages receivable 2,915,912 2,874,241 2,313,024
Other assets 16,457 10,427 14,559
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$ 3,814,195 $ 3,409,626 $ 2,901,194
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Liabilities and Shareholders' Equity
Liabilities:
Customer deposits $ 3,483,607 $ 3,104,524 $ 2,613,504
Future income taxes 11,733 7,945 5,541
Other liabilities 21,193 17,423 19,173
Bank term loans 44,595 44,595 44,595
Subordinated debentures 31,969 31,969 31,969
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3,593,097 3,206,456 2,714,782
Shareholders' equity:
Capital stock 87,653 87,062 86,339
Contributed surplus 2,124 1,778 1,415
Retained earnings 133,695 116,325 103,215
Accumulated other comprehensive loss (2,374) (1,995) (4,557)
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221,098 203,170 186,412
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$ 3,814,195 $ 3,409,626 $ 2,901,194
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CONSOLIDATED STATEMENT OF INCOME
FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2008 - UNAUDITED
With comparative figures for the three and six month periods ended
June 30, 2007
(In thousands of dollars, except per share amounts)
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Three Months ended Six Months ended
June 30, June 30, June 30, June 30,
2008 2007 2008 2007
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Interest income:
Mortgages $ 45,151 $ 38,086 $ 90,843 $ 74,481
Investments 2,146 3,478 4,322 6,632
Other 3,807 2,049 7,530 3,525
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51,104 43,613 102,695 84,638
Interest expense:
Customer deposits 32,128 26,147 62,837 50,501
Deposit agent commissions 2,148 1,542 4,090 2,940
Bank term loans 771 831 1,517 1,446
Subordinated debentures 584 626 1,168 1,183
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35,631 29,146 69,612 56,070
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Net interest income 15,473 14,467 33,083 28,568
Provision for credit losses 300 225 600 450
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Net interest income after
provision for credit losses 15,173 14,242 32,483 28,118
Other income:
Fees and other income 421 345 781 633
Net gain (loss) on
investments 49 - 230 (15)
Loan securitizations -
retained interests 4,278 770 4,959 2,140
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4,748 1,115 5,970 2,758
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Net interest income and
other income 19,921 15,357 38,453 30,876
Non-interest expenses:
Compensation and benefits 3,233 2,780 6,260 5,361
Other 2,448 2,257 4,569 4,169
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5,681 5,037 10,829 9,530
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Income before income taxes 14,240 10,320 27,624 21,346
Income taxes (recovery):
Current 1,384 2,978 4,988 5,033
Future 2,576 (138) 2,671 841
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3,960 2,840 7,659 5,874
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Net income $ 10,280 $ 7,480 $ 19,965 $ 15,472
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CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2008 - UNAUDITED
With comparative figures for the three and six month periods ended
June 30, 2007
(In thousands of dollars)
-------------------------------------------------------------------------
Three months ended Six months ended
June 30, June 30, June 30, June 30,
2008 2007 2008 2007
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Capital stock:
Balance, beginning of
period $ 87,257 $ 60,050 $ 87,062 $ 57,849
Common shares issued
Gross proceeds of
equity issue - 25,000 - 25,000
Issue expense, net of
tax recovery of - nil
(2007 - $498) - (962) - (962)
Proceeds from exercise
of stock options 350 1,966 525 3,965
Transfer from contributed
surplus relating to
the exercise of stock
options 46 285 66 487
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Balance, end of period 87,653 86,339 87,653 86,339
Contributed surplus:
Balance, beginning of
period 1,961 1,485 1,778 1,539
Stock-based compensation 209 215 412 363
Transfer to common shares
relating to the
exercise of stock options (46) (285) (66) (487)
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Balance, end of period 2,124 1,415 2,124 1,415
Retained earnings:
Balance, beginning of
period 124,714 97,025 116,325 90,348
Transition adjustment -
Financial instruments - - - (113)
Net income 10,280 7,480 19,965 15,472
Dividends (1,299) (1,290) (2,595) (2,492)
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Balance, end of period 133,695 103,215 133,695 103,215
Accumulated other
comprehensive loss:
Balance, beginning of
period (1,996) (63) (1,995) -
Transition adjustment -
Financial instruments - - - 302
Other comprehensive loss (378) (4,494) (379) (4,859)
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Balance, end of period (2,374) (4,557) (2,374) (4,557)
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Total retained earnings
and accumulated other
comprehensive loss 131,321 98,658 131,321 98,658
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Total shareholders'
equity $ 221,098 $ 186,412 $ 221,098 $ 186,412
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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2008 - UNAUDITED
With comparative figures for the three and six month periods ended
June 30, 2007
(In thousands of dollars)
-------------------------------------------------------------------------
Three months ended Six months ended
June 30, June 30, June 30, June 30,
2008 2007 2008 2007
-------------------------------------------------------------------------
Net income $ 10,280 $ 7,480 $ 19,965 $ 15,472
Other comprehensive loss:
Available-for-sale
assets, change in
unrealized gains
(losses) (304) (4,886) (391) (4,877)
Reclassification to
income for realization
of available-for-sale
assets fair value
changes (74) 392 12 18
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Other comprehensive loss (378) (4,494) (379) (4,859)
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Comprehensive income $ 9,902 $ 2,986 $ 19,586 $ 10,613
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-------------------------------------------------------------------------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.
Certain forward-looking statements are made in this news release,
including statements 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. 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 such
forward-looking statements. Equitable does not undertake to update any
forward-looking statements, oral or written, made by itself or on its behalf.
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
™ Trademark of Equitable Bank, All Rights Reserved
EQ Bank is a trade name of Equitable Bank.
