News
Net interest margins continue to expand
Credit metrics improve
TSX Symbols: ETC and ETC.PR.A
THIRD QUARTER RESULTS
- Net income increased 12.0% to $12.0 million compared to $10.8 million
in the same period a year ago.
- Diluted earnings per common share increased 9.5% to $0.81 per share
compared to $0.74 per share a year ago.
- Return on equity was 15.7% compared to 16.5% in the second quarter of
2009 and 16.7% in the third quarter of 2008.
- Return on average assets improved to 1.3% from 1.1% a year ago.
- Tangible common equity ratio, a key measure of capital strength, was
12.1%, an improvement over the ratios of 11.8% and 10.0% for the
second quarter of 2009 and third quarter of 2008 respectively.
- Productivity ratio on a taxable equivalent basis - a measure of
efficiency - was 25.7% compared to 24.4% in the second quarter of
2009 and 24.9% in the same quarter of 2008.
- Book value per common share increased 16.0% to $20.86 from $17.98 at
September 30, 2008.
DIVIDEND DECLARATIONS
The Company's Board of Directors declared a dividend on the Company's common stock in the amount of
The Board also declared an initial dividend on its recently issued Series 1 preferred shares in the amount of $0.605822 per share, payable
MANAGEMENT COMMENTARY
"Equitable's strong performance in the third quarter was well in line with our financial and strategic goals for 2009," said
CREDIT QUALITY
Mortgages in arrears 90 days or more (excluding CMHC-insured mortgages that are less than 365 days in arrears) improved to 0.88% of total principal outstanding from 1.34% at
THIRD QUARTER OPERATING HIGHLIGHTS
- Net interest margin on a taxable equivalent basis increased to 2.2%
from 1.9% in the second quarter of 2009 and from 1.7% a year ago.
- Mortgage fundings amounted to $454.5 million while total mortgage
principal outstanding at September 30, 2009 was $2.8 billion, as the
Company continued to focus its Commercial Lending Services business
on niches with the best investment return potential (including CMHC-
insured mortgages on multi-family apartment buildings) while stepping
up the pace of single family residential funding activity
commensurate with improving real estate and economic conditions.
- Equitable securitized and sold $294.6 million of CMHC-insured
mortgages - bringing its total securitized portfolio to $3.8 billion
- and generated $4.3 million of securitization income, despite a
temporary market delay in closing a CMB transaction involving 10-year
term mortgages; this transaction is now expected to close in the
fourth quarter.
- Fixed rate mortgages represented 64.8% of the portfolio compared to
60.5% at June 30, 2009.
NINE MONTH RESULTS
- Net income increased 16.8% to a record $35.9 million compared to
$30.7 million in the same period a year ago.
- Diluted earnings per common share increased 5.7% to $2.40 per share
compared to $2.27 per share a year ago.
- Return on equity was 16.7% compared to 18.1% in the same period of
2008.
CONCLUSION
"The economic and credit market landscapes have improved continuously over the second and third quarters of 2009," said
John Ayanoglou, Senior Vice-President and Chief Financial Officer, said: "From a capital perspective, Equitable is in excellent condition. After the issuance of our preferred shares and a
THIRD QUARTER WEBCAST
Management will discuss Equitable's results during a conference call beginning at
MD&A
The Company will post its MD&A for the three and nine months ended
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
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS (unaudited)
AS AT SEPTEMBER 30, 2009
With comparative figures as at December 31, 2008 and September 30, 2008
(In thousands of dollars)
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September December September
30, 2009 31, 2008 30, 2008
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Assets
Cash and cash equivalents $ 258,815 $ 50,121 $ 10,985
Restricted cash 8,070 8,422 5,000
Investment purchased under
reverse repurchase agreements 126,230 698,276 748,183
Investments 317,056 170,321 190,347
Securitization retained interests 137,488 101,806 84,252
Mortgages receivable 2,829,135 3,023,015 3,036,281
Other assets 10,830 35,590 19,039
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$ 3,687,624 $ 4,087,551 $ 4,094,087
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Liabilities and Shareholders' Equity
Liabilities:
Customer deposits $ 3,186,927 $ 3,692,569 $ 3,712,019
Future income taxes 19,442 17,839 14,018
Other liabilities 49,339 36,433 23,857
Bank term loans 40,784 44,595 44,595
Subordinated debentures 31,969 31,969 31,969
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3,328,461 3,823,405 3,826,458
Shareholders' equity:
Preferred shares 48,576 - -
Common shares 127,084 126,993 126,993
Contributed surplus 3,153 2,553 2,345
Retained earnings 180,765 149,365 142,959
Accumulated other
comprehensive loss (415) (14,765) (4,668)
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359,163 264,146 267,629
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$ 3,687,624 $ 4,087,551 $ 4,094,087
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CONSOLIDATED STATEMENTS OF INCOME (unaudited)
FOR THE THREE AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 2009
With comparative figures for the three and nine month periods ended
September 30, 2008
(In thousands of dollars, except share and per share amounts)
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Three months ended Nine months ended
September September September September
30, 2009 30, 2008 30, 2009 30, 2008
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Interest income:
Mortgages $ 41,033 $ 49,821 $ 122,052 $ 140,664
Investments 4,089 1,739 9,847 6,061
Other 496 4,425 2,985 11,955
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45,618 55,985 134,884 158,680
Interest expense:
Customer deposits 22,942 35,690 73,671 98,527
Deposit agent
commissions 1,817 2,553 5,184 6,643
Bank term loans 720 754 2,216 2,271
Subordinated
debentures 592 590 1,757 1,758
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26,071 39,587 82,828 109,199
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Net interest income 19,547 16,398 52,056 49,481
Provision for credit
losses 1,250 1,300 4,350 1,900
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Net interest income
after provision for
credit losses 18,297 15,098 47,706 47,581
Other income:
Fees and other income 789 525 2,540 1,306
Net gain on investments - (72) 36 158
Gains on securitization
activities and
income from
retained interests 4,341 5,050 19,473 10,009
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5,130 5,503 22,049 11,473
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Net interest income
and other income 23,427 20,601 69,755 59,054
Non-interest expenses:
Compensation and
benefits 3,789 3,371 11,234 9,631
Other 2,718 2,284 7,652 6,853
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6,507 5,655 18,886 16,484
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Income before
income taxes 16,920 14,946 50,869 42,570
Income taxes:
Current 2,437 1,212 11,333 6,200
Future 2,438 2,982 3,670 5,653
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4,875 4,194 15,003 11,853
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Net income $ 12,045 $ 10,752 $ 35,866 $ 30,717
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Dividends on
preferred shares - - - -
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Net income
available to
common shareholders $ 12,045 $ 10,752 $ 35,866 $ 30,717
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Earnings per share:
Basic $ 0.81 $ 0.74 $ 2.41 $ 2.28
Diluted $ 0.81 $ 0.74 $ 2.40 $ 2.27
Weighted average
number of shares
outstanding:
Basic 14,889,174 14,534,667 14,886,006 13,492,346
Diluted 14,947,493 14,561,797 14,915,290 13,533,386
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CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (unaudited)
FOR THE THREE AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 2009
With comparative figures for the three and nine month periods ended
September 30, 2008
(In thousands of dollars)
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Three months ended Nine months ended
September September September September
30, 2009 30, 2008 30, 2009 30, 2008
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Preferred shares:
Balance, beginning
of period $ - $ - $ - $ -
Gross proceeds of
equity issue,
Series 1 50,000 - 50,000 -
Issue expense, net
of tax recovery
of - $615
(2008 - nil) (1,424) - (1,424) -
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Balance, end of
period 48,576 - 48,576 -
Common shares:
Balance, beginning
of period 127,029 87,653 126,993 87,062
Gross proceeds of
equity issue - 40,850 - 40,850
Issue expense, net
of tax recovery
of - nil
(2008 - $698) - (1,510) - (1,510)
Proceeds from
reinvestment of
dividend 55 - 91 -
Proceeds from
exercise of stock
options - - - 525
Transfer from
contributed surplus
relating to the
exercise of stock
options - - - 66
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Balance, end of
period 127,084 126,993 127,084 126,993
Contributed surplus:
Balance, beginning
of period 2,984 2,124 2,553 1,778
Stock-based
compensation 169 221 600 633
Transfer to common
shares relating to
the exercise of
stock options - - - (66)
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Balance, end of
period 3,153 2,345 3,153 2,345
Retained earnings:
Balance, beginning
of period 170,209 133,695 149,365 116,325
Net income 12,045 10,752 35,866 30,717
Dividends - common
shares (1,489) (1,488) (4,466) (4,083)
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Balance, end of
period 180,765 142,959 180,765 142,959
Accumulated other
comprehensive income
(loss), net of tax:
Balance, beginning
of period (3,453) (2,374) (14,765) (1,995)
Other comprehensive
income (loss) 3,038 (2,294) 14,350 (2,673)
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Balance, end of
period (415) (4,668) (415) (4,668)
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Total retained
earnings and
accumulated other
comprehensive income
(loss) 180,350 138,291 180,350 138,291
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Total shareholders'
equity $ 359,163 $ 267,629 $ 359,163 $ 267,629
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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)
FOR THE THREE AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 2009
With comparative figures for the three and nine month periods ended
September 30, 2008
(In thousands of dollars)
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Three months ended Nine months ended
September September September September
30, 2009 30, 2008 30, 2009 30, 2008
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Net income $ 12,045 $ 10,752 $ 35,866 $ 30,717
Other comprehensive
income (loss), net
of tax:
Available for sale
investments:
Net unrealized
gains (losses)
from change in
fair value 1,655 (2,163) 16,927 (2,554)
Reclassification
of net (gains)
losses to income 1,383 (131) (2,577) (119)
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Other comprehensive
income (loss) 3,038 (2,294) 14,350 (2,673)
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Comprehensive income $ 15,083 $ 8,458 $ 50,216 $ 28,044
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CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
FOR THE THREE AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 2009
With comparative figures for the three and nine month periods ended
September 30, 2008
(In thousands of dollars)
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Three months ended Nine months ended
September September September September
30, 2009 30, 2008 30, 2009 30, 2008
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Cash provided by
(used in):
Operating activities:
Net income $ 12,045 $ 10,752 $ 35,866 $ 30,717
Non-cash items:
Financial
instruments -
fair value
adjustments 8,313 (3,666) 5,314 (5,407)
Securitizations
gains (3,531) (4,271) (16,090) (7,968)
Amortization of
capital assets 153 192 444 564
Provision for
credit losses 1,250 1,300 4,350 1,900
Net (gain) loss
on investments (494) 72 (574) (156)
Future income taxes 986 2,285 2,218 4,956
Stock-based
compensation 169 221 600 633
Amortization of
premiums on
investments, net 178 244 548 1,160
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19,069 7,129 32,676 26,399
Changes in operating
assets and
liabilities:
Other assets 1,149 1,698 9,799 (818)
Other liabilities (4,111) (3,404) (4,670) (3,318)
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16,107 5,423 37,805 22,263
Financing activities:
(Decrease) increase
in customer deposits (92,669) 228,900 (500,745) 607,290
Repayment of bank
term loan (2,466) - (3,811) -
Dividends paid on
common shares (1,489) (1,488) (4,466) (4,083)
Issuance of preferred
shares 47,961 - 47,961 -
Issuance of common
shares 55 39,340 91 39,865
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(48,608) 266,752 (460,970) 643,072
Investing activities:
Purchase of
investments (14,259) - (23,577) (5,000)
Proceeds on sale or
redemption of
investments 17,775 20,844 48,299 95,936
Purchase of
investments
purchased under
reverse repurchase
agreements (126,230) (748,183) (811,960) (1,435,261)
Proceeds on sale or
redemption of
investments
purchased under
reverse repurchase
agreements 145,037 412,004 1,384,006 919,198
Change in restricted
cash (3,070) - 352 -
Increase in mortgages
receivable (589,384) (987,259) (2,125,199) (2,331,765)
Mortgage principal
repayments 287,991 346,235 1,086,288 1,065,485
Proceeds from loan
securitizations 292,360 442,741 1,054,211 1,008,681
Securitization
retained interests 7,746 4,349 19,638 12,613
Purchase of capital
assets (72) (60) (199) (164)
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17,894 (509,329) 631,859 (670,277)
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(Decrease) increase in
cash and cash
equivalents (14,607) (237,154) 208,694 (4,942)
Cash and cash
equivalents,
beginning of period 273,422 248,139 50,121 15,927
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Cash and cash
equivalents, end
of period $ 258,815 $ 10,985 $ 258,815 $ 10,985
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This press release contains "forward-looking statements" within the meaning of applicable Canadian securities legislation, including statements found in the Management Commentary and Conclusion sections, above. 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 or 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 in the Company's documents filed on SEDAR (www.sedar.com).
Although the Company has attempted to identify 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. 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. See the MD&A for further information on forward-looking statements.
™ Trademark of Equitable Bank, All Rights Reserved
EQ Bank is a trade name of Equitable Bank.
