News

TORONTO, May 6, 2014 /CNW/ - Equitable Group Inc. (TSX: EQB and EQB.PR.A) ("Equitable" or the "Company") today reported its financial results for the three months ended March 31, 2014, a period of strong performance for its wholly owned subsidiary, Equitable Bank (the "Bank").

FIRST QUARTER HIGHLIGHTS

• Net income grew 21% to $25.3 million, a first quarter record, up from $20.9 million in 2013
• Diluted earnings per share increased 20% to $1.56 from $1.30 in 2013
• Return on Equity ("ROE") was 17.9%, up from 17.5% in Q1 2013
• Book value per common share increased 18% to $36.58 from $31.07 at March 31, 2013

"Equitable's first quarter results again demonstrated the Bank's ability to perform for customers and shareholders across our growing business lines," said Andrew Moor, President and Chief Executive Officer.  "Earnings reached a new first quarter record while ROE performance showed an increase over the same period last year and was above our five-year average of 17.5%.  I am particularly encouraged by the positive feedback I am getting from our mortgage broker partners about the consistently good service they are receiving from the Bank.  I believe that this reputation, now firmly established in the market, is the key reason for the 42% growth in single family originations in this quarter compared to the same quarter last year.  Combining a strong operational focus, a culture of cost control, strong risk management practices and discipline in capital allocation has allowed us to increase the dividends on our common shares for the 6^th time in just over three years."

DIVIDEND DECLARATIONS

The Company's Board of Directors today declared a common share dividend in the amount of $0.17 per common share, payable July 3, 2014, to common shareholders of record at the close of business on June 13, 2014.  This represents a 6% increase over dividends declared in the previous quarter and a 13% increase over dividends declared in May 2013.

The Board also declared a quarterly dividend in the amount of $0.453125 per preferred share, payable June 30, 2014, to preferred shareholders of record at the close of business on June 13, 2014.

OPERATING HIGHLIGHTS

• Single Family Lending Services origination was $404 million, up 42% from $285 million a year ago.  On strong origination volumes and mortgage renewal success, Single Family mortgage principal at March 31, 2014 was a record $4.1 billion, up 35% adjusted for $238 million of mortgages securitized during the past four quarters.
• Commercial Lending Services mortgage principal was $2.4 billion, up 10% or $210 million from a year ago.  Quarterly origination volumes were $126 million compared to $173 million in 2013.
• Securitization Financing Mortgages under Management of $5.8 billion remained at the same level as last year, which was broadly in-line with Management's expectations.
• Deposit Services total deposit principal increased 15% year-over-year to $6.4 billion at March 31, 2014.

The high quality of Equitable's mortgage portfolio is reflected in its strong credit metrics. In the three months ended March 31, 2014, the Company had a net impairment recovery of $42 thousand compared to an impairment provision of $0.5 million a year ago. Similarly, after the Company's normal extensive review of its collective allowance, Equitable determined that recording a lower than normal provision in the quarter of $0.5 million would be sufficient to maintain appropriate allowance levels.  At quarter end, net impaired mortgage assets were 0.35% of total mortgage assets compared to 0.34% a year ago and well within historical norms.

CAPITAL

Equitable Bank's capital ratios continue to exceed minimum regulatory standards and most industry benchmarks.  At March 31, 2014:

• Common Equity Tier 1 capital ratio was 12.9%, well ahead of the Basel III minimum of 7.0%, and most competitive benchmarks
• Total capital ratio was 16.6%, up from 16.4% a year ago, exceeding the regulatory requirement of 10.5% on an all-in basis

STRATEGIC INITIATIVES

Equitable will broaden its foundation as Canada's ninth largest independent Bank during 2014.

"In the first quarter, we took an important step in this regard by expanding our national Single Family Lending Services footprint to include the Greater Montreal and Gatineau regions of Quebec," said Mr. Moor.  "This further diversifies our largest core lending line and provides us with a new opportunity to serve borrowers in some of Canada's largest residential markets."

Equitable will also enter the prime single family mortgage market later this year, a strategic initiative that has been encouraged by policy changes that improve the ability of smaller banks to compete in the Canadian financial services market.  The Bank intends to fund a majority of prime mortgages through the Canada Mortgage and Housing Corporation ("CMHC") Mortgage Backed Securities ("MBS") program.  In 2014, this initiative will likely have an immaterial impact on earnings but it offers significant long-term strategic and financial value.  Management's goal is to originate $1 billion to $2 billion of prime single family loans per year once the program reaches a steady-state.

Equitable also continues to offer a broader range of services to savers and investors to diversify its sources of funding with two significant accomplishments in 2014 to date:

• Attracted $91 million in deposits to the Equitable Bank High Interest Savings Account, a product available through the FundSERV platform under the Code EQB100 and which pays 1.50% annually, since its launch in late 2013
• Successfully completed a $150 million, three-year fixed rate 2.595% Deposit Note offering subsequent to quarter end, attracting broad institutional investor demand.  Over time, the Bank intends to become a regular Deposit Note issuer across a variety of terms.

BUSINESS OUTLOOK

Equitable expects that its growth and performance strategies will continue to deliver high returns on shareholders' equity in 2014.

"The Bank started 2014 in record fashion and we intend to remain focused on the fundamental drivers of performance to sustain this very positive momentum throughout the year," said Mr. Moor.  "As we move into the spring and summer quarters, we look to take advantage of seasonally stronger real estate and mortgage market activity by maintaining the standards of service and responsiveness that have made Equitable a favoured choice for mortgage brokers and borrowers across Canada."

In commenting on profitability, Tim Wilson, Vice President and Chief Financial Officer said: "Net interest income increased 21% year-over-year in the first quarter on 3% growth in average asset balances and a 25 basis point increase in total NIM, which stood at 1.67%.  As we move deeper into 2014, we expect that total NIM will continue to reflect the positive benefit of the shift in our asset mix towards higher margin Core Lending activities and efficient liquidity management."

CONFERENCE CALL AND WEBCAST

The Company will hold its first quarter conference call and webcast [with accompanying slides] at 10:00 a.m. ET Wednesday, May 7, 2014.  To access the call live, please dial 416-644-3415 five minutes prior.  To access a listen-only version of the webcast, please log on to www.equitablebank.ca under Investor Relations.

A replay of the call will be available until May 14, 2014 and it can be accessed by dialing 416-640-1917 and entering passcode 4678810 followed by the number sign.  Alternatively, the call will be archived on the Company's website for three months.

ABOUT EQUITABLE GROUP INC.

Equitable Group Inc. is a growing Canadian financial services business that operates through its wholly-owned subsidiary, Equitable Bank.  Equitable Bank is a Schedule I Bank regulated by the Office of the Superintendent of Financial Institutions Canada with total assets of approximately $12 billion, with more than 300 employees and proven capabilities in lending and deposit-taking.  The Company's integrated operations are organized according to specialty. We serve retail and commercial customers across Canada with a range of savings solutions and mortgage lending products.  Within Equitable Bank's Core Lending business, Single Family Lending Services funds mortgages for owner-occupied and investment properties across Canada while Commercial Lending Services provides mortgages on a variety of commercial properties on a national basis.  Equitable's Securitization Financing business originates and securitizes insured residential mortgages under the Canada Mortgage and Housing Corporation administered National Housing Act.  Measured by assets, Equitable Bank was the ninth largest independent Schedule I Bank in Canada at December 31, 2013. For more information, visit the Company's website at www.equitablebank.ca and click on Investor Relations.

Cautionary NOTE Regarding FORWARD-LOOKING STATEMENTS

Statements made by the Company in the sections of this news release including those entitled "First Quarter Highlights", "Operating Highlights", Strategic Initiatives", "Business Outlook", 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.

NON-GENERALLY ACCEPTED ACCOUNTING PRINCIPLES ("GAAP") FINANCIAL MEASURES

This news release references certain non-GAAP measures such as Return on Shareholders' Equity ("ROE"), Net Interest Margin ("NIM"), capital ratios, book value per share, impairment provision (recovery), and Mortgages Under Management that management believes provide useful information to investors regarding the Company's financial condition and results of operations.  The "Non-Generally Accepted Accounting Principles ("GAAP") Financial Measures" section of the Company's first quarter 2014 Management's Discussion and Analysis provides a detailed description of each non-GAAP measure and should be read in conjunction with this report.  The Management's Discussion and Analysis also provides a reconciliation between all non-GAAP measures and the most directly comparable GAAP measure, where applicable.  Readers are cautioned that non-GAAP measures do not have any standardized meaning, and therefore, may not be comparable to similar measures presented by other companies.

ADDITIONAL GENERALLY ACCEPTED ACCOUNTING PRINCIPLES ("GAAP") FINANCIAL MEASURES

This news release references net interest income, an additional GAAP measure that management believes provide useful information to investors regarding the Company's financial results of operations.  The "ADDITIONAL Generally Accepted Accounting Principles ("GAAP") Financial Measures" section of the Company's first quarter 2014 Management's Discussion and Analysis provides a detailed description of net interest income and should be read in conjunction with this report.  Readers are cautioned that additional GAAP measures do not have any standardized meaning, and therefore, may not be comparable to similar measures presented by other companies. 

SOURCE Equitable Group Inc.