Equitable Group reports a solid Q1

Equitable Group Inc. reported solid earnings performance for the three months ended March 31, 2011 as it continued to profit from its growth strategies and strong mortgage production in its chosen market niches.
The results of the first quarter 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, the Company's MD&A and financial statements reflects conversion from previous Canadian Generally Accepted Accounting Principles ("GAAP") to an IFRS basis.

•    Diluted earnings per share increased 33.3% to $1.00 from $0.75 per share a year ago;
•    Net income increased 32.2% to $16.1 million compared to $12.2 million in the first quarter of 2010;
•    Net interest income grew 8.9% to $31.2 million from $28.7 million in the corresponding period of 2010;
•    Total assets reached a record $9.2 billion, with originations during the first three months of 2011 totaling $666.7 million,  a 34.9% increase over the same period in 2010;
•    Adjusted net income (a non-GAAP financial measure that removes gains and losses associated with unmatched derivative measurement accounting) increased 12.7% to $15.8 million from $14.0 million in the same period of 2010, while adjusted diluted earnings per share grew 12.5% to $0.99 from $0.88 a year ago;
•    ROE was 18.0% compared to 15.9% in the first quarter of 2010 while adjusted ROE was 17.8% compared to 18.5% in the first quarter of 2010;
•    Productivity ratio on a taxable equivalent bases - a measure of efficiency - was 27.4%, compared to 25.2% a year ago primarily as a result of the costs associated with growing the Company's single family residential mortgage portfolio;
•    Equitable Trust's total capital ratio (when collective allowance is included in capital) was a healthy 17.4% at March 31, 2011, compared to 17.5% a year earlier;
•    Book value per share at period end increased 18.4% to $23.32 from $19.70 a year ago.

The Company's Board of Directors declared a dividend of $0.11 per share on the Company's common shares, payable on July 5, 2011, to common shareholders of record at the close of business on June 15, 2011. These payments are consistent with the 10% increase in common share dividend payments announced by the Company's Board of Directors on February 23, 2011.
The Board also declared a quarterly dividend in the amount of $0.453125 per preferred share, payable on June 30, 2011, to preferred shareholders of record at the close of business on June 15, 2011.

"Equitable opened 2011 with good performance that reflects the successful execution of our ongoing growth and earnings enhancement strategies as well as our insistence on operating within well established risk tolerances," said Andrew Moor, President and CEO. "While IFRS reporting presents challenges to year-over-year comparability of results, even the transition in accounting standards cannot mask the fact that key performance metrics, including net interest income are well ahead of last year's opening quarter. Considering the slower pace of activity in Canadian real estate markets compared to a year ago, we are pleased with mortgage origination volumes. Growth in high quality funding opportunities is a direct result of the emphasis we've placed on delivering excellent service to our mortgage broker network. This is a long-term effort that is yielding excellent short-term benefits. In fact, across our mortgage lending businesses, origination volumes experienced in the first quarter of 2011 generally surpassed those of the first quarter of 2010 by a healthy margin. This adds to our earnings potential."

"Net interest income earned in the first quarter reflects the robust growth in our mortgage portfolio," said John Ayanoglou, Senior Vice-President and Chief Financial Officer. "As expected, Net Interest Margin or NIM on a taxable equivalent basis reflected the inclusion of securitization spreads. NIM on non-securitization assets was a healthy 2.5% compared to NIM of 1.4% as calculated on total assets. While delivering this level of performance and growth, the other noteworthy highlight of the quarter is the strength of our capital ratios. Our tangible common equity ratio improved to 13.0% (from 12.7% a year ago) and our Tier 1 capital ratio improved to 14.7% (from 14.6% last year). We continue to have the financial strength to support our growth strategies."

After becoming the largest component of Equitable's conventional mortgage lending businesses in 2010, single family residential mortgages grew again in the first quarter on both an absolute and relative basis. At quarter end, the mortgage portfolio originated by Equitable's single family residential business represented 19.9% of total mortgage principal, compared to 14.0% a year ago, or 46.0% of total conventional mortgage principal, compared to 35.2% a year ago. Equitable has increased its focus on this segment to take advantage of its strengths and to optimize ROE.

During the quarter:
•    Single Family Lending Services originated $216.3 million of conventional mortgages, representing an 11.0% increase over fundings of $194.8 million in the same period of 2010;
•    Commercial Mortgage - Broker Services originated $95.9 million of mortgages, 52.7% higher than fundings of $62.8 million a year ago;
•    Commercial Lending Services originated $100.2 million of conventional mortgages - an increase of 70.6% compared to $58.7 million a year ago - as well as $254.1 million of CMHC-insured multi-unit residential mortgages compared to $143.7 million a year ago.
At quarter end:
•    Fixed-rate mortgages represented 90.8% of the mortgage portfolio compared to 88.1% a year earlier, while floating rate mortgages with no interest rate floors amounted to 4.3% compared to 6.1% a year earlier;
•    Conventional mortgage principal increased 29.7% to $3.7 billion, while the Company's securitized portfolio grew 12.8% to $4.8 billion;
•    Net impaired mortgages were 0.33% of total mortgage principal, compared to 0.42% at the end of 2010 and 0.64% at March 31, 2010;
•    Mortgage principal in arrears 90 days or more were 0.33% of total mortgage principal compared to 0.46% at year end and 0.54% a year ago;
•    Net realized loan losses of $2.9 million were charged against specific allowances recorded in prior quarters.
Management expects arrears and net impaired mortgage levels to remain stable through 2011, a view supported by early stage delinquency rates at quarter end, which decreased to 0.19% of total outstanding principal compared to 0.34% at year end 2010.

"We expect to make even more progress with our strategies in 2011 by focusing on two priorities: continued service excellence in support of higher origination volumes in our chosen market areas and the optimization of ROE supported by high quality earnings and the maintenance of our strong capital base," said Mr. Moor. "While we have seen some evidence of slowing activity levels in certain sectors of the real estate market, and this is influencing the pace of originations, we believe we can continue to grow our portfolio without undue risk and achieve solid results for our shareholders."

While Equitable has three important lending businesses, an increasing focus over the last two years has been the building of the Company's single family residential business across Canada.  "We are completing the expansion of our single family business in western Canada by commencing lending on single family homes in Saskatchewan, which follows the successful development of this business in Alberta, Manitoba and British Columbia," said Mr Moor.  "It will take time to build relationships with brokers in Saskatoon and Regina, but, we are confident that our commitment to service will allow us to build enduring partnerships over time."
Mr. Ayanoglou added: "We believe Equitable is well-positioned, with a high level of financial health, to continue to grow its assets, revenue and net income. While we believe there is the potential for some modest contraction in NIM in 2011 from the excellent levels achieved in 2010, net interest income will remain strong and spreads on our conventional mortgage products are expected to remain relatively stable. In all, we are confident that we will continue to generate solid results, growing earnings as the year progresses."

on May 19, 2011