News Releases

Equitable Group reports record 2007 first quarter

    TSX Symbol: ETC

    TORONTO, May 1 /CNW/ - Equitable Group Inc. today reported its financial
results for the three months ended March 31, 2007 - setting new records for
net income and earnings per share on substantial growth in assets.First Quarter Highlights

        -  Assets expanded 35.7% to $2.87 billion from $2.11 billion a year
           earlier.
        -  Net income increased 37.0% to $8.0 million from $5.8 million a
           year earlier.
        -  Diluted earnings per share advanced 34.7% to $0.66 compared to
           $0.49 a year ago.
        -  Return on average equity increased to 21.1% compared to 18.6% a
           year earlier.
        -  Mortgage originations grew 12.6% to $664.2 million from
           $589.9 million last year.
        -  Productivity ratio was 32.1% on a Taxable Equivalent Basis
           compared to 32.0% a year ago.Dividend

    The Company's Board declared a dividend in the amount of $0.10 per share
payable July 4, 2007 to shareholders of record at the close of business
June 15, 2007.

    Management Commentary

    "Equitable performed very well in the first quarter achieving outstanding
results based on substantial growth in assets," said Andrew Moor, President
and CEO. "This performance reflects continued demand in Canada's real estate
market for residential and commercial mortgage financing as well as
Equitable's ongoing attention to business fundamentals. Our focus on
efficiency, productivity and disciplined lending has once again delivered
meaningful value to our shareholders."
    "From an earnings perspective, total interest revenues increased 38.4% to
a record $40.4 million while our net interest margin remained at a very strong
2.4% in the first quarter. This is a key highlight, as is the fact that
despite overall expense increases related to growth in staffing, at 32.1% our
productivity ratio on a TEB was at the low end of our 32% to 35% objective for
2007. As a result, Equitable's productivity ratio remains one of the best in
our industry."

    Mortgages Receivable

    Year over year growth in the Company's mortgage portfolio was registered
in most of its niches:-  Single family dwelling mortgages increased 17.4% to
           $797.0 million.
        -  Commercial mortgages increased 44.7% to $488.9 million.
        -  Conventional mortgages held for sale increased by more than
           3.4 times to $350.9 million.
        -  Construction loans increased 37.0% to $93.5 million.

    Multi-unit residential mortgages and CMHC insured mortgages both decreased
year-over-year (by 1.0% to $533.6 million and by 26.0% to $31.3 million
respectively) due to the discharge of certain multi-unit residential mortgages
and the earlier securitization of CMHC insured mortgages.

    Mortgage Credit Quality

        -  Mortgage principal in arrears over 90 days as a percentage of
           total mortgage principal was 0.13% at March 31, 2007, compared to
           a minimal 0.05% in 2006.
        -  Net impaired mortgages amounted to 0.13% of total mortgage
           principal outstanding at period end compared to 0.07% a year ago.
        -  Realized credit loss - net of recovery was $29 thousand in 2007
           versus $0 in the first quarter of 2006.Said Stephen Coffey, Senior Vice President and CFO: "These indicators
continue to reflect the benefits of a strong economy and our disciplined
lending practices, which have allowed us to build a good quality portfolio
that is well diversified by mortgage niche."

    Capital Management

    "To support efficient ongoing growth, we have implemented two important
capital measures," said Mr. Coffey. "First, we sought and received approval
for Equitable Trust to issue up to $40 million of new series 7 subordinated
debentures during 2007. By the end of the first quarter, we were already half
way to our objective for the entire year with a total of $22 million raised.
Second, just after the end of the quarter, we announced that we had entered
into an agreement with a group of underwriters to raise $25 million in gross
proceeds from the sale of 769,231 common shares. We successfully closed this
transaction April 30, 2007. These two initiatives position us to achieve our
financial objectives while bolstering our regulatory capital."

    Outlook

    "Based on Equitable's first quarter performance, we believe we have
established a solid foundation to achieve our growth and profit objectives for
the entire year," said Mr. Moor. "Although it's still early going, and some
analysts continue to forecast a soft landing for the real estate market
sometime in 2007, activity levels so far in the second quarter are strong and
we continue to position ourselves to take advantage of these conditions
through our disciplined niche lending practices."

    First Quarter Webcast

    Equitable's first quarter webcast begins at 10 am eastern time today. To
listen, please log on to www.equitablegroupinc.com. To participate in the
call, please dial 416-644-3424.

    MD&A

    The Company will post its MD&A for the three months ended March 31, 2007
on its website www.equitablegroupinc.com this morning. This document will be
archived on the site.

    About Equitable Group Inc.

    Equitable Group Inc. is a leading niche mortgage lender that focuses on
single family dwelling, multi-unit residential and commercial mortgage
financing in selected geographic territories in Canada. It conducts business
through its wholly-owned subsidiary, The Equitable Trust Company, which was
founded in 1970. Equitable is also a nationally-licensed deposit-taking
institution. Equitable's non-branch business model, valued relationships with
third-party 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.



    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
    OF OPERATIONS
    (for the three months ended March 31, 2007)


    OVERVIEW

    Equitable Group Inc. ("Equitable" or the "Company") is a niche mortgage
lender. Its core business is to raise funds by selling GICs to depositors and
to lend these funds to borrowers on the security of first mortgages on real
estate. It does this through its wholly-owned subsidiary - The Equitable Trust
Company ("Equitable Trust"). The Company's mortgage products bear fixed or
floating rates of interest and are primarily for fixed terms. The properties
on which the mortgages are secured are:-  residential - either single family dwellings or multi-unit
           (apartments, nursing homes etc.)
        -  commercial mortgages
        -  construction mortgages
        -  residential and commercial mortgages held for sale which are
           originated by third-party lenders who require financing prior to
           pooling and eventually selling the mortgages to investors. These
           conventional mortgages held for sale usually stay on the books of
           the Company for periods of up to six months and are therefore
           often referred to as 'warehoused' mortgages.
        -  residential insured mortgages for securitization through the
           Canada Mortgage and Housing Corporation Mortgage-Backed Securities
           ("CMHC-MBS") programEquitable conducts business through Equitable Trust, which is regulated
by the Office of the Superintendent of Financial Institutions - Canada
("OSFI"). Equitable Trust has prescribed capital requirements based on the
type and amount of assets on its balance sheet and on certain off-balance
sheet items. For this reason, Equitable focuses on capital management as a
means to balance growth and Return on Average Equity ("ROAE") targets.
    During the first quarter, to support future growth, Equitable Trust
authorized the issuance of up to $40.0 million of new series 7 subordinated
debentures to be issued during 2007 to augment regulatory capital and by
March 31, 2007 had issued $22.0 million of these debentures. As part of this
debenture issue, the Company arranged a term loan of $12.5 million with
Canadian Western Bank ("CWB") in order to purchase the same amount of
debentures from its subsidiary.
    After March 31, 2007 the Company agreed to an equity issue with a group
of underwriters to issue 769,231 common shares, by way of a short form
prospectus, at $32.50 per share totaling $25.0 million of gross proceeds. The
net proceeds (after the deduction of underwriters' commissions and issue
expenses) have been used to purchase common shares of Equitable Trust, thus
bolstering Tier 1 regulatory capital in the process, and for general corporate
purposes.

    Non-Generally Accepted Accounting Principles ("GAAP") Financial Measures

    The presentation of financial information on a taxable equivalent basis
("TEB") is a common practice of presentation in the banking and trust company
industries and does not have a standardized meaning within GAAP. Therefore,
TEB calculations may not be comparable to similar measures presented by other
companies. On a selective basis, Equitable uses TEB in analyzing revenues,
interest margins and productivity ratios in this Management's Discussion and
Analysis ("MD&A"). The TEB methodology grosses up tax exempt income, such as
dividends from equity securities, by an amount which makes this income
comparable, on a pre-tax basis, to regular taxable income such as mortgage
interest. For the three months ended March 31, 2007, this gross-up amounted to
$1.2 million as compared to $0.8 million during the comparable period in 2006.
    The adoption on January 1, 2007 of new accounting policies for financial
instruments requires that Equitable report deferred deposit agent commissions
as a component of customer deposits and the amortization of this deferred
charge as a component of interest expense in its financial statements.
Formerly, deferred deposit agent commissions were reported in other assets and
amortization was presented as a non-interest expense. Prior period
presentation is not restated. In order to make comparisons of current results
for net interest income, net interest margins and productivity ratios
meaningful, this MD&A presents deposit agent commissions on the same basis as
that presented in prior periods.

    PERFORMANCE AGAINST OBJECTIVES

    Equitable's principal financial objectives for 2007 are: 18-22% growth in
assets, 18-22% growth in net income, 18-22% growth in diluted earnings per
share, an ROAE of 18-22% and a productivity ratio - TEB of 32% to 35%.
    Record first quarter 2007 performance put Equitable on track to meet its
goals for 2007. Compared to the first quarter of 2006 Equitable achieved:-  A 35.7% growth in assets, which at March 31, 2007 stood at
           $2.87 billion, up from $2.11 billion a year earlier (and 9.2%
           higher than at December 31, 2006.)

        -  A 37.0% growth in net income for the quarter, which amounted to
           $8.0 million compared to $5.8 million a year earlier.

        -  A 34.7% growth in diluted earnings per share, which amounted to
           $0.66 compared to $0.49 during the same period in 2006.

        -  A 21.1% ROAE compared to 18.6% in the first quarter of 2006.

        -  A productivity ratio - TEB of 32.1% compared to 32.0% in the first
           quarter of 2006.

    Mortgages receivable increased to $2.30 billion at March 31, 2007, up 7.7%
from December 31, 2006. On a year-over-year basis, mortgages receivable at
March 31, 2007 increased 29.9% or $528.9 million from $1.77 billion at March
31, 2006.
    On April 30, 2007, the Company's Board declared a quarterly dividend in
the amount of $0.10 per share. The $0.10 per share dividend is payable on
July 4, 2007, to shareholders of record at the close of business June 15,
2007.

    Table 1: Selected financial information

    ($ thousands, except share and per share amounts)

                                                              Change From
                                   Three Months Ended        March 31, 2006
                                  March 31,    March 31,
                                      2007         2006        $        %
    OPERATIONS
    Net income                 $     7,992  $     5,833       2,159    37.0%
    Earnings per share - basic        0.67         0.49        0.18    36.7%
    Earnings per share -
     diluted                          0.66         0.49        0.17    34.7%
    Net interest income(2)          14,877       11,359       3,518    31.0%
    Total revenue                   42,668       30,820      11,848    38.4%
    Return on weighted average
     equity - annualized             21.1%        18.6%
    Return on average assets -
     annualized                       1.2%         1.1%
    Productivity ratio -
     TEB(1)(2)                       32.1%        32.0%
    BALANCE SHEET AND
     OFF-BALANCE SHEET
    Total assets               $ 2,866,393  $ 2,112,900     753,493    35.7%
    Mortgages receivable         2,299,043    1,770,110     528,933    29.9%
    Shareholders' equity           158,497      130,699      27,798    21.3%
    Mortgage-backed security
     assets under
     administration              1,815,824    1,927,741    (111,917)   (5.8%)

    COMMON SHARES
    Number of common shares
     outstanding at period end  12,037,468   11,872,645     164,823     1.4%
    Dividends per share               0.10         0.10           -        -
    Book value per share       $     13.17       $11.01       $2.16    19.6%
    Share price - close              32.75        28.50        4.25    14.9%
    Market capitalization          394,227      338,370      55,857    16.5%

    CREDIT QUALITY
    Realized loan loss - net
     of recovery               $        29  $         0
    Mortgages in arrears 90
     days or more as a % of
     total mortgages                 0.13%        0.05%
    Net impaired mortgages(3)
     as a % of total mortgages       0.13%        0.07%
    Allowance for credit losses
     as a % of gross impaired
     mortgages                      251.9%       256.9%

    (1) See explanation of TEB at the beginning of this MD&A.
    (2) See explanation of treatment of deposit agent commissions at the
        beginning of this MD&A.
    (3) Gross mortgage principal of impaired loans less specific reserves.FINANCIAL REVIEW

    EARNINGS

    The Company posted strong net income, earnings per share and revenue
growth in the first quarter of 2007 as a result of a 34.3% year-over-year
growth in average interest earning assets and stable, consistent interest
margins. All revenue lines have shown considerable growth while the Company's
efficient productivity ratio has been maintained and credit losses have been
minimal. The Company's mortgage business has produced record results both in
terms of asset accumulation and revenue generation, and record performance was
also achieved within the Company's investment portfolio of equity and debt
securities. As a result of strong asset growth and consistent spread, the
Company's net interest income has reached a record level and is illustrated in
Table 2.Table 2: Net interest income

    ($ thousands)           Three months ended         Three months ended
                              March 31, 2007             March 31, 2006
    Interest revenues
     or interest
     expenses           Average  Revenue/ Average  Average  Revenue/ Average
     derived from:      Balance  Expense    Rate   Balance  Expense    Rate

    Assets:
    Liquidity
     investments         287,868    3,135   4.4%     161,997    1,724   4.3%
    Equity securities -
     TEB(1)              179,998    2,715   6.1%     113,274    1,850   6.6%
    Mortgage loans     2,206,833   35,773   6.6%   1,716,802   26,405   6.2%
    Total interest
     earning assets -
     TEB(1)            2,674,699   41,623   6.3%   1,992,073   29,979   6.1%
    Total assets -
     TEB(1)            2,746,074   41,623   6.1%   2,062,576   29,979   5.9%

    Liabilities and
     shareholders'
     equity:
    Customer deposits  2,443,280   24,354   4.0%   1,822,850   16,911   3.8%
    Bank term loan        41,000      615   6.8%      19,750      325   6.7%
    Subordinated debt     29,975      557   7.4%      29,774      600   7.7%
    Total interest
     bearing
     liabilities       2,514,255   25,526   4.1%   1,872,374   17,836   3.9%
    Total liabilities
     and shareholders'
     equity            2,746,074   25,526   3.7%   2,062,576   17,836   3.5%
    Net interest income -
     TEB(1)(2)                     16,097                      12,143
    Net interest margin -
     TEB(1)(2)                              2.4%                        2.4%

    Less: Taxable
     equivalent adjustment          1,220                         784
    Less: Deposit agent
     commissions(2)                 1,398                           -

    Net interest income
     per financial
     statements                    13,479                      11,359

    (1) See explanation of TEB at the beginning of this MD&A.
    (2) See explanation of treatment of deposit agent commissions at the
        beginning of this MD&AThe Company's net interest margin of 2.4% in the first quarter of 2007 is
consistent with the 2.4% earned in the first quarter of 2006. Spread
performance during the first quarter of 2007 may be considered better than in
the comparable period in 2006 as the prime rate was stable at 6% throughout
the first quarter of 2007 whereas during the first quarter of 2006, revenue
from the Company's floating rate mortgage portfolio benefited from two
separate 25 basis point increases to the prime rate. Increases in the prime
rate affect revenues of the floating rate mortgage portfolio immediately while
the effect on GIC interest expense arises only as the GICs mature and reprice.
At March 31, 2007, 52.5% of the Company's mortgage portfolio was floating rate
compared to 47.0% a year earlier.
    Total interest revenues on a TEB were $41.6 million in the first quarter
compared to $30.0 million in the comparable 2006 period, an increase of 38.8%
due to growth in the Company's interest earning asset base and increases in
interest rates. Mortgage revenues increased $9.4 million or 35.5% in the first
quarter 2007 over 2006. Equity securities' income on a TEB increased
$0.9 million or 46.8% on a quarter-over-quarter basis due primarily to an
increased portfolio.
    Interest expense on average customer deposits outstanding for the first
quarter ended March 31, 2007 increased to 4.0% from 3.8% in 2006 due to
general increases in interest rates, while overall interest expense on
customer deposits for the quarter grew $7.4 million or 44.0% over 2006 due to
these higher interest rates as well as a 34.0% increase in average customer
deposits outstanding during the first quarter of 2007 compared to 2006.
    Net interest income - TEB increased $4.0 million or 32.6% for the first
quarter 2007 compared to the same period in 2006. As a result of the new
accounting policies for financial instruments deposit agent commissions are
accounted for as a component of interest expense. This change from prior
periods' financial statement presentation has not been applied retroactively
and certain elements of this MD&A have been presented in a manner so that
certain current ratios such as net interest margins - TEB and productivity
ratios - TEB are consistent with past MD&A presentation.

    Other Income

    Other income includes ancillary fees related to the mortgage portfolio,
gains on the securitization of mortgages and excess interest net of servicing
fee earned on mortgages issued through the Company's CMHC-MBS program. Sundry
income, gains or losses on the sale or redemption of investments and other
non-mortgage related fees are also included in other income. Other income
amounted to $2.3 million for the three months ended March 31, 2007 compared to
$1.6 million during the same period in 2006 due to an increase in earnings
from loan securitizations - retained interests and greater commitment fee
income in the first quarter of 2007 compared to 2006. Mortgage related fees
increased to $0.9 million compared to $0.7 million in the comparable period of
2006 even though conventional non-warehoused mortgage originations were
slightly lower in the first quarter of 2007 than in the first quarter of 2006
(Table 4).
    During the first quarter, the Company securitized, through the CMHC-MBS
program, $100.1 million of mortgages compared to $102.8 million during the
comparable period in 2006. Gains on sale of mortgages, increased to
$0.7 million in the first quarter of 2007 from $0.3 million during the same
period in 2006. Gross margins on the securitization of mortgages increased to
70 basis points in the first quarter of 2007 from 27 basis points in the
comparable period. This increase relates to a widening of spreads on this
business. Excess interest net of servicing fees remained consistent at
$0.7 million during the first quarter of 2007 as compared to $0.7 million in
the first quarter of 2006.

    Non-Interest Expenses

    Non-interest expenses include all of the expenses not related to interest
or credit provisions required to operate Equitable's business. The major
elements of non-interest expenses consist primarily of salaries and benefits,
premises and equipment expenses, capital taxes, insurance and other general
and administrative expenses. In prior periods, deposit agent commissions were
included in non-interest expenses. As a result of adopting the new accounting
policies for financial instruments, deposit agent commissions are accounted
for as a component of interest expense. This change from prior periods'
presentation has not been applied retroactively and commentary on non-interest
expenses in this MD&A is presented including deposit agent commissions so that
comparison with prior periods' results is meaningful. Please see the Non-GAAP
Financial Measures section at the beginning of this MD&A. Non-interest
expenses totaled $5.9 million for the first quarter compared to $4.4 million
during the same period in 2006. The increase in 2007 primarily reflected
higher employment levels to support growth and variable expenses related to
the expansion of the business including deposit agent commissions as well as
office and equipment costs to accommodate growth in staff. Total staff
complement at March 31, 2007, was 113, including 68 staff in the mortgage
origination and servicing department compared to a total of 85 a year ago
(which included 56 in the mortgage origination and servicing department).
    Included in non-interest expenses during the first quarter of 2007 was a
charge for stock-based compensation expense in the amount of $0.1 million
related to grants of options from 2004 to 2007. The offset to this expense was
an increase to contributed surplus in the same amount. The stock-based
compensation charge for the quarter ended March 31, 2006 was also
$0.1 million.
    The Company's productivity ratio - TEB was 32.1% in the first quarter of
2007 - in line with the Company's target for the year of 32%-35% - compared to
32.0% during the same period in 2006. This ratio (the lower, the more
efficient the operations) is a non-GAAP financial measure. Commencing in 2007
it is derived by dividing non-interest expenses, plus deposit agent
commissions, by the sum of net interest income - TEB as illustrated in table 2
above and other income. When not measured on a taxable equivalent basis, these
ratios were 34.4% and 33.9% in the first quarter of 2007 and 2006
respectively.

    BALANCE SHEET

    Mortgages

    The Company's mortgage lending is focused on first charges for real
estate in three primary niches: single family dwelling, multi-unit residential
and commercial. At March 31, 2007, single family dwelling mortgages
represented the largest portion of the portfolio (see Table 3). This portion
of the portfolio increased 7.5% from December 31, 2006 and 17.4% from
March 31, 2006 reflecting strong demand. Multi-unit residential mortgages
decreased 1.0% compared to a year earlier and decreased 6.4% from December 31,
2006 as a result of the discharge of certain multi-unit residential mortgages.
Commercial mortgages increased 44.7% from a year ago, also reflecting strong
demand.
    The composition of the Company's mortgage portfolio at March 31, 2007
reflects management's mortgage asset weighting strategy and is shown in the
following table together with comparisons for prior periods.Table 3: Mortgages receivable

                        March 31, 2007  December 31, 2006     March 31, 2006

                                  % of               % of               % of
    ($ thousands)        $       total      $       total      $       total

    Single family
     dwelling          797,024   34.7%    741,732   34.8%    678,860   38.4%
    Multi-unit
     residential       533,557   23.2%    570,312   26.7%    538,706   30.4%
    Commercial         488,896   21.3%    431,017   20.2%    337,865   19.1%
    Conventional
     mortgages held
     for sale          350,886   15.3%    268,396   12.6%    102,905    5.8%
    Construction        93,485    4.1%     87,043    4.1%     68,226    3.9%
    CMHC-insured        31,332    1.4%     33,617    1.6%     42,330    2.4%
                    -----------        -----------        -----------
    Total mortgage
     principal       2,295,180  100.0%  2,132,117  100.0%  1,768,892  100.0%
    Net premiums
     and sundry          1,234              1,423                712
                    -----------        -----------        -----------
    Mortgages
     reported        2,296,414          2,133,540          1,769,604
    Accrued interest    10,871             10,168              7,898
    Allowances for
     credit losses      (8,242)            (8,046)            (7,392)
                    -----------        -----------        -----------
    Total mortgages
     receivable      2,299,043          2,135,662          1,770,110
                    -----------        -----------        -----------
                    -----------        -----------        -----------Mortgage principal increased $163.1 million or 7.6% during the three
month period ended March 31, 2007 and increased $526.3 million or 29.8% since
March 31, 2006. The Company funded a total of $664.2 million of mortgages
during the quarter, an increase of 12.6% over last year's first quarter when a
total of $589.9 million of mortgages were funded. Conventional mortgages
(other than warehoused mortgages) funded during the quarter amounted to
$271.0 million, a decrease of 1.5% from that of the comparable quarter last
year. CMHC mortgages funded during the first quarter of 2007 amounted to
$98.4 million compared to $114.9 million a year earlier. Conventional
mortgages discharged during the first quarter of 2007 totaled $382.8 million
and included $203.3 million of short term warehoused mortgages. In the first
quarter of 2006, $382.6 million of conventional mortgages were discharged
including $257.7 million of warehoused mortgages.
    Table 4 segments mortgage principal funded.Table 4: Mortgage Production

                                     Three Months Ended   Three Months Ended
                                       March 31, 2007       March 31, 2006

                                      Mortgage             Mortgage
                                     Principal     % of   Principal     % of
    ($ thousands)                       Funded    total      Funded    total

    Conventional mortgages other
     than warehoused mortgages         270,978    40.8%     275,125    46.6%
    Warehoused mortgages               294,865    44.4%     199,857    33.9%
    CMHC-insured mortgages              98,359    14.8%     114,870    19.5%
                                    -----------------------------------------
    Total                              664,202   100.0%     589,852   100.0%Mortgage Credit Quality

    The Company realized a $50 thousand credit loss on one multi-unit
dwelling mortgage during the quarter ended March 31, 2007. A $21 thousand
recovery was also realized during the first quarter of 2007. There were no
realized losses or recoveries in the first quarter of 2006. Mortgages in
arrears 90 days or more amounted to 0.13% of total principal outstanding at
March 31, 2007. While this does represent an increase from 0.05% of total
principal outstanding at March 31, 2006, these arrears statistics are still
low. Mortgages identified as impaired amounted to 0.14% of total mortgage
principal outstanding at March 31, 2007, compared to 0.16% a year earlier. The
provision for credit losses for the first quarter of 2007 of $225 thousand was
equal to the amount recorded in the prior year's period.Table 5: Asset Categories

                      March 31, 2007   December 31, 2006      March 31, 2006
                       Asset    % of       Asset    % of       Asset    % of
    ($ thousands)     Amount   total      Amount   total      Amount   total

    Liquidity
     investments    $315,244   11.0%    $260,490    9.9%    $164,183    7.8%
    Equity
     securities      193,326    6.7%     166,669    6.4%     114,715    5.4%
    Mortgage
     loans         2,299,043   80.2%   2,135,662   81.3%   1,770,110   83.8%
    Loan
     securitiz-
     ations -
     retained
     interests        48,224    1.7%      48,271    1.8%      51,953    2.5%
    Other assets      10,556    0.4%      14,663    0.6%      11,939    0.5%
                 ------------------------------------------------------------
    Total         $2,866,393  100.0%  $2,625,755  100.0%  $2,112,900  100.0%Total assets at March 31, 2007 increased $240.6 million or 9.2% from
$2.63 billion at December 31, 2006 and increased $753.5 million or 35.7% from
$2.11 billion at March 31, 2006. Liquidity investments include cash and cash
equivalents as well as government bonds and notes - all considered eligible
liquid assets for regulatory purposes. Total liquid resources include
liquidity investments and equity securities which comprised 17.7% of total
assets at March 31, 2007, compared to 16.3% at December 31, 2006 and 13.2% as
at March 31, 2006.
    Equity securities are comprised of preferred shares. At March 31, 2007
equity securities were $26.7 million or 16.0% higher than at December 31, 2006
and $78.6 million or 68.5% higher compared to March 31, 2006. Tax exempt
dividend income from equity securities assists in lowering the Company's
effective tax rate. The Company's effective tax rate was 27.5% in the first
quarter compared to 30.2% for the period ended March 31, 2006. This decrease
in the effective tax rate was due to increased equity security dividend income
in the first quarter of 2007 as compared to the first quarter of 2006 and to a
first quarter 2007 tax recovery of $0.1 million related to future tax rate
decreases.
    Loan securitizations - retained interests have remained relatively flat
at $48.2 million at March 31, 2007 compared to $48.3 million at December 31,
2006 but was $3.7 million or 7.2% lower than a year ago. The decline from
March 31, 2006 was due to a decrease in mortgage-backed security assets under
administration at March 31, 2007 as compared to March 31, 2006 and to the
shorter average duration of securitized mortgages at March 31, 2007 as
compared to a year earlier. Total mortgages in the CMHC-MBS program
outstanding at March 31, 2007 were $1.82 billion, a decrease from the
$1.93 billion at March 31, 2006 but approximately equal to the $1.81 billion
outstanding at December 31, 2006.

    Liabilities

    Customer deposits are utilized to fund the bulk of the Company's asset
acquisitions and consist of GICs, sourced primarily through a national
distribution network of deposit agents. Customer deposits at March 31, 2007
increased $214.8 million or 9.0% from December 31, 2006 and $691.8 million or
36.2% from March 31, 2006. Sales of cashable GICs, first introduced in 2005,
continue to increase. Cashable GICs totaled $697.5 million at March 31, 2007,
up 90.0% from the March 31, 2006 balance of $367.2 million and 22.3% greater
than the December 31, 2006 balance of $570.5 million. Commencing in 2007, as
stated elsewhere in this MD&A, deferred deposit agent commissions are required
to be presented as a component of customer deposits. Formerly, these were
presented as an other asset.
    Future income taxes payable result from differences between the
measurement of assets and liabilities for financial statement purposes, as
opposed to tax purposes, and relate primarily to the Company's securitization
activities and its allowance for credit losses. Future taxes at March 31, 2007
have increased from December 31, 2006 due primarily to the changes in the tax
treatment for retained interests - loan securitizations as a result of
adopting the new financial instrument accounting policies. Future taxes have
decreased from March 31, 2006 as a result of a reduction in timing differences
related to loan securitizations - retained interests and greater general
reserves for credit losses at March 31, 2007 as compared to March 31, 2006.
    Equitable Trust issued $22.0 million of Series 7 subordinated debt during
the first quarter of 2007, of which $12.5 million was financed by way of a new
bank term loan. At March 31, 2007, a total of $82.0 million of subordinated
debt had been issued by Equitable Trust, $47.3 million of which was eliminated
upon consolidation and replaced by a $47.3 million bank term loan in the
consolidated statements. The issuance of $12.5 million of the Series 7
subordinated debt was financed by a bank term loan in the same amount as
described in note 10 of the financial statements and the "Overview" to this
MD&A.

    Other Assets and Liabilities

    Other assets at March 31, 2007 decreased $4.1 million or 28.0% from
December 31, 2006 and $1.4 million or 11.6% from a year earlier due primarily
to the treatment of deferred deposit agent commissions as a component of
customer deposits in 2007 and as an other asset in prior periods.
    Other liabilities include the future servicing liability of securitized
mortgages, realty taxes collected from borrowers, accounts payable, income
taxes payable in 2006 and periodic drawings under the Company's bank line of
credit facility. No drawings were made on this line at March 31, 2007,
December 31, 2006 or at March 31, 2006. In 2007, income tax installments paid
exceed tax liabilities and are recorded as an other asset.

    Shareholders' Equity

    Total shareholders' equity increased $8.8 million or 5.9% to
$158.5 million at March 31, 2007 from $149.7 million at December 31, 2006 and
grew 21.3% compared to March 31, 2006. As a result of the exercise of employee
stock options, 113,000 common shares were issued for cash proceeds of
$2.0 million which was added to common share capital during the first quarter
of 2007 compared to 90,705 common shares issued and $1.3 million cash proceeds
added to common share capital in the first quarter of 2006. At March 31, 2007,
the Company had 12,037,468 common shares issued and outstanding, up 164,823 or
1.4% from 11,872,645 common shares issued and outstanding at March 31, 2006.
    Shareholders' equity now includes accumulated other comprehensive loss as
a result of the adoption of the new accounting policies outlined in note 2 to
the financial statements.
    Accumulated other comprehensive income includes the after tax change in
unrealized gains and losses on available-for-sale investments and retained
interests - loan securitizations. This category of equity appears for the
first time in the first quarter of 2007 and prior periods have not been
restated. At March 31, 2007 these amounts were an accumulated unrealized gain
of $0.26 million on investments - primarily on preferred shares - and an
accumulated unrealized loss of $0.32 million on loan securitizations -
retained interests.
    Also, as a result of adopting these new accounting policies, the opening
balance of retained earnings has been adjusted to reflect the January 1, 2007
fair values of assets and liabilities required to be, or designated to be,
characterized as held-for-trading. Changes in the fair values of these
held-for-trading assets and liabilities, which include CMHC mortgages to be
securitized, mortgage commitments on CMHC mortgages to be securitized and
derivative financial instruments, will flow through the statement of income.
    On April 30, 2007, the Company closed an equity issue with a group of
underwriters for the issue of 769,231 common shares at $32.50 per share for
gross proceeds of $25.0 million. These funds, net of the underwriters'
commissions and issue expenses will be used to fund the future growth of the
business by increasing regulatory Tier 1 capital in Equitable Trust and for
general corporate purposes.

    Capital Management

    The Company maintains a capital management policy to govern the quality
and quantity of capital utilized by Equitable Trust in its regulated
operations. The objective of the policy is to ensure that adequate capital
requirements are met, while providing sufficient return to investors. As well,
the Company requires sufficient regulatory capital to meet the needs of its
asset growth targets. Equitable Trust's total capital ratio at March 31, 2007
was 11.2% compared to 10.6% at December 31, 2006 and 11.2% at March 31, 2006.
    Table 6 following summarizes Equitable Trust's regulatory capital
position.Table 6: Capital measures (relating solely to Equitable Trust):

    ($ thousands)
                                        March 31,  December 31,     March 31,
                                            2007          2006          2006

    Tier 1 capital                       157,958       148,466       128,859
    Tier 2 capital (eligible amount)      79,313        60,000        47,603
    Total capital                        237,271       208,466       176,462
    Total risk weighted assets         2,113,935     1,967,779     1,569,874
    Total capital as a % of total
     risk weighted assets                  11.2%         10.6%         11.2%
    Authorized asset to capital
     multiple                              17.5x         17.5x         17.5x
    Utilized asset to capital multiple     12.1x         12.6x         12.0x


    The Company invested in the common share capital of Equitable Trust on
April 30, 2007 in the manner outlined in Shareholders' Equity section of this
MD&A. This represents a significant addition to Equitable Trust's Tier 1
capital.

    Eight Quarter Summary

    Table 7 summarizes the Company's performance over the last eight quarters.
Assets, revenues, income and ROAE have all continued to improve sequentially
over the eight quarters ended March 31, 2007. Generally, the real estate
market experiences periods of seasonality at different times of the year, but
traditionally, this has had little impact on Equitable's results.

    Table 7: Summary of Quarterly Results

    ($ thousands, except assets and per share amounts)

                                    2007                 2006
                                      Q1       Q4       Q3       Q2       Q1

    Total assets at quarter end -
     $ millions                    2,866    2,626    2,414    2,244    2,113
    Total revenues - TEB(1)       43,888   41,941   38,552   34,885   31,604
    Total revenues                42,668   40,819   37,572   34,008   30,820
    Net interest income -
     TEB(1)(2)                    16,097   15,359   14,435   13,463   12,143
    Net interest income(2)        14,877   14,237   13,455   12,586   11,359
    Net earnings                   7,992    7,752    7,144    6,609    5,833
    EPS - basic                   $ 0.67   $ 0.65   $ 0.60   $ 0.56   $ 0.49
    EPS - diluted                 $ 0.66   $ 0.64   $ 0.59   $ 0.55   $ 0.49
    ROAE                           21.1%    21.0%    20.3%    19.8%    18.6%


                                           2005
                                      Q4       Q3       Q2

    Total assets at quarter end -
     $ millions                    2,012    1,821    1,788
    Total revenues - TEB(1)       28,881   26,530   25,039
    Total revenues                27,867   25,667   24,320
    Net interest income -
     TEB(1)(2)                    12,017   10,439    9,843
    Net interest income(2)        11,003    9,576    9,124
    Net earnings                   5,562    4,985    4,728
    EPS - basic                   $ 0.47   $ 0.42   $ 0.40
    EPS - diluted                 $ 0.46   $ 0.42   $ 0.40
    ROAE                           18.1%    16.8%    16.7%

    Notes:
    (1) For an explanation of TEB see the beginning of this Management's
        Discussion and Analysis.
    (2) See explanation of treatment of deposit agent commissions at the
        beginning of this MD&A.FORWARD-LOOKING STATEMENTS

    Certain statements in this Management's Discussion and Analysis ("MD&A")
contain forward-looking information within the meaning of applicable
securities laws ("forward-looking statements"). Such forward-looking
statements involve known and unknown risks, uncertainties and other factors
that may cause the actual results, performance or achievements of Equitable
Group Inc., or developments in Equitable's business or in its industry, to
differ materially from the anticipated results, performance, achievements or
developments expressed or implied by such forward-looking statements.
Forward-looking information includes all disclosure regarding possible events,
conditions or results of operations that is based on assumptions about future
economic conditions and courses of action. Forward-looking statements may also
include, without limitation, any statement relating to future events,
conditions or circumstances. Equitable cautions you not to place undue
reliance upon any such forward-looking statements, which speak only as of the
date they are made.
    Forward-looking statements relate to, among other things, realizing the
value of Equitable's assets, capitalizing on market demand for Equitable's
mortgage products, executing Equitable's strategic plan, and the demand for
Equitable's deposit products. The risks and uncertainties that may affect
forward-looking statements include, among others, risks involved in
fluctuating interest rates and general economic conditions, legislative and
regulatory developments, the nature of Equitable's customers, competition and
other risks detailed from time to time in Equitable's filings with Canadian
provincial securities regulators, including Equitable's Annual Report and
Annual Information Form dated February 26, 2007. Forward-looking statements
are based on management's current plans, estimates, projections, beliefs and
opinions, and Equitable does not undertake to update forward-looking
statements should assumptions related to these plans, estimates, projections,
beliefs and opinions change.

    RISKS AND UNCERTAINTIES

    The Company faces a number of risks. Please refer to pages 36 to 42 in
the Company's 2006 Annual Report, page 9 in the December 31, 2006 Annual
Information Form and pages 7 to 11 of the Short Form Prospectus dated
April 23, 2007, all of which are available at www.sedar.com for further
information on risks of the business. The risk factors below are not
all-inclusive, but do include risks which vary as the assets and liabilities
of the Company change.
    Liquidity risk relates to the Company's ability to redeem its deposit
obligations as they come due or otherwise arise, and to fund asset commitments
as scheduled.
    Interest rate risk involves the Company's sensitivity of earnings to
sudden changes in interest rates.
    Credit risk is the risk of financial loss resulting from the failure of a
borrower or any counterparty to fully honour its financial or contractual
obligations.

    Liquidity Risk Management

    Mitigating liquidity risk requires the Company to match its asset and
liability maturities and to keep sufficient liquid assets on hand at all times
to meet mortgage funding and investment purchase commitments, mortgage
renewals or extensions and any GIC redemptions. On a daily basis, the Company
raises funds based upon asset growth, target liquidity levels and forecasts of
its future liquidity requirements. Eligible liquid assets for regulatory
purposes consist of cash and cash equivalents and debt instruments guaranteed
by governments. Assets eligible for regulatory liquidity purposes were
$315.2 million at March 31, 2007 compared to $260.5 million at December 31,
2006 and $164.2 million at March 31, 2006. Total liquid resources, including
marketable portfolio securities, were $508.6 million at March 31, 2007
compared to $427.2 million as at December 31, 2006 and $278.9 million at
March 31, 2006.

    Interest Rate Risk Management

    The Company's primary method of mitigating interest rate risk is matching
asset and liability maturity or re-pricing terms, closely monitoring interest
rates and acting upon any mismatch in a timely fashion, to ensure that any
sudden or prolonged change in interest rates does not significantly affect the
Company's net interest income.
    The Company manages its asset and liability maturity or re-pricing
profile by adjusting GIC interest rates on a daily basis to raise GICs with
the appropriate maturities to best match the maturity or re-pricing profile of
assets being funded. The Company closely monitors the effects of possible
interest rate changes on both net interest income for the following twelve
month period and on the economic value of shareholders' equity using simulated
interest rate change sensitivity modeling and assumptions of borrower and
depositor behavior based upon historical experience. As estimated by the
Company, an immediate and sustained 1% increase in interest rates as of
March 31, 2007, would positively impact net interest income before any tax
effect for the following twelve month period by $2.3 million. If interest
rates were to decrease 1% on an immediate and sustained basis as at March 31,
2007, and if cashable GICs were to stay on the books until maturity in the
manner forecast by management, the estimated negative impact to net interest
income before any tax effect for the following twelve month period would be
$5.8 million.
    The Company has adopted a consistent and disciplined approach to hedging
the interest rate risk attached to its MBS activities. MBS interest rate risk
refers to the risk that interest rates will vary between the time a mortgage
interest rate is committed to and the time the underlying mortgage is
securitized and that the change in rates will reduce the value of the mortgage
being sold. The Company hedges the interest rate risk for all mortgages that
are targeted to be sold through the CMHC-MBS program. Hedging protects the
Company from losses due to changes in interest rates during the relevant
period. The hedge is initiated on the date that the mortgage is priced and
committed to and terminated on the date that the pool is sold. Changes in
interest rates affect the price at which the mortgage pool is sold and
inversely affects the value of the hedge. These hedges are derivative
financial instruments and are required to be carried at fair value under the
new financial instrument accounting policies.

    Credit Risk Management

    Under the Company's lending criteria, all mortgages are individually
evaluated under a risk rating system to determine the level of risk
attributable to each loan.
    In accordance with sound business and financial practices, Equitable
Trust's credit risk policies include the annual review of all commercial loans
and mortgages. In addition, all loans that are in arrears are reviewed to
determine whether any should be classified as doubtful or as a potential loss.
Generally, a loan is classified as impaired when management is of the opinion
that there is no longer reasonable assurance of full and timely collection of
principal and interest. On a regular basis, management reviews all loans in
these categories in order to determine the appropriate loan loss reserves
required. Reviews of credit policies and lending practices are regularly
undertaken by senior management and approved by Equitable Trust's Investment
Committee.
    Equitable Trust's Investment Committee meets on a quarterly basis to
review the status of the Company's investments portfolio, the transactions
during the past quarter and the portfolio characteristics such as term, credit
rating and type of security. Investment policies are reviewed regularly by
Equitable Trust's Investment Committee to ensure that the type, credit
quality, duration and concentration of investments in marketable securities
are appropriate, prudent and consistent with the risk profile targets adopted
by the Company. P-2 and better rated securities comprised 77.5% of the
preferred share equity securities portfolio at March 31, 2007, compared to
75.9% a year earlier.
    The Company holds preferred shares of BCE Inc. with an amortized cost of
approximately $33 million. Subsequent to March 31, 2007, there have been
reports that certain Canadian pension funds and other institutions are
exploring the possibility of acquiring BCE Inc. As a result, since March 31,
2007, the market value of the preferred shares issued by BCE Inc. has fallen.
It is premature to forecast the outcome of these events.

    Changes in Accounting Policies

    Significant accounting policies are detailed on pages 51 to 67 of the
Company's 2006 Annual Report. Effective January 1, 2007, the Company adopted
new accounting policies issued by the Canadian Institute of Chartered
Accountants: Financial Instruments - Recognition and Measurement, Hedges,
Comprehensive Income and Financial Instruments - Disclosure and Presentation.
A new section of shareholders' equity - Accumulated other comprehensive
income - has been created by virtue of the adoption of these new standards.
Please refer to note 2 of the interim unaudited consolidated financial
statements for further details on these accounting changes.

    Changes in Internal Control over Financial Reporting:

    Effective March 1st, 2007, Andrew Moor was appointed as the Company's
President and Chief Executive Officer, and Geoffrey Bledin, Equitable's former
President and Chief Executive Officer, was appointed Vice Chairman of the
Company. Also, effective February 16, 2007, John Harry, Vice President, Credit
and Risk Management resigned from Equitable. With the exception of these
events, there were no changes in the Company's internal control over financial
reporting that occurred during the first quarter ended March 31, 2007 that
have materially affected, or are reasonably likely to materially affect, the
Company's internal control over financial reporting.

    Updated Share Information

    As a result of the issue of 769,231 common shares on April 30, 2007, the
Company now has 12,806,699 common shares issued and outstanding. There are
unexercised options to purchase 762,011 common shares and a further
518,659 common shares are available for options grants.

    OUTLOOK

    The Company's outlook, expressed in its annual MD&A, remains intact.
    Demand for residential and commercial mortgage financing remains strong
in the Company's primary niche markets and the interest rate environment
remains supportive to the housing industry. Strong resale activity in the
Greater Toronto Area and in Alberta, the Company's two main geographical
target markets, continues unabated. The prime rate was stable at 6.0%
throughout first quarter 2007 and certain economists forecast little or no
change during the remainder of 2007; all of which would tend to indicate a
strong year in the mortgage lending business. However, as also expressed in
the Company's annual MD&A for 2006, overall market conditions could prove to
be more challenging in 2007 than in 2006 depending on interest rate and
economic movements.
    During this time of strong demand, the Company remains committed to its
disciplined lending practices and intends to continue to build a quality
portfolio that is well balanced between single family, multi-unit residential
and commercial mortgage lending. The Company will continue to investigate and
analyze new geographical market opportunities and will cautiously expand its
single family dwelling operations when opportunities are identified. The
Company continues to advance its growth initiative in Alberta. In the first
quarter of 2007, Equitable originated $24.0 million in single family dwelling
mortgages in Alberta.
    Based on Equitable's first quarter performance, we believe we have
established a solid foundation to achieve our growth and profit objectives for
the entire year. Although it's still early going, and some analysts continue
to forecast a soft landing for the real estate market sometime in 2007,
activity levels so far in the second quarter are strong and we continue to
position ourselves to take advantage of these conditions through our
disciplined niche lending practices. We look forward to making the most of our
opportunities as we progress farther into the year.
    To summarize, management continues to be committed to the 2007 targets
and performance objectives outlined in its 2006 Annual Report and in this
Management's Discussion and Analysis.

    April 30, 2007


    The interim unaudited consolidated financial statements and notes have
not been reviewed by the Company's auditors but have been reviewed and
approved by the Company's Audit Committee and Board of Directors.CONSOLIDATED BALANCE SHEET
    AS AT MARCH 31, 2007 - UNAUDITED
    With comparative figures as at December 31, 2006 and March 31, 2006
    (In thousands of dollars)

    -------------------------------------------------------------------------
                                        March 31,  December 31,     March 31,
                                            2007          2006          2006
    -------------------------------------------------------------------------

    Assets

    Cash and cash equivalents           $165,219      $107,842       $80,179
    Investments (note 3)                 343,351       319,317       198,719
    Loan securitizations - retained
     interests (note 4)                   48,224        48,271        51,953
    Mortgages receivable (note 5)      2,299,043     2,135,662     1,770,110
    Other assets (note 6)                 10,556        14,663        11,939
    -------------------------------------------------------------------------
                                      $2,866,393    $2,625,755    $2,112,900
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities and Shareholders'
     Equity

    Liabilities:

    Customer deposits (note 7)        $2,604,530    $2,389,755    $1,912,705
    Future income taxes payable            5,679         4,700         6,032
    Other liabilities (note 8)            15,737        21,564        15,861
    Bank term loan (note 10)              47,250        34,750        19,750
    Subordinated debt (note 11)           34,700        25,250        27,853
    -------------------------------------------------------------------------
                                       2,707,896     2,476,019     1,982,201

    Shareholders' equity:

    Capital stock (note 12)               60,050        57,849        56,959
    Contributed surplus (note 12)          1,485         1,539         1,323
    Retained earnings                     97,025        90,348        72,417
    Accumulated other comprehensive
     (loss) (note 13)                        (63)            -             -
    -------------------------------------------------------------------------
                                         158,497       149,736       130,699

    -------------------------------------------------------------------------
                                      $2,866,393    $2,625,755    $2,112,900
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes to interim unaudited consolidated financial
    statements.



    CONSOLIDATED STATEMENT OF INCOME
    FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2007 - UNAUDITED
    With comparative figures for the three month period ended March 31, 2006
    (In thousands of dollars, except per share amounts)

    -------------------------------------------------------------------------
                                                        Three months ended
                                                      March 31,     March 31,
                                                          2007          2006
    -------------------------------------------------------------------------

    Interest income:
      Mortgages                                        $35,773       $26,405
      Investments                                        3,154         1,754
      Other                                              1,476         1,036
    -------------------------------------------------------------------------
                                                        40,403        29,195
    Interest expense:
      Customer deposits                                 24,354        16,911
      Subordinated debt                                    557           600
      Term loan                                            615           325
      Deposit agent commissions (note 2)                 1,398             -
    -------------------------------------------------------------------------
                                                        26,924        17,836
    -------------------------------------------------------------------------

    Interest income, net                                13,479        11,359

    Provision for credit losses (note 5)                   225           225
    -------------------------------------------------------------------------
    Net interest income after provision for
     credit losses                                      13,254        11,134

    Other income:
      Mortgage commitment income and other fees            910           674
      Net gain (loss) on sale or redemption
       of investments                                      (15)            2
      Loan securitizations - retained
       interests (note 4)                                1,370           949
    -------------------------------------------------------------------------

                                                         2,265         1,625
    -------------------------------------------------------------------------
    Net interest income and other income                15,519        12,759

    Non-interest expenses:
      Compensation and benefits                          2,581         2,048
      Deposit agent commissions (note 2)                     -         1,045
      Other                                              1,912         1,306
    -------------------------------------------------------------------------
                                                         4,493         4,399

    Income before income taxes                          11,026         8,360
    Income taxes (recovery) (note 9)
      Current                                            2,055         3,033
      Future                                               979          (506)
    -------------------------------------------------------------------------
                                                         3,034         2,527
    -------------------------------------------------------------------------

    Net income                                          $7,992        $5,833
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings per share:
      Basic                                              $0.67         $0.49
      Diluted                                            $0.66         $0.49

    Weighted average number of shares outstanding:
      Basic                                         11,953,318    11,802,679
      Diluted                                       12,191,258    12,007,843

    -------------------------------------------------------------------------
    See accompanying notes to interim unaudited consolidated financial
    statements.



    CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
    FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2007 - UNAUDITED
    With comparative figures for the three month period ended March 31, 2006
    (In thousands of dollars)

    -------------------------------------------------------------------------
                                                        Three months ended
                                                      March 31,     March 31,
                                                          2007          2006
    -------------------------------------------------------------------------

    Common shares:
      Balance, beginning of period                     $57,849       $55,510
      Common shares issued (note 12)
        Proceeds from exercise of employee
         stock options                                   1,999         1,325
        Transfer from contributed surplus relating
         to the exercise of stock options                  202           124
    -------------------------------------------------------------------------
      Balance, end of period                            60,050        56,959

    Contributed surplus:
      Balance, beginning of period                       1,539         1,327
      Stock-based compensation (note 12)                   148           120
      Transfer to common shares relating to the
       exercise of stock options                          (202)         (124)
    -------------------------------------------------------------------------
      Balance, end of period                             1,485         1,323

    Retained earnings:
      Balance, beginning of period                      90,348        67,771
      Transition adjustment - Financial
       instruments (note 2)                               (113)            -
      Net income                                         7,992         5,833
      Dividends                                         (1,202)       (1,187)
    -------------------------------------------------------------------------
      Balance, end of period                            97,025        72,417

    Accumulated other comprehensive income:
      Balance, beginning of period                           -             -
      Transition adjustment - Financial
       instruments (note 2)                                302             -
      Other comprehensive income (loss) (note 13)         (365)            -
    -------------------------------------------------------------------------
      Balance, end of period                               (63)            -

    Total shareholders' equity                        $158,497      $130,699
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
    FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2007 - UNAUDITED
    (In thousands of dollars)

    -----------------------------------------------------------
                                            Three months ended
                                                March 31, 2007
    -----------------------------------------------------------

    Net income                                          $7,992
    Other comprehensive income (loss)
    Available-for-sale assets, change in
     unrealized gains (losses) (note 13)                     9
    Reclassification to earnings for realization
     of available-for-sale assets fair value
     changes (note 13)                                    (374)
    -----------------------------------------------------------
    Other comprehensive income (loss)                     (365)
    -----------------------------------------------------------
    Comprehensive income                                $7,627
    -----------------------------------------------------------
    -----------------------------------------------------------
    See accompanying notes to interim unaudited consolidated financial
    statements.



    CONSOLIDATED STATEMENT OF CASH FLOWS
    FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2007 - UNAUDITED
    With comparative figures for the three month period ended March 31, 2006
    (In thousands of dollars)

    -------------------------------------------------------------------------
                                                        Three months ended
                                                      March 31,     March 31,
                                                          2007          2006
    -------------------------------------------------------------------------

    Cash provided by (used in):

    Operating activities:
      Net income                                        $7,992        $5,833
      Non-cash items:
        Financial instruments - fair value
         adjustments and reclassifications                  98             -
        Loan securitizations - gains on sale
         of mortgages                                     (703)         (277)
        Amortization                                       200           109
        Provision for credit losses                        225           225
        Net loss (gain) on sale or redemption
         of investments                                     15            (2)
        Future income taxes                                979          (506)
        Stock-based compensation                           148           120
        Amortization of premiums on investments          1,071           881
    -------------------------------------------------------------------------
                                                        10,025         6,383

      Changes in operating assets and liabilities:
        Other assets                                     4,346        (1,414)
        Other liabilities                               (5,830)       (5,169)
    -------------------------------------------------------------------------
                                                         8,541          (200)

    Financing activities:
      Increase in customer deposits                    214,775       103,750
      Issuance (redemption) of subordinated
       debt, net                                         9,450        (3,841)
      Issuance of bank term loan                        12,500             -
      Dividends paid on common shares                   (1,202)       (1,187)
      Issuance of common shares                          1,999         1,325
    -------------------------------------------------------------------------
                                                       237,522       100,047

    Investing activities:
      Purchase of investments                          (61,282)      (19,960)
      Proceeds on sale or redemption of investments     36,569        14,791
      Investments in mortgages receivable             (665,855)     (590,285)
      Mortgage principal repayments                    400,411       395,172
      Proceeds from loan securitizations                98,536        99,966
      Loan securitizations - retained interests          3,293         3,474
      Purchase of capital assets                          (358)          (40)
    -------------------------------------------------------------------------
                                                      (188,686)      (96,882)

    -------------------------------------------------------------------------
    Increase in cash and cash equivalents               57,377         2,965

    Cash and cash equivalents, beginning of period     107,842        77,214
    -------------------------------------------------------------------------
    Cash and cash equivalents, end of period          $165,219       $80,179
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Comprised of:
      Deposits at banks                                 53,652        75,044
      Short term investments                           118,440        15,000
      Cheques and other items in transit                (6,873)       (9,865)
    -------------------------------------------------------------------------
                                                      $165,219       $80,179
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Supplemental cash flow information:
      Interest paid                                    $24,346       $15,885
      Income taxes paid                                  7,046         6,447

    -------------------------------------------------------------------------
    See accompanying notes to interim unaudited consolidated financial
    statements.


    NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
    THREE MONTH PERIOD ENDED MARCH 31, 2007
    (In thousands of dollars, except per share amounts)
    -------------------------------------------------------------------------


    1.  Basis of preparation:

    These interim unaudited consolidated financial statements should be read
    in conjunction with the notes to the consolidated financial statements
    for the year ended December 31, 2006 as set out on pages 51 to 67 of the
    2006 Annual Report. These interim unaudited consolidated financial
    statements have been prepared in accordance with Canadian generally
    accepted accounting principles (GAAP) using the same accounting policies
    and methods of computation as were used in the preparation of the
    consolidated financial statements for the year ended December 31, 2006
    except as described in note 2.

    These interim unaudited consolidated financial statements reflect amounts
    which must, of necessity, be based on the best estimates and judgment of
    management with appropriate consideration as to materiality. Actual
    results may differ from these estimates.

    Certain comparative figures have been reclassified to conform with the
    current period's presentation.

    2.  Changes in accounting policy:

    Effective January 1, 2007, the Company adopted new accounting standards
    issued by the Canadian Institute of Chartered Accountants ("CICA"):
    Comprehensive Income, Financial Instruments - Recognition and
    Measurement, Hedges and Financial Instruments - Disclosure and
    Presentation. As a result of adopting these standards, a new category,
    accumulated other comprehensive income (loss), has been added to
    shareholders' equity and certain unrealized gains and losses are reported
    in accumulated other comprehensive income (loss) until realization.

    As a result of adopting these new accounting standards, certain financial
    assets and liabilities are measured at fair value with the remainder
    recorded at amortized cost. Under the new standards, adjustments to the
    previously recorded amounts have been made either to retained earnings or
    to accumulated other comprehensive income (loss) as at January 1, 2007.
    The Company has not restated prior period consolidated financial
    statements.

    Significant aspects of the Company's implementation of these new
    standards include:

        -  Investments in preferred shares, government bonds, treasury bills
           and notes and loan securitizations - retained interests have been
           designated as available-for-sale and are reported on the balance
           sheet at fair value with changes in fair value included in other
           comprehensive income, net of income taxes.

        -  Derivatives, government guaranteed mortgages held for
           securitization and commitments to fund government guaranteed
           mortgages for securitization have been recorded on the balance
           sheet at fair value, with changes in fair value included in loan
           securitizations - retained interests in the statement of income.

        -  Cash and cash equivalents, mortgages, with the exception of
           government guaranteed mortgages held for securitization, customer
           deposits, bank term loans and subordinated debt continue to be
           recorded at amortized cost using the effective interest method.

        -  Deferred deposit agent commissions are accounted for as a
           component of customer deposits with the amortization of these
           commissions calculated on an effective yield basis as a component
           of interest expense. In prior periods, deferred deposit agent
           commissions were reported as an other asset, with amortization
           being reported as a non-interest expense.

    For financial instruments measured at fair value where active market
    prices are available, bid prices are used for financial assets and ask
    prices used for financial liabilities. For those financial instruments
    measured at fair value where an active market is not available, fair
    value estimates are determined using valuation methods which refer to
    observable market data and include discounted cash flow analysis and
    other commonly used valuation techniques.

    Transition adjustments - financial instruments recorded at January 1,
    2007 relate to:

    -------------------------------------------------------------------------
                                                          Income
                                               Gross       Taxes         Net
    -------------------------------------------------------------------------
    Retained earnings - increase (decrease)
      Fair value adjustment of government
       guaranteed mortgages held for
       securitization                            $(5)        $(2)        $(3)
      Fair value of government guaranteed
       mortgage  commitments for
       securitization                            284         103         181
      Fair value of derivatives                 (456)       (165)       (291)
                                              -------------------------------
                                               $(177)       $(64)      $(113)

    Accumulated other comprehensive
     income (loss)
      Available-for-sale investments,
       unrealized gains  (losses)               $850        $307        $543
      Available-for-sale loan
       securitizations - retained interests,
       unrealized gains (losses)                (378)       (137)       (241)
                                              -------------------------------
                                                $472        $170        $302
    -------------------------------------------------------------------------

    3.  Investments:

    (a) Carrying value:

    -------------------------------------------------------------------------
                                            March 31, December 31,  March 31,
                                                2007        2006        2006
    -------------------------------------------------------------------------
    Preferred shares                        $193,326    $166,669    $113,596
    Government bonds, treasury bills
     and notes                               150,025     152,648      84,004
    Common shares                                  -           -       1,119
    -------------------------------------------------------------------------
                                            $343,351    $319,317    $198,719
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Investments are accounted for at settlement date. Net unrealized gains
    (losses) included in carrying value on the balance sheet as at March 31,
    2007 as required by the change in accounting policies described in note 2
    are as follows:

    -------------------------------------------------------------------------
                                                              March 31, 2007
    -------------------------------------------------------------------------

    Preferred shares                                                    $523
    Government bonds, treasury bills and notes                          (117)
    -------------------------------------------------------------------------
                                                                        $406
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (b) Derivative financial instruments:

    The Company's equity securities contain embedded derivatives which are
    bifurcated from the investment and valued separately. These bifurcated
    derivatives do not currently have significant value and therefore they
    are not reported separately.

    (c) Credit facility:

    The Company has a bank line of credit facility. Under this facility, the
    Company may borrow up to $35.0 million (December 31, 2006 -
    $35.0 million, March 31, 2006 - $35.0 million) for short-term liquidity
    purposes. The facility is secured by the Company's investments in
    preferred shares. There was no outstanding balance on the line as at
    March 31, 2007 (December 31, 2006 - $Nil, March 31, 2006 - $Nil).

    4.  Loan securitizations:

    (a) Retained interests:

    The Company securitizes Canadian government guaranteed residential
    mortgage loans through the creation of mortgage-backed securities and
    removes the mortgages from the balance sheet. As at March 31, 2007,
    outstanding securitized mortgages totaled $1,815,824 (December 31, 2006 -
    $1,807,479, March 31, 2006 - $1,927,741), substantially all of which are
    multi-family residential mortgage loans.

    During the period, the Company securitized Canadian government guaranteed
    residential mortgage loans and received net cash proceeds of $98,536
    (March 31, 2006 - $99,966). The Company retained the rights to future
    excess interest on the residential mortgages valued at $4,498 (March 31,
    2006 - $4,000) and received net cash flows on interests retained of
    $3,960 (March 31, 2006 - $4,146). The Company retained the responsibility
    for servicing the mortgages and enjoys the right to receive the future
    excess interest spread. The Company has outsourced the servicing of the
    transferred loans to an unrelated third party and has recorded a
    servicing liability of $729 (March 31, 2006 - $490) relating to loans
    securitized during the period.

    Retained interests are accounted for at settlement date. The fair value
    of the retained interests is determined with internal valuation models
    using market data inputs, where possible, by discounting the expected
    future cash flows at like term Government of Canada bond interest rates
    plus a spread. Net unrealized gains (losses) included in carrying value
    on the balance sheet as required by the change in accounting policies
    described in note 2 are as follows:

    -------------------------------------------------------------------------
                                                              March 31, 2007
    -------------------------------------------------------------------------

    Loan securitizations - retained interests                         $ (504)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The components of income from loan securitizations - retained interests
    are as follows:

    -------------------------------------------------------------------------
                                                        March 31,   March 31,
                                                            2007        2006
    -------------------------------------------------------------------------

    Gain on sale of mortgages                               $703        $277
    Excess interest net of servicing fee                     667         672

    -------------------------------------------------------------------------
                                                          $1,370        $949
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    There are no expected credit losses, as the mortgages underlying the
    retained interests are government guaranteed.

    (b) Derivative financial instruments:

    The Company enters into hedging transactions to manage market interest
    rate exposures on government guaranteed mortgages held for securitization
    and commitments for government guaranteed mortgages to be securitized,
    typically for periods of up to 90 days. Hedge instruments outstanding at
    March 31, 2007, December 31, 2006 and March 31, 2006 relating to forward
    contracts on Government of Canada bonds, where the counterparties for
    which are chartered banks, are as follows:

    -------------------------------------------------------------------------
                      March 31, 2007   December 31, 2006      March 31, 2006
    -------------------------------------------------------------------------
    Bond term     Notional      Fair  Notional      Fair  Notional      Fair
     (years)        amount     value    amount     value    amount     value
    -------------------------------------------------------------------------

    1 to 5         $11,400   $11,284   $14,400   $14,289   $14,000   $13,977
    5 to 10         17,000    17,389    21,800    22,444    47,500    49,898

    -------------------------------------------------------------------------
                   $28,400   $28,673   $36,200   $36,733   $61,500   $63,875
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The hedge instruments are fair value hedges and are required to be
    classified as held-for-trading and carried at fair value. The fair values
    of the hedge instruments are determined by reference to the ask side of
    the related Government of Canada bonds as at the reporting date. The
    period end fair value of hedges of $81 is disclosed in note 6, other
    assets.

    (c) Mortgage commitments:

    Mortgage commitments for government guaranteed mortgages to be
    securitized are designated as held-for-trading and are carried at fair
    value. Fair value is determined by reference to the bid side of a like
    term Government of Canada bond plus a spread between the bond yield and
    the mortgage rate. Changes in fair value reflect changes in interest
    rates which have occurred since the mortgage interest rate was committed
    to. The period end fair value of mortgage commitments of ($22) is
    disclosed in note 8, other liabilities.

    5.  Mortgages receivable:

    (a) Mortgages receivable and impaired mortgages:

    -------------------------------------------------------------------------
    March 31, 2007                  Allowance for credit losses
                             -----------------------------------------
                     Gross amount  Specific   General     Total   Net amount
    -------------------------------------------------------------------------

    Residential
     mortgages         $1,411,618      $360    $5,519    $5,879   $1,405,739
    Other mortgages       517,317         -     1,798     1,798      515,519
    Mortgages held for
     securitization
     or for sale          367,479         -       565       565      366,914
    Accrued interest       10,871         -         -         -       10,871
    -------------------------------------------------------------------------
                       $2,307,285      $360    $7,882    $8,242   $2,299,043
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    December 31, 2006               Allowance for credit losses
                             -----------------------------------------
                     Gross amount  Specific   General     Total   Net amount
    -------------------------------------------------------------------------

    Residential
     mortgages         $1,373,842      $160    $5,168    $5,328   $1,368,514
    Other mortgages       472,635         -     2,047     2,047      470,588
    Mortgages held for
     securitization
     or for sale          287,063         -       671       671      286,392
    Accrued interest       10,168         -         -         -       10,168
    -------------------------------------------------------------------------
                       $2,143,708      $160    $7,886    $8,046   $2,135,662
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    March 31, 2006                  Allowance for credit losses
                             -----------------------------------------
                     Gross amount  Specific   General     Total   Net amount
    -------------------------------------------------------------------------

    Residential
     mortgages         $1,266,496    $1,670    $4,156    $5,826   $1,260,670
    Other mortgages       373,192         -     1,309     1,309      371,883
    Mortgages held for
     securitization
     or for sale          129,916         -       257       257      129,659
    Accrued interest        7,898         -         -         -        7,898
    -------------------------------------------------------------------------
                       $1,777,502    $1,670    $5,722    $7,392   $1,770,110
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Included in mortgages held for securitization or for sale are Canadian
    Government insured mortgages of $16,409, as at March 31, 2007
    (December 31, 2006 - $18,551, March 31, 2006 - $26,943). These Government
    of Canada guaranteed loans held for securitization have been designated
    as held-for-trading and are carried at fair value determined by reference
    to the bid side of a like term Government of Canada bond plus a spread
    between the bond yield and the mortgage rate. Changes in fair value
    reflect changes in interest rates which have occurred since the mortgage
    interest rate was committed to. The period end fair value adjustment of
    Government of Canada guaranteed loans held for securitization is ($64).
    Loans held for sale include loans which are to be pooled and discharged
    subsequent to the balance sheet date at their investment cost. These
    loans are carried at the lower of cost or fair value. There are no
    foreclosed assets held for sale at March 31, 2007, December 31, 2006 and
    March 31, 2006.

    The principal outstanding and net carrying amount of mortgages receivable
    classified as impaired as at March 31, 2007 aggregated $3,272
    (December 31, 2006 - $1,138, March 31, 2006 - $2,877) and $2,912
    (December 31, 2006 - $978, March 31, 2006 - $1,207), respectively.

    The Company has commitments to fund a total of $314,526 (December 31,
    2006 - $279,278, March 31, 2006 - $282,279) of mortgages as at the end of
    the period.

    (b) Allowance for credit losses:

    -------------------------------------------------------------------------
                                                              March 31, 2007
    -------------------------------------------------------------------------
                                        Specific       General
                                       allowance     allowance         Total
    -------------------------------------------------------------------------

    Balance, beginning of period            $160        $7,886        $8,046
    Provision for credit losses              229            (4)          225
    Recoveries                                21             -            21
    Realized losses                          (50)            -           (50)

    -------------------------------------------------------------------------
    Balance, end of period                  $360        $7,882        $8,242
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
                                                              March 31, 2006
    -------------------------------------------------------------------------
                                        Specific       General
                                       allowance     allowance         Total
    -------------------------------------------------------------------------

    Balance, beginning of period          $2,087        $5,080        $7,167
    Provision for credit losses             (417)          642           225
    Recoveries                                 -             -             -
    Realized losses                            -             -             -

    -------------------------------------------------------------------------
    Balance, end of period                $1,670        $5,722        $7,392
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    6.  Other assets:

    -------------------------------------------------------------------------
                                        March 31,  December 31,     March 31,
                                            2007          2006          2006
    -------------------------------------------------------------------------

    Prepaid expenses and other            $2,834        $2,378        $1,490
    Capital assets                         2,421         2,263         1,433
    Other receivables                      2,099         1,868         1,777
    Accrued interest on non-mortgage
     assets                                1,701         1,866         1,234
    Income taxes recoverable               1,420             -             -
    Derivative financial instruments
     - hedges (note 4)                        81             -             -
    Deferred deposit agent commissions
     (note 2)                                  -         6,288         6,005

    -------------------------------------------------------------------------
                                         $10,556       $14,663       $11,939
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    7.  Customer deposits:

    -------------------------------------------------------------------------
                                        March 31,  December 31,     March 31,
                                            2007          2006          2006
    -------------------------------------------------------------------------

    Cashable GICs, payable on demand    $697,544      $570,455      $367,202
    GICs with fixed maturity dates     1,859,436     1,766,011     1,506,547
    Accrued interest                      54,436        53,289        38,956
    Deferred deposit agent commissions
     (note 2)                             (6,886)            -             -

    -------------------------------------------------------------------------
                                      $2,604,530    $2,389,755    $1,912,705
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    8.  Other liabilities:

    -------------------------------------------------------------------------
                                        March 31,  December 31,     March 31,
                                            2007          2006          2006
    -------------------------------------------------------------------------

    Accounts payable and accrued
     liabilities                          $6,515        $6,860        $4,887
    Securitized mortgage servicing
     liability                             6,367         6,044         6,547
    Mortgagor realty taxes                 2,833         5,089         3,175
    Mortgage commitments (note 4)             22             -             -
    Income taxes payable                       -         3,571         1,252

    -------------------------------------------------------------------------
                                         $15,737       $21,564       $15,861
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    9.  Income taxes:

    The provision for income taxes shown in the statement of income differs
    from that obtained by applying statutory income tax rates to income
    before income taxes for the following reasons:

    -------------------------------------------------------------------------
                                                      March 31,     March 31,
                                                          2007          2006
    -------------------------------------------------------------------------

    Canadian statutory income tax rate                   36.1%         36.1%
    Increase (decrease) resulting from:
      Tax exempt income                                  (7.2%)        (6.0%)
      Future tax rate reductions                         (1.3%)         0.0%
      Non-deductible expenses and other                  (0.1%)         0.1%
    -------------------------------------------------------------------------
    Effective income tax rate                            27.5%         30.2%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    10. Bank term loan:

    The Company has received three non-revolving term loans totaling $47,250
    from Canadian Western Bank, $19,750 of which was received on March 17,
    2005, $15,000 on April 17, 2006 and $12,500 on March 16, 2007. Each loan
    is for a fixed term of five years with the balance of the loan, together
    with all accrued and unpaid interest, due on the fifth anniversary of the
    loan. The proceeds of the loans were used to purchase $19,750 of
    Series 5, $15,000 of Series 6 and $12,500 of Series 7 of the Subordinated
    Debentures of the Company's subsidiary, The Equitable Trust Company
    ("Equitable Trust"). The loans are repayable in full at the option of the
    Company at any time during their term and as collateral for the loans,
    the Company has provided a promissory note, a general security agreement,
    a pledge of all the issued and outstanding shares in the capital of
    Equitable Trust and an assignment of the Subordinated Debentures
    purchased from Equitable Trust using the proceeds of the loans. Interest
    is payable monthly on the $19,750 loan at 6.37%, on the $15,000 loan at
    6.82% and on the $12,500 loan at 6.41%

    11. Subordinated debt:

    The Company has issued debentures which are subordinated to the deposits
    and other liabilities of the Company and which are repayable at any time
    without penalty. Any redemption of this debt, contractual or earlier, is
    subject to regulatory approval. Interest is paid quarterly.

    -------------------------------------------------------------------------
                                             Out-  Issued  Redeemed      Out-
    2007       Inter-                   standing,  during    during standing,
    Debenture    est   Issue  Maturity  December      the       the    March
    series      rate    date      date  31, 2006   period    period  31, 2007
    -------------------------------------------------------------------------

    Series 5   7.31%-   2004   January  $ 20,250  $     -  $      -  $ 20,250
                7.58%    /05     2015

    Series 6    7.27%   2006   January     5,000        -         -     5,000
                                 2016

    Series 7    7.10%   2007   January         -    9,450         -     9,450
                                 2017

    -------------------------------------------------------------------------
                                        $ 25,250  $ 9,450  $      -  $ 34,700
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
                                             Out-  Issued  Redeemed      Out-
    2006       Inter-                   standing,  during    during standing,
    Debenture    est   Issue  Maturity  December      the       the    March
    series      rate    date      date  31, 2005   period    period   31,2006
    -------------------------------------------------------------------------

    Series 4   7.54%-   2003   January  $ 11,444  $     -  $  3,841  $  7,603
                8.15%            2013

    Series 5   7.31%-   2004   January    20,250        -         -    20,250
                7.58%    /05     2015

    -------------------------------------------------------------------------
                                        $ 31,694  $     -  $  3,841  $ 27,853
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    12. Shareholders' equity:

    (a) Capital stock:

           Authorized:
              Unlimited number of common shares
              Unlimited number of preferred shares

           Issued:
              Common shares:

    -------------------------------------------------------------------------
                                       March 31, 2007         March 31, 2006
    -------------------------------------------------------------------------
                                  Number of              Number of
                                     shares    Amount       shares    Amount
    -------------------------------------------------------------------------

    Balance, beginning of
     period                      11,924,468   $57,849   11,781,940   $55,510
    Issued during the period        113,000     1,999       90,705     1,325
    Transfer from contributed
     surplus relating to the
     exercise of stock options            -       202            -       124
    -------------------------------------------------------------------------
    Balance, end of period       12,037,468   $60,050   11,872,645   $56,959
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (b) Stock-based compensation plans:

    Stock option plan:

    Under the Company's stock option plan, options on common shares are
    periodically granted to eligible participants for terms of five years and
    vest over a four or five-year period. The maximum number of common shares
    available for issuance under the plan is 10% of the Company's issued and
    outstanding common shares. The outstanding options expire on various
    dates to March 2012. A summary of the Company's stock option activity and
    related information for the periods ended March 31, 2007 and March 31,
    2006 is as follows:

    -------------------------------------------------------------------------
                                        March 31, 2007        March 31, 2006
    -------------------------------------------------------------------------
                                              Weighted              Weighted
                                     Number    average     Number    average
                                   of stock   exercise   of stock   exercise
                                    options      price    options      price
    -------------------------------------------------------------------------

    Outstanding, beginning
     of period                      749,011     $20.54    768,539     $18.07
    Granted                         150,000      34.49          -          -
    Exercised                      (113,000)     17.69    (90,705)     14.61
    Forfeited/cancelled             (24,000)     19.98          -          -
    -------------------------------------------------------------------------
    Outstanding, end of period      762,011     $23.73    677,834     $18.53
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Exercisable, end of period      150,900     $18.34    172,111     $17.27
    -------------------------------------------------------------------------

    Under the fair value-based method of accounting for stock options, the
    Company has recorded compensation expense in the amount of $148
    (March 31, 2006 - $120) related to grants of options in 2005 to 2007
    under the stock option plan. This amount has been credited to contributed
    surplus. During the first quarter of 2007, a total of 150,000 stock
    options were granted (2006 - nil). The fair value of options granted in
    2007 is estimated at the date of grant using the Black-Scholes valuation
    model, with the following assumptions: (i) risk-free rate of 4.0%; (ii)
    expected option life of 4.0 years; (iii) expected volatility of 23.0%;
    and (iv) expected dividends of 1.2%. The weighted average fair value of
    each option granted was $6.71.

    13. Accumulated other comprehensive income (loss):

    Accumulated other comprehensive income (loss) includes the after tax
    change in unrealized gains and losses on available-for-sale investments
    and retained interests - loan securitizations.

    -------------------------------------------------------------------------
                                                              March 31, 2007
    -------------------------------------------------------------------------

    Available-for-sale investments:
      Transition adjustment on adoption of new accounting
       standards, net (note 2)                                         $ 543
      Losses from changes in fair value, net of income taxes
       recovered of $150                                                (266)
      Reclassification to earnings for gain (loss) on sale or
       redemption of investments, net of income taxes
       recovered of $10                                                  (18)
    -------------------------------------------------------------------------
    Balance, end of period                                               259

    Available-for-sale loan securitizations -
     retained interests:
      Transition adjustment on adoption of new accounting
       standards, net (note 2)                                          (241)
      Gains from changes in fair value, net income taxes
       of $156                                                           275
      Reclassification to earnings for loan securitizations
       - retained interests, net of income taxes recovered
       of $201                                                          (356)
    -------------------------------------------------------------------------
    Balance, end of period                                              (322)

    -------------------------------------------------------------------------
    Total accumulated other comprehensive income (loss)                $ (63)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    14. Interest rate sensitivity:

    The following table shows the Company's position with regard to interest
    rate sensitivity of assets, liabilities and equity on the date of the
    earlier of contractual maturity or re-pricing date, as at March 31, 2007,
    December 31, 2006 and March 31, 2006:

                                                              March 31, 2007
    -------------------------------------------------------------------------
                                Floating
                                    rate                               Total
                               or within      1 to 3    3 months      within
                                 1 month      months   to 1 year      1 year
    -------------------------------------------------------------------------
    Total assets             $ 1,435,866   $ 100,544   $ 419,642 $ 1,956,052
    Total liabilities
     and equity                1,094,727     305,897     418,552   1,819,176
    -------------------------------------------------------------------------
    Interest rate
     sensitive gap             $ 341,139  $ (205,353)    $ 1,090   $ 136,876
    -------------------------------------------------------------------------
    Cumulative gap             $ 341,139  $  135,786   $ 136,876   $ 136,876
    -------------------------------------------------------------------------
    Cumulative gap as a
     percentage of
     total assets                 11.90%       4.74%       4.78%       4.78%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
                                                              March 31, 2007
    -------------------------------------------------------------------------
                                                            Non-
                               1 year to        Over    interest
                                 5 years     5 years   sensitive       Total
    -------------------------------------------------------------------------
     Total assets              $ 855,600    $ 38,548    $ 16.193 $ 2,866,393
     Total liabilities
      and equity                 785,054      34,700     227,463   2,866,393
    -------------------------------------------------------------------------
     Interest rate
      sensitive gap             $ 70,546     $ 3,848  $ (211,270)        $ -
    -------------------------------------------------------------------------
     Cumulative gap            $ 207,422   $ 211,270         $ -         $ -
    -------------------------------------------------------------------------
     Cumulative gap as a
      percentage of
      total assets                 7.24%       7.37%       0.00%       0.00%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
                                                           December 31, 2006
    -------------------------------------------------------------------------
                                Floating
                                    rate                               Total
                               or within      1 to 3    3 months      within
                                 1 month      months   to 1 year      1 year
    -------------------------------------------------------------------------

    Cumulative gap             $ 261,613    $ 83,012   $ 113,316   $ 113,316
    -------------------------------------------------------------------------
    Cumulative gap as a
     percentage of
     total assets                  9.96%       3.16%       4.32%       4.32%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
                                                           December 31, 2006
    -------------------------------------------------------------------------
                                                            Non-
                               1 year to        Over    interest
                                 5 years     5 years   sensitive       Total
    -------------------------------------------------------------------------

    Cumulative gap             $ 203,091   $ 211,366         $ -         $ -
    -------------------------------------------------------------------------
    Cumulative gap as a
     percentage of
     total assets                  7.73%       8.05%       0.00%       0.00%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
                                                              March 31, 2006
    -------------------------------------------------------------------------
                                Floating
                                    rate                               Total
                               or within      1 to 3    3 months      within
                                 1 month      months   to 1 year      1 year
    -------------------------------------------------------------------------
    Cumulative gap             $ 334,346   $ 246,053   $ 133,346   $ 133,346
    -------------------------------------------------------------------------
    Cumulative gap as a
     percentage of
     total assets                 15.82%      11.65%       6.31%       6.31%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
                                                              March 31, 2006
    -------------------------------------------------------------------------
                                                            Non-
                               1 year to        Over    interest
                                 5 years     5 years   sensitive       Total
    -------------------------------------------------------------------------
    Cumulative gap             $ 201,302   $ 175,114         $ -         $ -
    -------------------------------------------------------------------------
    Cumulative gap as a
     percentage of
     total assets                  9.53%       8.29%       0.00%       0.00%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (a) Accrued interest is excluded in calculating interest sensitive assets
        and liabilities.
    (b) Potential prepayments of fixed rate loans have not been estimated.
        Cashable GICs are included with floating rate liabilities as these
        are cashable by the depositor upon demand. Any prepayments of
        subordinated debt, contractual or otherwise, have not been estimated
        as these would require pre-approval by OSFI.

    15. Subsequent events:

    On April 30, 2007, the Company issued 769,231 common shares at a price of
    $32.50 per share for aggregate gross proceeds of approximately
    $25.0 million. The net proceeds of the offering will be used to invest in
    the common shares of Equitable Trust and for general corporate purposes.
For further information:
For further information: Andrew Moor, (416) 513-3519; Stephen Coffey,
(416) 515-7000