Equity Financial Holdings Reports Year-End and Fourth Quarter 2013 Results

TORONTO, March 31, 2014 /CNW/ - Equity Financial Holdings Inc. (TSX: EQI) ("EQI" or the "Corporation"), a Canadian financial services company serving the alternative residential mortgage market through its wholly-owned subsidiary Equity Financial Trust Company ("Equity Trust"), today reported its audited consolidated financial results for the year-ended December 31, 2013
(dollar amounts, except per-share, are in $000s)

Year-End 2013 Highlights

  • Mortgage loan book ending balance of $394,812, a 99% increase year over year
  • Net loss from continuing operations of $327; adjusted net earnings from continuing operations1 of $518 after removing the effect of one-time costs in the fourth quarter2
  • Basic and diluted net loss per share from continuing operations of $0.04; adjusted basic and diluted net earnings per share from continuing operations1 of $0.06
  • $64,000 sale of transfer agent and corporate trust services business in April 2013
  • Consolidated net earnings of $41,782 due to the gain on sale; basic and diluted earnings per share of $4.52 and $4.47 respectively
  • Regulatory capital (transitional basis) of $86,591 as at December 31, 2013

Fourth Quarter 2013 Highlights

  • Fourth quarter originations of $62,876, a 51% increase year over year
  • Q4 adjusted net earnings from continuing operations1 of $1,080
  • Adjusted basic earnings per share from continuing operations1 of $0.12 per share
  • Shareholder action initiated by Smoothwater Capital Partners LP I, which was subsequently settled as announced on February 26, 2014, and resulted in changes to the Board and CEO; Annual General Meeting now set for May 28, 2014
  • Costs related to the shareholder action are estimated at $4,650, most of which were incurred in the first quarter of 2014.  These costs will be paid by EQI and will not impact the regulatory capital of Equity Trust
  • Internal control review conducted subsequent to year end found no material impacts on financial reporting
  • Costs related to the internal control review are estimated at $1,100 incurred in the first quarter of 2014, plus additional external audit fees for 2013 of $600, paid by Equity Trust

Equity Financial Holdings Interim CEO Michael R. Jones said,

"As we move forward with a reconstituted Board of Directors and new management leadership following the resolution of the Smoothwater shareholder action, our mortgage loan portfolio of nearly $400,000 continues to generate net interest and fee income. We were pleased with the pace of our mortgage originations over 2013, however, this pace is expected to slow in 2014, primarily as a result of changes to our underwriting and risk management processes we began implementing in the first quarter.  As a result, we anticipate net growth in our mortgage loan portfolio to be nominal for fiscal 2014.  Despite one-time costs incurred by the Corporation in recent months, Equity Trust remains a well-capitalized deposit-taking institution, which provides a base for continued growth in the future."

Financial Highlights (audited)
(dollar amounts, except per-share, are in $000s, unless otherwise stated)

             
    For the years ended
    December 31,
2013
  December 31,
2012
  December 31,
2011
OPERATIONS            
Net earnings (loss)            
  Continuing $ (327) $ (1,958) $ (4,081)
  Discontinued   42,109   2,492   13,312
    41,782   534   9,230
Net interest income and other income, net of provision   10,634   4,658   1,075
Earnings (loss) per share - basic/diluted            
  Continuing $ (0.04)/(0.04) $ (0.21)/(0.21) $ (0.47)/(0.47)
  Discontinued   4.56/4.51   0.27/0.27   1.52/1.52
    4.52/4.47   0.06/0.06   1.05/1.05
Net interest margin   3.18%   3.10%   3.82%
ROE from continuing operations (annualized) 1   (0.4%)   (3.8%)   (10.6%)
ADJUSTED EARNINGS            
Adjusted net earnings from continuing operations 2 $ 518   (1,958)   (4,081)
Adjusted earnings per share from continuing operations - basic/diluted 2   0.06/0.06   (0.21)/(0.21) $ (0.47)/(0.47)
             
As at   December 31,
2013
  December 31,
2012
  December 31,
2011
BALANCE SHEET            
Total assets $ 442,493 $ 251,442 $ 129,736
Mortgages   394,812   198,147   84,780
Deposits   332,437   192,757   66,863
Shareholders' Equity   96,110   52,267   49,998
FINANCIAL STRENGTH            
Capital Measures 3            
  Regulatory Capital (transitional basis) $ 86,591 $ 35,001 $ 23,063
  Assets-to-Capital Multiple   5.0   6.6   4.7
  Common Equity Tier 1 Ratio   54.1%   28.7%   31.6%
Share Information            
  Book value per common share $ 10.33 $ 5.71 $ 5.57
  Common share price - close $ 12.35 $ 8.00 $ 9.49
  Common shares outstanding   9,305,840   9,155,007   8,973,926
  Market Capitalization $ 114,927 $ 73,240 $ 85,163
1 See definition of return on equity under Non-IFRS financial measures section of our MD&A for the year ended December 31, 2013.
2 Adjusted net earnings from continuing operations, adjusted basic earnings per share from continuing operations and adjusted diluted
earnings per share from continuing operations are defined in the Non-IFRS Measures section of our MD&A for the year ended December
31, 2013.  
3 These figures relate to the Corporation's operating subsidiary, Equity Trust, and are calculated under Basel III for
2013 and Basel II for 2012 and 2011.      

 

Fourth Quarter Financial Highlights (audited)
(dollar amounts, except per-share, are in $000s, unless otherwise stated)

             
    For the three months ended
($000s, except share, per share and percentage amounts)   December 31,
2013
  September 30,
2013
  December 31,
2012
OPERATIONS            
Net earnings (loss)            
  Continuing $ 235 $ (175) $ (356)
  Discontinued   -   -   480
    235   (175)   124
Net interest income and other income, net of provision   3,598   2,839   1,569
Earnings (loss) per share - basic/diluted            
  Continuing $ 0.03/0.02 $ (0.02)/(0.02) $ (0.04)/(0.04)
  Discontinued       0.05/0.05
    0.03/0.02   (0.02)/(0.02)   0.01/0.01
Net interest margin   3.20%   3.08%   3.10%
ROE from continuing operations (annualized) 1   1.0%   (0.7%)   (0.6%)
ADJUSTED EARNINGS            
Adjusted net earnings from continuing operations 2 $ 1,080   (175)   (356)
Adjusted earnings per share from continuing operations - basic/diluted 2   0.12/0.11   (0.02)/(0.02)   (0.04)/(0.04)
             
As at   December 31,
2013
  September 30,
2013
  December 31,
2012
BALANCE SHEET            
Total assets   442,493   409,130   251,442
Mortgages   394,812   356,565   198,147
Deposits   332,437   301,306   192,757
Shareholders' Equity   96,110   95,565   52,267
FINANCIAL STRENGTH            
Capital Measures 3            
  Regulatory Capital (transitional basis) $ 86,591 $ 86,201 $ 35,001
  Assets-to-Capital Multiple   5.0   4.6   6.6
  Common Equity Tier 1 Ratio   54.1%   59.6%   28.7%
Share Information            
  Book value per common share $ 10.33 $ 10.32 $ 5.71
  Common share price - close $ 12.35 $ 10.45 $ 8.00
  Common shares outstanding   9,305,840   9,264,340   9,155,007
  Market Capitalization $ 114,927 $ 96,812 $ 73,240
1 See definition of return on equity under Non-IFRS financial measures section of our MD&A for the year ended December 31, 2013.
2 Adjusted net earnings from continuing operations, adjusted basic earnings per share from continuing operations and adjusted diluted
earnings per share from continuing operations are defined in the Non-IFRS Measures section of our MD&A for the year ended December
31, 2013.
3 These figures relate to the Corporation's operating subsidiary, Equity Financial Trust, and are calculated under
Basel III for 2013 and Basel II for 2012.

 

Audited Consolidated Financial Statements and Management's Discussion and Analysis for the fourth quarter and year-ended December 31, 2013 can be found on SEDAR at www.sedar.com and on Equity's website at www.equityfinancialtrust.com.

Analyst Conference Call

EQI will hold a conference call on April 1, 2014 at 10 a.m. Eastern Time to discuss its operating results and to answer questions. Participants can dial in locally at 416-340-8018 or toll free at 1-866-223-7781.

Forward Looking Information

Certain portions of this press release as well as other public statements by the Corporation contain "forward-looking information" within the meaning of applicable Canadian securities legislation, which is also referred to as "forward-looking statements", which may not be based on historical fact. Wherever possible, words such as "will", "plans," "expects," "targets," "continue", "estimates," "scheduled," "anticipates," "believes," "intends," "may," and similar expressions or statements that certain actions, events or results "may," "could," "would," "might" or "will" be taken, occur or be achieved, have been used to identify forward-looking information. Such forward-looking statements include, without limitation, the Corporation's expectations in respect of earnings, fee income, expense levels, general economic, political and market factors in North America and internationally, interest rates, global equity and capital markets, activities, the Corporation's expected need for equity on debt financing, business competition, technological change, changes in government regulations, unexpected judicial or regulatory proceedings, catastrophic events, and the Corporation's ability to complete strategic transactions and integrate acquisitions and other factors.

All material assumptions used in making forward-looking statements are based on management's knowledge of current business conditions and expectations of future business conditions and trends, including their knowledge of the current credit, interest rate and liquidity conditions affecting the Corporation and the Canadian economy. Certain material factors or assumptions are applied by the Corporation in making forward-looking statements, including without limitation, factors and assumptions regarding interest rates, availability of key personnel, the effect of competition on the Corporation's business, government regulation of its business, computer failure or security breaches, future capital requirements, its ability to fund its mortgage business, the value of mortgage originations, the competitive nature of the alternative mortgage market, the expected margin between the interest earned on its mortgage portfolio and the interest to be paid on its deposits, the relative continued health of real estate markets, acceptance of its products in the marketplace, as well as its operating cost structure and the current tax regime.

Forward-looking statements reflect the Corporation's current views with respect to future events and are subject to a number of risks and uncertainties. Actual results may differ materially from results contemplated by the forward-looking statements. Readers should not place undue reliance on such forward-looking statements, as they reflect the Corporation's current views with respect to future events and are subject to risks and uncertainties and are necessarily based upon a number of estimates and assumptions that, while considered reasonable by the Corporation, are inherently subject to significant uncertainties and contingencies. Many factors could cause the Corporation's 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, including a significant downturn in capital markets or the economy as a whole, significant increases in the cost of complying with applicable regulatory requirements, civil unrest, economic recession, pandemics, war and acts of terrorism which may adversely impact the North American and global economic and financial markets, inability to raise funds through public or private financing significant changes in interest rates, failure by Equity Financial Trust Company ("Equity Trust") to meet ongoing regulatory requirements, the failure of borrowers or counterparties to honour their financial or contractual obligations to Equity Trust, failure by Equity Trust to adequately monitor and/or adjust its mortgage portfolio management practices for changing circumstances, failure by the Corporation to attract and to retain the necessary employees to meet its needs, failure by Equity Trust to adequately monitor the services provided by third party service providers or to establish alternative arrangements if required, failure by Equity Trust to secure sufficient deposits from securities dealers or a sufficient level of mortgage origination from its mortgage broker network, a failure of the computer systems of the Corporation or one or more of its service providers or the risks detailed from time-to-time in the Corporation's quarterly filings, annual information forms, annual reports and annual filings with securities regulators. The preceding list is not exhaustive of possible factors. The Corporation disclaims any intent or obligation to update or revise publicly any forward-looking statements whether as a result of new information, estimates, future events or results, or otherwise, unless required to do so by applicable laws.

About Equity Financial Holdings Inc.

EQI is a Canadian financial services company serving the alternative retail mortgage market through its federally regulated and wholly-owned subsidiary, Equity Financial Trust Company. Learn more at www.equityfinancialtrust.com.

______________________________
1 Adjusted net earnings from continuing operations and adjusted basic and diluted earnings per share from continuing operations are Non-IFRS Measures, as defined in our MD&A for the year ended December 31, 2013
2 One-time costs in Q4 were for shareholder action advisory of $550 ($404 after tax) and additional external audit fees of $600 ($441 after tax).  For more detail refer to our MD&A for the year ended December 31, 2013

SOURCE Equity Financial Trust Company

For further information:


Equity Financial Holdings Inc.
Michael R. Jones
President & Interim CEO
(416) 361-0152 Ext 290
www.equityfinancialtrust.com