Equity Financial Holdings Inc. Reports Solid Second Quarter 2014 Results

TORONTO, Aug. 13, 2014 /CNW/ - Equity Financial Holdings Inc. (TSX: EQI) ("Equity" or the "Corporation"), a Canadian financial services company serving the alternative retail mortgage market through its wholly-owned subsidiary, Equity Financial Trust Company, today reported its interim financial results for the three and six months ended June 30, 2014.

(dollar amounts, except per-share, are in $000s)

Second Quarter 2014 Financial Highlights

  • Mortgage loan book ending balance of $364,563, down 8% from the beginning of the quarter and 32% higher year over year
  • Net interest margin of 3.24% vs. 3.19% in the first quarter
  • Net earnings from continuing operations of $270; basic earnings per share of $0.03
  • Net interest income of $3,389, up 47% year over year
  • Regulatory capital of $84,346

Year to Date 2014 Financial Highlights

  • Net interest margin of 3.21%
  • Net interest income of $6,837, up 66% year over year
  • Fee income of $787, up 119% year over year
  • Adjusted net earnings from continuing operations[1] of $869
  • Adjusted basic earnings per share from continuing operations1 of $0.09
  • Net loss from continuing operations of $3,225, due to significant non-recurring one-time costs in the first quarter of 2014

Equity's CEO Michael R. Jones said, "We had positive net earnings for the second quarter despite an 8% decrease in our mortgage loan portfolio, reflecting our focus on rebuilding in 2014, and the relatively short term nature of our loan book.  Our senior management team is now complete, with recent appointments in sales and marketing and mortgage operations.  As a result we remain on track to complete the rebuild in accordance with our plan, with a view to growing again in 2015 and beyond."

Mr. Jones continued, "Equity Financial Trust Company remains a well-capitalized, federally regulated deposit-taking institution, with a senior management team and Board with many years of experience in the single family alternative mortgage business. We are well positioned to take advantage of our strong capital base and the profitable opportunities that continue to exist in our industry."

Interim Consolidated Financial Statements and Management's Discussion and Analysis for the quarter ended June 30, 2014 can be found on SEDAR at www.sedar.com and on Equity's website 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 financial measures, as defined in our MD&A for the for the second quarter ended June 30, 2014

Financial Highlights (Unaudited)
















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























For the three months ended


For the six months ended

($000s, except share, per share and percentage amounts)

















June 30,

 2014


March 31,

 2014


June 30,

 2013


June 30, 2014


June 30,

 2013

OPERATIONS
















Net interest income






$

3,389

$

3,448

$

2,306

$

6,837

$

4,114

Provision for credit losses






105


(58)


(176)


47


(277)

Other income







409


378


212


787


359

Net interest income and other income, net of provision




3,903


3,768


2,342


7,671


4,196

Net interest margin







3.24%


3.19%


3.16%


3.21%


3.20%

















Net earnings (loss)

















Continuing






$

270

$

(3,495)

$

1

$

(3,225)

$

(387)


Discontinued







-


-


42,747


-


42,109








270


(3,495)


42,748


(3,225)


41,722

Earnings (loss) per share - basic/diluted















Continuing






$

 0.03/0.03 

$

(0.37)/(0.37)

$

-/-

$

(0.34)/(0.34)

$

(0.04)/(0.04)


Discontinued







 -/- 


-/-


4.66/4.60


-/-


4.59/4.53








 0.03/0.03 


(0.37)/(0.37)


4.66/4.60


(0.34)/(0.34)


4.55/4.49

















ROE from continuing operations (annualized) 1





1.2%


(15.0%)


0.0%


(6.8%)


(1.1%)

ADJUSTED EARNINGS AND ADJUSTED ROE














Adjusted net earnings (loss) from continuing operations 2



$

270

$

599

$

1

$

869

$

(387)

Adjusted earnings (loss) per share from continuing operations - basic/diluted 2


0.03/0.03


0.06/0.06


-/-


0.09/0.09


(0.04)/(0.04)

















As at







June 30,

 2014


March 31,

 2014


December 31,

 2013





BALANCE SHEET
















Total assets






$

409,043

$

463,137

$

442,376





Mortgages







364,563


397,036


394,812





Deposits







310,712


362,906


332,437





Shareholders' Equity







93,865


92,806


96,110





FINANCIAL STRENGTH
















Capital Measures 4

















Regulatory Capital (all-in basis)





$

84,346

$

84,268

$

84,755






Assets-to-Capital Multiple






4.7x


5.3x


5.0x






Common Equity Tier 1 Ratio






55.3%


53.4%


54.1%





Share Information

















Book value per common share





$

9.91

$

9.93

$

10.33






Common share price - close





$

10.35

$

11.38

$

12.35






Common shares outstanding






9,468,341


9,348,341


9,305,840






Market Capitalization






$

97,997

$

106,384

$

114,927





1 See definition of return on equity under Non-IFRS financial measures section of our MD&A for the quarter ended June 30, 2014.

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 financial measures section of our MD&A for the quarter ended June 30, 2014.

3 These figures relate to the Corporation's operating subsidiary, Equity Financial Trust, and are calculated under Basel III.

 

Senior Management Additions

Lorraine Sato, VP Mortgage Operations
Ms. Sato has been a leader in the residential mortgage industry for over 35 years.  Her experience includes starting the alternative residential lending department at CIBC's FirstLine Mortgages, and in 2002 she helped establish GMAC's Canadian alternative residential underwriting division, where she developed all lending products, guidelines, policies and procedures and oversaw fundings of over $2 billion annually over 3 years.  Ms. Sato joined Radius Financial (formerly myNext Mortgage) in 2006 and built the company's residential mortgage origination and operations departments.

Gino Tieri, VP Sales and Marketing
Mr. Tieri brings over 20 years of sales and marketing experience across a diverse set of industries to Equity with a primary focus on distribution channel management. He entered the mortgage industry in 2010, joining MCAP as Vice President National Sales, leading origination sales and marketing efforts in the mortgage broker channel. Under Mr. Tieri's leadership, MCAP's mortgage broker originations grew from $3.5 billion to over $5 billion annually.  He is currently in his second year of his term as a member of the Board of the Canadian Association of Accredited Mortgage Professionals (CAAMP).

Additions to the Board of Directors

Stephen J. Griggs, Chair of the Board of Equity and Equity Financial Trust Company stated, "We are also very pleased to announce the appointment of two new directors to the Board of Equity Financial Trust Company, both of whom have deep mortgage industry and related experience.  We now have in place an excellent board with all of the skills and expertise we believe are required to guide the prudent growth of our business now and into the future.  Each of our directors brings a unique background to our board and I look forward to working closely with them and the management team as we together build Equity into a major player in the Canadian alternative mortgage industry."

Yousry Bissada
Mr. Bissada is President and CEO of Kanetix, the leading provider of online insurance marketplace, quotation technology, mobile solutions and websites for many of Canada's leading insurance brands.  Mr. Bissada brings many years of experience in the financial services industry, including executive positions at several Canadian banks, including CIBC's FirstLine Mortgages and TD Canada Trust.  He also served as President and CEO of Filogix, a leading software provider for the mortgage broker industry.  Mr. Bissada has also served as a director on the boards of several small and medium sized financial services companies.

William Mulvihill
Dr. Mulvihill's experience includes thirty years with Canada Mortgage and Housing Corporation, where he held various positions including Vice-President Insurance and Chief Financial Officer before retiring in 2004.  From 2004 to 2013 he worked as a consultant providing strategic planning advice to several mortgage industry players.  Dr. Mulvihill is currently a director on the Board of AIG Canada, where he is Chair of the Risk Committee.

Analyst Conference Call

The Corporation will hold a conference call on August 14, 2014 at 10 a.m. Eastern Time to discuss its operating results and to answer questions. Participants can dial in locally at 416-340-8010 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.

Equity 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.

SOURCE Equity Financial Holdings Inc.

For further information: Contact information: Equity Financial Holdings Inc., Michael R. Jones, President and CEO, (647) 277.0106, www.equityfinancialtrust.com