Equity Financial Holdings Reports Second Quarter 2015 Results

TORONTO, Aug. 12, 2015 /CNW/ - Equity Financial Holdings Inc. (TSX: EQI) ("EQI" or the "Corporation"), which offers residential mortgage loans through its wholly-owned subsidiary Equity Financial Trust Company ("Equity Trust"), today reported its interim consolidated financial results for the quarter ended June 30, 2015.

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

Second Quarter 2015 Financial Highlights

  • Mortgage originations of $44,679, up 56% quarter over quarter and up 377% year over year
  • Mortgage loan book ending balance of $314,086, up 7% over the prior quarter
  • Net interest margin of 2.88%
  • Net interest income of $2,434, down 28% year over year due to lower average loan book
  • Adjusted net loss of $472, adjusted basic loss per share of $0.051
  • Net loss of $992, including charge for contingent consideration of $600 ($520 after tax) 1

Year to Date June 2015 Financial Highlights

  • Mortgage originations of $73,355, up 114% year over year
  • Net interest margin of 2.97%
  • Net interest income of $4,930, down 28% year over year due to lower average loan book
  • Adjusted net loss of $732, adjusted basic loss per share of $0.081
  • Net loss of $1,252, including charge for contingent consideration of $600 ($520 after tax) 1
  • Regulatory capital of $84,653 as at June 30, 2015
  • Book value per share of $9.86 as at June 30, 2015

Equity Financial Holdings CEO Michael R. Jones said,

"Our second quarter mortgage originations of $44,679 represent a quarter over quarter increase of 56% and the size of our mortgage loan portfolio increased for the first time since early 2014, ending at a balance of $314,086 as at June 30, 2015, an increase of 7% compared to the ending balance as at March 31, 2015. The resumption of growth in our loan book is an important step in the execution of our strategy, which remains focused on the Ontario non-prime and near-prime residential mortgage market.

The growth of our mortgage loan portfolio has continued in the third quarter and remains a key focus of management as we seek to return to profitable net income levels.  We have staffed up our originations team significantly since the beginning of the year and our sales and marketing team continues to develop and build on key relationships with reputable mortgage brokers in Ontario.  We recently launched an updated company website and continue to evaluate technology solutions to enhance scalability and support sustainable growth.

We have a management team and Board with many years of experience in the non-prime and near-prime residential mortgage business. We believe the strength of our risk management and corporate governance culture has been validated by third party reviews and that our originations process is well designed for the current regulatory environment.  As a well-capitalized, federally regulated deposit-taking institution, we believe Equity Trust is well positioned to take advantage of the available opportunities in our industry during the remainder of 2015 and beyond."

Financial Highlights (unaudited)







For the three months ended

For the six months ended

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

June 30, 2015

March 31,

2015

June 30,
2014

 

June 30, 2015

June 30,
2014

OPERATIONS











Net interest income

$

2,434

$

2,496

$

3,389

$

4,930

$

6,837

(Increase) reversal of provision for credit losses


(128)


(32)


105


(160)


47

Non-interest income


457


297


409


754


787

Net interest income and non-interest income, including (increase) reversal of credit losses  


2,763


2,761


3,903


5,524


7,671

Net interest margin


2.88%


3.07%


3.24%


2.97%


3.21%












Net (loss) income

$

(992)

$

(260)

$

270


(1,252)


(3,225)

(Loss) earnings per share - basic/diluted

$

 (0.10)/(0.10) 

$

(0.03)/(0.03)

$

0.03/0.03

$

(0.13)/(0.13)

$

(0.34)/(0.34)

ROE (annualized) 1


(4.2%)


(1.1%)


1.2%


(2.7%)


(6.8%)

ADJUSTED INCOME AND EPS











Adjusted net (loss) income 2

$

(472)

$

(260)

$

270

$

(732)

$

869

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


 (0.05)/(0.05) 


(0.03)/(0.03)


0.03/0.03


 (0.08)/(0.08) 


0.09/0.09












As at


June 30, 2015


March 31,
2015


June 30,
2014





BALANCE SHEET











Total assets

$

366,394

$

334,876

$

334,953





Mortgages, net


314,086


294,398


297,375





Deposits


268,704


236,496


235,597





Shareholders' Equity


93,975


94,788


94,851





FINANCIAL STRENGTH











Capital Measures 3












Regulatory Capital (all-in basis)

$

84,653

$

85,351

$

85,332






Leverage ratio


23.0%


25.6%


25.9%






Common Equity Tier 1 Ratio (all-in basis)


60.0%


64.9%


65.6%





Share Information












Book value per common share

$

9.86

$

9.95

$

9.98






Common share price - close

$

8.15

$

9.69

$

10.35






Common shares outstanding


9,529,508


9,529,508


9,507,508






Market Capitalization

$

77,665

$

92,341

$

98,403





1See definition of ROE ("return on equity") under Non-IFRS financial measures section of our MD&A for the quarter ended June 30, 2015.

2Adjusted net (loss) income, adjusted basic (loss) earnings per share, adjusted diluted (loss) earnings per share are defined in the Non-IFRS
financial measures section of our MD&A for the quarter ended June 30, 2015.

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

Interim Consolidated Financial Statements and Management's Discussion and Analysis for the quarter ended June 30, 2015 can be found on SEDAR at www.sedar.com and on our website at www.equityfinancialtrust.com.

Analyst Conference Call

EQI will hold a conference call on August 14, 2015 at 10 a.m. Eastern Time to discuss its operating results and to answer questions. Participants can dial in locally at 647.427.7450 or toll free at 1.888.231.8191 and use Conference ID 99771529.

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," "continues", "estimates," "scheduled," "anticipates," "believes," "intends," "may," "could," "would" or might, and the negative of such 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, future loans and originations, repayment by borrowers, general economic, political and market factors in North America and internationally, interest and foreign exchange rates, global equity and capital markets activities, the Corporation's expected need for equity or debt financing, business competition, technological change, changes in government regulations and regulatory guidelines, unexpected judicial or regulatory proceedings, catastrophic events, and the Corporation's ability to complete strategic transactions and integrate acquisitions and other factors. Forward looking statements should not be read as guarantees of future events, future performance or results, and will not necessarily be accurate indicators of the times at, or by which, such events, performance or results will be achieved, if achieved at all.

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, retail mortgage markets, housing sales and capital markets. 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, 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 business, economic, regulatory, competitive, political and social 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 among others, a significant downturn in capital markets or the economy as a whole, errors or omissions by the Corporation in providing services to its customers, 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 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. The forward looking statements contained herein are expressly qualified in their entirety by this cautionary statement.

About Equity Financial Holdings Inc.

The Corporation is a financial services company operating through its wholly-owned subsidiary, Equity Trust, a federally regulated deposit-taking institution. Equity Trust serves the Canadian alternative mortgage market by offering residential mortgage loans to non-prime and near-prime customers who do not meet the conventional underwriting standards of the major Canadian banks.  Learn more at www.equityfinancialtrust.com.

__________________________________
1 Adjusted net loss and adjusted basic loss per share are defined in the Non-IFRS Financial Measures section of our MD&A for the quarter ended June 30, 2015.  Reported net loss for the second quarter and year to date 2015 includes a charge for contingent consideration of $600 ($520 after tax) related to the 2013 sale of our transfer agent and corporate trust business.

SOURCE Equity Financial Holdings Inc.

For further information: Equity Financial Holdings Inc., Michael R. Jones, President & CEO, 647.277.0106, www.equityfinancialtrust.com


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