Equity Financial Holdings Inc.

Equity Financial Holdings Inc.

August 13, 2013 17:15 ET

Equity Financial Holdings Reports Second Quarter 2013 Results

Mortgage Operations Break-even, Mortgages Balance of $277M

TORONTO, ONTARIO--(Marketwired - Aug. 13, 2013) - Equity Financial Holdings Inc. (TSX:EQI) ("Equity" or "the Corporation"), a Canadian financial services company serving the alternative retail mortgage market, today reported its interim financial results for the three months ended June 30, 2013.

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

(Unaudited) For the three months ended For the six months ended
June 30, March 31, June 30, June 30, June 30,
2013 2013 2012 2013 2012
Net interest income $ 2,306 $ 1,808 $ 1,061 $ 4,114 $ 1,918
Provision for credit losses (176 ) (101 ) (117 ) (277 ) (189)
Net interest income, net of provision 2,130 1,707 944 3,837 1,729
Other income 212 147 67 359 110
Net interest income and other income, net of provision 2,342 1,854 1,011 4,196 1,839
Net earnings (loss)
Continuing $ 1 $ (388 ) $ (515 ) $ (387 ) $ (1,179)
Discontinued 42,747 (638 ) 789 42,109 1,499
42,748 (1,026 ) 274 41,722 320
Net interest income and other income, net of provision 2,342 1,854 1,011 4,196 1,839
Earnings per share - basic/diluted
Continuing $ -/- $ (0.04)/(0.04 ) $ (0.06)/(0.06 ) $ (0.04)/(0.04 ) $ (0.13)/(0.13)
Discontinued 4.66/4.60 (0.07)/(0.07 ) 0.09/0.09 4.59/4.53 0.17/0.17
4.66/4.60 (0.11)/(0.11 ) 0.03/0.03 4.55/4.49 0.04/0.04
Net interest margin 3.16 % 3.21 % 3.09 % 3.20 % 3.14%
ROE from continuing operations (annualized) 1 0.0 % (3.0 %) (4.0 %) (1.1% ) (4.7%)
June 30, March 31, December 31, June 30,
As at 2013 2013 2012 2012
Total assets $ 337,923 $ 282,179 $ 251,442 $ 212,543
Mortgages 276,550 226,876 198,147 138,679
Deposits 230,840 224,913 192,757 152,218
Shareholders' Equity 95,193 51,339 52,267 51,830
Capital Measures 2
Regulatory Capital (transitional basis) $ 86,132 $ 34,467 $ 35,001 $ 23,952
Assets-to-Capital Multiple 3.81 7.68 6.64 7.54
Common Equity Tier 1 Ratio 57.0 % 23.8 % 28.7 % 24.2 %
Share Information
Book value per common share $ 10.28 $ 5.61 $ 5.71 $ 5.66
Common share price - close $ 10.45 $ 9.89 $ 8.00 $ 8.99
Common shares outstanding 9,264,340 9,155,840 9,155,007 9,153,007
Market Capitalization $ 96,812 $ 90,551 $ 73,240 $ 82,286

1 See definition of return on equity under Non-IFRS financial measures section on page 21 of our MD&A for the Second Quarter ended June 30, 2013.

2 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 (see Capital Management on page 15 & 16 of our MD&A for the Second Quarter ended June 30, 2013).

Second Quarter 2013 Highlights

  • Net earnings of $42,748 and earnings per share of $4.66, driven primarily by the gain on sale of discontinued operations of $43,850, which occurred April 5, 2013.
  • Regulatory capital of $86,132 as at June 30, 2013 compared with $35,001 as at December 31, 2012, comprised entirely of Common Equity Tier 1capital. The increase reflects the gain on sale from the disposition of our transfer agent and corporate trust service business.
  • Break-even net earnings from our continuing mortgage operations for the second quarter, compared to a net loss of $515 for the same period in 2012 and also an improvement compared to the net loss of $388 experienced in the first quarter of 2013.
  • Mortgage portfolio balance as at June 30, 2013 of $276,550, an increase of 40% compared to December 31, 2012 and an increase of 99% compared to June 30, 2012.
  • Mortgage originations of $72,662, an increase of $33,131 or 84% compared to the first quarter of 2013 and $31,964 or 79% compared to originations for the second quarter last year. Mortgage originations for the year to date of $112,193, an increase of $57,666 or 106% compared to the prior year.
  • Net interest income for the second quarter increased by 117% compared to the second quarter of 2012 and increased by 114% for the six months year to date.
  • Other income for the second quarter increased by 216% compared to the second quarter of 2012 and increased by 226% for the six months year to date.

Equity Financial Holdings President & CEO Paul G. Smith said,

"The Corporation is in the midst of a transitional period as we work to execute our new strategy that is now focused solely on our mortgage lending and deposit taking business and efficiently transfer the business unit sold to TMX in April. Management continues to believe the most attractive opportunities are available to us under our mortgage and deposit-taking business and realizing on the inherent value of our transfer agent and corporate trust business allowed us to allocate our resources accordingly."

Equity Financial Trust CEO Nick Kyprianou said,

"Our second quarter mortgage originations of nearly $73 million was a new record for us. We are pleased with the pace of our mortgage originations for the year to date and our expectation is that by the end of 2013 our mortgage loan portfolio will have expanded 80% to 90% compared to the balance at the end of 2012."

Interim Consolidated Financial Statements and Management's Discussion and Analysis for the second quarter and fiscal period ended June 30, 2013 can be found on SEDAR at www.sedar.com and on Equity's website at www.equityfinancialholdings.com.

Analyst Conference Call

EQI will hold a conference call on August 14, 2013 at 9:00 AM Eastern Time to discuss its operating results and to answer questions. Participants can dial 416-340-2216 or toll free 866-226-1792.

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.equityfinancialholdings.com.

Advisory notes:

Certain portions of this press release as well as other public statements by Equity Financial Holdings Inc. (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", "could", "would", "might" or "will" 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 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.

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 equity and capital markets, operations and financial results and assumptions relating to the Corporation's capital and financing requirements. Certain material factors or assumptions are applied by the Corporation in making forward-looking statements, including without limitation, factors and assumptions regarding interest rates, housing sales and retail mortgage borrowing activities, availability of key personnel, the effect of competition, government regulation of its business, computer failure or security breaches, future capital and funding 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 the Corporation's 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 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 in the event that the Corporation incurs operating losses or requires substantial capital investment in order to respond to unexpected competitive pressures, significant changes in interest rates, failure by Equity Financial Trust Company ("EFT") to meet ongoing regulatory obligations, failure by the Corporation to generate or obtain sufficient cash or cash equivalents in a timely manner and at a reasonable price or to meet 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 EFT to adequately monitor the services provided by third party service providers or to establish alternative arrangements if required, failure by EFT 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 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 Toronto Stock Exchange has neither approved nor disapproved the contents of this press release.

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