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  • Equity Financial Holdings Reports First Quarter 2017 Results

    Tue, 09 May 2017 19:04:00 -0400

    TORONTO, May 9, 2017 /CNW/ - Equity Financial Holdings Inc. (TSX: EQI) ("EQI" or the "Corporation"), which offers residential first mortgage loans through its wholly-owned subsidiary, Equity Financial Trust Company ("Equity Trust"), today reported its interim consolidated financial results for the quarter ended March 31, 2017.

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

    Figure 1: Mortgage & Deposit Balances ($millions) Figure 2: Mortgage Originations ($ million) (CNW Group/Equity Financial Holdings Inc.)

    First Quarter 2017 Financial Highlights

    • Net income of $1,256 or $0.13 per share
    • Mortgage loan book of $817,009, up 7% from the end of 2016
    • Mortgage originations of $113,904, up 33% from Q1 2016
    • Net interest income of $6,159, up 12% compared to Q4 2016
    • Net interest margin of 3.00%
    • Regulatory capital of $86,583 as at March 31, 2017
    • Book value per share of $10.18 as at March 31, 2017
    • Annualized return on equity of 5.3%

    Equity Financial Holdings CEO Michael R. Jones said,

    "The solid level of profitability established in the fourth quarter of 2016 has continued into fiscal 2017 as we balance the trade-offs between portfolio growth, net interest margin, duration and minimum acceptable credit quality. While we work to grow our loan book we are also responding to a changing residential mortgage market.  These changes include the announcements made last October that restricted access to Canada Mortgage and Housing Corporation's prime mortgage insurance program, rapidly rising home prices in the Greater Toronto Area (GTA) and recently announced counter-measures by the Ontario government, as well as changes in the competitive landscape for mortgage lending in Ontario.

    Equity Trust is strategically focused on lending uninsured first mortgages to non-prime and near-prime customers, and as such we believe the company is well-positioned to take advantage of most of these market changes. At the same time, continuing house price inflation in the GTA is creating heightened credit risk and is also beginning to have the effect of making housing less affordable for some of our prospective customer base.

    We continue to expand and deepen our relationships with key brokers, to ensure that we receive loan applications that we can fund in accordance with our risk appetite. We also continue to hire and train underwriters to make responsible credit decisions compliant with our lending policies and procedures and regularly enhance our back office quality control functions to ensure that this occurs on a consistent basis.

    We fund our mortgage loan book with fixed term, non-redeemable GICs, and have recently enhanced our ability to access liquidity by adding to the list of registered securities dealers that offer our GIC products.  Our asset liability management policy requires that mortgage terms are matched to equivalent (or longer) deposit terms. We do not have any demand deposits. Since the end of the first quarter, our deposit cost of funds has remained within the expected range, and we have increased our liquidity reserve in anticipation of higher summer market funding volumes.

    Our mortgage loan portfolio continues to grow and we anticipate it will reach the $1 billion level during fiscal 2017. As such we have begun planning for additional capital to support our growth objectives.

    We believe that the combination of our risk and compliance focus, a stable treasury and our supportive stakeholders will enable Equity Trust to continue to take advantage of profitable opportunities in 2017 and beyond."

     

    Financial Highlights (unaudited)



    For the three months ended

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

    March 31,
    2017

    December 31,
    2016

    March 31,
    2016

    OPERATIONS




    Net interest income

    $

    6,159

    $

    5,483

    $

    3,158

    Provision for credit losses

    (131)

    123

    (167)

    Non‑interest income

    596

    476

    495

    Net interest income and other income, including provision for credit losses

    6,624

    6,082

    3,486

    Net interest margin 1

    3.00%

    2.89%

    2.86%

    Net income

    $

    1,256

    $

    1,072

    $

    149

    Earnings per share ‑ basic/diluted

    0.13 / 0.13

    0.12 / 0.12

    0.02 / 0.02

    ROE (annualized) 2

    5.3%

    4.5%

    0.6%

    As at

    March 31,
    2017

    December 31,
    2016

    March 31,
    2016

    BALANCE SHEET




    Assets

    $

    911,558

    $

    833,744

    $

    487,184

    Mortgages receivable, net

    817,009

    760,201

    441,330

    Deposits

    807,499

    726,762

    388,934

    Shareholders' equity

    97,193

    95,727

    93,664

    FINANCIAL STRENGTH




    Capital Measures 3





    Regulatory capital (all‑in basis)

    $

    86,583

    $

    85,045

    $

    84,427


    Leverage ratio

    9.3%

    10.0%

    16.9%


    Common Equity Tier 1 ratio (all‑in basis)          

    25.1%

    27.3%

    44.6%

    Share Information





    Book value per common share

    $

    10.18

    $

    10.03

    $

    9.82


    Common share price ‑ close

    8.93

    9.90

    9.00


    Common shares outstanding

    9,543,508

    9,543,508

    9,539,508


    Market capitalization

    $

    85,224

    $

    94,481

    $

    85,856



    1

    See definition of Net interest margin under Non‑IFRS Financial Measures section of our MD&A for the quarter ended March 31, 2017.

    2

    See definition of ROE ("return on equity") under Non‑IFRS Financial Measures section of our MD&A for the quarter ended March 31, 2017.

    3

    Captial Measures 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 March 31, 2017 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 May 10, 2017 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 10787570.

    Conference Call Archive

    A telephone replay of the call will be available between 1:00 p.m. Eastern Time May 10, 2017 and midnight June 7, 2017 by calling 416.849.0833 or toll free at 1.855.859.2056 (enter passcode 10787570).

    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 investment dealers or deposit 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 mortgage market by offering residential first mortgage loans to non and near-prime customers who do not meet the conventional underwriting standards of the major Canadian banks. Learn more at www.equityfinancialtrust.com.

    SOURCE Equity Financial Holdings Inc.


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