• Equity Financial Holdings Reports Third Quarter 2017 Results and Update to Bank License Application

    Tue, 07 Nov 2017 17:59:00 -0500

    TORONTO, Nov. 7, 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 September 30, 2017.

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

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

    Third Quarter 2017 Financial Highlights

    • Net income of $1,733 or $0.18 per share
    • Mortgage loan book of $1,010,461, up 14% from Q2 2017 and up 33% from the end of 2016
    • Mortgage originations of $213,630, up 43% from Q2 2017 and up 24% from Q3 2016
    • Net interest income of $7,399, up 11% compared to Q2 2017 and up 62% over Q3 2016
    • Net interest margin of 2.94%
    • Annualized return on equity of 6.9%

    Year to date 2017 Financial Highlights

    • Net income of $4,605 or $0.48 per share
    • Mortgage originations of $477,370, up 22% year over year
    • Net interest income of $20,200, up 77% year over year
    • Net interest margin of 2.98%
    • Regulatory capital of $89,473 as at September 30, 2017
    • Book value per share of $10.51 as at September 30, 2017
    • Annualized return on equity of 6.3%

    Equity Financial Holdings CEO Michael R. Jones said,

    "The first three quarters of 2017 saw a period of ongoing change in the mortgage lending industry, during which we successfully grew our balance sheet to over $1 billion in mortgage assets. Profitability has continued to increase each quarter as we grow our mortgage assets, supported by stable net interest margin and no significant loan losses in 2017. For the fourth quarter and looking ahead to 2018 we anticipate a further slowdown in the growth of home prices in Ontario, but continued affordability challenges for our borrowers given the high ratio of home prices to income in the region, the potential for further interest rate increases from the Bank of Canada and the need to adapt to recent regulatory changes that directly affect lenders of uninsured residential mortgages.

    The final version of Guideline B‑20 published in mid‑October remains largely consistent with the draft guideline issued in July and will be effective starting January 1, 2018. The most significant impact of the new guideline for Equity is the requirement to use a 200 basis point margin over the contract rate when calculating debt service ratios for qualification purposes. We expect this change will have a negative impact on origination volumes, but a mitigating positive impact on retention rates.  While we do not plan to significantly change our overall business strategy, our current assessment is the new requirements will lead to a slow down in the pace of our loan book growth.  We will continue to evaluate the relative impact of these factors during the first part of 2018 to assess the magnitude of their effect.   

    Update to Bank License Application

    In August 2017, the Corporation announced its intention to apply to convert Equity Trust to a Schedule I bank.  The conversion application is subject to regulatory approval from OSFI and the Minister of Finance, Canada and there can be no assurance as to when or if these approvals will be received.  Management believes that, in the longer term, operating as a bank will promote efficiencies and assist in the creation of a brand identity that resonates with our customers, employees and financial backers and provide a national platform to expand its business beyond Ontario.  We will remain strategically focused on lending conventional first mortgages to customers who do not meet the lending criteria of large banks and are seeking alternative solutions.  With the continued support of our stakeholder group we believe the Corporation is well positioned to respond to ongoing market changes as we continue to pursue our strategic objectives.

    Arrangement Agreement

    On October 30, 2017 the Corporation entered into a definitive arrangement agreement (the "Arrangement Agreement") pursuant to which Smoothwater Capital Corporation ("Smoothwater") will acquire all of the issued and outstanding common shares of EQI (the "Shares"), other than Shares already owned or controlled by Smoothwater, its officers, and by certain other shareholders who have agreed to remain as continuing shareholders, by way of a plan of arrangement (the "Arrangement").

    Under the terms of the Arrangement Agreement, each Share will be acquired for $9.75 per share. A special meeting of the Corporation's shareholders is anticipated to be held in December 2017 to approve the Arrangement. The Arrangement is expected to be completed by the end of 2017. Estimated costs in the fourth quarter of 2017 related to the proposed transaction are in the range of $1,000 to $1,500, which include legal and advisory fees and share based compensation expenses expected to be incurred upon change of control.   

    Financial Highlights (unaudited)

    For the three months ended

    For the nine months ended

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

    September 30,

    June 30,

    September 30,

    September 30,

    September 30,


    Net interest income











    Provision for credit losses






    Non‑interest income






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






    Net interest margin 1






    Net income











    Earnings per share ‑ basic/diluted

    0.18 / 0.18

    0.17 / 0.17

    0.04 / 0.04

    0.48 / 0.48

    0.06 / 0.06

    ROE (annualized) 2






    As at

    September 30,

    June 30,

    December 31,









    Mortgages receivable, net








    Shareholders' equity





    Capital Measures 3

    Regulatory capital (all‑in basis)







    Leverage ratio




    Common Equity Tier 1 ratio (all‑in basis)  




    Share Information

    Book value per common share







    Common share price ‑ close




    Common shares outstanding




    Market capitalization







    1 See definition of Net interest margin under Non‑IFRS Financial Measures section of our MD&A for the quarter ended September 30, 2017.

    2 See definition of ROE ("return on equity") under Non‑IFRS Financial Measures section of our MD&A for the quarter ended September 30, 2017.

    3 Capital 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 September 30, 2017 can be found on SEDAR at and on our website at

    Analyst Conference Call

    EQI will hold a conference call on November 8, 2017 at 10:00 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 10809067.

    Conference Call Archive

    A telephone replay of the call will be available between 1:00 p.m. Eastern Time November 8, 2017 and midnight December 6, 2017 by calling 416.849.0833 or toll free at 1.855.859.2056 (enter passcode 10809067).

    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 mortgages to customers who are seeking an alternative solution because they do not meet the conventional underwriting standards of the major Canadian banks.  Learn more at

    SOURCE Equity Financial Holdings Inc.

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