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
March 31, 2013.
Financial Highlights (all dollar amounts, except per-share, are in $000s, unless
otherwise stated)
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For the three months ended Change Change
March 31, 2013 2012 $ %
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Operating Results
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Net interest income 1,808 857 951 111%
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Other revenue 147 43 104 242%
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Net interest income and
other revenue 1,955 900 1,055 117%
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Net earnings (loss) and
comprehensive income: (1)
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Continuing operations
(1) (388) (664) 276 42%
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Discontinued operations
(1) (638) 710 (1,348) (190%)
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Total Net earnings (loss)
and comprehensive income (1,026) 46 (1,072) (2330%)
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Earnings per share, basic
(1) $ (0.11) $ 0.01 $ (0.12) (1200%)
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Earnings per share,
diluted (1) $ (0.11) $ 0.01 $ (0.12) (1200%)
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Return on equity
(annualized) (2) (8%) 0%
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March December Change over Mar
31, 31, 2013-Dec 2012
As at 2013 2012 $ %
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Balance Sheet Highlights
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Cash and cash equivalents 37,463 34,429 3,034 9%
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Mortgage recievables 226,876 198,147 28,729 14%
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Total assets 282,179 251,442 30,737 12%
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Total liabilities 230,840 199,175 31,665 16%
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(1) As a result of the Transaction noted below we have also reported on the
operating results of continuing and discontinued operations. For
additional details please refer to our interim consolidated financial
statements and MD&A for the three months ended March 31, 2013.
(2) Return on equity (net earnings divided by the simple average of reported
shareholders' equity at the beginning and end of the period) does not
have any standardized meaning prescribed by IFRS and may not be
comparable to similar measures presented by other issuers. However, we
believe financial analysts and investors view these as key measures of
certain aspects of our performance. They use return on equity as a key
indicator of whether we use our capital resources efficiently. This
measure should not be considered as an alternative to cash flows from
operating activities nor to any other measures of performance presented
in accordance with IFRS.
On April 5, 2013 we completed the previously announced sale of the assets of our
transfer agent and corporate trust services business, including corporate trust
foreign exchange services, to an affiliate of the TMX Group Inc. for cash
consideration of $64,000 received at closing, subject to post closing
adjustments (the "Transaction"). Our wholly-owned subsidiary Equity Financial
Trust Company ("EFT") will use the majority of the net proceeds from the
Transaction to significantly increase our regulatory capital base to a level
that is expected to provide support for the expansion of our mortgage loan
portfolio over the coming years.
As a result of the Transaction and the parallel wind-down of our foreign
exchange operations the Corporation is now focused solely on our mortgage
lending and deposit taking business segment. Our previously reported transfer
agent and corporate trust segment and our foreign exchange segment are now
classified as discontinued operations (see note 16 of our interim consolidated
financial statements).
We originated $39,531 of new mortgage loans during the first quarter of 2013 (an
increase of 75% from 2012) and as at March 31, 2013 we had estimated commitments
to make future advances on mortgage loans of $22,500. We ended the first quarter
with mortgage loans outstanding of $226,876, representing an increase of 14%
compared to December 31, 2012 and an increase of 115% compared to March 31,
2012. We remain confident in our expectation that compared to the balance at the
end of 2012 our mortgage portfolio will be approximately double in size by the
end of 2013. We maintained a net interest margin of 3.21% compared to 3.22% for
the comparable period last year, which is above our long run expectation of
approximately 3.0%.
As a result of the increase in our mortgage portfolio, the total of net interest
income and other revenue contributed by our mortgage unit increased by 117% year
over year.
Although revenue increased compared to the prior year we have reported a net
loss from our continuing mortgage operations of $388 for the three months ended
March 31, 2013, compared to a net loss of $664 for the comparable period in
2012. This represents a change in presentation as we had previously reported net
earnings of $118 from our mortgage segment for the first quarter of 2012. The
change in net earnings presented reflects approximately $1,000 of corporate
overhead costs previously assigned to the transfer agent and corporate trust
segment and the foreign exchange segment that have now been reallocated to our
continuing mortgage operation. These overhead costs include executive
management, administration and risk and control functions which provide the
foundational infrastructure to support our strategy to grow our mortgage
operation.
Our discontinued transfer agent and corporate trust and foreign exchange
operations contributed a net loss of $638 for the three months ended March 31,
2013 compared to net earnings of $710 for the comparable period in 2012. The
results of our discontinued operations include before tax costs of $1,149
incurred in connection with the Transaction during the first quarter of 2013.
These non-recurring costs were primarily for investment banking, legal and other
advisory services. Also during the first quarter of 2013 we incurred before tax
costs of $500 in connection with the wind-down of our foreign exchange business.
In total we experienced a net loss of $1,026 for the three months ended March
31, 2013 compared to net earnings of $46 for the comparable period in 2012. We
had a net loss per share of $0.11 for the three months ended March 31, 2013
compared to net earnings per share of $0.01 for the comparable period in 2012.
Despite the fact it is now absorbing overhead costs previously allocated between
three operating segments we anticipate our continuing mortgage business segment
to be modestly profitable in 2013. As well, a gain on sale from the Transaction
will be recognized in the second quarter.
Equity Financial Holdings President & CEO, Paul G. Smith said,
"The sale of our transfer agent and corporate trust services business is
important for us as it positions us to focus exclusively on our growing mortgage
and deposit-taking business, thereby clarifying our strategic direction and
value proposition to our investors. Management believes 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 allows us to allocate our resources accordingly."
Equity Financial Trust CEO, Nick Kyprianou said,
"We started the year by originating $39,531 of new mortgage loans during the
first quarter and ended with mortgage loans outstanding of $226,876. We remain
confident in our expectation that compared to the balance at the end of 2012 our
mortgage portfolio will be approximately double in size by the end of 2013."
Interim Consolidated Financial Statements and Management's Discussion and
Analysis for the first quarter and fiscal period ended March 31, 2013 can be
found on SEDAR at www.sedar.com and on Equity's website at
www.equityfinancialholdings.com.
Analyst Conference Call
Equity will hold a conference call on May 15, 2013 at 9 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" be taken,
statements that certain actions, events or results "may", "could", "would",
"might" or "will" be taken, o ccur or be achieved, have been used to identify
forward-looking information. Such forward-looking statements include, without
limitation, operations and financial results, and otherwise with respect to the
Corporation's business, operations and policies, including the Corporation's new
strategic focus of operating as a mortgage provider and deposit-taking
institution, the Corporation's earnings expectations, 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, the Corporation's ability to 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 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, 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.
FOR FURTHER INFORMATION PLEASE CONTACT:
Equity Financial Holdings Inc.
Paul G. Smith
President & CEO
(416) 361-0930 Ext 270
www.equityfinancialholdings.com
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