Street Capital Announces 2018 Annual and Fourth Quarter Results
TORONTO, March 6, 2019 /CNW/ - Street Capital Group Inc. ("Street Capital" or the "Company") (TSX: SCB), today announced its financial results for the three months and year ended December 31, 2018.
Fiscal 2018 Financial Highlights
All comparisons below are to Fiscal 2017, unless otherwise noted
- Total revenue (net of acquisition costs) was $54.96 million, compared to $63.16 million.
- Reported shareholders' diluted earnings per share were ($0.37), compared to $0.02.
- Adjusted shareholders' diluted earnings per share(i) were $0.00, compared to $0.06.
- Adjusted return on tangible equity(i) was 0.4%, compared to 7.7%.
- Book value per share was $0.78, compared to $1.13.
- Mortgages under administration were $27.59 billion, compared to $28.02 billion.
- Total prime originations and renewals were $6.24 billion, compared to $7.23 billion.
- Total Street Solutions originations were $421.4 million, compared to $203.7 million.
Q4-2018 Financial Highlights
All comparisons below are to Q4-2017, unless otherwise noted
- Total revenue (net of acquisition costs) was $12.3 million, compared to $14.8 million.
- Reported shareholders' diluted earnings per share were ($0.37), compared to $0.01.
- Adjusted shareholders' diluted earnings per share(i) were ($0.01), compared to $0.01.
- Adjusted return on tangible equity(i) was (5.9%), compared to 6.1%.
- Total prime originations and renewals were $1.36 billion, compared to $1.67 billion.
- Total Street Solutions originations were $121.6 million, compared to $62.1 million.
Duncan Hannay, President and CEO of Street Capital, commented, "Street Capital faced several challenges during 2018 and as a management team and board of directors, we are facing them head-on. We achieved several key milestones during the year, including strong growth in Street Solutions originations, robust prime insured renewals, and the securing of off-balance sheet funding solutions for both our Street Solutions and prime uninsurable product suites. During 2019, we will remain keenly focused on deepening sources of funding and strengthening the Bank's capital base. We have also placed a renewed emphasis on growing prime new mortgage originations and prime mortgage renewals, while enhancing efficiency and the client experience through improved loan origination systems and processes. I would like to take this opportunity to thank our highly dedicated team, our shareholders and our Board of Directors for their continued support and efforts during the year, as well as our valued mortgage broker, funding and other partners for their continued choice of Street Capital as a preferred partner."
Business Update
Note to readers: This section includes forward-looking information and is qualified in its entirety by the discussion about Forward-Looking Information, below.
EPS was ($0.37) in Q4 2018 and for the year, down from $0.01 in Q4 2017 and $0.02 for 2017. Adjusted EPS was ($0.01) for Q4 2018 and $0.00 for the year, down from $0.01 in Q4 2017 and $0.06 for 2017. Adjusted EPS excludes non-recurring restructuring costs and non-cash asset write-downs. (Please see the section Non-GAAP Measures in the Company's Management's Discussion and Analysis for the fourth quarter and year ended December 31, 2018, for further detail and numerical reconciliations of these non-GAAP measures to the most directly comparable measure specified, defined or determined under the GAAP presented in the Company's financial statements.)
Revenue of $12.3 million in the quarter and $55.0 million for the year was down from $14.8 million in Q4 2017 and $63.2 million for 2017, and down from $14.0 million last quarter. Increasing contribution from net interest income from Street Solutions mortgages was offset by the weakness in contribution from prime mortgage sales, which resulted from reduced origination volumes and spread compression in the quarter and in the year.
The Bank originated and renewed $1.36 billion in prime mortgages in Q4 2018 and $6.24 billion for the year, down approximately 18% from $1.67 billion in Q4 2017 and approximately 14% from $7.23 billion in 2017. The declines primarily reflect the heightened competition for a smaller addressable market of prime insurable mortgages and the Bank's lack of competitive funding for prime uninsurable mortgages for most of 2018, offset, as expected, by strong growth in prime renewals.
Additionally, as described in the Company's MD&As for Q2 and Q3 2018, as mortgage underwriting and mortgage insurance qualification requirements have become more stringent, both because of changes in regulatory requirements, as seen through the Department of Finance in October 2016 and most recently from OSFI in October 2017 with respect to updates to Guideline B-20, and through changes in general industry practice, the inherent risk of misrepresentation in mortgage documents has increased. This is particularly the case when income qualification rules are tightened and within the current environment of high home prices and increasing interest rates. To proactively mitigate this higher inherent risk, and in line with management's ongoing focus on credit quality, the Bank strengthened and continues to strengthen its internal capabilities by evolving its processes and use of technology. The Bank also carefully evaluates its broker relationships on an ongoing basis and will take actions, as required, in the normal course of its business. All these measures serve to mitigate risk to the Bank and its business partners from the types of systemic issues that have affected other market participants. These actions, at times, can come at the expense of near-term volume growth and market share, as was experienced in 2018. The Bank sees these actions as important but generally transitory. Much of the process improvement has been implemented and service levels have improved, and management did observe improving prime originations and market share gain in the later part of Q4 2018. The Bank is well underway with a renewed go-to-market strategy, which is expected to result in improvements in prime originations in 2019.
The Bank experienced strong demand and uptake for the Street Solutions product, originating $121.6 million in Q4 2018 and $421.4 million in 2018. The on-balance sheet portfolio was at $526.8 million at the end of the year, up 162% from last year, with a healthy weighted average yield of 5.27% combined with strong credit quality and credit performance. Management is taking a prudent approach to managing the growth in Street Solutions, both in terms of credit quality, which remains very strong, and by managing funding and liquidity risk. While management originally targeted originations in the range of $600 - $700 million for 2018, given the slower than anticipated progress in the Bank's funding initiatives during 2018, originations were revised to the range of $375 - $400 million. Additionally, in a press release on February 19, 2019 management lowered its Street Solutions origination targets for 2019 to $300 - $450 million. Ultimately, originations for Street Solutions will depend on the success of Bank's current initiatives to deepen its funding sources both on-and off-balance sheet, and on the Bank's regulatory capital levels. The Bank continues to make good progress in gaining access to third-party broker deposit platforms with bank-owned and independent investment dealers, and has developed off-balance sheet funding relationships with institutional investors, completing its first sale of $26.2 million Street Solutions mortgages in Q4 2018. The ultimate sustainability of off-balance sheet funding is dependant upon several factors outside the control of the Company including, but not limited to, funding availability and funding costs relative to the yield on the underlying mortgages. For the Bank to materially increase its portfolio of Street Solutions funded on-balance sheet it will need a commensurate increase in its level of regulatory capital. The Company continues to explore various opportunities to strengthen the Bank's capital position.
Additionally, as announced on February 19, 2019, the Company recorded non-cash write-downs totalling $37.0 million in Q4 2018, noting these charges are at the parent, SCGI, and do not impact the Bank's capital. Subsequent to the February 19 announcement, management determined that a further non-cash write-down related to reversing deferred tax assets was required, bringing total pre-tax non-cash write-downs to $39.1 million.
In Q4 2018, after a detailed review of the Company's operations, management began executing on a strategic realignment with the intent of leveraging the Company's core strengths to return it to sustainable profitability. The strategic realignment called for immediate and decisive actions to reduce costs, drive profitability and efficiency, and strengthen the capital position of the Bank.
Key actions of the strategic realignment to date include:
- As announced on December 20, 2018 - the management team and Board of Directors decided to suspend the development of the Bank's core banking system, which would have been required to launch a web and mobile enabled banking platform, including a direct-to-consumer deposit offering, that was originally planned for launch in 2019. There was a charge against income of $7.4 million in Q4 2018 related to termination of the related IT contract and the development costs already incurred. Despite the termination of the project, the development and design work has been retained and the Company will re-evaluate the implementation of the core banking system towards the end of 2019.
- As announced on January 16, 2019 - as part of generating targeted efficiencies to improve profitability, management made the difficult decision to reduce its workforce by about 30 positions, taking its FTE count to 192 from 222. The Company expects to incur up to $2.3 million of restructuring charges in Q1 2019. As part of the restructuring, and to improve efficiency and accountability, the Company also reorganized its management team to align its operating model to the new strategic focus.
- The Company leveraged its shift towards Agile project delivery to initiate three core priorities in support of its strategic realignment:
- Prime New Mortgage Originations – supporting a renewed go-to-market strategy initiated in late 2018, this Agile workgroup is focused on new prime origination volume growth across insured and uninsured segments by focussing on new broker onboarding, deepening share of wallet, and improving the end-to-end customer experience.
- Prime Mortgage Renewals – this Agile workgroup plays a key role in increasing renewals and improving overall contribution by strengthening processes and targeting offers to maximize customer retention and overall profitability of mortgage renewals.
- Loan Origination Systems and Process – this team is focussed on middle office transformation and digital delivery to improve throughput, customer experience and overall efficiency of the Company's mortgage origination platform, with the objective of driving competitive advantage and strengthening overall market share.
The ongoing strategic realignment, which includes growing a profitable balance sheet, is designed to improve financial performance in the medium to long term and will also require the Company to take action to improve the Bank's capital levels in 2019. Management and the Board of Directors are committed to balancing the speed of execution of the Bank's plans and use of capital with the realities of the current market, to choose the path to strengthen capital that best recognizes the needs of all stakeholders.
2019 Outlook
Note to readers: This section includes forward-looking information and is qualified in its entirety by the discussion about Forward-Looking Information, below.
Prime Mortgage Lending
Market competition for prime insurable mortgages remains high, particularly in the high ratio segment, and this is anticipated to continue. Housing activity is expected to remain relatively consistent with the most recent experience. This view reflects current economic forecasts, national housing sale statistics, and the effect of anticipated future interest rate increases. As discussed above, management is actively working on renewed go-to-market strategies and improving service levels to increase prime originations and is targeting an improvement in prime originations and its broker market share in 2019.
Price competition for prime insurable mortgages is expected to continue to put some negative pressure on the gain on sale rates earned on prime mortgages, and as such management is not anticipating material increases in gain on sale rates over the near to mid-term.
Given the nascent funding model for prime uninsurable mortgages, for most of 2018 the Bank was not able to offer competitive rates for prime uninsured mortgages and as such it was a product the Bank was largely shut out of following the 2016 mortgage insurance eligibility rule changes. In 2018 the Bank secured some funding for prime uninsurable mortgages and Bank funded and sold $56.6 million during the year. Early indicators in 2019 are showing more competitive pricing and improving originations. The ultimate success and sustainability of the prime uninsurable mortgage product, given the Bank's current business model, will depend on the further development of a sufficiently liquid and active non-government sponsored Residential Mortgage Backed Securities ("RMBS") market. Management is cautiously optimistic that originations will begin to improve for this product, although the profitability levels remain uncertain. In any case broadening of its mortgage shelf is expected to positively contribute to overall origination levels across the mortgage shelf.
Prime Mortgage Renewals
Softness in new originations of prime insurable mortgages continues to be partly offset by the Bank's expected highly profitable mortgage renewal activity. Management continues to expect prime renewals in range of $2.40 - $2.60 billion in 2019 and $2.60 - $2.80 billion in 2020.
This activity will continue at relatively lower net gain on sale rates due to a few factors. First, from the period January 2011 – July 2015, the Bank offered brokers a Loyalty Program that pays a trailer commission upon mortgage renewal. The bulk of mortgages originated under this program have maturity dates between 2018 and 2020, which began noticeably increasing acquisition costs for renewals in 2018. Second, the Bank has differing contracts with funders, which determine the premiums paid on renewal. A higher relative proportion of renewals in 2019 with a funder who pays a lower premium on renewal will put some downward pressure on gain on sale rates, but with some improvement compared to 2018. And, third, renewals are subject to the same margin pressure as new prime originations. Even with these pressures, the gain on sale rates for renewals remain materially more profitable than new originations and will continue to significantly contribute to the Bank's financial results.
It should be noted that optimizing contribution from mortgage renewals is a strategic priority for management. In that regard the Bank will continue to focus on its service and retention activities. The Bank's almost $27 billion of prime MUA provides both a sustainable portfolio of quality revenue generating assets and a customer base to drive significant value over the coming years as the Bank expands into additional product areas.
Street Solutions Uninsured Residential Mortgage Lending
The Bank continues to experience strong demand for the Street Solutions product, at high levels of credit quality and ongoing solid credit performance. The Bank is targeting $300 - $450 million in originations in 2019 with spreads relatively consistent with Q4 2018.
Ultimate originations for Street Solutions in 2019 will depend on the success of Bank's current initiatives to deepen its funding sources both on-and off-balance sheet and the Bank's regulatory capital levels. The Bank continues to make good progress in gaining access to third-party broker deposit platforms with bank-owned and independent investment dealers and has developed off-balance sheet funding relationships with institutional investors, and completed its first sale in Q4 2018. The ultimate sustainability of off-balance sheet funding is dependent upon several factors outside the control of the Company including, but not limited to, funding availability and funding costs relative to the yield on the underlying mortgages. For the Bank to materially increase its portfolio of Street Solutions on-balance sheet it will need a commensurate increase in its level of regulatory capital.
Funding and Liquidity
When investors purchase prime insurable mortgages at commitment, the Bank transfers substantially all the risks associated with the mortgage. The Bank's access to this funding is currently adequate, and the Bank remains competitive in this mortgage segment. Also, as mentioned above, the Bank has been successful in obtaining initial funding for a prime uninsurable mortgage product.
The primary funding strategy for the Street Solutions product continues to be to originate deposits, sourced through the investment broker network, across tenors and focus on deposits with fixed terms to manage liquidity risk. The Bank continues to onboard new brokers to increase diversification and volume in the channel and remains very active in this regard. Additionally, the Bank continues to develop off-balance sheet funding strategies for Street Solutions and will look to fund this way to manage its balance sheet, optimize the use of capital and grow originations when the economics are within targets.
Operating Expenses
The Bank will continue to target positive operating leverage as a key performance indicator in 2019.
Management has managed expenses prudently including a reorganization that resulted in a net reduction of just over 10% of the workforce in early 2019. Balancing all factors, including additional servicing costs and balancing improvements in efficiency against making the appropriate investments in people and technology to enable its priorities and the strengthening of the Bank's risk and compliance management programs, the Company anticipates expenses to run marginally above 2018 but does expects to achieve positive operating leverage in 2019.
Beyond 2019 management will continue undertake proactive strategies to achieve positive operating leverage, both through planned cost saving initiatives and improved revenue.
Achievement Against 2018 Strategic Priorities
In its 2017 Q4 and Annual Report the Bank set out five strategic priorities to support its growth objectives over the medium to long-term. During 2018 the Bank made progress on several fronts.
Strategic Priorities for 2018 |
2018 Accomplishments |
Diversify funding sources |
|
Build momentum in new |
|
Drive contribution from |
|
Enhance the risk and |
|
Transform the organization |
|
Table 1 – Financial Highlights
(in thousands of $, except where defined) |
For the three months ended or as at |
For the year ended or as at |
||||||||||
December 31, |
September 30, |
December 31, |
December 31, |
December 31, |
||||||||
2018 |
2018 |
2017 |
2018 |
2017 |
||||||||
Financial performance |
||||||||||||
Shareholders' net income (loss) |
$ |
(45,369) |
$ |
(1,361) |
$ |
1,239 |
$ |
(44,789) |
$ |
2,292 |
||
Shareholders' diluted earnings (loss) per share |
$ |
(0.37) |
$ |
(0.01) |
$ |
0.01 |
$ |
(0.37) |
$ |
0.02 |
||
Adjusted shareholders' net income (loss) (i) |
$ |
(1,665) |
$ |
713 |
$ |
1,544 |
$ |
(97) |
$ |
7,756 |
||
Adjusted shareholders' diluted earnings (loss) |
||||||||||||
per share (i) |
$ |
(0.01) |
$ |
0.01 |
$ |
0.01 |
$ |
0.00 |
$ |
0.06 |
||
Total revenue (net of acquisition costs) |
$ |
12,307 |
$ |
14,020 |
$ |
14,788 |
$ |
54,961 |
$ |
63,157 |
||
Net gain on sale - new - excluding portfolio |
||||||||||||
insurance (ii) |
$ |
4,682 |
$ |
6,304 |
$ |
8,536 |
$ |
24,193 |
$ |
43,602 |
||
Net gain on sale - new - % excluding portfolio |
||||||||||||
insurance (ii) |
0.52% |
0.63% |
0.75% |
0.64% |
0.81% |
|||||||
Net gain on sale of mortgages - renewals |
$ |
5,249 |
$ |
7,271 |
$ |
7,376 |
$ |
28,300 |
$ |
25,990 |
||
Net gain on sale - renewals - % of renewals |
1.15% |
1.05% |
1.39% |
1.16% |
1.40% |
|||||||
Net interest income - non-securitized assets |
$ |
3,207 |
$ |
2,768 |
$ |
828 |
$ |
9,533 |
$ |
922 |
||
Net interest margin - non-securitized assets |
2.09% |
2.06% |
1.27% |
1.99% |
0.82% |
|||||||
Return on tangible equity (i) |
(174.0%) |
(4.4%) |
4.9% |
(40.8%) |
2.6% |
|||||||
Adjusted return on tangible equity (i) |
(5.9%) |
2.9% |
6.1% |
0.4% |
7.7% |
|||||||
Mortgages originated and under |
||||||||||||
administration |
||||||||||||
Mortgages under administration |
||||||||||||
(in billions of $) |
$ |
27.59 |
$ |
27.64 |
$ |
28.02 |
$ |
27.59 |
$ |
28.02 |
||
Prime mortgages originated and sold |
$ |
904,442 |
$ |
1,005,705 |
$ |
1,138,274 |
$ |
3,798,567 |
$ |
5,372,803 |
||
Prime mortgage renewals sold |
457,161 |
695,609 |
531,080 |
2,440,286 |
1,859,267 |
|||||||
Total prime mortgages sold |
$ |
1,361,603 |
$ |
1,701,314 |
$ |
1,669,354 |
$ |
6,238,853 |
$ |
7,232,070 |
||
Total Street Solutions originations |
$ |
121,611 |
$ |
93,685 |
$ |
62,116 |
$ |
421,386 |
$ |
203,717 |
||
Credit quality - mortgages |
||||||||||||
Provision for Street Solutions credit losses |
$ |
(58) |
$ |
(67) |
$ |
(80) |
$ |
(326) |
$ |
(216) |
||
Provision for Street Solutions credit losses |
||||||||||||
- rate |
0.06% |
0.08% |
0.19% |
0.09% |
0.18% |
|||||||
Allowance for Street Solutions credit losses |
$ |
595 |
$ |
538 |
$ |
216 |
$ |
595 |
$ |
216 |
||
Allowance for Street Solutions credit losses |
||||||||||||
- % of Street Solutions assets |
0.11% |
0.12% |
0.11% |
0.11% |
0.11% |
|||||||
Regulatory Capital Ratios |
||||||||||||
- Street Capital Bank |
||||||||||||
Risk-weighted assets |
$ |
479,866 |
$ |
460,448 |
$ |
388,187 |
||||||
Common equity Tier 1 (CET1) ratio |
19.84% |
22.05% |
25.39% |
|||||||||
Total capital ratio |
19.96% |
22.16% |
25.39% |
|||||||||
Leverage ratio |
10.07% |
10.81% |
13.76% |
|||||||||
Equity and share information |
||||||||||||
Shareholders' equity |
$ |
94,960 |
$ |
139,743 |
$ |
138,162 |
||||||
Shares outstanding end of period (000s) |
122,184 |
122,184 |
122,184 |
|||||||||
Book value per share |
$ |
0.78 |
$ |
1.14 |
$ |
1.13 |
||||||
Market capitalization |
$ |
73,310 |
$ |
109,966 |
$ |
125,850 |
||||||
Share price at close of market |
$ |
0.60 |
$ |
0.90 |
$ |
1.03 |
||||||
(please see Non-GAAP definitions below) |
||||||||||||
Note:The table above includes non-GAAP measures that highlight the Company's core operating business (the Bank) by removing non-recurring items, including non-recurring restructuring costs or recoveries, and material items associated with the Company's legacy businesses. Please see the section Non-GAAP Measures in the Company's Management's Discussion and Analysis for the fourth quarter and year ended December 31, 2018, for further detail and numerical reconciliations of these non-GAAP measures to the most directly comparable measure specified, defined or determined under the GAAP presented in the Company's financial statements. |
|
(i) |
Non-GAAP measure the Company uses to measure its performance from continuing and recurring income from its core business. |
(ii) |
Portfolio insurance refers to the amortization of the prepaid portfolio insurance asset which is included as an expense in the calculation of total revenue. This amortization of the asset is not variable based on the current period's volume, and, as such, can distort gain on sale trends. Please see Table 2 in the Company's Management's Discussion and Analysis for the fourth quarter and year ended December 31, 2018, for additional information. |
Reconciliation of Shareholders' Net Income (Loss) to Adjusted Shareholders' Net Income (Loss)
(in thousands of $, |
For the three months ended |
For the year ended |
||||||||||
except per share data) |
December 31, |
September 30, |
December 31, |
December 31, |
December 31, |
|||||||
2018 |
2018 |
2017 |
2018 |
2017 |
||||||||
Net income (loss) |
$ |
(45,369) |
$ |
(1,361) |
$ |
1,239 |
$ |
(44,789) |
$ |
2,292 |
||
Write off of goodwill and intangible assets |
||||||||||||
(net of tax) |
25,763 |
- |
- |
25,763 |
- |
|||||||
Deferred tax adjustment (reassessment |
||||||||||||
of loss carry forwards) |
12,458 |
1,770 |
- |
14,228 |
- |
|||||||
Net interest accrual on legacy payable |
||||||||||||
(net of tax) |
32 |
293 |
- |
324 |
- |
|||||||
Restructuring expense (net of tax) |
5,612 |
- |
164 |
5,612 |
4,985 |
|||||||
Fair value adjustments |
||||||||||||
(net of non-controlling interest) |
- |
11 |
87 |
(1,331) |
119 |
|||||||
Private equity management expense (net of tax) |
- |
- |
54 |
257 |
345 |
|||||||
Discontinued operations |
||||||||||||
(net of tax) |
(161) |
- |
- |
(161) |
15 |
|||||||
Adjusted net income (loss) |
$ |
(1,665) |
$ |
713 |
$ |
1,544 |
$ |
(97) |
$ |
7,756 |
||
Shareholders' diluted earnings |
||||||||||||
(loss) per share |
$ |
(0.37) |
$ |
(0.01) |
$ |
0.01 |
$ |
(0.37) |
$ |
0.02 |
||
Adjusted shareholders' diluted earnings |
||||||||||||
(loss) per share |
$ |
(0.01) |
$ |
0.01 |
$ |
0.01 |
$ |
0.00 |
$ |
0.06 |
||
Further Information
Please also refer to the Company's 2018 Audited Consolidated Financial Statements and Fourth Quarter and Year Ended December 31, 2018 Management's Discussion and Analysis, which are available on the Company's website (www.streetcapital.ca) and on SEDAR (www.sedar.com).
Conference Call
Street will host a conference call today, Wednesday, March 6, 2019 at 8:00 a.m. ET to discuss its financial results. Duncan Hannay, Chief Executive Officer of Street, will chair the call with Marissa Lauder, Chief Financial Officer of Street.
Participant Dial-in |
Webcast |
Reference Number |
|
Conference Call
|
416-764-8609; or 1-888-390-0605 |
34211710 |
|
Replay (available for 2 weeks) |
416-764-8677; or 1-888-390-0541 |
211710 |
About Street Capital Group Inc. (streetcapitalgroup.ca)
Street Capital Group Inc. (TSX: SCB) is a public company operating through its wholly-owned subsidiary, Street Capital Bank of Canada, a federally regulated Schedule I Bank offering residential mortgage loans with the strategic goal of introducing additional retail banking products in the coming years. Street Capital Bank of Canada sources its mortgage products primarily through a network of independent mortgage brokers across Canada with whom it has built relationships. Street Capital Bank of Canada offers a broad line-up of high ratio and conventional mortgages to borrowers and either sells the mortgages it underwrites to top tier financial institutions or holds them on balance sheet. Street Capital Bank of Canada lends throughout all of the Provinces of Canada (other than Quebec) and has offices in Ontario, Alberta and British Columbia. For more information please visit streetcapital.ca.
Forward-Looking Statements
This release contains certain forward-looking statements that are based on management's exercise of business judgment .as well as assumptions made by, and information currently available to, management. When used in this document, the words "may", "plan", "will", "anticipate", "believe", "estimate", "expect", "intend", and words of similar import, are intended to identify any forward-looking statements. You should not place undue reliance on these forward-looking statements. These statements reflect our current view of future events and are subject to certain risks and uncertainties as outlined in the Company's Annual Information Form and other filings made with securities regulators, which are available on SEDAR (sedar.com). These factors include, without limitation: expansion opportunities, technological changes, regulatory changes (including mortgage insurance and capital rules), and changes to the business and economic environment, including, but not limited to, Canadian housing market conditions and activity, interest rates, mortgage backed securities markets, and employment conditions that may impact the Company, its mortgage origination volumes, investments and capital expenditures, and competitive factors that may impact revenue and operating costs. Any of these factors, amongst others, could cause actual results to vary materially from current results or from the Company's currently anticipated future results and financial condition. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, our actual results could differ materially from those anticipated in these forward-looking statements. We undertake no obligation, and do not intend, to update, revise or otherwise publicly release any revisions to these forward looking statements to reflect events or circumstances after the date hereof, or to reflect the occurrence of any unanticipated events, except as required by applicable securities laws. Although we believe that our expectations are based on reasonable assumptions, we can give no assurance that our expectations will materialize.
The following table sets out financial highlights of the Company's consolidated quarterly results of operations for the eight quarters ended December 31, 2018. Please see the section Non-GAAP Measures in the Company's Management's Discussion and Analysis for the Quarter and Year Ended December 31, 2018, which is available on the Company's website (www.streetcapital.ca) and on SEDAR (www.sedar.com), for the definitions of adjusted net income, other related non-GAAP measures, and credit quality indicators.
(in thousands of $, except |
2017 |
2017 |
2017 |
2017 |
2018 |
2018 |
2018 |
2018 |
|||||||||
where defined) |
Q1 |
Q2 |
Q3 |
Q4 |
Q1 |
Q2 |
Q3 |
Q4 |
|||||||||
Financial performance |
|||||||||||||||||
Shareholders' net income (loss) |
$ |
(2,574) |
$ |
(104) |
$ |
3,731 |
$ |
1,239 |
$ |
(1,365) |
$ |
3,306 |
$ |
(1,361) |
$ |
(45,369) |
|
Adjusted shareholders' net |
|||||||||||||||||
income (loss) |
$ |
69 |
$ |
1,845 |
$ |
4,297 |
$ |
1,544 |
$ |
(1,481) |
$ |
2,337 |
$ |
713 |
$ |
(1,665) |
|
Shareholders' diluted earnings |
|||||||||||||||||
(loss) per share |
$ |
(0.02) |
$ |
0.00 |
$ |
0.03 |
$ |
0.01 |
$ |
(0.01) |
$ |
0.03 |
$ |
(0.01) |
$ |
(0.37) |
|
Adjusted shareholders' diluted |
|||||||||||||||||
earnings (loss) per share |
$ |
0.00 |
$ |
0.02 |
$ |
0.04 |
$ |
0.01 |
$ |
(0.01) |
$ |
0.02 |
$ |
0.01 |
$ |
(0.01) |
|
Return on equity |
(7.7%) |
(0.3%) |
11.1% |
3.6% |
(4.0%) |
9.5% |
(3.9%) |
(154.6%) |
|||||||||
Adjusted return on equity |
0.2% |
5.6% |
12.8% |
4.5% |
(4.3%) |
6.7% |
2.0% |
(5.7%) |
|||||||||
Return on tangible equity |
(9.3%) |
0.1% |
14.4% |
4.9% |
(4.5%) |
12.2% |
(4.4%) |
(174.0%) |
|||||||||
Adjusted return on tangible equity |
0.7% |
7.5% |
16.5% |
6.1% |
(4.9%) |
8.8% |
2.9% |
(5.9%) |
|||||||||
Mortgages sold and under |
|||||||||||||||||
Prime mortgages sold - new |
$ 1,213,257 |
$ |
1,499,930 |
$ |
1,521,342 |
$ |
1,138,274 |
$ |
826,528 |
$ |
1,061,892 |
$ |
1,005,705 |
$ |
904,442 |
||
Prime mortgages sold - renewal |
304,597 |
463,167 |
560,423 |
531,080 |
519,686 |
767,830 |
695,609 |
457,161 |
|||||||||
Prime mortgages sold - total |
$ 1,517,854 |
$ |
1,963,097 |
$ |
2,081,765 |
$ |
1,669,354 |
$ |
1,346,214 |
$ |
1,829,722 |
$ |
1,701,314 |
$ |
1,361,603 |
||
Total Street Solutions originations |
N/A |
$ |
10,225 |
$ |
131,376 |
$ |
62,116 |
$ |
98,285 |
$ |
107,805 |
$ |
93,685 |
$ |
121,611 |
||
Mortgages under administration |
|||||||||||||||||
(in billions of $) |
$ |
27.81 |
$ |
27.81 |
$ |
27.98 |
$ |
28.02 |
$ |
27.83 |
$ |
27.90 |
$ |
27.64 |
$ |
27.59 |
|
Total revenue |
$ |
11,572 |
$ |
16,881 |
$ |
19,916 |
$ |
14,788 |
$ |
11,593 |
$ |
17,041 |
$ |
14,020 |
$ |
12,307 |
|
Gain on sale of mortgages |
$ |
26,886 |
$ |
37,278 |
$ |
39,531 |
$ |
30,077 |
$ |
22,274 |
$ |
29,728 |
$ |
26,075 |
$ |
21,459 |
|
As a % of mortgages sold |
1.77% |
1.90% |
1.90% |
1.80% |
1.65% |
1.62% |
1.53% |
1.58% |
|||||||||
Acquisition expenses |
$ |
15,523 |
$ |
20,902 |
$ |
20,819 |
$ |
16,750 |
$ |
12,360 |
$ |
15,890 |
$ |
15,118 |
$ |
13,998 |
|
As a % of mortgages sold |
1.02% |
1.06% |
1.00% |
1.00% |
0.92% |
0.87% |
0.89% |
1.03% |
|||||||||
Net gain on sale of mortgages |
$ |
11,363 |
$ |
16,376 |
$ |
18,712 |
$ |
13,327 |
$ |
9,914 |
$ |
13,838 |
$ |
10,957 |
$ |
7,461 |
|
As a % of mortgages sold |
0.75% |
0.83% |
0.90% |
0.80% |
0.74% |
0.76% |
0.64% |
0.55% |
|||||||||
Adjusted operating expenses |
$ |
11,561 |
$ |
14,510 |
$ |
13,821 |
$ |
12,223 |
$ |
13,357 |
$ |
13,827 |
$ |
13,350 |
$ |
14,400 |
|
As a % of mortgages sold |
0.76% |
0.74% |
0.66% |
0.73% |
0.99% |
0.76% |
0.78% |
1.06% |
|||||||||
Equity and share performance |
|||||||||||||||||
Shareholders' equity |
$ |
131,998 |
$ |
132,252 |
$ |
136,590 |
$ |
138,162 |
$ |
137,056 |
$ |
140,763 |
$ |
139,743 |
$ |
94,960 |
|
Shares outstanding end of period |
|||||||||||||||||
(in 000s) |
121,580 |
121,974 |
122,184 |
122,184 |
122,184 |
122,184 |
122,184 |
122,184 |
|||||||||
Book value per share |
$ |
1.09 |
$ |
1.08 |
$ |
1.12 |
$ |
1.13 |
$ |
1.12 |
$ |
1.15 |
$ |
1.14 |
$ |
0.78 |
|
Market capitalization |
$ |
182,370 |
$ |
164,665 |
$ |
171,058 |
$ |
125,850 |
$ |
91,638 |
$ |
103,856 |
$ |
109,966 |
$ |
73,310 |
|
Share price at close of market |
$ |
1.50 |
$ |
1.35 |
$ |
1.40 |
$ |
1.03 |
$ |
0.75 |
$ |
0.85 |
$ |
0.90 |
$ |
0.60 |
|
The following table sets out the Company's consolidated financial position as at December 31, 2018 and 2017; and as at the most recent quarter ended September 30, 2018.
As at |
|||||||
December 31, |
September 30, |
December 31, |
|||||
(in thousands of $) |
2018 |
2018 |
2017 |
||||
Assets |
|||||||
Cash and cash equivalents |
$ |
65,018 |
$ |
77,529 |
$ |
89,414 |
|
Restricted cash |
9,656 |
17,437 |
35,543 |
||||
Securities |
22,692 |
7,414 |
- |
||||
Street Solutions uninsured mortgages |
526,782 |
460,246 |
200,804 |
||||
Other non-securitized mortgages and loans |
37,996 |
26,492 |
13,259 |
||||
Securitized mortgage loans |
123,362 |
193,202 |
220,774 |
||||
Deferred placement fees receivable |
48,670 |
50,187 |
52,325 |
||||
Prepaid portfolio insurance |
75,285 |
77,251 |
82,511 |
||||
Deferred income tax assets |
- |
13,062 |
14,568 |
||||
Other assets |
33,204 |
27,217 |
23,826 |
||||
Goodwill and intangible assets |
1,500 |
27,998 |
28,426 |
||||
Total assets |
$ |
944,165 |
$ |
978,035 |
$ |
761,450 |
|
Liabilities |
|||||||
Deposits |
$ |
638,710 |
$ |
555,848 |
$ |
292,976 |
|
Loans payable |
4,274 |
4,107 |
4,039 |
||||
Securitization liabilities |
125,472 |
193,056 |
221,594 |
||||
Accounts payable and accrued liabilities |
44,334 |
45,126 |
64,840 |
||||
Deferred income tax liabilities |
43,507 |
47,247 |
45,889 |
||||
Total liabilities |
$ |
856,297 |
$ |
845,384 |
$ |
629,338 |
|
Total shareholders' equity |
94,960 |
139,743 |
138,162 |
||||
Non-controlling interests |
(7,092) |
(7,092) |
(6,050) |
||||
Total liabilities and equity |
$ |
944,165 |
$ |
978,035 |
$ |
761,450 |
|
Total MUA (in billions of $) |
$ |
27.59 |
$ |
27.64 |
$ |
28.02 |
|
SOURCE Street Capital Group Inc.
Duncan Hannay, CEO, Street Capital Group Inc., [email protected]; Jonathan Ross, LodeRock Advisors Inc., Inv. Relations, [email protected], (416) 283-0178
Share this article