Element Financial Corporation reported financial results for the three-month and nine-month periods ending September 30, 2014. New originations during the period of $1.2 billion, together with the acquisition of PHH Arval at the beginning of the period, contributed to a 120 percent increase in the Company’s total earning assets to $8.9 billion as at September 30, 2014 versus $4.1 billion as at June 30, 2014.
The Company’s U.S. Commercial & Vendor Finance unit reported new originations of $224.5 million for the three month period ending September 30, 2014 versus $213.3 million originated in the preceding quarter. Originations from Element’s Canadian Commercial & Vendor platform were $147.9 million versus $158.4 million in the previous quarter. Aviation Finance reported originations of $157.1 million in Q3 versus originations of $149.4 million in the preceding quarter and has three to four hundred million worth of transactions scheduled to close in Q4. Element’s Fleet Management unit reported originations of $482.5 million in Q3, including $409 million of new volume originated from the acquired operations of PHH Arval, versus $138.2 million of fleet originations in the preceding quarter. The Rail Finance vertical reported $162.6 million of new railcar leases in Q3 versus $133.2 originations in the previous quarter.
“This is normally our seasonally weakest quarter, but these very strong results helped to prove up several of the core fundamentals of Element’s business model,” said Steven Hudson, Element’s Chairman and CEO. “We delivered record origination growth and surpassed expectations on earnings; we added further leverage to our balance sheet and increased our return on equity to almost 10 percent; and we secured more than half of the promised integration savings from our acquisition of PHH Arval and have identified further annualized savings of $15 million,” added Mr. Hudson.
Financial revenue for the three-month period ending September 30, 2014 was $157.0 million or 8.0 percent of average earning assets versus $75.1 million in the previous quarter or 7.9 percent of average earning assets. Interest expense was $45.8 million for the three-month period ending September 30, 2014 or 2.3 percent of average earning assets versus $22.9 million in the previous quarter or 2.4 percent of average earning assets. Net financial income for the three-month period ending September 30, 2014 was $111.2 million for the quarter versus $52.1 million in the preceding quarter.
As expected following the acquisition of PHH Arval at the beginning of the period, the Company’s consolidated adjusted operating expense ratio increased during Q3 to 2.6 percent of average earning assets versus 2.2 percent in the preceding quarter. However, excluding the fleet management business, all of the other business verticals reported operating expenses at or below the Company’s target of 2.0 percent of average earning assets. The Company expects to bring the consolidated operating expense ratio down over the next several quarters as the impact of cost reductions from the PHH integration are fully realized and the average earning asset base of the company continues to grow.
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