Home Capital Reports First Quarter 2018 Results

TORONTO--()--Home Capital Group (“Home Capital” or “the Company”) (TSX: HCG) today reported financial results for the three months ended March 31, 2018. This press release should be read in conjunction with the Company’s 2018 First Quarter Report including Financial Statements and Management’s Discussion and Analysis (MD&A), which are available on Home Capital’s website at www.homecapital.com and on SEDAR at www.sedar.com.

First Quarter 2018, compared with the Fourth Quarter 2017:

  • Net income of $34.6 million, an increase of 13.0% or $4.0 million from $30.6 million.
  • Diluted earnings per share of $0.43, an increase of 13.2% from $0.38.
  • Non-interest expense of $51.4 million, a decrease of $14.1 million and a 21.5% improvement from $65.5 million.
  • Non-securitized single-family residential mortgages of $10.26 billion, an increase of 2.3% or $227.3 million from $10.04 billion.
  • Total mortgage originations of $1.16 billion, an increase of 32.9% or $287.2 million from $872.1 million.
  • Provision for credit losses as a percentage of gross uninsured loans of 0.20%, compared to 0.12%.

First Quarter 2018, compared with the First Quarter 2017:

  • Net income of $34.6 million, a decrease of 40.4% or $23.5 million from $58.0 million.
  • Net income in Q1 2018 includes the impact of reduced loan balances and lower securitization income, partially offset by lower non-interest expenses.
  • Diluted earnings per share of $0.43, a decrease of 52.2% from $0.90.
  • Non-interest expenses were $51.4 million, a $13.1 million decline and a 20.3% improvement from $64.5 million.
  • Total mortgage originations of $1.16 billion, a decrease of 50.6% or $1.19 billion from $2.35 billion.
  • Provision for credit losses as a percentage of gross uninsured loans was 0.20% compared to 0.16%.

“We have taken another step forward on our journey to renewed growth. We had a good start to the year building on the momentum in our business from the past two quarters and our first quarter results demonstrate that Home is back," said Yousry Bissada, President and CEO, Home Capital Group. “We delivered growth in our residential and commercial lending business as result of our constant focus on improving our service to brokers and customers while building a sustainable risk culture.”

"Looking forward, we are ready to grow. Our capital and liquidity position provides flexibility to be competitive in our markets. As we work towards building shareholder value, we are following a responsible growth strategy to be the leading Canadian Alt-A lender, leading in service, technology and market share.”

First Quarter 2018 Financial Position

  • Total loans under administration of $22.54 billion, which includes securitized mortgages that qualify for off-balance sheet accounting, increased $22.4 million from $22.52 billion at the end of Q4 2017, and decreased $4.63 billion from $27.17 billion at the end of Q1 2017.
  • Total loans of $15.22 billion increased 1.0% from $15.07 billion at the end of Q4 2017, and decreased 18.1% from $18.58 billion at the end of Q1 2017.
    • Single-family residential mortgage originations of $869.7 million compared with $566.0 million in Q4 2017, and $1.71 billion in Q1 2017.
    • Multi-unit residential mortgage originations of $104.9 million compared to $194.8 million in Q4 2017, and $294.8 million in Q1 2017. Most multi-unit residential mortgage originations are insured and subsequently securitized through programs that qualify for off-balance sheet accounting.
    • Non-residential commercial mortgage originations, which include store and apartment mortgages, of $184.7 million compared to $111.2 million in Q4 2017, and $338.4 million in Q1 2017.
  • Liquid assets were $1.45 billion, compared to $1.65 billion at the end of Q4 2017 and $2.10 billion at the end of Q1 2017. The Company maintains a prudent level of liquidity, given the current level of operations, loan balances and the Company’s obligations.
  • Total deposits were $12.08 billion compared to $12.17 billion at the end of Q4 2017 and $16.25 billion at the end of Q1 2017.

Credit Quality

Effective January 1, 2018, the Company adopted IFRS 9 Financial Instruments (IFRS 9), which replaced IAS 39 Financial Instruments: Recognition and Measurement (IAS 39). Please see Note 2 of the unaudited interim consolidated financial statements included in the 2018 First Quarter Report for more information on the implementation of IFRS 9.

Credit losses and delinquencies are expected to remain low in 2018; however, the Company is prepared for volatility in this performance that may result from uncertainty in the macroeconomic environment.

Implementing the changes to OSFI Guideline B-20 could have a negative impact on the housing market and economic growth in the Company’s largest market of Ontario. This in turn could contribute to deterioration in credit performance in future quarters, if the extent of the impact is more severe than widely expected. The implementation of IFRS 9 requires consideration of forward-looking information, and may also add higher volatility to reported credit losses going forward.

The Company continues to have strong credit performance with total provision for credit losses of $6.0 million in Q1 2018. Provision as a percentage of gross uninsured loans remained low at 0.20% compared to 0.12% in Q4 2017 and 0.16% in Q1 2017. Provisions for credit losses were calculated under IFRS 9 for Q1 2018 and under IAS 39 for 2017. As provisions for credit losses for 2017 were not restated, comparability is reduced to some extent. Provision for credit losses for the quarter primarily related to the single-family residential mortgage portfolio, reflecting portfolio growth including volume of renewals and the impact of forward-looking macroeconomic information.

The provision on the commercial mortgage portfolio was a decrease of $0.3 million, comprising a reduction of the provision on performing loans of $3.4 million, offset by an increase of $3.0 million for a specific commercial loan. This increase was included in Stage 3 under IFRS 9.

The Company continues to observe strong credit profiles and stable loan-to-value ratios across its portfolio, which continues to support low delinquency and non-performing rates and ultimately low net write-offs. Net write-offs were $1.1 million and represented 0.03% of gross loans compared to 0.11% in Q4 2017 and unchanged from Q1 2017.

Net non-performing loans (represented by Stage 3 loans under IFRS 9) as a percentage of gross loans remained low at 0.29% at the end of Q1 2018 compared to 0.30% at the end of Q4 2017 and 0.24% at the end of Q1 2017.

Non-Interest Expenses

Non-interest expenses decreased by $14.1 million or 21.5% from Q4 2017, resulting primarily from a decrease in other operating expenses. Other operating expenses last quarter included $11.4 million of expenses comprising $6.3 million of impairment losses on intangible assets along with costs related to the exit of the PSiGate and prepaid card business and litigation-related costs.

The decrease in non-interest expenses over Q1 2017 represents a decrease in salaries and benefits expense mainly as a result of reduced staff levels. In addition, salaries and benefits expense in Q1 2017 included $7.4 million of Project EXPO restructuring provision.

Non-Interest Expenses Outlook

Overall non-interest expenses for 2018 are expected to decline from the elevated levels of 2017 as there were a number of significant expenses related to the liquidity event in last year’s results.

However, non-interest expenses are expected to increase for the remainder of 2018 principally due to salaries and benefits expense. It is expected to increase from the amount recorded in Q1 2018 as staffing levels have subsequently increased. It is expected that quarterly salaries and benefits expense will increase between $5 million to $6 million over Q1 2018 levels in subsequent quarters. Due to the lingering impact of certain costs stemming from the liquidity event other operating costs will remain at the current level and increase modestly in connection with new initiatives.

Capital Position

The Company maintained strong capital ratios well above Company targets and regulatory minimums at the end of Q1 2018. Management continues to review opportunities to deploy capital in the most efficient manner to maximize long-term shareholder value.

  • Home Trust’s Common Equity Tier 1 and Total capital ratios remained very strong at 23.64% and 24.12%, respectively, at March 31, 2018. The comparative balances were 23.17% and 23.68%, respectively, at December 31, 2017 and 16.34% and 16.77%, respectively, at March 31, 2017.
  • Home Trust’s Leverage ratio was 9.02% at March 31, 2018, 8.70% at December 31, 2017 and 7.29% at March 31, 2017.

Corporate Update

Home Capital is ready to grow with a robust capital, liquidity and leverage position. The Company’s primary strategic objective is to grow sustainably and regain its leading market share position in Canada’s Alt-A mortgage market.

In the near term, management’s key areas of focus are:

1. Building a sustainable risk culture.

2. Being the leader in the Alt-A marketplace, in service, technology and solutions.

3. Developing robust and diverse liquidity sources and maintaining a strong balance sheet.

4. Profitably growing residential and commercial business lines and increasing market share, relative to market conditions.

5. Increasing renewal and retention rates.

6. Deepening broker relationships and increasing outreach to advance higher-quality applications.

7. Assessing opportunities for the business as it relates to operating in the context of an evolving regulatory environment.

Governance

In 2018, the Company is ready to grow under the direction of a revitalized management team and Board of Directors. Management and the Board are aligned and focused on ensuring that Home Capital regains its position as the leading Canadian Alt-A lender, with leading service, innovative solutions, strong financial performance, the highest ethical standards and the most rigorous risk management. The Board is also focused on leading in governance. Last year’s Board renewal began that process, which is being continued through the slate proposed at the Company’s upcoming annual shareholders’ meeting. The Board is committed to ongoing board renewal to add skills and expertise that will strengthen the Board’s important oversight capabilities.

Moving forward, management and the Board are following a strategy that will take advantage of the Company’s capital position and balance sheet to invest in sustainable and responsible growth. Investments in talent, training and technology will be key to driving profitable growth and creating long-term shareholder value.

YOUSRY BISSADA
President & Chief Executive Officer

BRENDA EPRILE
Chair of the Board
May 8, 2018

The Company’s 2018 First Quarter Financial Report, including Management’s Discussion and Analysis, for the three months ended March 31, 2018 is available at www.homecapital.com and on the Canadian Securities Administrators’ website at www.sedar.com.

First Quarter 2018 Results Conference Call and Webcast

The conference call will take place on Wednesday, May 9, 2018, at 8:00 a.m. ET. Participants are asked to call approximately 10 minutes in advance at 647-427-7450 in Toronto or toll-free 1-888-231-8191 throughout North America. The call will also be accessible in listen-only mode on Home Capital’s website at www.homecapital.com in the Investor Relations section of the website.

Conference Call Archive

A telephone replay of the call will be available between 11:00 a.m. ET Wednesday, May 9, 2018 and 12:00 a.m. ET Wednesday, May 16, 2018 by calling 416-849-0833 or 1-855-859-2056 (enter passcode 5991866). The archived audio webcast will be available for 90 days on Home Capital’s website at www.homecapital.com.

 

FINANCIAL HIGHLIGHTS

(Unaudited)           For the three months ended
(000s, except Percentage and Per Share Amounts)   March 31   December 31   March 31
      2018     2017     2017

OPERATING RESULTS1

Net Income $ 34,586 $ 30,619 $ 58,041
Net Interest Income 88,100 91,718 125,857
Total Revenue 103,765 109,455 147,742
Diluted Earnings per Share $ 0.43 $ 0.38 $ 0.90

Return on Shareholders’ Equity (annualized)

7.6% 6.8% 14.0%
Return on Average Assets (annualized) 0.8% 0.7% 1.1%
Net Interest Margin (TEB)2 2.02% 2.02% 2.44%
Provision as a Percentage of Gross Uninsured Loans (annualized) 0.20% 0.12% 0.16%
Provision as a Percentage of Gross Loans (annualized) 0.16% 0.09% 0.13%
Efficiency Ratio (TEB)2     49.5%     59.8%     43.4%
                  As at
March 31 December 31 March 31
      2018     2017     2017
BALANCE SHEET HIGHLIGHTS1
Total Assets $ 17,458,034 $ 17,591,143 $ 20,993,385
Total Assets Under Administration3 24,776,803 25,040,182 29,583,545
Total Loans4 15,222,310 15,069,636 18,578,969
Total Loans Under Administration3,4 22,541,079 22,518,675 27,169,129
Liquid Assets 1,454,313 1,654,718 2,098,192
Deposits 12,084,408 12,170,454 16,249,611
Shareholders’ Equity     1,849,067     1,813,505     1,680,898
FINANCIAL STRENGTH1
Capital Measures5
Risk-Weighted Assets $ 6,604,744 $ 6,532,130 $ 9,086,886
Common Equity Tier 1 Capital Ratio 23.64% 23.17% 16.34%
Tier 1 Capital Ratio 23.64% 23.17% 16.34%
Total Capital Ratio 24.12% 23.68% 16.77%
Leverage Ratio 9.02% 8.70% 7.29%
Credit Quality
Net Non-Performing Loans as a Percentage of Gross Loans 0.29% 0.30% 0.24%
Allowance as a Percentage of Gross Non-Performing Loans 78.1% 79.5% 91.8%
Share Information
Book Value per Common Share $ 23.04 $ 22.60 $ 26.18
Common Share Price – Close $ 13.56 $ 17.31 $ 26.03
Dividend paid during the period ended $ - $ - $ 0.26
Dividend Payout Ratio - - 28.9%
Market Capitalization $ 1,088,136 $ 1,389,058 $ 1,671,230
Number of Common Shares Outstanding     80,246     80,246     64,204
1 The amounts as at and for the period ended March 31, 2018 have been prepared in accordance with IFRS 9 Financial Instruments (IFRS 9); prior period amounts have not been restated and have been prepared in accordance with IAS 39 Financial Instruments: Recognition and Measurement (IAS 39). Please see Note 2 in the unaudited interim consolidated financial statements included in the 2018 First Quarter Report for further information.
2 See definition of Taxable Equivalent Basis (TEB) under Non-GAAP Measures in the 2018 First Quarter Report.
3 Total assets and loans under administration include both on- and off-balance sheet amounts.
4 Total loans include loans held for sale and are presented gross of allowance for credit losses, for all periods presented.
5 These figures relate to the Company’s operating subsidiary, Home Trust Company.
Consolidated Statements of Income
    For the three months ended
thousands of Canadian dollars, except per share amounts March 31 December 31 March 31
(Unaudited)   2018   2017   2017
Net Interest Income Non-Securitized Assets
Interest from loans¹ $ 154,934 $ 158,938 $ 192,435
Dividends from securities 286 278 2,286
Other interest   4,480   6,417   2,920
  159,700 165,633 197,641
Interest on deposits and other 68,367 70,330 77,252
Interest and fees on line of credit facility   6,007   6,215   -
Net interest income non-securitized assets   85,326   89,088   120,389
 
Net Interest Income Securitized Loans and Assets
Interest income from securitized loans and assets¹ 22,059 22,563 21,558
Interest expense on securitization liabilities   19,285   19,933   16,090
Net interest income securitized loans and assets   2,774   2,630   5,468
 
Total Net Interest Income 88,100 91,718 125,857
Provision for credit losses¹   5,968   3,434   5,919
      82,132   88,284   119,938
Non-Interest Income
Fees and other income 12,041 16,346 16,331
Securitization income 2,691 1,695 6,432
Gain on sale of PSiGate 950 - -
Net realized and unrealized gains (losses) on securities and loans 1,000 - (3)
Net realized and unrealized losses on derivatives   (1,017)   (304)   (875)
      15,665   17,737   21,885
      97,797   106,021   141,823
Non-Interest Expenses
Salaries and benefits 16,229 17,063 29,619
Premises 2,402 3,478 3,752
Other operating expenses   32,756   44,949   31,094
      51,387   65,490   64,465
 
Income Before Income Taxes   46,410   40,531   77,358
Income taxes
Current 7,423 8,160 23,142
Deferred   4,401   1,752   (3,825)
      11,824   9,912   19,317
NET INCOME $ 34,586 $ 30,619 $ 58,041
 
NET INCOME PER COMMON SHARE
Basic $ 0.43 $ 0.38 $ 0.90
Diluted $ 0.43 $ 0.38 $ 0.90
AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
Basic 80,246 80,246 64,263
Diluted   80,246   80,286   64,294
 
Total number of outstanding common shares 80,246 80,246 64,204
Book value per common share $ 23.04 $ 22.60 $ 26.18

1 The amounts for the period ended March 31, 2018 have been prepared in accordance with IFRS 9 Financial Instruments (IFRS 9); prior period amounts have not been restated

and have been prepared in accordance with IAS 39 Financial Instruments: Recognition and Measurement (IAS 39). Please see Note 2 in the unaudited interim

consolidated financial statements included in the 2018 First Quarter Report for further information.

Consolidated Statements of Comprehensive Income
  For the three months ended
March 31 December 31 March 31
thousands of Canadian dollars (Unaudited)   2018   2017   2017
 
NET INCOME $ 34,586 $ 30,619 $ 58,041
 
OTHER COMPREHENSIVE INCOME
 
ITEMS THAT WILL NOT BE SUBSEQUENTLY RECLASSIFIED TO NET INCOME
 
Equity Securities Designated at FVOCI1
Change in net unrealized gains or losses 931 N/A N/A
Income tax expense   248   N/A   N/A
    683   N/A   N/A
 
ITEMS THAT WILL BE SUBSEQUENTLY RECLASSIFIED TO NET INCOME
 
Available for Sale Securities and Retained Interests1
Net change in unrealized gains or losses N/A 1,431 16,414
Net losses reclassified to net income   N/A   -   3
N/A 1,431 16,417
Income tax expense   N/A   378   4,358
    N/A   1,053   12,059
 
Debt Instruments at FVOCI1
Net change in unrealized gains or losses 1,018 N/A N/A
Net gains or losses reclassified to net income   -   N/A   N/A
1,018 N/A N/A
Income tax expense   280   N/A   N/A
    738   N/A   N/A
 
Cash Flow Hedges
Net change in net unrealized gains or losses (348) 356 (85)
Net losses (gains) reclassified to net income   287   (68)   329
(61) 288 244
Income tax (recovery) expense   (26)   78   72
    (35)   210   172
 
Total other comprehensive income   1,386   1,263   12,231
 
COMPREHENSIVE INCOME $ 35,972 $ 31,882 $ 70,272

1 The amounts for the period ended March 31, 2018 have been prepared in accordance with IFRS 9; prior period amounts have not been restated and have been

prepared in accordance with IAS 39. N/A indicates not applicable under the accounting policy for the respective period. FVOCI indicates fair value through other comprehensive income.

Please see Note 2 in the unaudited interim consolidated financial statements included in the 2018 First Quarter Report for further information.

Consolidated Balance Sheets
           
  March 31 December 31
thousands of Canadian dollars (Unaudited)   2018   2017
ASSETS
Cash and Cash Equivalents $ 1,013,945 $ 1,336,138
Securities   332,899   332,468
Loans Held for Sale   75,748   165,947
Loans
Securitized mortgages 2,873,343 2,993,250
Non-securitized mortgages and loans   12,273,219   11,910,439
      15,146,562   14,903,689
Allowance for credit losses¹   (45,140)   (38,775)
      15,101,422   14,864,914
Other
Restricted assets 504,113 437,011
Derivative assets 4,069 7,325
Other assets 325,040 336,770
Deferred tax assets 3,107 9,577
Goodwill and intangible assets   97,691   100,993
      934,020   891,676
    $ 17,458,034 $ 17,591,143
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities
Deposits
Deposits payable on demand $ 476,038 $ 539,364
Deposits payable on a fixed date   11,608,370   11,631,090
      12,084,408   12,170,454
Securitization Liabilities
CMHC-sponsored mortgage-backed security liabilities 1,550,183 1,562,152
CMHC-sponsored Canada Mortgage Bond liabilities 1,473,472 1,473,318
Bank-sponsored securitization conduit liabilities   106,192   142,279
      3,129,847   3,177,749
Other
Derivative liabilities 43,759 38,728
Other liabilities 322,792 360,477
Deferred tax liabilities   28,161   30,230
      394,712   429,435
      15,608,967   15,777,638
Shareholders’ Equity
Capital stock 231,156 231,156
Contributed surplus 4,568 4,978
Retained earnings 1,617,851 1,583,265
Accumulated other comprehensive loss   (4,508)   (5,894)
      1,849,067   1,813,505
    $ 17,458,034 $ 17,591,143

1 The allowance for credit losses as at March 31, 2018 represents expected credit losses and have been prepared in accordance with IFRS 9. The allowance for credit losses as at

December 31, 2017 represents the total of individual and collective allowances on loan principal as prepared in accordance with the incurred loss model under IAS 39.

Please see Note 2 in the unaudited interim consolidated financial statements included in 2018 First Quarter Report for further information including information on reclassification of comparative balances.

  Consolidated Statements of Changes in Shareholders' Equity¹        
                                                       
        Net Unrealized Gains (Losses), After Tax, on: Total Total
thousands of Canadian dollars Capital Contributed Retained Equity Securities   Debt Instruments     Cash Flow Accumulated Other Shareholders'
(Unaudited)   Stock   Surplus   Earnings   Designated at FVOCI   at FVOCI     Hedges     Comprehensive Loss     Equity
Balance at January 1, 2018 2 $ 231,156 $ 4,978 $ 1,583,265 $ (6,902) $ 2,197 $ (1,189) $ (5,894) $ 1,813,505
Comprehensive income - - 34,586 683 738 (35) 1,386 35,972
Amortization of fair value of
employee stock options     -     (410)     -     -     -       -       -       (410)
Balance at March 31, 2018   $ 231,156   $ 4,568   $ 1,617,851   $ (6,219)   $ 2,935     $ (1,224)     $ (4,508)     $ 1,849,067
 
                                                       
Net Unrealized
Losses Net Unrealized Total
on Securities and Losses on Accumulated
Retained Interests Cash Flow Other Total
thousands of Canadian dollars, Capital Contributed Retained Available for Sale, Hedges, Comprehensive Shareholders'
except per share amounts (Unaudited)   Stock   Surplus   Earnings       After Tax     after Tax     Loss     Equity
Balance at December 31, 2016 $ 84,910 $ 4,562 $ 1,598,180 $ (53,589) $ (1,476) $ (55,065) $ 1,632,587
Comprehensive income - - 58,041 12,059 172 12,231 70,272
Stock options settled 548 (141) - - - - 407
Amortization of fair value of
employee stock options - 304 - - - - 304
Repurchase of shares (264) - (5,698) - - - (5,962)
Dividends ($0.26 per share)     -     -     (16,710)           -       -       -       (16,710)
Balance at March 31, 2017   $ 85,194   $ 4,725   $ 1,633,813         $ (41,530)     $ (1,304)     $ (42,834)     $ 1,680,898

1 The amounts for the period ended March 31, 2018 have been prepared in accordance with IFRS 9; prior period amounts have not been restated and have been prepared in

accordance with IAS 39.

2 Please see Note 2 in the unaudited interim consolidated financial statements included in the 2018 First Quarter Report for further information on transition of balances as at

December 31, 2017 to balances as at January 1, 2018 upon adoption of IFRS 9.

Consolidated Statements of Cash Flows
  For the three months ended
March 31 March 31
thousands of Canadian dollars (Unaudited)   2018   2017
CASH FLOWS FROM OPERATING ACTIVITIES
Net income for the period $ 34,586 $ 58,041
Adjustments to determine cash flows relating to operating activities:
Amortization of net premium (discount) on securities 111 (86)
Provision for credit losses 5,968 5,919
Recovery on sale of loan portfolios (1,000) -
Gain on sale of PSiGate (950) -
Gain on sale of mortgages or residual interest (1,322) (4,738)
Net realized and unrealized losses on securities - 3
Amortization and impairment losses¹ 5,333 6,219
Amortization of fair value of employee stock options (410) 304
Deferred income taxes 4,401 (3,825)
Changes in operating assets and liabilities
Loans, net of gains or losses on securitization and sales (150,955) (537,269)
Restricted assets (67,102) 125,049
Derivative assets and liabilities 8,226 3,669
Accrued interest receivable (1,910) (512)
Accrued interest payable 11,235 19,648
Deposits (86,046) 363,581
Securitization liabilities (47,902) (2,604)
Taxes receivable or payable and other   (33,872)   33,807
Cash flows (used in) provided by operating activities   (321,609)   67,206
CASH FLOWS FROM FINANCING ACTIVITIES
Repurchase of shares - (5,962)
Exercise of employee stock options - 407
Dividends paid to shareholders   -   (16,710)
Cash flows used in financing activities   -   (22,265)
CASH FLOWS FROM INVESTING ACTIVITIES
Activity in securities
Purchases - (5,803)
Proceeds from sales - -
Proceeds from maturities 299 9,051
Net proceeds from sale of PSiGate 310 -
Purchases of capital assets (22) (56)
Capitalized intangible development costs   (1,171)   (2,337)
Cash flows (used in) provided by investing activities   (584)   855
Net (decrease) increase in cash and cash equivalents during the period (322,193) 45,796
Cash and cash equivalents at beginning of the period   1,336,138   1,205,394
Cash and Cash Equivalents at End of the Period $ 1,013,945 $ 1,251,190
Supplementary Disclosure of Cash Flow Information
Dividends received on investments $ 273 $ 3,028
Interest received 179,687 215,644
Interest paid 82,424 73,694
Income taxes paid   13,081   20,222

1 Amortization and impairment losses include amortization on capital and intangible assets and impairment losses on intangible assets.

Caution Regarding Forward-looking Statements

From time to time Home Capital Group Inc. makes written and verbal forward-looking statements. These are included in the Annual Report, periodic reports to shareholders, regulatory filings, press releases, Company presentations and other Company communications. Forward-looking statements are made in connection with business objectives and targets, Company strategies, operations, anticipated financial results and the outlook for the Company, its industry, and the Canadian economy. These statements regarding expected future performance are “financial outlooks” within the meaning of National Instrument 51-102. Please see the risk factors, which are set forth in detail in the Risk Management section of the 2018 First Quarter Report, as well as the Company’s other publicly filed information, which is available on the System for Electronic Document Analysis and Retrieval (SEDAR) at www.sedar.com, for the material factors that could cause the Company’s actual results to differ materially from these statements. These risk factors are material risk factors a reader should consider, and include credit risk, liquidity and funding risk, structural interest rate risk, operational risk, investment risk, strategic risk, reputational risk, compliance risk and capital adequacy risk along with additional risk factors that may affect future results. Forward-looking statements can be found in the Report to the Shareholders and the 2018 Outlook section in the 2018 First Quarter Report. Forward-looking statements are typically identified by words such as “will,” “believe,” “expect,” “anticipate,” “intend,” “should,” “estimate,” “plan,” “forecast,” “may,” and “could” or other similar expressions.

By their very nature, these statements require the Company to make assumptions and are subject to inherent risks and uncertainty, general and specific, which may cause actual results to differ materially from the expectations expressed in the forward-looking statements. These risks and uncertainties include, but are not limited to, global capital market activity, changes in government monetary and economic policies, changes in interest rates, inflation levels and general economic conditions, legislative and regulatory developments, competition and technological change. The preceding list is not exhaustive of possible factors.

These and other factors should be considered carefully and readers are cautioned not to place undue reliance on these forward-looking statements. The Company presents forward-looking statements to assist shareholders in understanding the Company’s assumptions and expectations about the future that are relevant in management’s setting of performance goals, strategic priorities and outlook. The Company presents its outlook to assist shareholders in understanding management’s expectations on how the future will impact the financial performance of the Company. These forward-looking statements may not be appropriate for other purposes. The Company does not undertake to update any forward-looking statements, whether written or verbal, that may be made from time to time by it or on its behalf, except as required by securities laws.

Assumptions about the performance of the Canadian economy in 2018 and its effect on Home Capital’s business are material factors the Company considers when setting its performance goals, strategic priorities and outlook. In determining expectations for economic growth, both broadly and in the financial services sector, the Company primarily considers historical and forecasted economic data provided by the Canadian government and its agencies. In setting and reviewing its strategic priorities and outlook for the remainder of 2018, management’s expectations continue to assume:

  • The Canadian economy is expected to be relatively stable in 2018.
  • Generally the Company expects stable employment conditions in its established regions. Also, the Company expects inflation will generally be within the Bank of Canada’s target of 1% to 3%, leading to stable credit losses and demand for the Company’s lending products in its established regions.
  • The Canadian economy will continue to be influenced by the economic conditions in the United States and global markets and further adjustments in commodity prices; as such, the Company is prepared for the variability that may result.
  • While the Company is assuming that interest rates will experience increases in 2018, the impact of such increases is not expected to be material. The level of interest rates is expected to continue to support relatively low mortgage interest rates for the remainder of 2018.
  • The Company believes that the current and expected levels of housing activity indicate a relatively stable real estate market overall. Please see Market Conditions under the 2018 Outlook in the Company’s 2018 First Quarter Report for more discussion on the Company’s expectations for the housing market.
  • The Company expects that debt service levels will remain manageable by Canadian households in 2018, however high levels of consumer debt make the economy more vulnerable to rising interest rates.
  • The Company will have access to the mortgage and deposit markets through broker networks.

Non-GAAP Measures

The Company has adopted IFRS as its accounting framework. IFRS are the generally accepted accounting principles (GAAP) for Canadian publicly accountable enterprises for years beginning on or after January 1, 2011. The Company uses a number of financial measures to assess its performance. Some of these measures are not calculated in accordance with GAAP, are not defined by GAAP, and do not have standardized meanings that would ensure consistency and comparability between companies using these measures. Definitions of non-GAAP measures can be found under Non-GAAP Measures in the Management’s Discussion and Analysis included in the Company’s 2018 First Quarter Report.

Regulatory Filings

The Company’s continuous disclosure materials, including interim filings, annual Management’s Discussion and Analysis and audited consolidated financial statements, Annual Information Form, Notice of Annual Meeting of Shareholders, and Proxy Circular are available on the Company’s website at www.homecapital.com and on the Canadian Securities Administrators’ website at www.sedar.com.

About Home Capital

Home Capital Group Inc. is a public company, traded on the Toronto Stock Exchange (HCG), operating through its principal subsidiary, Home Trust Company. Home Trust is a federally regulated trust company offering deposits, residential and non-residential mortgage lending, securitization of insured residential first mortgage products, consumer lending and credit card services. In addition, Home Trust offers deposits via brokers and financial planners, and through its direct to consumer brand, Oaken Financial. Home Trust also conducts business through its wholly owned subsidiary, Home Bank. Licensed to conduct business across Canada, Home Trust has offices in Ontario, Alberta, British Columbia, Nova Scotia, Quebec and Manitoba.

Contacts

FOR FURTHER INFORMATION:
Home Capital Group Inc.
Laura Lepore, 416-933-5652
Assistant Vice President, Investor Relations
laura.lepore@hometrust.ca

Contacts

FOR FURTHER INFORMATION:
Home Capital Group Inc.
Laura Lepore, 416-933-5652
Assistant Vice President, Investor Relations
laura.lepore@hometrust.ca