- Diluted Earnings per Share of $1.03
- Quarterly Dividend of $0.22 per
Common Share
TORONTO, July 29, 2015 /CNW/ - Home Capital
today reported results for the second quarter ended June 30, 2015.
This press release should be read in conjunction with the
Company's Second Quarter Report, including Financial Statements and
Management's Discussion and Analysis. In addition, this press
release should be read in conjunction with the Company's press
release entitled "Home Capital Group Inc. Provides Additional
Disclosures Regarding Broker Suspensions and Revises Material
Change Report," issued July 29,
2015. These materials are available on Home Capital's website
at www.homecapital.com and the Canadian Securities Administrators'
website at www.sedar.com.
FINANCIAL HIGHLIGHTS
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
For the three months
ended
|
For the six months
ended
|
(000s, except
Percentage, Multiples and Per Share Amounts)
|
June
30
|
March 31
|
June 30
|
June
30
|
June 30
|
|
|
2015
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
OPERATING
RESULTS
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
$
|
72,317
|
$
|
72,286
|
$
|
73,745
|
$
|
144,603
|
$
|
143,481
|
Net Interest
Income
|
|
117,210
|
|
115,524
|
|
115,143
|
|
232,734
|
|
225,530
|
Total
Revenue
|
$
|
250,879
|
$
|
249,232
|
$
|
255,448
|
$
|
500,111
|
$
|
503,348
|
Diluted Earnings per
Share
|
|
1.03
|
|
1.03
|
|
1.05
|
|
2.05
|
|
2.04
|
Return on
Shareholders' Equity
|
|
19.1%
|
|
19.7%
|
|
23.1%
|
|
19.4%
|
|
23.0%
|
Return on Average
Assets
|
|
1.4%
|
|
1.4%
|
|
1.4%
|
|
1.4%
|
|
1.4%
|
Net Interest Margin
(TEB)1
|
|
2.29%
|
|
2.28%
|
|
2.26%
|
|
2.28%
|
|
2.23%
|
Provision as a
Percentage of Gross Uninsured Loans (annualized)
|
|
0.07%
|
|
0.07%
|
|
0.10%
|
|
0.07%
|
|
0.10%
|
Provision as a
Percentage of Gross Loans (annualized)
|
|
0.05%
|
|
0.05%
|
|
0.07%
|
|
0.05%
|
|
0.07%
|
Efficiency Ratio
(TEB)1
|
|
32.2%
|
|
30.4%
|
|
28.3%
|
|
31.3%
|
|
28.4%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at
|
|
|
|
June
30
|
|
March 31
|
|
December 31
|
|
June 30
|
|
|
|
|
2015
|
|
2015
|
|
2014
|
|
2014
|
|
|
BALANCE SHEET
HIGHLIGHTS
|
|
|
|
|
|
|
|
|
|
|
Total
Assets
|
$
|
20,516,247
|
$
|
20,514,613
|
$
|
20,082,744
|
$
|
20,503,526
|
|
|
Total Assets Under
Administration2
|
|
25,456,212
|
|
25,066,234
|
|
24,281,366
|
|
23,716,585
|
|
|
Total
Loans3
|
|
17,982,475
|
|
18,190,841
|
|
18,364,910
|
|
18,022,175
|
|
|
Total Loans Under
Administration2,3
|
|
22,922,440
|
|
22,742,462
|
|
22,563,532
|
|
21,235,234
|
|
|
Liquid
Assets
|
|
1,815,817
|
|
1,825,775
|
|
1,058,297
|
|
1,766,314
|
|
|
Deposits
|
|
14,966,544
|
|
14,741,902
|
|
13,939,971
|
|
13,747,625
|
|
|
Shareholders'
Equity
|
|
1,536,099
|
|
1,487,259
|
|
1,448,633
|
|
1,313,159
|
|
|
FINANCIAL
STRENGTH
|
|
|
|
|
|
|
|
|
|
|
Capital
Measures4
|
|
|
|
|
|
|
|
|
|
|
Risk-Weighted
Assets
|
$
|
7,634,392
|
$
|
7,454,175
|
$
|
7,186,132
|
$
|
6,874,353
|
|
|
Common Equity Tier 1
Capital Ratio
|
|
18.03%
|
|
17.95%
|
|
18.30%
|
|
17.45%
|
|
|
Tier 1 Capital
Ratio
|
|
18.03%
|
|
17.94%
|
|
18.30%
|
|
17.45%
|
|
|
Total Capital
Ratio
|
|
20.53%
|
|
20.50%
|
|
20.94%
|
|
20.20%
|
|
|
Leverage
Ratio5
|
|
6.94
|
|
6.75
|
|
N/A
|
|
N/A
|
|
|
Credit
Quality
|
|
|
|
|
|
|
|
|
|
|
Net Non-Performing
Loans as a Percentage of Gross Loans
|
|
0.33%
|
|
0.25%
|
|
0.30%
|
|
0.32%
|
|
|
Allowance as a
Percentage of Gross Non-Performing Loans
|
|
62.9%
|
|
78.2%
|
|
64.4%
|
|
60.4%
|
|
|
Share
Information
|
|
|
|
|
|
|
|
|
|
|
Book Value per Common
Share
|
$
|
21.87
|
$
|
21.18
|
$
|
20.67
|
$
|
18.74
|
|
|
Common Share Price –
Close
|
$
|
43.28
|
$
|
42.56
|
$
|
47.99
|
$
|
47.83
|
|
|
Dividend paid during
the quarter ended
|
$
|
0.22
|
$
|
0.22
|
$
|
0.20
|
$
|
0.16
|
|
|
Market
Capitalization
|
$
|
3,040,290
|
$
|
2,988,819
|
$
|
3,363,907
|
$
|
3,350,922
|
|
|
Number of Common
Shares Outstanding
|
|
70,247
|
|
70,226
|
|
70,096
|
|
70,059
|
|
|
1 See definition of Taxable Equivalent Basis (TEB)
under Non-GAAP Measures in the unaudited interim consolidated
financial report.
2 Total assets and loans under administration include
both on and off-balance sheet amounts.
3 Total loans include loans held for sale.
4 These figures relate to the Company's operating
subsidiary, Home Trust Company.
5 Effective Q1 2015, the Assets to Regulatory Capital
Multiple has been replaced with the Basel III leverage ratio.
See definition of the leverage ratio under Non-GAAP Measures in the
unaudited interim consolidated financial report.
SECOND QUARTER 2015 HIGHLIGHTS
Home Capital today reported financial results for the second
quarter ended June 30, 2015. The
Company continued to deliver strong results across its business,
including a stable net interest margin, a healthy loan portfolio
evidenced by low non-performing loans and credit losses, and a
strong capital position, despite lower residential mortgage
originations in the first half of 2015.
Home Capital continues to expect that it will meet its three to
five year mid-term targets, reflecting the continued strength of
the overall business, its diverse sources of growth and the
Company's expectation of improving origination volumes for the
remainder of the year.
Q2 Financial Highlights:
- Q2 2015 reported net income of $72.3
million and $144.6 million for
the first six months of 2015, down 1.9% compared to $73.7 million in Q2 2014 and up 0.8% compared to
$143.5 million in the first half of
2014. Q2 2015 net income was in line with $72.3 million earned in Q1 2015.
- Q2 2015 reported diluted earnings per share (EPS) of
$1.03 and $2.05 for the first six months of 2015, compared
to $1.05 and $2.04 earned in the comparable periods of 2014.
Q2 2015 diluted EPS was consistent with $1.03 earned in Q1 2015.
- Return on common shareholders' equity was 19.1% for Q2 2015 and
19.4% for the first six months of 2015.
- Provision for credit losses as a percentage of gross uninsured
loans of 0.07% on an annualized basis for both Q2 2015 and the
first six months of 2015, down from 0.10% in both the comparable
periods of 2014 and stable as compared to Q1 2015.
- Q2 2015 Common Equity Tier 1 ratio of 18.03% and Tier 1 and
Total capital ratios of 18.03% and 20.53%, respectively.
Growing Our Core Business
Home Capital, through its principal subsidiary Home Trust
Company, continued in Q2 2015 to build on its presence as
Canada's leading alternative
financial institution serving an established, but underserved and
growing, market niche.
The Company's results reflect its continued profitability as
measured by a stable net interest margin in the quarter of 2.29%, a
healthy loan portfolio as evidenced by continued low non-performing
loans and credit losses, and a strong capital position.
Home Capital reported Q2 2015 traditional (uninsured
single-family) residential mortgage originations of $1.29 billion, as compared to $1.53 billion in Q2 2014, and Accelerator
originations of $279.5 million for Q2
2015, as compared to $619.6 million
for Q2 2014, decreases of 15.4% and 54.9%, respectively.
Mortgage originations were impacted directly by, among other
things, the Company suspending, during the period of September 2014 to March
2015, its relationship with 18 independent mortgage brokers
and 2 brokerages, for a total of approximately 45 individual
mortgage brokers, and a loss of originations from these
sources.
Mortgages originated by this group in 2014 could be expected to
contribute approximately $6 million
to the Company's net income over a full year, or approximately 2%
of the total net income of $313.2
million reported in 2014. This group of brokers originated
$960.4 million of single-family
residential mortgages in 2014, or 5.3% of the outstanding loan
assets on the Company's balance sheet. The majority (approximately
60%) of loans originated by this group were the Company's lower
margin Accelerator mortgages. The total value of single-family
residential mortgage originations for 2014 was $7.65 billion.
The Company continues to actively monitor the subject mortgages
and notes that there have been no unusual credit issues.
Home Capital also continuously revises its underwriting
procedures to ensure best practices. Following the suspension of
brokers, the Company further enhanced its income verification
procedures to ensure new loans continue to reflect Home Capital's
risk appetite, which remains unchanged. These enhancements include
requests for more detailed documentation and income verification
from brokers, which may have increased approval time for some
applications and led some customers to turn to other funding
sources in the short-term.
In addition to these factors, originations were also affected by
the current competitive market for prime insured mortgages and the
Company's conservative approach to growing its residential mortgage
business in the current Canadian economic environment.
Home Capital has taken several steps to improve origination
volumes in the second half of 2015, including sales measures to
build on the Company's pipeline for residential mortgage
originations and to leverage the solid demand for its traditional
mortgages within its established regions. Home Capital also expects
origination volumes to improve as brokers adjust to the Company's
enhanced approval processes.
The Company has already seen an increase in originations near
the end of the reporting period compared to the first half of 2015,
and expects this trend to continue.
Building on Operational Excellence
Home Capital continues to experience strong credit performance,
with net non-performing loans as a percentage of gross loans (NPL
ratio) at 0.33% at the end of Q2 2015, compared to 0.32% at the end
of Q2 2014. These results reflect the high credit quality of the
Company's loan portfolio and were supported by the Company's
continued investments in its risk oversight and control
functions.
Home Capital also continued to make disciplined and measured
investments in other areas related to the longer-term growth of the
business. These investments include, among other things, continuing
to update the Company's loans-origination platform, which is
designed for more efficient processing of loan applications, as
well as ongoing investments to build an IT security platform for
its fast growing online banking service, which we view as vital to
protecting our customers and maintaining their trust.
Overall, expenses, while higher for these reasons, remain in
line with the Company's financial plan.
While most of the increase in expenses incurred by the Company
continue to be associated with ongoing efforts to build on Home
Capital's operational excellence and dedication to providing
service to clients and business partners, the Company has incurred
additional expenses of less than $1
million cumulatively from Q4 2014 related to its efforts to
realign some of its business partnerships following the suspension
of a small number of brokers.
Home Capital's efficiency ratio rose in Q2 to 32.2% (Q2 2014
28.3%), reflecting the increased expenses in the quarter set
against the flat revenue numbers. As revenues increase, the Company
expects the efficiency ratio to return to levels more in line with
historical averages and to remain relatively consistent.
Strong Shareholder Returns, Strong and Conservative Financial
Position
Home Capital continued to focus on maintaining its strong and
conservative financial position in Q2 2015 and delivered a return
on average shareholders' equity of 19.1%.
Subsequent to the end of the quarter, and in light of the
Company's performance, profitability and strong financial position,
the Board of Directors approved a quarterly dividend of
$0.22 per common share, payable on
September 1, 2015 to shareholders of
record at the close of business on August
14, 2015.
In summary, the Company has maintained its solid fundamentals,
despite the short-term impact of decreased originations. Home
Capital's focus remains on providing the best service and support
to our customers and valued partners, generating future growth that
is sustainable and prudent, and making the investments in our
business that help us to achieve those goals.
Looking ahead, the Board of Directors and management expect that
Home Capital will continue generating solid shareholder returns in
2015 and beyond.
GERALD M.
SOLOWAY
|
KEVIN P.D.
SMITH
|
Chief Executive
Officer
|
Chair of the
Board
|
July 29,
2015
|
|
Additional information concerning the Company's targets and
related expectations for 2015, including the risks and assumptions
underlying these expectations, may be found in the Management's
Discussion & Analysis (MD&A) of the quarterly
report.
Second Quarter Results Conference Call
The conference
call will take place on Thursday, July 30,
2015 at 10:30 a.m.
Participants are asked to call 5 to 15 minutes in advance,
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 via the Internet at www.homecapital.com.
Conference Call Archive
A telephone replay of the call
will be available between 1:30 p.m.
Thursday, July 30, 2015 and midnight Thursday, August 6, 2015 by calling 416-849-0833
or 1-855-859-2056 (enter passcode 79685033). The archived audio web
cast will be available for 90 days on CNW Group's website at
www.newswire.ca and Home Capital's website at
www.homecapital.com.
Supplemental Financial Information
Home Capital has
provided a Supplemental Financial Information package available at
the Company's website at www.homecapital.com to improve readers'
understanding of the financial position and performance of the
Company. This information should be used in conjunction with
the Company's second quarter unaudited interim consolidated
financial report, as well as the Company's 2014 Annual Report.
Consolidated
Statements of Income
|
|
|
|
|
|
|
For the three months
ended
|
For the six months
ended
|
thousands of
Canadian dollars, except per share amounts
|
June
30
|
March 31
|
June 30
|
June
30
|
June 30
|
(Unaudited)
|
|
2015
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
Net Interest
Income Non-Securitized Assets
|
|
|
|
|
|
|
|
|
|
|
Interest from
loans
|
$
|
190,559
|
$
|
186,900
|
$
|
176,182
|
$
|
377,459
|
$
|
347,425
|
Dividends from
securities
|
|
2,677
|
|
2,738
|
|
2,898
|
|
5,415
|
|
5,629
|
Other
interest
|
|
2,303
|
|
2,108
|
|
4,109
|
|
4,411
|
|
7,575
|
|
|
|
195,539
|
|
191,746
|
|
183,189
|
|
387,285
|
|
360,629
|
Interest on deposits
and other
|
|
80,669
|
|
79,395
|
|
76,718
|
|
160,064
|
|
149,740
|
Interest on senior
debt
|
|
1,516
|
|
1,544
|
|
1,542
|
|
3,060
|
|
3,122
|
Net interest income
non-securitized assets
|
|
113,354
|
|
110,807
|
|
104,929
|
|
224,161
|
|
207,767
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Interest
Income Securitized Loans and Assets
|
|
|
|
|
|
|
|
|
|
|
Interest income from
securitized loans and assets
|
|
26,279
|
|
30,394
|
|
45,494
|
|
56,673
|
|
90,769
|
Interest expense on
securitization liabilities
|
|
22,423
|
|
25,677
|
|
35,280
|
|
48,100
|
|
73,006
|
Net interest income
securitized loans and assets
|
|
3,856
|
|
4,717
|
|
10,214
|
|
8,573
|
|
17,763
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Net Interest
Income
|
|
117,210
|
|
115,524
|
|
115,143
|
|
232,734
|
|
225,530
|
Provision for credit
losses
|
|
2,266
|
|
2,403
|
|
3,232
|
|
4,669
|
|
6,437
|
|
|
|
114,944
|
|
113,121
|
|
111,911
|
|
228,065
|
|
219,093
|
Non-Interest
Income
|
|
|
|
|
|
|
|
|
|
|
Fees and other
income
|
|
21,390
|
|
21,219
|
|
18,439
|
|
42,609
|
|
35,233
|
Securitization
income
|
|
9,251
|
|
5,409
|
|
7,494
|
|
14,660
|
|
16,224
|
Net realized and
unrealized gains on securities
|
|
-
|
|
1,444
|
|
1,187
|
|
1,444
|
|
1,939
|
Net realized and
unrealized losses on derivatives
|
|
(1,580)
|
|
(980)
|
|
(355)
|
|
(2,560)
|
|
(1,446)
|
|
|
|
29,061
|
|
27,092
|
|
26,765
|
|
56,153
|
|
51,950
|
|
|
|
144,005
|
|
140,213
|
|
138,676
|
|
284,218
|
|
271,043
|
Non-Interest
Expenses
|
|
|
|
|
|
|
|
|
|
|
Salaries and
benefits
|
|
21,603
|
|
22,014
|
|
19,872
|
|
43,617
|
|
40,080
|
Premises
|
|
3,260
|
|
3,134
|
|
3,014
|
|
6,394
|
|
5,769
|
Other operating
expenses
|
|
22,511
|
|
18,515
|
|
17,636
|
|
41,026
|
|
33,613
|
|
|
|
47,374
|
|
43,663
|
|
40,522
|
|
91,037
|
|
79,462
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Before
Income Taxes
|
|
96,631
|
|
96,550
|
|
98,154
|
|
193,181
|
|
191,581
|
Income
taxes
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
25,193
|
|
24,551
|
|
24,405
|
|
49,744
|
|
49,518
|
|
Deferred
|
|
(879)
|
|
(287)
|
|
4
|
|
(1,166)
|
|
(1,418)
|
|
|
|
24,314
|
|
24,264
|
|
24,409
|
|
48,578
|
|
48,100
|
NET
INCOME
|
$
|
72,317
|
$
|
72,286
|
$
|
73,745
|
$
|
144,603
|
$
|
143,481
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME PER
COMMON SHARE
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
1.03
|
$
|
1.03
|
$
|
1.06
|
$
|
2.06
|
$
|
2.06
|
Diluted
|
$
|
1.03
|
$
|
1.03
|
$
|
1.05
|
$
|
2.05
|
$
|
2.04
|
AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
70,230
|
|
70,137
|
|
69,743
|
|
70,184
|
|
69,617
|
Diluted
|
|
70,488
|
|
70,467
|
|
70,496
|
|
70,488
|
|
70,352
|
|
|
|
|
|
|
|
|
|
|
|
|
Total number of
outstanding common shares
|
|
70,247
|
|
70,226
|
|
70,059
|
|
70,247
|
|
70,059
|
Book value per common
share
|
$
|
21.87
|
$
|
21.18
|
$
|
18.74
|
$
|
21.87
|
$
|
18.74
|
Consolidated
Statements of Comprehensive Income
|
|
|
|
|
|
For the three months
ended
|
For the six months
ended
|
|
June
30
|
March 31
|
June 30
|
June
30
|
June 30
|
thousands of
Canadian dollars (Unaudited)
|
|
2015
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
NET
INCOME
|
$
|
72,317
|
$
|
72,286
|
$
|
73,745
|
$
|
144,603
|
$
|
143,481
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
COMPREHENSIVE (LOSS) INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for Sale
Securities and Retained Interest
|
|
|
|
|
|
|
|
|
|
|
Net unrealized
(losses) gains
|
$
|
(12,860)
|
$
|
(25,572)
|
$
|
5,265
|
$
|
(38,432)
|
$
|
9,268
|
Net gains
reclassified to net income
|
|
-
|
|
(1,443)
|
|
(1,187)
|
|
(1,443)
|
|
(1,939)
|
|
|
(12,860)
|
|
(27,015)
|
|
4,078
|
|
(39,875)
|
|
7,329
|
Income tax (recovery)
expense
|
|
(3,422)
|
|
(7,156)
|
|
1,080
|
|
(10,578)
|
|
1,940
|
|
|
(9,438)
|
|
(19,859)
|
|
2,998
|
|
(29,297)
|
|
5,389
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flow
Hedges
|
|
|
|
|
|
|
|
|
|
|
Net unrealized gains
(losses)
|
|
345
|
|
(814)
|
|
(295)
|
|
(469)
|
|
(670)
|
Net losses
reclassified to net income
|
|
370
|
|
366
|
|
362
|
|
736
|
|
726
|
|
|
715
|
|
(448)
|
|
67
|
|
267
|
|
56
|
Income tax expense
(recovery)
|
|
188
|
|
(119)
|
|
18
|
|
69
|
|
15
|
|
|
527
|
|
(329)
|
|
49
|
|
198
|
|
41
|
|
|
|
|
|
|
|
|
|
|
|
Total other
comprehensive (loss) income
|
$
|
(8,911)
|
$
|
(20,188)
|
$
|
3,047
|
$
|
(29,099)
|
$
|
5,430
|
|
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE
INCOME
|
$
|
63,406
|
$
|
52,098
|
$
|
76,792
|
$
|
115,504
|
$
|
148,911
|
Consolidated
Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
|
As at
|
|
|
June
30
|
March 31
|
December
31
|
thousands of
Canadian dollars (Unaudited)
|
|
2015
|
|
2015
|
|
2014
|
ASSETS
|
|
|
|
|
|
|
Cash and Cash
Equivalents
|
$
|
915,674
|
$
|
882,252
|
$
|
360,746
|
Available for Sale
Securities
|
|
449,216
|
|
463,669
|
|
582,819
|
Loans Held for
Sale
|
|
21,304
|
|
55,068
|
|
102,094
|
Loans
|
|
|
|
|
|
|
Securitized
mortgages
|
|
2,814,301
|
|
3,313,567
|
|
3,945,654
|
Non-securitized
mortgages and loans
|
|
15,146,870
|
|
14,822,206
|
|
14,317,162
|
|
|
|
17,961,171
|
|
18,135,773
|
|
18,262,816
|
Collective allowance
for credit losses
|
|
(35,300)
|
|
(34,700)
|
|
(34,100)
|
|
|
|
17,925,871
|
|
18,101,073
|
|
18,228,716
|
Other
|
|
|
|
|
|
|
Restricted
assets
|
|
733,185
|
|
539,033
|
|
421,083
|
Derivative
assets
|
|
63,123
|
|
82,452
|
|
38,534
|
Other
assets
|
|
287,598
|
|
274,848
|
|
235,616
|
Goodwill and
intangible assets
|
|
120,276
|
|
116,218
|
|
113,136
|
|
|
|
1,204,182
|
|
1,012,551
|
|
808,369
|
|
|
$
|
20,516,247
|
$
|
20,514,613
|
$
|
20,082,744
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
Deposits
|
|
|
|
|
|
|
Deposits payable on
demand
|
$
|
1,435,924
|
$
|
1,187,517
|
$
|
1,064,152
|
Deposits payable on a
fixed date
|
|
13,530,620
|
|
13,554,385
|
|
12,875,819
|
|
|
|
14,966,544
|
|
14,741,902
|
|
13,939,971
|
Senior
Debt
|
|
151,930
|
|
154,280
|
|
152,026
|
Securitization
Liabilities
|
|
|
|
|
|
|
Mortgage-backed
security liabilities
|
|
365,884
|
|
388,078
|
|
471,551
|
Canada Mortgage Bond
liabilities
|
|
3,144,960
|
|
3,436,112
|
|
3,831,912
|
|
|
|
3,510,844
|
|
3,824,190
|
|
4,303,463
|
Other
|
|
|
|
|
|
|
Derivative
liabilities
|
|
3,059
|
|
3,578
|
|
2,266
|
Other
liabilities
|
|
312,383
|
|
267,137
|
|
199,831
|
Deferred tax
liabilities
|
|
35,388
|
|
36,267
|
|
36,554
|
|
|
|
350,830
|
|
306,982
|
|
238,651
|
|
|
|
18,980,148
|
|
19,027,354
|
|
18,634,111
|
Shareholders'
Equity
|
|
|
|
|
|
|
Capital
stock
|
|
89,603
|
|
88,862
|
|
84,687
|
Contributed
surplus
|
|
3,474
|
|
3,285
|
|
3,989
|
Retained
earnings
|
|
1,490,726
|
|
1,433,905
|
|
1,378,562
|
Accumulated other
comprehensive loss
|
|
(47,704)
|
|
(38,793)
|
|
(18,605)
|
|
|
|
1,536,099
|
|
1,487,259
|
|
1,448,633
|
|
|
$
|
20,516,247
|
$
|
20,514,613
|
$
|
20,082,744
|
Consolidated
Statements of Changes in Shareholders' Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Unrealized
|
|
|
|
|
|
|
|
Losses
|
Net
Unrealized
|
Total
|
|
|
|
|
|
on Securities
and
|
Losses on
|
Accumulated
|
|
|
|
|
|
|
|
|
Retained
Interest
|
Cash Flow
|
Other
|
Total
|
thousands of
Canadian dollars,
|
Capital
|
Contributed
|
Retained
|
Available
|
Hedges,
|
Comprehensive
|
Shareholders'
|
except per share
amounts (Unaudited)
|
Stock
|
Surplus
|
Earnings
|
for Sale, after
Tax
|
after Tax
|
Loss
|
Equity
|
Balance at
December 31, 2014
|
$
|
84,687
|
$
|
3,989
|
$
|
1,378,562
|
$
|
(16,242)
|
$
|
(2,363)
|
$
|
(18,605)
|
$
|
1,448,633
|
Comprehensive
income
|
|
-
|
|
-
|
|
144,603
|
|
(29,297)
|
|
198
|
|
(29,099)
|
|
115,504
|
Stock options
settled
|
|
4,920
|
|
(1,323)
|
|
-
|
|
-
|
|
-
|
|
-
|
|
3,597
|
Amortization of
fair value of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
employee stock
options
|
|
-
|
|
808
|
|
-
|
|
-
|
|
-
|
|
-
|
|
808
|
Repurchase of
shares
|
|
(4)
|
|
-
|
|
(124)
|
|
-
|
|
-
|
|
-
|
|
(128)
|
Dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($0.44 per
share)
|
|
-
|
|
-
|
|
(32,315)
|
|
-
|
|
-
|
|
-
|
|
(32,315)
|
Balance at June
30, 2015
|
$
|
89,603
|
$
|
3,474
|
$
|
1,490,726
|
$
|
(45,539)
|
$
|
(2,165)
|
$
|
(47,704)
|
$
|
1,536,099
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December
31, 2013
|
$
|
70,233
|
$
|
5,984
|
$
|
1,119,959
|
$
|
(15,823)
|
$
|
(2,656)
|
$
|
(18,479)
|
$
|
1,177,697
|
Comprehensive
income
|
|
-
|
|
-
|
|
143,481
|
|
5,389
|
|
41
|
|
5,430
|
|
148,911
|
Stock options
settled
|
|
12,615
|
|
(3,388)
|
|
-
|
|
-
|
|
-
|
|
-
|
|
9,227
|
Amortization of fair
value of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
employee stock
options
|
|
-
|
|
1,088
|
|
-
|
|
-
|
|
-
|
|
-
|
|
1,088
|
Repurchase of shares
(note 8(A))
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
Dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($0.32 per
share)
|
|
-
|
|
-
|
|
(23,764)
|
|
-
|
|
-
|
|
-
|
|
(23,764)
|
Balance at June 30,
2014
|
$
|
82,848
|
$
|
3,684
|
$
|
1,239,676
|
$
|
(10,434)
|
$
|
(2,615)
|
$
|
(13,049)
|
$
|
1,313,159
|
|
|
Consolidated
Statements of Cash Flows
|
|
|
|
|
|
For the three months
ended
|
For the six months
ended
|
|
June
30
|
June 30
|
June
30
|
June 30
|
thousands of
Canadian dollars (Unaudited)
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
CASH FLOWS FROM
OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
Net income for the
period
|
$
|
72,317
|
$
|
73,745
|
$
|
144,603
|
$
|
143,481
|
Adjustments to
determine cash flows relating to operating activities:
|
|
|
|
|
|
|
|
|
|
Amortization of
net premium on securities
|
|
29
|
|
517
|
|
23
|
|
1,194
|
|
Provision for credit
losses
|
|
2,266
|
|
3,232
|
|
4,669
|
|
6,437
|
|
Gain on sale of
mortgages or residual interest
|
|
(7,804)
|
|
(6,971)
|
|
(12,231)
|
|
(14,901)
|
|
Net realized and
unrealized gains on securities
|
|
-
|
|
(1,187)
|
|
(1,444)
|
|
(1,939)
|
|
Amortization of
capital and intangible assets
|
|
3,423
|
|
3,219
|
|
6,347
|
|
6,196
|
|
Amortization of fair
value of employee stock options
|
|
389
|
|
449
|
|
808
|
|
1,088
|
|
Deferred income
taxes
|
|
(879)
|
|
4
|
|
(1,166)
|
|
(1,418)
|
Changes in operating
assets and liabilities
|
|
|
|
|
|
|
|
|
|
Loans, net of
securitization and sales
|
|
214,733
|
|
(129,338)
|
|
391,509
|
|
7,523
|
|
Restricted
assets
|
|
(194,152)
|
|
33,634
|
|
(312,102)
|
|
38,473
|
|
Derivative assets and
liabilities
|
|
19,525
|
|
3,936
|
|
(23,529)
|
|
(2,555)
|
|
Accrued interest
receivable
|
|
1,274
|
|
2,021
|
|
1,320
|
|
625
|
|
Accrued interest
payable
|
|
(15,426)
|
|
(14,623)
|
|
20,780
|
|
25,229
|
|
Deposits
|
|
224,642
|
|
662,688
|
|
1,026,573
|
|
981,671
|
|
Securitization
liabilities
|
|
(313,346)
|
|
(567,496)
|
|
(792,619)
|
|
(782,460)
|
|
Taxes receivable or
payable and other
|
|
46,108
|
|
38,151
|
|
47,167
|
|
32,550
|
Cash flows provided
by operating activities
|
|
53,099
|
|
101,981
|
|
500,708
|
|
441,194
|
CASH FLOWS FROM
FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
Repurchase of
shares
|
|
(43)
|
|
-
|
|
(128)
|
|
-
|
Exercise of employee
stock options
|
|
543
|
|
9,159
|
|
3,597
|
|
9,227
|
Dividends paid to
shareholders
|
|
(15,450)
|
|
(11,165)
|
|
(30,880)
|
|
(22,283)
|
Cash flows used in
financing activities
|
|
(14,950)
|
|
(2,006)
|
|
(27,411)
|
|
(13,056)
|
CASH FLOWS FROM
INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
Activity in
securities
|
|
|
|
|
|
|
|
|
|
Purchases
|
|
-
|
|
(371,493)
|
|
-
|
|
(423,910)
|
|
Proceeds from
sales
|
|
-
|
|
153,047
|
|
76,924
|
|
154,848
|
|
Proceeds from
maturities
|
|
2,932
|
|
60,562
|
|
19,593
|
|
85,562
|
Purchases of capital
assets
|
|
(870)
|
|
367
|
|
(2,693)
|
|
(853)
|
Capitalized
intangible development costs
|
|
(6,789)
|
|
(7,510)
|
|
(12,193)
|
|
(12,569)
|
Cash flows (used in)
provided by investing activities
|
|
(4,727)
|
|
(165,027)
|
|
81,631
|
|
(196,922)
|
Net increase
(decrease) in cash and cash equivalents during the
period
|
|
33,422
|
|
(65,052)
|
|
554,928
|
|
231,216
|
Cash and cash
equivalents at beginning of the period
|
|
882,252
|
|
1,029,440
|
|
360,746
|
|
733,172
|
Cash and Cash
Equivalents at End of the Period (note 4(A))
|
$
|
915,674
|
$
|
964,388
|
$
|
915,674
|
$
|
964,388
|
Supplementary
Disclosure of Cash Flow Information
|
|
|
|
|
|
|
|
|
Dividends received on
investments
|
$
|
2,463
|
$
|
2,448
|
$
|
4,948
|
$
|
4,513
|
Interest
received
|
|
220,829
|
|
231,197
|
|
440,619
|
|
446,249
|
Interest
paid
|
|
121,989
|
|
130,118
|
|
190,476
|
|
200,671
|
Income taxes
paid
|
|
27,351
|
|
20,421
|
|
75,506
|
|
38,729
|
|
|
|
|
|
|
|
|
|
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
quarterly report, as well as its other publicly filed
information, which are 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, funding and liquidity risk, structural interest rate
risk, operational risk, investment risk, strategic and business
risk, reputational risk and regulatory and legislative 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 Outlook Section in the quarterly
report. Forward-looking statements are typically
identified by words such as "will," "believe," "expect,"
"anticipate," "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
uncertainties, 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 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
2015 and its effect on Home Capital's business are material factors
the Company considers when setting its objectives, targets 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 targets, objectives and outlook for the
remainder of 2015, management's expectations continue to
assume:
- The Canadian economy is expected to produce modest growth on
balance in 2015; however, there continues to be some uncertainty
about the full impact of the oil price adjustment. While the
Company has limited exposure in energy producing regions, it has
plans for geographic expansion in Canada. There is some uncertainty as to the
timing and extent of expansion given the economic conditions.
- Generally the Company expects stable employment conditions in
its established regions. Unemployment rates in energy producing
regions are expected to continue to increase through 2015. 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 consistent demand for the
Company's lending products in its established regions. Credit
losses and delinquencies in the energy producing regions may see an
increase, but given the Company's limited exposure and lending
practices, this is not expected to be significant.
- 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 to plan that may result.
- The Company is assuming that overnight interest rates will
remain at the current very low rate for 2015. This is expected to
continue to support relatively low mortgage interest rates for the
foreseeable future.
- In the Company's established regions the expectation is the
housing market will remain stable with balanced supply supported by
continued low interest rates, relatively stable employment, and
immigration. There will be stable housing starts and resale
activity with relatively stable prices, with regional disparities,
throughout most of Canada. This
supports continued stable credit losses and stable demand for the
Company's lending products in its established regions.
- Consumer debt levels, while elevated, will remain serviceable
by Canadian households.
- The Company will have access to the mortgage and deposit
markets through broker networks.
Non-GAAP Measures
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 Second Quarter 2015 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 deposit brand, Oaken
Financial. Licensed to conduct business across Canada, Home Trust has branch offices in
Ontario, Alberta, British
Columbia, Nova Scotia,
Quebec and Manitoba.
SOURCE Home Capital Group Inc.