Home Capital Delivers Strong Second Quarter Results; Earnings Per Share Rise by 33.3% Over 2006; Return on Equity is 28.9%



    TORONTO, Aug. 7 /CNW/ - Home Capital Group Inc. (TSX: HCG) today
announced strong financial results for the second quarter and the first six
months of 2007. Highlights of the quarter include strong growth in all
business segments, including core residential mortgage lending, VISA
operations and commercial mortgage lending, a significantly improved
efficiency ratio, strong return on equity and assets, and continued vigilance
with respect to asset quality.

    
    Key results from the period included:

    -   Net income for the quarter was $22.0 million, an increase of 33.5%
        over the $16.5 million recorded in the same period last year, and
        4.1% over $21.2 million for the quarter ended March 31, 2007.
        Earnings for the first six months of 2007 reached $43.2 million, a
        rise of 40.7% over the comparable period of 2006.

    -   Basic earnings per share were $0.64, 33.3% above $0.48 for the second
        quarter of 2006, and $1.26 for the six-month period, 40.0% higher
        than the $0.90 recorded last year. Diluted earnings per share were
        $0.63, a rise of 34.0% from the $0.47 recorded for the second quarter
        of 2006; results for the six months were $1.24, 40.9% above the same
        period last year.

    -   Return on equity was 28.9% for the second quarter compared to 27.6%
        for the quarter ended June 30, 2006 and 29.4% for the first six
        months of 2007, versus 26.4% for the first half of last year.

    -   Total assets at June 30, 2007 reached $4.30 billion, 21.4% higher
        than the $3.55 billion reported one year earlier. Total assets,
        together with Mortgage-Backed Securities (MBS) originated and
        administered by the Company, grew to $5.54 billion, a rise of
        23.0% from $4.51 billion at June 2006.

    -   Total mortgage originations were $622.6 million during the second
        quarter, an increase of 23.4% from the $504.6 million advanced during
        the comparable period of 2006. Residential mortgage lending growth
        remained strong with originations of $575.3 million, a 14.0% increase
        over the $504.6 million reported in the second quarter of last year.

    -   Outstanding balances on the Equityline VISA portfolio reached
        $272.0 million, arise of 85.5% from the $146.6 million recorded at
        the same time in 2006. During the six-month period, 2,628 credit card
        accounts with $114.5 million in authorized credit limits were issued,
        compared to 2,109 cards and $89.0 million of credit for the six
        months ended June 2006, representing increases of 24.6% and 28.7%,
        respectively.

    -   The efficiency ratio (TEB) was 27.2% for the second quarter, compared
        to 29.5% during the same period one year earlier. The ratio was 26.9%
        for the first six months of 2007, versus 30.7% for the comparable
        period last year.

    -   Net impaired loans represented 0.68% of the total loans portfolio, up
        from 0.54% at the end of the second quarter of 2006, and down from
        0.74% at March 2007. Losses resulting from loan write-offs during the
        period remained negligible. Non-performing loans continue to be
        professionally managed on a loan-by-loan basis by the Company.
    

    During the first half of 2007, Home Capital undertook two important
initiatives to support the long-term growth and development of the Company.
First, the Company launched its commercial mortgage lending business at the
beginning of 2007, which has grown at a steady pace since inception.
$106.2 million of commercial loans have been advanced in the first six months
of 2007 and management expects this division will continue to grow through the
balance of the year to become an important profit centre for the Company in
2008 and beyond.
    The second major development is the strategic addition of key personnel
in several business areas. With an eye to the future, Home Capital's senior
management team recently added several new members to accommodate planned
business growth. Since the start of 2007, the Company has strengthened its
senior team with the additions of John Harry, Senior Vice President,
Commercial Mortgage Lending, Phil Braginetz, Chief Financial Officer, and
Jason Donville, Chief Investment Officer. The Company has also made other
significant management appointments in recent years, specifically in the areas
of mortgages, credit, information technology, finance, credit card services,
human resources, marketing, regulatory compliance, and corporate and legal
affairs. These seasoned executives bring a wealth of experience to an already
robust senior team and, together, they are leading Home Capital through its
continuing evolution as an innovative, competitive and profitable
organization.
    Subsequent to the end of the quarter, the Board of Directors declared a
dividend increase of 10.0% to $0.11 per share on a quarterly basis, payable on
September 1, 2007 to shareholders of record at the close of business on
August 15, 2007. This increase reflects Home Capital's continued strong
performance and earnings growth.
    Canada's residential property sector remains underpinned by solid
fundamentals, unlike the challenging conditions now prevailing in the mortgage
marketplace in the United States. Home Capital remains ideally positioned for
future growth within the residential lending marketplace. Management continues
to administer its core lending business with a balanced sense of both prudence
and opportunity. At the same time, recent initiatives in the credit card,
commercial lending and asset management areas suggest unequivocally that our
focus remains on continuing our track record of superior growth. As a result,
the Board of Directors and management remain confident about our ability to
meet or exceed all of our stated targets for 2007.
    


    (signed)                                  (signed)

    GERALD M. SOLOWAY                         WILLIAM A. DIMMA
    President and Chief Executive Officer     Chairman of the Board
    August 7, 2007
    


    SECOND QUARTER RESULTS CONFERENCE CALL
    The conference call will take place on Tuesday, August 7, 2007 at
10:30 a.m. Participants are asked to call 5 to 15 minutes in advance,
416-644-3415 in Toronto or toll-free 1-800-733-7560 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 12:30 p.m.,
Tuesday, August 7, 2007 and midnight Tuesday, August 14, 2007 by calling
416-640-1917 or 1-877-289-8525 (enter passcode 21238865 followed by the number
sign). 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.

    
    Financial Highlights

    For the Period Ended
     June 30 (Unaudited)
    In Thousands of Dollars
     (Except Per Share and      Three Months Ended          Six Months Ended
     Percentage Amounts)         2007         2006         2007         2006
    -------------------------------------------------------------------------
    OPERATING RESULTS

    Net Income            $    22,018  $    16,496  $    43,176  $    30,679
    Total Revenue(3)           87,708       68,495      169,453      130,875
    Earnings per Share
     - Basic              $      0.64  $      0.48  $      1.26  $      0.90
    Earnings per Share
     - Diluted                   0.63         0.47         1.24         0.88
    Return on Shareholders'
     Equity                    28.88%       27.59%       29.44%       26.36%
    Return on Average Assets    2.08%        1.92%        2.10%        1.80%
    Efficiency Ratio(3)        27.88%       30.05%       27.59%       31.34%
    Efficiency Ratio
     (TEB)(2)(3)               27.20%       29.48%       26.94%       30.74%

    (Non-interest Expense/Net
     Interest Income Plus
     Fee Income)
    -------------------------------------------------------------------------
    BALANCE SHEET HIGHLIGHTS

    Total Assets                                      4,304,271    3,545,852
    Loans                                             3,570,416    3,066,008
    Deposits                                          3,808,159    3,127,079
    Shareholders' Equity                                309,841      246,589
    Mortgage-Backed Security
     Assets Under Administration                      1,237,239      959,704
    -------------------------------------------------------------------------
    FINANCIAL STRENGTH

    Capital Measures

    Risk Adjusted Assets(1)                         $ 2,296,651  $ 1,847,822
    Tier 1 Capital Ratio(1)                              12.72%       12.67%
    Total Capital Ratio                                  14.24%       14.35%
    Credit Quality
    Net Impaired Loans % of
     Gross Loans                                          0.68%        0.54%
    Allowance % of Gross Impaired Loans                  85.62%      109.72%
    Annualized Provision % of Gross Loans                 0.08%        0.14%

    Share Information
    Book Value per Common Share                     $      8.98  $      7.22
    Common Share Price - Close                            36.90        32.60
    Market Capitalization                             1,273,111    1,113,518
    Number of Common Shares Outstanding                  34,502       34,157
    -------------------------------------------------------------------------
    (1) These figures relate to the Company's operating subsidiary,
        Home Trust Company.
    (2) See definition of Taxable Equivalent Basis ("TEB") in this unaudited
        interim consolidated financial report.
    (3) Reclassification - refer to Note 2 of these unaudited interim
        consolidated financial statements.
    

    Management's Discussion and Analysis

    Caution Regarding Forward-Looking Statements

    From time to time Home Capital Group Inc. (the "Company" or "Home
Capital") 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 include, but are not limited to,
business objectives and targets, Company strategies, operations, anticipated
financial results and the outlook for the Company, its industry, and the
Canadian economy. Forward-looking statements are typically identified by words
such as "believe," "expect," "anticipate," "estimate," "plan," "may," and
"could" or other similar expressions. By their very nature, these statements
require us 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.

    Taxable Equivalent Basis (TEB)

    Most banks and trust companies analyze revenue on a TEB to provide
uniform measurement and comparison of net interest income. Net interest income
(as presented in the consolidated statements of income) includes tax-exempt
income from certain securities. The adjustment to TEB increases income and the
provision for income taxes to what they would have been had the tax-exempt
securities been taxed at the statutory tax rate. The TEB adjustments of
$1.2 million for the second quarter and $2.2 million for the first six months
of 2007 ($0.7 million - Q2 2006 and $1.4 million - six months 2006) increase
interest income. TEB does not have a standard meaning prescribed by Canadian
generally accepted accounting principles (GAAP) and therefore may not be
comparable to similar measures used by other companies. Net interest income
and income taxes are discussed on a TEB basis throughout this Management's
Discussion and Analysis (refer to Financial Highlights).

    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 web site at
www.homecapital.com, and on the Canadian Securities Administrators' website at
www.sedar.com.

    Management's Discussion and Analysis of Operating Performance

    This management's discussion and analysis ("MD & A") should be read in
conjunction with the unaudited interim consolidated financial statements for
the period ended June 30, 2007 included herein and the audited consolidated
financial statements and MD & A for the year ended December 31, 2006. These
are available on SEDAR at www.sedar.com and on pages 8 through 52 of the
Company's 2006 Annual Report. Except as discussed in these unaudited interim
consolidated financial statements and MD & A, all other factors discussed and
referred to in the MD & A for fiscal 2006 remain substantially unchanged.
These unaudited interim consolidated financial statements and MD & A have been
prepared based on information available as at August 3, 2007. As in prior
quarters, the Company's Audit and Risk Management Committee reviewed this
document, and prior to its release the Company's Board of Directors approved
it on the Audit and Risk Management Committee's recommendation.

    2007 Performance and 2007 Objectives

    Home Capital published its financial objectives for 2007 in the Company's
2006 Annual Report, found on page 10. The following table compares actual
performance to date against these objectives.

    
    -------------------------------------------------------------------------
                                                    Six Month Period Ended
                                                         June 30, 2007

                             2007 Objectives           Actual Results(1)
    -------------------------------------------------------------------------
    Net Income            20% over 2006 or         $43.2 million, or 40.7%
                           $36.8 million            increase over same
                                                    period last year

    Diluted Earnings      20% over 2006 or $1.06   $1.24 per share, or 40.9%
     per Share             per share                increase over same
                                                    period last year

    Combined Total        20% over 2006 or $5.41   $5.54 billion, or 23.0%
     Assets and Assets     billion                  increase over last
     Under Administration                           year

    Return on Equity      25%                      29.4%

    Efficiency Ratio      35.0% to 39.0%           26.9%
     (TEB)(2)

    Capital Ratio         Minimum of 9.5%          12.7%
     - Tier 1

    Capital Ratio         Minimum of 12.0%         14.2%
     - Total

    Provision for Loan    0.1% to 0.2%             0.1%
     Losses as a
     Percentage of
     Total Loans
    -------------------------------------------------------------------------
    (1) Objectives and results for net income and diluted earnings per share
        are for the current period relative to the same period in the prior
        year; asset growth is the change from twelve months prior; and ratios
        are based on the current period, annualized.
    (2) Reclassification, refer to Note 2 of these unaudited interim
        consolidated financial statements.
    


    FINANCIAL HIGHLIGHTS

    Income Statement Highlights

    The Company achieved another period of strong results building on the
momentum of the first quarter. The Company experienced positive growth in all
of its operating segments.

    
    -   Net income rose 33.5% over the comparable quarter in 2006.

    -   Net interest income was up 28.9% over the same period in 2006 as the
        Company's income-producing assets grew by 21.9%.

    -   Non-interest income was up 21.8% over the second quarter of 2006,
        driven by growth in fee income from increased mortgage and Equity
        line VISA originations.

    -   The efficiency ratio (TEB) improved to 27.2% from 29.5% in the second
        quarter of 2006 through management's continuing efforts to control
        fixed costs.

    -   Diluted earnings per share for the quarter increased 34.0% to $0.63
        compared to $0.47 for the second quarter of 2006.

    -   Return on average shareholders' equity for the quarter was 28.9%, an
        improvement over the 27.6% achieved in the second quarter of 2006.

    Balance Sheet Highlights

    -   Total assets at June 30, 2007 grew by 10.3% over the six-month period
        to reach $4.30 billion, compared to the $3.90 billion reported at
        December 31, 2006. This asset growth was principally driven by the
        Company's residential mortgage portfolio which grew by $140.2
        million; other mortgages (primarily commercial mortgages) grew by
        $59.5 million and cash resources rose by $99.5 million.

    -   The Equityline VISA portfolio sustained its strong momentum,
        achieving growth of 26.0% over the fourth quarter of 2006 and 85.5%
        over the second quarter of 2006.

    -   Deposit liabilities as at June 30, 2007 grew 10.6% to reach $3.81
        billion, as compared to $3.44 billion as at December 31, 2006. These
        proceeds were utilized to fund the growth of the Company's loan
        portfolio with excess funds invested in the Company's cash and
        securities portfolio.
    

    Earnings Review

    Net Interest Income

    Net interest income was $36.5 million in the second quarter and
$69.9 million for the first six months of 2007 representing increases of
$8.2 million, or 28.9%, over the $28.3 million reported in the second quarter
of 2006, and $14.8 million, or 26.8%, over the $55.1 million recorded during
the same six-month period of 2006. These increases were the result of improved
net interest margins as the growth in interest bearing assets exceeded the
growth in interest-bearing liabilities. The growth in interest earning assets
was $756.5 million over June 2006, compared to an increase in interest bearing
liabilities of $676.1 million. The net interest margin (TEB) for the second
quarter was 3.6%, and 3.5% for the six-month period ended June 30, 2007, both
improved over the comparable periods of 2006 of 3.4% for the comparable
quarter and 3.3% for the six-month period ended June 30, 2006. The interest
spread between loans and borrowings for the quarter was 3.7% and 3.6% for the
six-month period ended June 30, 2007, compared to 3.4% for both comparable
periods in 2006.
    The mortgage lending line of business continues to be the primary driver
of the Company's net interest income. It contributed $25.0 million in the
second quarter of 2007 and $47.9 million for the six months ended June 30,
2007, compared to $21.1 million during the second quarter of 2006, and
$41.4 million for the first six months of 2006.
    The consumer lending line of business contributed second quarter net
interest income of $5.3 million and $10.0 million for the six-month period,
compared to $3.4 million and $6.4 million for the quarter and six months ended
June 30, 2006, respectively. The Equityline VISA product continues to drive
income growth in the consumer lending line of business, with receivable
balance increases of 26.0% over the fourth quarter of 2006, and 85.5% over the
second quarter of last year.
    Refer to Note 11 of the accompanying unaudited interim consolidated
financial statements, which summarizes the Company's interest rate risk
position as at June 30, 2007. This table illustrates that after one year the
Company had a deficient cumulative dollar gap of $304.7 million (liabilities
and off-balance sheet items exceeding total assets) compared to deficiencies
of $441.4 million at December 31, 2006 and $587.9 million at June 30, 2006.
The deficiency in the cumulative gap reverts to a surplus in one to three
years for both the current period and at December 31, 2006, while the
deficiency in the cumulative gap at June 30, 2006 reverts to a surplus after
three years. The reduced gap balance in the one-year timeframe in comparison
to December 31, 2006 and June 30, 2006 was due to the Company's focus on
extending maturities on the deposit portfolio to better match the maturity
duration of the mortgage portfolio.

    Non-Interest Income

    Total non-interest income was $11.5 million for the second quarter and
$21.5 million for the first six months of 2007, an increase of $2.1 million
and $5.5 million from the $9.4 million and $16.0 million reported for the
three- and six-month periods ended June 30, 2006. The increases over the prior
periods were driven by fee income generated from the increase in originations
in the loan and Equityline VISA portfolios.
    The fees and other income components of non-interest income ended the
quarter at $5.1 million and $9.7 million for the first six months of 2007,
compared to $2.5 million and $4.8 million for the comparable periods in 2006.
The mortgage lending line of business contributed $3.0 million of this income
in the quarter and $5.4 million for the first six months, compared to
$0.5 million and $1.1 million for the second quarter and first six months of
2006. The consumer lending line of business contributed $2.1 million of fee
income during the quarter and $4.1 million for the first six months of 2007,
compared to $1.9 million and $3.6 million for the comparable quarter and
six-month period of 2006. With the implementation of new financial instrument
standards, the Company reclassified the amortization of deferred commitment
fees in 2006 from fees and other income to interest from loans. Please refer
to Note 2 of these unaudited interim consolidated financial statements.
    During the second quarter, the Company issued four MBS pools, consisting
of $150.7 million of Canada Mortgage and Housing Corporation (CMHC) insured
residential mortgages for a total issuance of MBS pools in 2007 to date of
$285.0 million. This represents an increase of $10.0 million over the
$140.7 million in MBS pools that were issued in the second quarter of 2006 and
a $22.6 million increase over the $262.4 million issued during the first six
months of 2006. Securitization gains were $3.9 million during the quarter and
$8.7 million for the six-month period ended June 30, 2007, down from
$4.0 million realized in the second quarter and up from the $6.9 million gain
realized during the first six months of 2006 (refer to Note 4 of these
unaudited interim consolidated financial statements). The decrease in
securitization gains during the quarter, in comparison to the second quarter
of 2006, was primarily due to an increase in the unscheduled prepayment rate
from 12.6% in the second quarter of 2006 to 13.3% in the second quarter of
2007, as the spreads achieved on the sales were consistent at 2.4% for both
2007 and 2006. For the six-month period, the gains were higher in 2007 in
comparison to 2006, as the excess spread achieved in the six-month period
ended June 30, 2007 over June 30, 2006 more than offset the increased
unscheduled prepayment rate utilized during the six-month period ended
June 30, 2007.

    Non-Interest Expenses

    Total non-interest expenses for the quarter and six-month period were
$13.4 million and $25.2 million, up 18.0%, or $2.1 million from the
$11.3 million recorded for the second quarter of 2006 and up by 13.2%, or
$2.9 million over the $22.3 million reported for the first six months of 2006.
The primary driver of the increase in non-interest expenses over the previous
year's period was increased staffing levels and professional fees incurred as
the result of the Company's initiatives to meet future growth of the Company
and changing regulatory requirements. Salaries and staff benefit expenses for
the second quarter increased by $0.5 million, or 6.9%, over the second quarter
of 2006 and by $ 1.7 million, or 13.2%, over the first six months of 2006. The
Company ended the quarter with 359 employees, up from the first quarter of
2007 and up from 352 employed at the end of June 2006. The June 2007 total
includes 25 temporary summer staff (21 temporary summer staff for June 2006)
to assist the Company during higher employee vacation periods. Premises
expenses increased from the prior period as the Company entered into a new
lease in May 2007 for the opening of the Montreal branch.
    General and administration expenses increased by $1.4 million over the
second quarter of 2006 and $1.0 million over the first six months of 2006. The
increase in general and administration expenses from the second quarter and
six-month period ended June 30, 2006 is primarily due to increased
professional fees related to a number of initiatives to provision for future
growth opportunities for the Company and certain regulatory requirements. The
overall increase in general and administration expenses from the fourth
quarter of 2006 is largely due to outsourcing and consulting expenses.
    The efficiency ratio (TEB) ended the quarter at 27.2% and 26.9% for the
first six months of 2007, compared to 29.5% and 30.7% for the comparable
periods in 2006. Management's focus on cost containment has been reflected in
the favourable efficiency ratio (TEB) achieved in the current and first six
months of 2007 and represents a significant improvement over the second
quarter and six months of 2006. On January 1, 2007, the Company implemented
new accounting standards on financial instruments. With the implementation of
the new standards, the Company reclassified the amortization of Deferred
Finders Fees and Deferred Agent Commission from General and Administration to
Interest from Loans and Interest on Deposits. This had the effect of improving
the efficiency ratio from past historic levels and beyond the Company's target
range of between 35% to 39%. Please refer to Note 2 of these unaudited interim
consolidated financial statements.

    Provision for Credit Losses

    The Company expensed $1.0 million in the second quarter and $1.5 million
year-to-date, compared to $1.3 million and $2.1 million last year, through the
provision for credit losses. This expense represents 0.1% of total loans on an
annualized basis. The Company continues to add to the general allowance for
credit losses, primarily in response to the growth in risk-weighted assets and
in particular the growth in the loan portfolio. The total general allowance
amounted to $20.7 million at the end of the quarter, an increase of
$1.1 million over the $19.6 million recorded at December 31, 2006, and a
$2.4 million rise over the $18.3 million allowance recorded at June 30, 2006.
    At June 30, 2007 net impaired loans amounted to $24.3 million (0.68% of
gross loans), compared to $22.8 million (0.68% of gross loans) at December 31,
2006 and $16.7 million (0.54% of gross loans) at June 30, 2006. The slight
rise in net impaired loans relative to last year at this time, has not
resulted in increased loan write-offs (refer to Note 3 of these unaudited
interim consolidated financial statements). Total net loans written-off during
the six months ended June 30, 2007 were $0.6 million, consistent with the six
months ended December 2006 and up slightly from the six months ended June
2006. The Company continues to closely monitor non-performing loans and has
taken proactive steps to manage losses, as described under the Credit Risk
Section of this MD & A.

    Income Taxes

    The income tax expense amounted to $11.6 million (effective tax rate of
34.5%) for the second quarter of 2007, and $21.5 million (effective tax rate
of 33.3%) for the first six months of 2007, compared to $8.6 million
(effective tax rate of 34.3%) for the second quarter of 2006 and $16.0 million
(effective tax rate of 34.3%) for the first six months of 2006. Canadian
dividend income is non-taxable to financial institutions, which results in a
reduced income tax rate. In the absence of tax-free dividends, the tax rates
would have been 36.6% for the second quarter and 35.3% for the first six
months of 2007, compared to 36.3% for both the second quarter and first six
months of 2006.

    Balance Sheet Review

    Assets

    Total assets as at June 30, 2007 were $4.30 billion, an increase of
$758.4 million, or 21.4%, over the $3.55 billion reported one year ago, and up
by $402.0 million, or 10.3%, over the December 31, 2006 asset balance of
$3.90 billion.
    Growth in the loan portfolio of $504.4 million, or 16.5%, generated most
of this year-over-year asset increase. Residential mortgages contributed
$258.7 million to the total loan portfolio growth, consumer lending
contributed $123.5 million, other mortgages (primarily commercial mortgages)
contributed $102.5 million, secured loans added $22.1 million, and the general
allowance increased by $2.4 million. MBS receivables added $2.0 million to
total assets. The Company's investment securities portfolio increased by
$104.3 million over June 30, 2006, and cash resources increased significantly
by $147.8 million year-over-year resulting from funds raised through deposits
and internally-generated earnings. Other assets declined marginally by $0.7
million from the comparable quarter in the prior year due to the
implementation of new financial instrument standards that came into effect
January 1, 2007 (refer to Note 2 of these unaudited interim consolidated
financial statements). Deferred finders fees and deferred agent commissions
were reclassified and included in the cost base of the respective loans and
deposits. Remaining balances in Other Assets, consisting of accrued interest
receivable, goodwill, other prepaid and other deferred assets (refer to Note 5
of these unaudited interim consolidated financial statements) were relatively
consistent year-over-year.
    Growth in the loans portfolio of $261.2 million, or 7.9%, was the
principal contributor to asset growth over December 31, 2006. The loan
portfolio growth arose from a $140.2 million increase in residential
mortgages, $59.5 million rise in other mortgages (primarily commercial),
$54.5 million increase in personal and credit card loans and an $8.0 million
increase in secured loans. The Company's securities portfolio increased by
$46.0 million, or 13.4%, over December 31, 2006 and cash resources increased
$99.5 million, or 69.3%, primarily due to funds raised through deposits and
internally generated earnings. As announced in the fourth quarter of 2006 the
Company commenced commercial lending by entering into lending arrangements
secured by pools of commercial mortgages. During the six months, the
commercial mortgage group advanced loans for $106.2 million, and $36.7 million
of residential mortgages. Total other assets decreased by $3.3 million
primarily due to a reclassification of deferred finders fees and deferred
agent commissions into the respective mortgage and deposit cost base. This was
implemented effective January 1, 2007 as required under new financial
instrument accounting standards (refer to Note 2 of these unaudited interim
consolidated financial statements). Other balances within Other Assets, which
include Mortgage-Backed Securities receivable, increased consistent with
securitization activity during the quarter.

    Liabilities

    Liabilities for the second quarter ended June 30, 2007 rose to
$3.99 billion, an increase of $695.2 million, or 21.1%, over the $3.30 billion
reported at June 30, 2006 and up by $369.0 million, or 10.2%, over the
$3.63 billion recorded at December 31, 2006.
    Most of the year-over-year growth resulted from an increase in deposits
of $676.1 million. Increased deposit liabilities funded all of the loan
portfolio growth along with adding to the Company's investment securities and
cash resources. Higher retained earnings and other liabilities contributed to
the Company's remaining securities and other assets. Other liabilities (refer
to Note 6 of these unaudited interim consolidated financial statements)
increased by $17.1 million, or 10.5%, over the $163.2 million reported at June
30, 2006. This growth was principally the result of increases in accrued
interest payable of $13.9 million related to the rise in deposits and a $12.7
million increase in other liabilities due to the timing of operating
expenditures. The growth was offset by a decline in deferred commitment fees
which are now classified with the respective mortgage loan. This was required
as a result of the new financial instrument standards that came into effect on
January 1, 2007 (refer to Note 2 to these unaudited interim consolidated
financial statements).
    The rise in liabilities over December 31, 2006 resulted primarily from
increased deposits of $364.5 million. Increased deposit liabilities were the
primary funding source for the loan portfolio growth for the first six months
of 2007 as well as adding to the Company's investment securities and cash
resources. The increase in Other Liabilities (refer to Note 6 of these
unaudited interim consolidated financial statements) compared to the December
2006 quarter was driven by similar factors discussed above and offset by the
reclassification of the deferred commitment fees as discussed in Note 2 of
these unaudited interim consolidated financial statements.

    Shareholders' Equity

    The increase in shareholders' equity of $63.3 million, or 25.7%, over the
$246.6 million reported at June 30, 2006 was internally generated from net
income of $80.3 million for the twelve-month period ended June 30, 2007,
together with adjustments from the adoption of new financial instrument
accounting standards of $5.6 million, less $13.4 million for dividends paid
and payable to shareholders. The remaining increase was from proceeds of
$2.9 million received on the exercise of Company share options and the
amortization of the fair value of share options of $0.7 million, offset by
$1.6 million paid by the Company to repurchase capital stock through the
Normal Course Issuer Bid.
    Shareholders' equity rose to $309.8 million, an increase of
$33.0 million, or 11.9%, over $276.9 million reported at December 31, 2006.
This growth of $33.0 million was internally generated from net income for the
six months of $43.2 million, adjustments from the adoption of new financial
instrument accounting standards of $5.6 million, less $6.9 million for
shareholder dividends. The remaining changes were from proceeds received on
the exercise of Company share options and recording the fair market adjustment
on stock options, offset by the Company's repurchase of capital stock through
the Normal Course Issuer Bid.
    At June 30, 2007 the book value per common share was $8.98, compared to
$8.10 at December 31, 2006, and $7.22 one year ago.

    Off-Balance Sheet Arrangements

    From time to time, the Company may enter into hedging transactions to
mitigate the interest exposure on outstanding loan commitments. During the
quarter ended June 30, 2007 the Company did not enter into new interest rate
swap contracts. During the quarter ended June 30, 2006 the Company entered
into interest rate swap contracts with a notional value of $200.0 million
resulting in a mark-to-market positive income statement adjustment of
$0.9 million. During the second quarter of 2006, the Company unwound
$75.0 million of these interest rate swap contracts realizing a $0.2 million
gain. For additional information refer to Note 10 of these accompanying
unaudited interim consolidated financial statements.
    The Company securitizes insured residential mortgage loans into special
purpose entities for liquidity funding and capital management purposes.
Transactions consist of the transfer of these loans to a Canadian trust
company as security, in exchange for cash. When these assets are sold, the
Company retains rights to certain excess interest spreads and servicing
liabilities, which constitute retained interests. The Company periodically
reviews the value of the retained interests, and any permanent impairment in
value is charged to income. The Company continues to administer all
securitized assets after the sales. As of June 30, 2007 outstanding
securitized mortgage loans under administration amounted to $1.24 billion
($1.11 billion - Q4 2006 and $959.7 million - Q2 2006) and retained interest
of $49.3 million ($51.0 million - Q4 2006 and $47.3 million - Q2 2006). For
additional information, refer to Note 4 in the consolidated financial
statements of the 2006 Annual Report, and Note 4 of these accompanying
unaudited interim consolidated financial statements.
    In the normal course of its business, the Company offers credit products
to meet the financial needs of its customers. Outstanding commitments for
future advances on mortgage loans amounted to $234.2 million at June 30, 2007
compared to $201.8 million at December 31, 2006 and $242.6 million at June 30,
2006. These commitments remain open for various dates through July 2008. As of
June 30, 2007 unutilized credit card balances amounted to $72.4 million,
compared to $66.8 million at December 31, 2006 and $48.8 million at June 30,
2006.
    Capital Management

    The capital base of the Company's operating subsidiary, Home Trust
Company ("Home Trust"), continues to be strongly positioned. The Tier 1
capital ratio ended the quarter at 12.7%, consistent with both the second and
fourth quarter of 2006. The total capital ratio was 14.2% at June 30, 2007
compared to 14.2% and 14.4% reported at December 31 and June 30, 2006. These
ratios continue to comfortably exceed the minimum regulatory requirements of
7.0% for Tier 1 capital and 10.0% for total capital.
    As at June 30, 2007, Home Trust was utilizing 75.5% of its approved
Assets to Regulatory Capital Multiple of 17.5 times (76.1% Q4 -2006 and 76.3%
Q2 - 2006), providing sufficient capital for continued lending growth going
forward.

    Risk Management

    The Company's key risk management practices remain in place and unchanged
from those outlined on pages 22 through 27 in the MD & A section of the
Company's 2006 Annual Report.

    Credit Risk

    Credit risk management is the management of all aspects of borrower risk
associated with the total loan portfolio, including the risk of loss of
principal and/or interest from the failure of debtors to honour their
contractual obligations to the Company.
    As at June 30, 2007 the composition of the total mortgage portfolio was
93.9% residential, 3.6% store and apartments, 2.0% commercial and 0.5% other
non-residential loans. Within the Company's residential mortgage portfolio,
5.1% of loans are insured by CMHC. First mortgages represent 99.5% of the
total mortgage portfolio.
    As at June 30, 2007 the gross credit card receivable balance totaled
$284.1 million, comprised of $282.9 million, or 99.6% of accounts secured
either by cash deposits or residential mortgage collateral, and $1.2 million,
or 0.4% which is unsecured. The total credit approved includes $354.9 million
in secured and $1.6 million in unsecured credit, compared to $294.2 million in
secured and $2.4 million of unsecured credit at December 31, 2006 and
$207.0 million in secured and $2.8 million of unsecured credit at June 30,
2006. Within the secured credit card portfolio the Equityline VISA credit
cards represent the principal driver of receivable balance growth. Equityline
VISA credit cards are secured by a collateral residential mortgage, and this
portfolio segment amounted to $272.0 million of the credit card receivable
balance as at June 30, 2007, compared to $215.9 million at December 31, 2006
and $146.6 million at June 30, 2006. Cash security deposits on credit card
accounts amounted to $18.8 million, and are included in the Company's
deposits. The Company has experienced minimal losses on the credit card
portfolio. At June 30, 2007, $2.3 million, or 0.8%, of the credit card
portfolio was over 60 days in arrears.
    The secured loan portfolio of $78.3 million increased by $8.0 million
over the December 31, 2006 balance of $70.3 million, and $22.1 million over
the June 30, 2006 balance of $56.2 million. These loans are secured by second
mortgages on residential property. Since commencing this program, the Company
has experienced minimal losses on these loans. At June 30, 2007, $0.6 million,
or 0.7% was over 60 days in arrears. These loans are subject to the same
credit and lending criteria as the Company's residential mortgage portfolio.
    Although the Company has experienced a small increase in net impaired
loans to $24.3 million at June 30, 2007 compared with $22.8 million at
December 31, 2006 and $16.7 million at June 30, 2006, the Company has not
experienced any material rise in net loan write-offs.
    Additionally, net impaired loans as a percentage of gross loans has
improved from the first quarter of 2007 ending the second quarter at 0.68%,
down from 0.74%) for the first quarter. The Company continues to focus its
underwriting efforts, taking account of local market conditions in order to
minimize the Company's potential loss exposure. Experienced senior employees
of the Company undertake thorough reviews of all non-performing loans greater
than 60 days to analyze potential drivers and then reflect those drivers in
the Company's lending criteria. This analytical approach and constant
attention to emerging trends has resulted in continued low write-offs.
Write-offs net of recoveries applied against the accumulated allowance for
credit losses realized on loans during the six-month period ended June 30,
2006 totaled $0.6 million which is consistent with the six-month period ended
December 31, 2006 and up slightly from the six-month period ended June 30,
2006. The Company continues to monitor this area closely and is dealing
prudently and effectively with impaired loans.
    The Company has ensured that it is well positioned for any unforeseen
future losses by establishing general allowances of $20.7 million at June 30,
2007, as compared to the general allowances of $19.6 million at December 31,
2006, and $18.3 million at June 30, 2006. The Company continues to monitor the
adequacy of the general allowance. The Company's actual loss experience on
mortgages has amounted to 0.03% per annum over the past 15 years, 0.01% for
the past 10 years, and 0.001% for the past 5 years. The Company has security
in the form of real property or cash deposits on loans making up 99.8% of the
total loan portfolio. A methodology has been implemented by the Company to
test the adequacy of the general allowance that takes into account asset
quality, borrowers' creditworthiness, property location and past loss
experience. The Company periodically reviews this general allowance
methodology giving due consideration to changes in economic conditions,
interest rates and local housing market conditions.
    The total general allowance was 90.1 basis points of the Company's
risk-weighted assets at June 30, 2007 compared to 95.1 basis points at
December 31, 2006 and 99.1 basis points at June 30, 2006.

    Liquidity Risk

    The Company maintains sufficient liquidity to fund its obligations as
they come due under normal operating conditions, as well as under various
stress scenarios, with a framework for minimum levels of liquid assets to be
held at all times. The Company holds liquid assets in the form of cash, bank
deposits, treasury bills, bankers acceptances and government or government
guaranteed bonds and debentures to meet the Company's liquidity requirements.
On June 30, 2007 liquid assets amounted to $438.6 million, up 29.4% from
$339.0 million at December 31, 2006 and up 65.4% from $265.2 million at
June 30, 2006.
    The Company's policy is to maintain a minimum 20% of 100-day obligations
in liquid assets. For the twelve months ended June 30, 2007 the Company
maintained an average of $340.0 million, or 40.9%, of 100-day obligations in
liquid assets compared to $288.0 million, or 41.3%, for the twelve months
ended December 31, 2006 and $242.4 million, or 42.4%, for the twelve-month
period ended June 30, 2006.

    Interest Rate Risk

    The objective of interest rate risk management is to ensure that the
Company is able to realize stable and predictable earnings over specific time
periods despite interest rate fluctuations. The Company has adopted a balanced
approach to the management of its asset and liability positions to prevent
interest rate fluctuations from materially impacting future earnings. The
interest rate sensitivity position as at June 30, 2007 is presented under
Note 11 in these unaudited interim consolidated financial statements. The
table provided there represents these positions at a point in time, and the
gap represents the difference between assets and liabilities in each maturity
category.
    In addition to matching assets and liabilities, the Company utilizes an
interest rate risk sensitivity model that measures the relationship between
changes in interest rates, and the resulting impact on the economic value of
shareholders' equity. As at June 30, 2007 a 1% decrease in interest rates
would decrease net interest income after tax by approximately $1.5 million,
and a 2% rate decrease would also decrease net interest income after tax by
approximately $3.0 million, over the next 12 months.
    The Company has the ability to enter into interest rate swap arrangements
for the purpose of hedging commitment risk. The purpose is to manage interest
rate exposures during the time frame between when a mortgage commitment is
made and when this mortgage loan is securitized into an MBS pool. The Company
had no open interest rate swap arrangements as at June 30, 2007. Refer to
Note 10 of these unaudited interim consolidated financial statements for
additional information.

    Results by Business Segment

    The following section discusses the mortgage and consumer lending lines
of business for the second quarter and first six months of 2007 compared to
both the second quarter and first six-month period of 2006 (refer to Note 12
of the accompanying unaudited interim consolidated financial statements).

    Mortgage Lending

    The Company's principal line of business contributed $15.3 million to net
income during the second quarter of 2007, and $30.2 million for the first six
months of 2007, as compared to $12.3 million and $22.5 million for the same
periods ended June 30, 2006. The increase from the prior quarter was partially
driven by new fee increases instituted in late 2006 that were not reflected in
the 2006 balance along with increases in transaction based fees as the
Company's mortgage volumes continue to grow. The total value of new mortgages
advanced in the second quarter and first six months of 2007 amounted to
$622.6 million and $1.17 billion, up 23.4% and 25.5% over the $504.6 million
advanced in the second quarter and $931.3 million advanced for the six-month
period ended June 30, 2006.
    The Company securitized $150.7 million of government guaranteed (CMHC)
residential mortgage loans through the creation of MBS securities during the
second quarter, and a total of $285.0 million for the first six months of
2007, realizing total gains on securitization of $3.9 million during the
quarter and $8.7 million year-to-date. This compares to $140.7 million for the
second quarter of 2006 and $262.4 million for the first six months of 2006,
resulting in gains of $4.0 million and $6.9 million, respectively. For
additional information refer to Note 4 of these unaudited interim consolidated
financial statements. Securitization will continue to contribute to the
Company's income; however, core mortgage lending is expected to remain the
main driver of the Company's financial results going forward.
    The second mortgage program (recorded as secured loans) is conducted by
way of an agreement with QSPE-HCC Trust operating as Regency Finance Corp.
("Regency"), whereby the Company acts as Regency's agent in offering
residential second mortgage loans. These mortgage loans are securitized and
the investments are purchased by the Company. At the end of the quarter the
Company held $78.3 million in Secured Loans as Notes Receivable issued by
Regency, compared to $70.3 million at December 31, 2006 and $56.2 million at
June 30, 2006. These Notes yield 6.8% with an average duration of 3.1 years.
The Company also receives fee income for servicing and administering these
mortgages for Regency. This income amounted to 0.6% of the portfolio value, on
an annualized basis. The underlying credit quality of the mortgage loans
securing the Notes Receivable remains high, with 0.7% of the portfolio in
arrears over 60 days. This program has experienced only minor losses since
inception. It also continues to provide the Company with ancillary marketing
opportunities in the residential first mortgage marketplace.

    Consumer Lending - Credit Cards and Retail Services

    Consumer lending continued to generate strong results through the second
quarter of 2007. Net income for the quarter was $3.7 million, and $7.3 million
for the first six months of 2007, compared to $2.2 million and $4.2 million
for the comparable periods in 2006. The Equityline VISA loans portfolio
amounted to $272.0 million at June 30, 2007 ($215.9 million - Q4 2006 and
$146.6 million - Q2 2006) and comprises 95.7% (94.0% - Q4 2006 and 91.1% - Q2
2006) of the total gross credit card receivable balance of $284.1 million,
bearing an average interest rate of 10.8% (10.2% - Q4 2006 and 10.0% - Q2
2006) on outstanding balances.

    Accounting Standards and Policies

    Critical Accounting Estimates

    Critical accounting estimates which require management to make
significant judgements, some of which are inherently uncertain, are outlined
on page 29 of the 2006 Annual Report. These estimates are critical since they
involve material amounts and require management to make estimates that, by
their very nature, include uncertainties. The preparation of unaudited interim
consolidated financial statements in accordance with GAAP requires management
to make estimates and assumptions, mainly concerning the valuation of items,
which affect the amounts reported. Actual results could differ from those
estimates.
    Accounting policies requiring critical accounting estimates include the
allowance for credit losses, securitization of Mortgage-Backed Securities,
future income tax liabilities and contingencies for litigation. Further
information can be found under Notes 3, 4, and 9 of the unaudited interim
consolidated financial statements. There have been no subsequent changes to
the critical accounting estimates disclosed on page 29 of the 2006 Annual
Report.

    Change in Accounting Policy

    On January 1, 2007 the Company adopted the Canadian Institute of
Chartered Accountants (CICA) handbook sections 3855, Financial Instruments -
Recognition and Measurement; 3865, Hedges; and 1530, Comprehensive Income.
    The standards require that all financial assets and liabilities be
classified as held for trading, available for sale, held to maturity, or loans
and receivables. In addition, the standards require that all financial assets
be measured at fair value with the exception of loans and receivables and
other liabilities which are recorded at amortized cost using the effective
interest method. As required, these standards have been applied as an
adjustment to opening retained earnings and accumulated other comprehensive
income (AOCI). As a result, retained earnings increased by $1.4 million and
AOCI decreased by $0.6 million. Prior period balances have not been restated.
    For further details, see Note 2 to these unaudited interim consolidated
financial statements.

    Controls over Financial Reporting

    No changes were made in the Company's internal controls over financial
reporting during the interim period ended June 30, 2007 that have materially
affected, or are reasonably likely to materially affect, the Company's
internal controls over financial reporting.

    Updated Share Information

    As at August 3, 2007, the Company had issued 34,495,640 Common Shares. In
addition, outstanding director and employee stock options amounted to
1,130,000 (1,266,000 - Q4 2006 and 1,132,000 - Q2 2006) of which 570,000 are
exercisable as of the quarter-end (910,375 - Q4 2006 and 878,875 - Q2 2006)
for proceeds to the Company upon exercise of $6.4 million ($8.4 million - Q4
2006 and $7.1 million - Q2 2006).
    Subsequent to the end of the quarter, the Board of Directors declared a
dividend increase of 10.0% to $0.11 per share on a quarterly basis, payable on
September 1, 2007 to shareholders of record at the close of business on
August 15, 2007.
    Effective January 1, 2006, the Federal Government implemented a new
dividend tax regime for dividends paid by Canadian corporations to their
shareholders. The result of these changes is that the top federal personal
income tax rate on eligible dividends received by investors decreased by 5% in
2006. For the year ended December 31, 2006 all dividends paid in 2006 by the
Company were eligible dividends and all dividends paid subsequently will be
considered eligible unless indicated otherwise.

    Quarterly Financial Highlights

    In thousands of dollars, except per share amounts and percentages

    

                                    2007                                2006
    -------------------------------------------------------------------------
                             Q2       Ql       Q4       Q3       Q2       Ql
    -------------------------------------------------------------------------
    Net Interest Income
     (TEB)(1)           $37,724  $34,341  $33,040  $30,727  $29,072  $27,396
    Less TEB Adjustment   1,195    1,007      841      764      740      651
    -------------------------------------------------------------------------
    Net Interest
     Income per Financial
     Statements(3)       36,529   33,334   32,199   29,963   28,332   26,745
    Non-Interest
     Income(3)           11,467   10,075   12,743    6,880    9,412    6,623
    Total Revenues(3)    87,708   81,745   81,053   70,621   68,495   62,380
    Net Income           22,018   21,158   20,518   16,618   16,496   14,183
    Return on Common
     Shareholders'
     Equity               28.9%    29.3%    30.5%    26.2%    27.6%    25.2%
    Return on Average
     Total Assets          2.1%     2.1%     2.2%     1.8%     1.9%     1.7%
    Earnings per
     Common Share
      Basic             $  0.64  $  0.62  $  0.60  $  0.49  $  0.48  $  0.42
      Diluted           $  0.63  $  0.61  $  0.59  $  0.48  $  0.47  $  0.41
    Book Value per
     Common Share       $  8.98  $  8.70  $  8.10  $  7.62  $  7.22  $  6.79
    Efficiency Ratio
     (TEB)(1)(3)          27.2%    26.7%    26.8%    32.0%    29.5%    32.2%
    Efficiency Ratio(3)   27.9%    27.3%    27.3%    32.7%    30.1%    32.8%
    Tier 1 Capital
     Ratio(2)             12.7%    12.8%    12.7%    12.5%    12.7%    12.9%
    Total Capital
     Ratio(2)             14.2%    14.3%    14.2%    14.1%    14.4%    14.6%
    Net Impaired Loans as
     % of Gross Loans     0.68%    0.74%    0.68%    0.56%    0.54%    0.51%
    Annualized Provision
     as % of Gross Loans   0.1%     0.1%     0.1%     0.1%     0.1%     0.1%
    -------------------------------------------------------------------------


                                    2005
    -------------------------------------
                             Q4       Q3
    -------------------------------------
    Net Interest Income
     (TEB)(1)           $27,745  $26,553
    Less TEB Adjustment     708      682
    -------------------------------------
    Net Interest
     Income per Financial
     Statements(3)       27,037   25,871
    Non-Interest
     Income(3)            8,028    8,899
    Total Revenues(3)    62,787   60,737
    Net Income           16,881   15,766
    Return on Common
     Shareholders'
     Equity               31.9%    32.1%
    Return on Average
     Total Assets          2.1%     2.1%
    Earnings per
     Common Share
      Basic             $  0.50  $  0.47
      Diluted           $  0.47  $  0.45
    Book Value per
     Common Share       $  6.44  $  6.00
    Efficiency Ratio
     (TEB)(1)(3)          27.5%    29.0%
    Efficiency Ratio(3)   28.0%    29.5%
    Tier 1 Capital
     Ratio(2)             12.7%    12.6%
    Total Capital
     Ratio(2)             14.5%    14.5%
    Net Impaired Loans as
     % of Gross Loans     0.49%    0.50%
    Annualized Provision
     as % of Gross Loans   0.0%     0.2%
    -------------------------------------
    (1) TEB - taxable equivalent basis: see definition in these unaudited
        interim consolidated financial statements.
    (2) These figures relate to the Company's operating subsidiary,
        Home Trust Company
    (3) Reclassification - refer to Note 2 of these unaudited interim
        consolidated financial statements.
    


    The Company's key financial measures for each of the last eight quarters
are summarized in the preceding table. These highlights illustrate the
Company's profitability, return on equity, as well as efficiency measures and
capital ratios, quarter-over-quarter. The Company continues to achieve strong
financial results led by improved net interest margins, strong revenue growth
in all business segments and continued low efficiency ratios (the lower the
better). The Company has not experienced any material mortgage loan write-offs
and the quarter saw an improvement in the net impaired loans as a percentage
of gross loans declined to 0.68% from 0.74% in the first quarter of 2007.

    Outlook

    Home Capital remains committed to serving selected segments of the
Canadian financial services marketplace that are not being served by the major
financial institutions. The Company is very well positioned to benefit from
favourable market and economic conditions across its business activities. As
2007 continues, we foresee continued economic growth in Canada and a modest
rise in interest rates during the third quarter. The rise in interest rates is
not expected to have a significant impact on housing starts or the resale
market and the Company continues to have strong growth in the mortgage
pipeline. The Company has a proven corporate strategy and proprietary risk
management procedures to manage the Company's further growth prospects.

    Certificate of Interim Consolidated Financial Statements

    The consolidated financial statements of Home Capital Group Inc. were
prepared by management, which is responsible for the integrity and fairness of
the financial information presented. Management has reviewed the Interim
Consolidated Financial Statements of Home Capital Group Inc. for the period
ended June 30, 2007. Based on our knowledge, the Interim Consolidated
Financial Statements do not contain any untrue statement of a material fact or
omit to state a material fact required to be stated or that is necessary to
make a statement not misleading in light of the circumstances under which it
was made, with respect to the period covered by the Interim Consolidated
Financial Statements. Based on this knowledge, the Interim Consolidated
Financial Statements together with the other financial information included in
the interim filings fairly present in all material respects the financial
condition, results of operations and cash flows of Home Capital Group Inc. as
of June 30, 2007.
    The Board of Directors and Audit and Risk Management Committee of Home
Capital Group Inc. reviewed this quarterly report. The disclosure controls and
procedures of Home Capital Group Inc. support the ability of the President and
Chief Executive Officer and the Chief Financial Officer of Home Capital Group
Inc. to assure that Home Capital's Interim Consolidated Financial Statements
are fairly presented.

    
    (signed)                                 (signed)
    Gerald M. Soloway                        Phil Braginetz, CFA
    President and Chief Executive Officer    Chief Financial Officer
    August 3, 2007



    Consolidated Statements of Income

                                Three Months Ended          Six Months Ended
    -------------------------------------------------------------------------
    In Thousands of Dollars,
     Except Per Share         June 30      June 30      June 30      June 30
     Amounts (Unaudited)         2007         2006         2007         2006
    -------------------------------------------------------------------------
    Interest from Loans   $    70,183  $    55,981  $   136,451  $   107,871
    Dividends from
     Securities                 2,229        l,38l        4,107        2,596
    Other Interest              3,829        1,722        7,353        4,374
    -------------------------------------------------------------------------
                               76,241       59,084      147,911      114,841
    -------------------------------------------------------------------------

    Interest Expense
    Interest on Deposits       39,712       30,751       78,048       59,763
    -------------------------------------------------------------------------
    Net Interest Income        36,529       28,333       69,863       55,078
    Provision for Credit
     Losses (Note 3)            1,002        1,288        1,490        2,143
    -------------------------------------------------------------------------
                               35,527       27,045       68,373       52,935
    -------------------------------------------------------------------------
    Non-interest Income
    Fees and Other Income       5,139        2,467        9,674        4,792
    Securitization Income
     on Mortgage-Backed
     Securities                 5,568        5,334       10,791        8,689
    Net Gain Realized and
     Unrealized on
     Investment Securities        760          482        1,104        1,425
    Gain (Loss) on
     Derivatives                    -        1,129          (27)       1,129
    -------------------------------------------------------------------------
                               11,467        9,412       21,542       16,035
    -------------------------------------------------------------------------

                               46,994       36,457       89,915       68,970
    -------------------------------------------------------------------------
    Non-interest Expenses
    Salaries and Staff
     Benefits                   7,029        6,577       14,219       12,559
    Premises                      956          817        1,873        1,639
    General and
     Administration             5,397        3,950        9,130        8,089
    -------------------------------------------------------------------------
                               13,382       11,344       25,222       22,287
    -------------------------------------------------------------------------
    INCOME BEFORE PROVISION
     FOR INCOME TAXES          33,612       25,113       64,693       46,683

    Provision for Income
     Taxes (Note 9)            11,594        8,617       21,517       16,004
    -------------------------------------------------------------------------
    NET INCOME            $    22,018  $    16,496  $    43,176  $    30,679
    -------------------------------------------------------------------------
    NET INCOME PER COMMON
     SHARE
    Basic                 $      0.64  $      0.48  $      1.26  $      0.90
    -------------------------------------------------------------------------
    Diluted               $      0.63  $      0.47  $      1.24  $      0.88
    -------------------------------------------------------------------------

    AVERAGE NUMBER OF COMMON SHARES

    OUTSTANDING (Thousands)

    Basic                      34,408       34,071       34,403       34,106
    -------------------------------------------------------------------------
    Diluted                    34,904       34,848       34,902       34,818
    -------------------------------------------------------------------------
    Total Number of
     Outstanding Common
     Shares (Note 7)           34,502       34,157       34,502       34,157
    Book Value Per Share  $      8.98  $      7.22  $      8.98  $      7.22
    -------------------------------------------------------------------------



    Consolidated Statements of Comprehensive Income

                                Three Months Ended          Six Months Ended
    -------------------------------------------------------------------------
    In Thousands of
     Dollars, Except
     Per Share Amounts        June 30      June 30      June 30      June 30
     (Unaudited)                 2007         2006         2007         2006
    -------------------------------------------------------------------------
    NET INCOME FOR THE
     PERIOD               $    22,018  $    16,496  $    43,176  $    30,679
    -------------------------------------------------------------------------
    OTHER COMPREHENSIVE
     LOSS, NET OF TAX

    Unrealized Losses on
     Available for Sale
     Securities

    Net Unrealized Losses
     on Securities Available
     for Sale                  (7,764)           -       (5,025)           -
    Transfer of Net
     Realized (Gains)
     to Net Income               (910)           -       (1,364)           -
    -------------------------------------------------------------------------
    Total Other
     Comprehensive Loss        (8,674)           -       (6,389)           -
    -------------------------------------------------------------------------
    COMPREHENSIVE INCOME  $    13,344  $    16,496  $    36,787  $    30,679
    -------------------------------------------------------------------------



    Consolidated Balance Sheets

    In Thousands of                        June 30  December 31      June 30
     Dollars (Unaudited)                      2007         2006         2006
    -------------------------------------------------------------------------
    ASSETS

    Cash Resources

    Deposits with Regulated Financial
     Institutions                      $    68,854  $    43,701  $    45,409
    Treasury Bills Guaranteed
     by Canada                             174,191       99,830       49,881
    -------------------------------------------------------------------------
                                           243,045      143,531       95,290
    -------------------------------------------------------------------------
    Securities

    Issued or Guaranteed by Canada               -      208,980      179,779
    Issued or Guaranteed by Provinces            -          299          299
    Other Securities                             -      134,855      105,727
    Held for Trading                        19,668            -            -
    Available for Sale                     370,460            -            -
    -------------------------------------------------------------------------
                                           390,128      344,134      285,805
    -------------------------------------------------------------------------
    Loans

    Personal and Credit Card Loans         291,569      237,037      168,039
    Secured Loans                           78,282       70,250       56,177
    Residential Mortgages                3,025,969    2,885,806    2,767,309
    Other Mortgages                        195,286      135,765       92,800
    General Allowance for Credit
     Losses (Note 3)                       (20,690)     (19,644)     (18,317)
    -------------------------------------------------------------------------
                                         3,570,416    3,309,214    3,066,008
    -------------------------------------------------------------------------
    Other

    Mortgage-Backed Securities
     Receivable (Note 4)                    49,299       50,963       47,284
    Capital Assets                           4,882        4,691        4,284
    Other Assets (Note 5)                   46,501       49,783       47,181
    -------------------------------------------------------------------------
                                           100,682      105,437       98,749
    -------------------------------------------------------------------------
                                       $ 4,304,271  $ 3,902,316  $ 3,545,852
    -------------------------------------------------------------------------
    LIABILITIES

    Term Loan                          $         -  $         -  $     5,000
    Deposits
      Payable on Demand                     18,467       27,871       17,526
      Payable on a Fixed Date            3,789,692    3,415,769    3,109,553
    -------------------------------------------------------------------------
                                         3,808,159    3,443,640    3,132,079
    -------------------------------------------------------------------------
    Other

    Cheques and Other Items in Transit       6,007        2,655        4,012
    Other Liabilities (Note 6)             180,264      179,155      163,172
    -------------------------------------------------------------------------
                                           186,271      181,810      167,184
    -------------------------------------------------------------------------
                                         3,994,430    3,625,450    3,299,263
    -------------------------------------------------------------------------
    SHAREHOLDERS' EQUITY

    Capital Stock (Note 7)                  36,403       34,551       35,192
    Contributed Surplus                      1,256          783          510
    Retained Earnings                      279,201      241,532      210,887
    Accumulated Other Comprehensive
     Loss                                   (7,019)           -            -
    -------------------------------------------------------------------------
                                           309,841      276,866      246,589
    -------------------------------------------------------------------------
                                       $ 4,304,271  $ 3,902,316  $ 3,545,852
    -------------------------------------------------------------------------



    Consolidated Statement of Changes in Shareholders' Equity

                        For the Three Months Ended  For the Six Months Ended
    In Thousands of           June 30      June 30      June 30      June 30
     Dollars (Unaudited)         2007         2006         2007         2006
    -------------------------------------------------------------------------
    CAPITAL STOCK

    Common Shares
    Balance at Beginning
     of the Period         $   36,363   $   34,864   $   34,551   $   34,272
    Proceeds of Options
     Exercised                    341          328        2,571          920
    Normal Course Issuer
     Bid                         (301)           -         (719)           -
    -------------------------------------------------------------------------

    BALANCE AT END OF THE
     PERIOD                $   36,403   $   35,192   $   36,403   $   35,192

    -------------------------------------------------------------------------
    CONTRIBUTED SURPLUS

    Balance at Beginning
     of the Period         $    1,021   $      415   $      783   $      306
    Amortization of Fair
     Value of Employee
     Stock Options (Note 8)       285          113          523          222
    Employee Stock Options
     Exercised                    (50)         (18)         (50)         (18)
    -------------------------------------------------------------------------

    BALANCE AT END OF THE
     PERIOD                $    1,256   $      510   $    1,256   $      510

    -------------------------------------------------------------------------
    RETAINED EARNINGS

    Balance at Beginning
     of the Period         $  260,978   $  196,443   $  241,532   $  184,307
    Transitional Adjustment
     on Adoption of
     Financial Instruments,
     Net of Tax of
     $786 (Note 2)                  -            -        1,391            -
    Net Income for the
     Period                    22,018       16,496       43,176       30,679
    Dividends Paid During
     the Period                  (345)           -       (3,448)      (2,047)
    Dividends Declared,
     Unpaid During the
     Period                    (3,450)      (2,052)      (3,450)      (2,052)
    -------------------------------------------------------------------------

    BALANCE AT END OF
     THE PERIOD            $  279,201   $  210,887   $  279,201   $  210,887

    -------------------------------------------------------------------------
    ACCUMULATED OTHER
     COMPREHENSIVE (LOSS)
     INCOME

    Balance at Beginning
     of the Period         $    1,655                $        -
    Transitional
     Adjustment on
     Adoption of Financial
     Instruments, Net of
     Tax of $664 (Note 2)           -                      (630)
    Other Comprehensive
     Loss                      (8,674)                   (6,389)
    -------------------------------------------------------------------------

    BALANCE AT END OF
     THE PERIOD            $   (7,019)               $   (7,019)

    -------------------------------------------------------------------------



    Consolidated Statements of Cash Flows

                                Three Months Ended          Six Months Ended
    In Thousands of           June 30      June 30      June 30      June 30
     Dollars (Unaudited)         2007         2006         2007         2006
    -------------------------------------------------------------------------
    CASH FLOWS FROM
     OPERATING ACTIVITIES

    Net Income for the
     Period               $    22,018  $    16,496  $    43,176  $    30,679
    Adjustments to Determine
     Cash Flows Relating to
     Operating Activities:
      Future Income Taxes      (1,308)       l,596           12        2,259
      Amortization              6,428          205        6,204          411
      Provision for Credit
       Losses                   1,002        1,288        1,490        2,143
      Change in Accrued
       Interest Payable        (8,627)        (431)       6,990        7,647
      Change in Accrued
       Interest Receivable       (722)        (795)      (2,101)      (1,386)
      Net Gain Realized
       and Unrealized on
       Investment Securities     (760)        (482)      (1,104)      (1,425)
      Loss (Gain) on
       Derivatives                  -       (1,129)          27       (1,129)
      Net Unrealized Gain on
       Securities Available
       for Sale                (5,664)           -       (4,184)           -
      Securitization Income
       on Mortgage-Backed
       Securities              (5,568)      (5,334)     (10,791)      (8,689)
      Amortization of Fair
       Value of Employee
       Stock Options (Note 8)     285          113          523          222
      Other                    (1,941)      (3,082)      (1,264)      (5,861)
    -------------------------------------------------------------------------
    Cash Provided by
     Operating Activities       5,143        8,445       38,978       24,871
    -------------------------------------------------------------------------
    CASH FLOWS FROM
     FINANCING ACTIVITIES

    Repayment of Term Loan          -       (5,000)           -       (5,000)
    Net Increase in
     Deposits                 124,057      207,748      366,367      231,618
    Issuance of Capital
     Stock                        341          328        2,571          920
    Normal Course Issuer
     Bid                         (301)           -         (719)           -
    Dividends Paid             (3,448)      (2,047)      (6,524)      (3,748)
    -------------------------------------------------------------------------
    Cash Provided by
     Financing Activities     120,649      201,029      361,695      223,790
    -------------------------------------------------------------------------
    CASH FLOWS FROM
     INVESTING ACTIVITIES

    Activity in Available
     for Sale and Held for
     Trading Securities
      Purchases               (65,413)           -     (114,947)           -
      Proceeds from Sales       9,026            -       25,904            -
      Proceeds from
       Maturities              21,581            -       40,120            -
    Activity in Securities
      Purchases                     -      (57,456)           -      (98,420)
      Proceeds on Sales             -       16,801            -       24,315
      Proceeds on Maturities        -       11,873            -       18,695
    Activity in Mortgages
      Net Increase           (218,832)    (249,469)    (484,876)    (469,321)
      Proceeds from
       Securitization of
       Mortgage-Backed
       Securities             146,639      137,112      277,505      255,846
      Change in
       Mortgage-Backed
       Securities
       Receivable              16,247        5,977       18,897        9,272
    Net Increase in
     Personal and Credit
     Card Loans               (22,817)     (33,130)     (54,866)     (51,749)
    Net Increase in
     Secured Loans             (3,816)      (6,643)      (7,919)     (12,612)
    Proceeds from
     Leasehold Inducements          -        1,009            -        1,009
    Purchases of Capital
     Assets                      (761)        (740)        (977)      (1,549)
    -------------------------------------------------------------------------
    Cash Used in Investing
     Activities              (118,146)    (174,666)     (301,159)   (324,514)
    -------------------------------------------------------------------------
    Net Increase in Cash and
     Cash Equivalents           7,646       34,808        99,514     (75,853)
    Cash and Cash
     Equivalents at the
     Beginning of the
     Period                   235,399       60,482       143,531     171,143
    -------------------------------------------------------------------------
    Cash and Cash
     Equivalents at the
     End of the Period    $   243,045  $    95,290   $   243,045  $   95,290
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Supplementary
     Disclosure of Cash
     Flow Information
    Amount of Interest
     Paid During the
     Period               $    46,596  $    29,457  $    66,825  $    48,665
    Amount of Income Taxes
     Paid During the
     Period                     9,928        8,839       24,717       20,981




    Notes to the Unaudited Interim Consolidated Financial Statements

    1.  ACCOUNTING POLICIES USED TO PREPARE THE UNAUDITED INTERIM
        CONSOLIDATED FINANCIAL STATEMENTS

    These unaudited interim consolidated financial statements should be read
    in conjunction with the audited consolidated financial statements for the
    year ended December 31, 2006 as set out in the 2006 Annual Report, on
    pages 32 through 52. These unaudited interim consolidated financial
    statements have been prepared in accordance with Canadian generally
    accepted accounting principles. Except as disclosed in Note 2, the
    accounting policies and methods of application used in the preparation of
    these interim consolidated financial statements are consistent with the
    accounting policies used in the Company's most recent annual audited
    financial statements. These unaudited interim consolidated financial
    statements reflect amounts which must, of necessity, be based on the best
    estimates and judgement of management with appropriate consideration as
    to materiality. Actual results may differ from these estimates.

    Certain comparative figures have been reclassified to conform to the
    current period's presentation.

    2.  CHANGE IN ACCOUNTING POLICY

    Financial Instruments

    Effective January 1, 2007 the Company adopted new accounting standards
    issued by the Canadian Institute of Chartered Accountants (CICA) Handbook
    Section 3855, Financial Instruments - Recognition and Measurement;
    Section 3865, Hedges; and Section 1530, Comprehensive Income. As a result
    of adopting these standards, all financial assets will be classified as
    held for trading, available for sale, or loans and receivables. Financial
    liabilities will be classified as held for trading or other liabilities.
    Further, the new standards require that all financial assets and
    liabilities be measured at fair value with the exception of loans and
    receivables, financial assets and liabilities held to maturity, and other
    liabilities that will be measured at amortized cost using the effective
    interest method. The comparative unaudited interim consolidated financial
    statements have not been restated as a result of the adoption of these
    standards.

    Determination of Fair Value

    The fair value of a financial instrument on initial recognition is
    normally the transaction price, i.e. the fair value of the consideration
    given or received. In certain circumstances, however, the initial fair
    value may be based on other observable current market transactions of the
    same instrument, without modification or repackaging, or on a valuation
    technique whose variables include only data from observable markets.
    Subsequent to initial recognition, the fair values of financial
    instruments measured at fair value that are quoted in active markets are
    based on bid prices for financial assets held and offer prices for
    financial liabilities. When independent prices are not available, fair
    values are determined by using valuation techniques which refer to
    observable market data. These include comparisons with similar
    instruments where market observable prices exist, and discounted cash
    flow analysis.

    Transaction Costs

    Transaction costs related to held for trading securities are expensed as
    incurred. Transaction costs related to available for sale securities and
    loans and receivables are generally capitalized and are then amortized
    over the expected life of the instrument using the effective yield
    method.

    Classification of Financial Instruments

    Held for trading financial assets are securities purchased for resale,
    generally within a short period of time and primarily held for liquidity
    purposes. These financial assets are measured at fair value as at the
    balance sheet date. Gains and losses realized on disposal and unrealized
    gains and losses from market fluctuations are reported in income.
    Interest earned is included in interest income. Cash resources and
    securities issued or guaranteed by provinces previously disclosed as such
    in the audited consolidated financial statements for the year ended
    December 31, 2006 were designated as held for trading on January 1, 2007.
    The Company did not elect under the fair value option to designate any
    financial asset or liability as held for trading.

    Available for sale financial assets are those non-financial assets that
    the Company designates as available for sale, or that are not classified
    as loans and receivables. Securities included in this category comprise
    both debt and equity securities. Available for sale securities are
    carried at fair value whereby the unrealized gains and losses, net of
    related taxes, are included in accumulated other comprehensive income
    until sold or an other-than-temporary impairment is recognized, at which
    time the cumulative gain or loss is transferred to the consolidated
    statement of income. Write-downs to reflect other-than-temporary
    impairments in value are included under non-interest income. Dividends
    and interest income from these securities are included in dividends from
    securities or other interest. Securities issued or guaranteed by Canada,
    other securities, and Mortgage-Backed Securities receivable previously
    disclosed as such in the audited consolidated financial statements for
    the year ended December 31, 2006 were designated as available for sale on
    January 1, 2007.

    Loans and receivables are accounted for at amortized cost using the
    effective interest method. Prior to January 1, 2007, loan origination
    costs were classified as other assets and other liabilities and
    recognized in income and expense over the life of the respective loan.
    The new accounting standards require the Company to use the effective
    interest method to recognize loan origination costs whereby the amount
    recognized varies over the life of the loan based on the principal
    outstanding. On January 1, 2007, the Company adjusted deferred loan
    origination costs to what the balance would have been had the Company
    always used the effective interest method to recognize loan origination
    costs. The impact was an increase in loans of $73,000, an increase to
    future income tax liability of $27,000 and an increase in retained
    earnings of $46,000. In addition, the Company reclassified the deferred
    origination revenue and costs from other assets and other liabilities to
    net against the respective loans on the Consolidated Balance Sheet and
    reclassified the amortization of the deferred origination revenue and
    costs previously recorded in fees and other income (non-interest income)
    and general and administrative non-interest expense to interest from
    loans and interest on deposits on the Consolidated Statement of Income.

    Financial liabilities classified as other than held for trading are
    recorded at amortized cost and include all liabilities. Prior to
    January 1, 2007 deposit origination costs were classified as other assets
    and expensed over the life of the resulting deposit. The new accounting
    standards require the Company to use the effective interest method to
    recognize deposit origination costs whereby the amount recognized
    varies over the life of the deposit. The impact of adopting this new
    standard was a decrease to deposits of $1.9 million, an increase to
    future income tax liability of $0.7 million and an increase in retained
    earnings of $1.2 million. On January 1, 2007 the Company reclassified
    deferred origination costs previously classified in other assets to net
    against deposits on the Consolidated Balance Sheet and reclassified the
    amortization of deferred origination costs previously classified as
    general and administrative to interest on deposits on the Consolidated
    Statement of Income.

    For those financial assets that have been designated by definition as
    held for trading, the Company is not required to identify any embedded
    derivatives that might exist within these instruments. The Company
    conducted a search for embedded derivatives in all other contractual
    arrangements and found that certain of the Company's equity securities
    contained embedded derivatives which are required to be bifurcated from
    the underlying investment and valued separately. These bifurcated
    derivatives do not currently have significant value and therefore are not
    reported separately.

    Transitional Adjustments

    As required, these standards have been applied as an adjustment to
    opening retained earnings and accumulated other comprehensive income
    (AOCI) as of January 1, 2007. Prior period balances have not been
    restated following the adoption of these new standards. The impact of
    adopting these standards at January 1, 2007 on a net of tax basis was as
    follows:

    -------------------------------------------------------------------------
                                       December 31,    Retained
    In Thousands of Dollars                   2006     Earnings         AOCI
    -------------------------------------------------------------------------
    ASSETS

    Cash Resources                     $   143,531  $        (1) $         -
    Investments                            344,134          164           70
    Loans                                3,309,214           47            -
    Other                                  105,437            -         (700)
    -------------------------------------------------------------------------
                                       $ 3,902,316  $       210  $      (630)
    -------------------------------------------------------------------------
    LIABILITIES

    Deposits                           $ 3,443,640  $     1,181  $         -
    Other Liabilities                      181,810            -            -
    -------------------------------------------------------------------------
                                         3,625,450        1,181            -
    -------------------------------------------------------------------------
    SHAREHOLDERS' EQUITY

    Capital Stock                           34,551            -            -
    Retained Earnings                      241,532        1,391            -
    Contributed Surplus                        783            -            -
    Accumulated Other Comprehensive
     Income                                      -            -         (630)
    -------------------------------------------------------------------------
                                           276,866            -            -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                       $ 3,902,316  $         -  $         -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The impact of the reclassification of the deferred expenses and
    commitment fees on the Consolidated Statement of Income for the three-
    and six-month periods ended June 30, 2007 is as follows:

                                       Three Months  Six Months
                                              Ended       Ended
    ------------------------------------------------------------
                                           June 30,     June 30,
    In Thousands of Dollars                   2007         2007
    ------------------------------------------------------------
    Consolidated Statement of Income

    Interest from Loans                $     2,164  $     4,006
    Fees and Other Income                   (4,407)      (8,304)
    ------------------------------------------------------------
    Decrease to Income                 $    (2,243) $    (4,298)
    ------------------------------------------------------------

    Interest on Deposits               $     1,743  $     4,233

    General and Administration              (3,986)      (8,531)
    ------------------------------------------------------------
    Decrease to Expenses               $    (2,243) $    (4,298)
    ------------------------------------------------------------

    3.  LOANS

    (A) Impaired Loans and Related Allowance for Specific Credit Losses

                                                         As at June 30, 2007
    -------------------------------------------------------------------------
                                   Gross Amount of     Specific     Carrying
    In Thousands of Dollars         Impaired Loans   Allowances        Value
    -------------------------------------------------------------------------
    Personal, Credit Card and
     Secured Loans                     $     1,407  $       158  $     1,249
    Residential Mortgages                   22,776          316       22,460
    Other Mortgages                            581           39          542
    -------------------------------------------------------------------------
                                       $    24,764  $       513  $    24,251
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                                     As at December 31, 2006
    -------------------------------------------------------------------------
    Personal, Credit Card and
     Secured Loans                     $     1,376  $       256  $     1,120
    Residential Mortgages                   21,521          386       21,135
    Other Mortgages                            548            -          548
    -------------------------------------------------------------------------
                                       $    23,445  $       642  $    22,803
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                                         As at June 30, 2006
    -------------------------------------------------------------------------
    Personal, Credit Card and
     Secured Loans                     $       604  $       236  $       368
    Residential Mortgages                   16,342           40       16,302
    -------------------------------------------------------------------------
                                       $    16,946  $       276  $    16,670
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (B) Allowance for Credit Losses

                                For the Six-Month Period Ended June 30, 2007
    -------------------------------------------------------------------------
                                                         General
                                         Specific  Allowance for
    In Thousands of Dollars            Allowances    Credit Risk       Total
    -------------------------------------------------------------------------
    Balance at the Beginning
     of the Period                     $       642  $    19,644  $    20,286
    Provisions (Recoveries) for Credit
     Losses for the Current Period             444        1,046        1,490
    Write-offs                                (691)           -         (691)
    Recoveries                                 118            -          118
    -------------------------------------------------------------------------
    Balance at the End of the Period   $       513  $    20,690  $    21,203
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                            For the Six-Month Period Ended December 31, 2006
    -------------------------------------------------------------------------
    Balance at the Beginning
     of the Period                     $       276  $    18,317  $    18,593
    Provisions (Recoveries) for Credit
     Losses for the Current Period             928        1,327        2,255
    Write-offs                                (696)           -         (696)
    Recoveries                                 134            -          134
    -------------------------------------------------------------------------
    Balance at the End of the Period   $       642  $    19,644  $    20,286
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                For the Six-Month Period Ended June 30, 2006
    -------------------------------------------------------------------------
    Balance at the Beginning
     of the Period                     $       162  $    16,586  $    16,748
    Provisions (Recoveries) for Credit
     Losses for the Current Period             412        1,731        2,143
    Write-offs                                (458)           -         (458)
    Recoveries                                 160            -          160
    -------------------------------------------------------------------------
    Balance at the End of the Period   $       276  $    18,317  $    18,593
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    4.  LOAN SECURITIZATIONS

    The following tables summarize the Company's new securitization activity
    for the three- and six-month periods.

    In Thousands
     of Dollars,
     Except             For the Three Months Ended  For the Six Months Ended
     Percentages            June 2007    June 2006    June 2007    June 2006
    -------------------------------------------------------------------------
    Book Value of
     Mortgages
     Securitized          $   150,688  $   140,675  $   285,043  $   262,403
    Retained Interests    $     8,437  $     8,078  $    17,210  $    14,272
    Servicing Liability   $       239  $       226  $       451  $       432
    Net Proceeds Received
     on Securitized
     Mortgages            $   146,639  $   137,112  $   277,505  $   255,846
    Gain on Sales         $     3,910  $     4,038  $     8,651  $     6,875
    Prepayment Rate             13.3%        12.6%        13.1%        12.6%
    Excess Spread                2.4%         2.4%         2.6%         2.2%
    Discount Rate                4.3%         4.2%         4.1%         4.2%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    5.  OTHER ASSETS

                                           June 30  December 31      June 30
    In Thousands of Dollars                   2007         2006         2006
    -------------------------------------------------------------------------
    Accrued Interest Receivable        $    21,147  $    19,046  $    16,620
    Income Taxes Receivable                  3,434            -        1,035
    Deferred Agent Commission (Note 2)           -        9,198        8,441
    Deferred Finders Fees (Note 2)               -        8,356        8,329
    Goodwill                                 2,324        2,324        2,324
    Other Prepaid Assets and
     Deferred Items                         19,596       10,859       10,432
    -------------------------------------------------------------------------
                                       $    46,501  $    49,783  $    47,181
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    6.  OTHER LIABILITIES

                                           June 30  December 31      June 30
    In Thousands of Dollars                   2007         2006         2006
    -------------------------------------------------------------------------
    Accrued Interest Payable           $   118,910  $   111,920  $   105,038
    Income Taxes Payable                         -        3,788            -
    Dividends Payable                        3,450        3,076        2,052
    Deferred Commitment Fees (Note 2)            -       12,213       10,825
    Future Income Taxes (Note 9)            14,260       12,733       14,274
    Other, Including Accounts Payable
     and Accrued Liabilities                43,644       35,425       30,983
    -------------------------------------------------------------------------
                                       $   180,264  $   179,155  $   163,172
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    7.  CAPITAL STOCK

    Issued and Outstanding

    In Thousands of Dollars,                      For the Three Months Ended
     Except Per Share Amounts            June 2007                 June 2006
    -------------------------------------------------------------------------
                            Number of                 Number of
    Common Shares              Shares       Amount       Shares       Amount
    -------------------------------------------------------------------------
    Outstanding at
     Beginning of Period       34,482  $    36,363       34,109  $    34,864
    Options Exercised              28          341           48          328
    Normal Course
     Issuer Bid                    (8)        (301)           -            -
    -------------------------------------------------------------------------
    Outstanding at End
     of Period                 34,502  $    36,403       34,157  $    35,192
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                          Weighted-                 Weighted-
                                           average                   average
                                          Exercise                  Exercise
    Share Purchase Options                   Price                     Price
    -------------------------------------------------------------------------
    Outstanding at
     Beginning of Period        1,157  $     21.49        1,180  $     12.99
      Granted                       -            -            -            -
      Exercised                   (27)       10.56          (48)        6.52
      Forfeited                     -            -            -            -
    -------------------------------------------------------------------------
    Outstanding at
     End of Period              1,130  $     21.76        1,132  $     13.26
    -------------------------------------------------------------------------
    Exercisable, End
     of Period                    570  $     11.24          879  $      8.09
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    In Thousands of Dollars,                        For the Six Months Ended
     Except Per Share Amounts            June 2007                 June 2006
    -------------------------------------------------------------------------
                            Number of                 Number of
    Common Shares              Shares       Amount       Shares       Amount
    -------------------------------------------------------------------------
    Outstanding at
     Beginning of Period       34,166  $    34,551       34,012  $    34,272
    Options Exercised             356        2,571          145          920
    Normal Course
     Issuer Bid                   (20)        (719)           -            -
    -------------------------------------------------------------------------
    Outstanding at End
     of Period                 34,502  $    36,403       34,157  $    35,192
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                          Weighted-                 Weighted-
                                           average                   average
                                          Exercise                  Exercise
    Share Purchase Options                   Price                     Price
    -------------------------------------------------------------------------
    Outstanding at
     Beginning of Period        1,266  $     15.43        1,272  $     12.32
      Granted                     220        34.44           10        42.02
      Exercised                  (356)        7.08         (145)        6.22
      Forfeited                     -            -           (5)       35.25
    -------------------------------------------------------------------------
    Outstanding at
     End of Period              1,130  $     21.76        1,132  $     13.26
    -------------------------------------------------------------------------
    Exercisable, End
     of Period                    570  $     11.24          879  $      8.09
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    8.  STOCK BASED COMPENSATION

    For all options issued after January 1, 2003 the Company has recognized a
    compensation expense. During the second quarter of 2007, $285,000 was
    recorded as an expense for a total of $523,000 for the first six months
    of 2007 ($113,000 - Q2 2006 and $222,000 - six months 2006) for stock
    option awards in the Consolidated Statement of Income, with an
    off-setting credit to Contributed Surplus. The fair value of options
    granted in the first six months of 2007 is estimated at the date of
    granting using the Black-Scholes valuation model with the following
    assumptions: risk-free interest rate of 4.1%, anticipated option life of
    5.2 years, anticipated volatility of 27.1%, and anticipated dividend
    yield of 0.9%. No new options were granted during the second quarter
    ended June 30, 2007. For the six-month period ended June 30, 2007, stock
    options granted amounted to 220,000 and these granted options will vest
    subject to performance targets over a four-year period at a rate of 25%
    per year, expiring over a period of seven years.

    For those options issued prior to January 1, 2003 no compensation expense
    has been recognized. Had these options been subject to the same
    accounting policy they would have no effect on the second quarter of 2007
    as they would have been fully expensed. However, the impact on previous
    comparable quarters would have reduced net income ($46,000 - Q2 2006 and
    $127,000 - six months 2006) and net income and earnings per share would
    have been reported as follows:


                        For the Three Months Ended  For the Six Months Ended
                            June 2007    June 2006    June 2007    June 2006
    -------------------------------------------------------------------------
    Pro-forma Net Income
     (in Thousands
     of Dollars)          $    22,018  $    16,450  $    43,176  $    30,552
    Pro-forma Earnings
     per Share - Basic    $      0.64  $      0.48  $      1.26  $      0.90
    Pro-forma Earnings
     per Share - Diluted  $      0.63  $      0.47  $      1.24  $      0.88
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    9.  INCOME TAXES

    Reconciliation of Income Taxes for the three- and six-month periods
    ended:

    In Thousands        For the Three Months Ended  For the Six Months Ended
     of Dollars             June 2007    June 2006    June 2007    June 2006
    -------------------------------------------------------------------------
    Income Before Income
     Taxes                $    33,612  $    25,113  $    64,693  $    46,683
    -------------------------------------------------------------------------
    Income Taxes at
     Statutory Combined
     Federal and Provincial
     Income Tax Rates          12,141        9,005       23,367       16,779
    Increase (Decrease)
     in Income Taxes at
     Statutory Income Tax
     Rates Resulting From:
      Tax-exempt Income          (673)        (449)      (1,316)        (888)
      Non-deductible
       Expenses                   113           94          207          147
      Other                        13          (33)        (741)         (34)
    -------------------------------------------------------------------------
    Income Tax            $    11,594  $     8,617  $    21,517  $    16,004
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Sources of Future Income Tax Balances:

    In Thousands
     of Dollars                          June 2007  December 2006  June 2006
    -------------------------------------------------------------------------
    Future Income Tax Liabilities
      Deferred Agent Commissions
       and Other Charges               $     7,608  $     6,251  $     6,175
      Mortgage-Backed Securities
       Receivable                           17,349       17,995       17,906
    -------------------------------------------------------------------------
                                            24,957       24,246       24,081
    -------------------------------------------------------------------------
    Future Income Tax Assets
      Allowance for Credit Losses            6,302        6,028        3,910
      Mark-to-market Adjustments
       to Securities (Note 2)                    -        1,216          255
      Deferred Commitment Fees
       and Other Charges                     4,395        4,269        5,642
    -------------------------------------------------------------------------
                                            10,697       11,513        9,807
    -------------------------------------------------------------------------
    Net Future Income Tax Liability    $    14,260  $    12,733  $    14,274
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    10.  DERIVATIVE FINANCIAL INSTRUMENTS

    The Company utilized off-balance sheet financial instruments during the
    first six months of 2007. During this period the Company entered into
    economic hedge swap transactions with a major financial institution. The
    Company can utilize interest rate swaps to hedge the economic fair value
    exposure of movements in interest rates between the time that the
    mortgages are committed to be sold under asset securitization, and the
    time the mortgages are actually sold. (These mortgages qualify for
    government insurance.) The intent of the swap is to have fair value
    movements in the swap be effective in offsetting the fair value movements
    in the pool of mortgages over the period in which the fixed rate pool may
    be exposed to movements in the variable interest rate, generally 60 to
    150 days. The interest rate swaps referred to as "pay-fixed interest rate
    swaps" are structured such that the Company agrees to pay a fixed rate
    (as designated in the swap) and receives the floating rate (as designated
    in the swap). These transactions do not qualify for hedge accounting
    under the CICA Accounting Guideline 13 - Hedging Relationships, and
    therefore the Company must mark-to-market the swap, with changes in the
    fair value of the swap being recognized at the applicable financial
    reporting dates.

    There were no outstanding interest rate swaps at June 30, 2007. During
    the first quarter of 2007, the Company entered into $20.0 million of
    interest rate swap contracts. These contracts were unwound during the
    first quarter for a negligible loss. During the comparable six-month
    period of 2006, the Company entered into interest rate swap contracts for
    a notional amount of $200.0 million with $125.0 million remaining,
    consisting of $50.0 million three-year and $75.0 million five-year swaps
    maturing in August 2006. The Company unwound $50.0 million in April 2006
    and $25.0 million in June 2006 and realized gains of $0.2 million. The
    remaining $125.0 million outstanding at June 30, 2006 was
    marked-to-market for unrealized gains of $0.9 million. The total of
    realized and unrealized gains of $1.1 million were reported in the
    Consolidated Statement of Income and Gain (Loss) on Derivatives.

    11. INTEREST RATE SENSITIVITY

    The Company's exposure to interest rate risk results from the difference,
    or gap, between the maturity or repricing dates of interest sensitive
    assets and liabilities, including off-balance sheet items. The following
    table shows the gap positions at June 30, 2007, December 31, 2006 and
    June 30, 2006 for selected period intervals. Figures in brackets
    represent an excess of liabilities over assets or a negative gap
    position.

    -------------------------------------------------------------------------
    In Thousands             Floating       0 to 3     3 Months
     of Dollars                  Rate       Months    to 1 Year  1 to 3 Years
    -------------------------------------------------------------------------
    June 30, 2007

    Total Assets          $    55,554  $   776,334  $ 1,228,411  $ 1,545,268
    Total Liabilities
     and Equity                     -      566,403    1,578,801    1,297,455
    Off-balance Sheet Items         -      226,071       (6,266)     (75,530)
    -------------------------------------------------------------------------
    Interest Rate
     Sensitive Gap        $    55,554 $    (16,140) $  (344,124) $   323,343
    -------------------------------------------------------------------------
    Cumulative Gap        $    55,554 $     39,414  $  (304,710) $    18,633
    -------------------------------------------------------------------------
    Cumulative Gap as a
     % of Total Assets           1.3%         0.9%        (7.1%)        0.4%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    December 31, 2006

    Total Assets          $    30,401 $    561,180  $ 1,204,365  $ 1,553,657
    Total Liabilities
     and Equity                     -      311,280    1,748,542    1,153,619
    Off-balance
     Sheet Items                    -      190,356      (12,808)     (62,081)
    -------------------------------------------------------------------------
    Interest Rate
     Sensitive Gap        $    30,401 $     59,544  $  (531,369) $   462,119
    -------------------------------------------------------------------------
    Cumulative Gap        $    30,401 $     89,945  $  (441,424) $    20,695
    -------------------------------------------------------------------------
    Cumulative Gap as a
     % of Total Assets           0.8%         2.3%       (11.3%)        0.5%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    June 30, 2006

    Total Assets          $    36,409  $   446,875  $   998,120  $ 1,524,291
    Total Liabilities
     and Equity                 5,000      380,702    1,454,640    1,032,261
    Off-balance Sheet Items         -      211,599       17,385      (84,181)
    -------------------------------------------------------------------------
    Interest Rate
     Sensitive Gap        $    31,409  $  (145,426) $  (473,905) $   576,211
    -------------------------------------------------------------------------
    Cumulative Gap        $    31,409  $  (114,017) $  (587,922) $   (11,711)
    -------------------------------------------------------------------------
    Cumulative Gap as a
     % of Total Assets           0.9%        (3.2%)      (16.6%)       (0.3%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    ------------------------------------------------------------
    In Thousands                 Over  Non-interest
     of Dollars               3 Years    Sensitive        Total
    ------------------------------------------------------------
    June 30, 2007

    Total Assets          $   570,832  $   127,872  $ 4,304,271
    Total Liabilities
     and Equity               328,281      533,331    4,304,271
    Off-balance Sheet Items  (144,275)           -            -
    ------------------------------------------------------------
    Interest Rate
     Sensitive Gap        $   386,826  $  (405,459) $         -
    ------------------------------------------------------------
    Cumulative Gap        $   405,459  $         -  $         -
    ------------------------------------------------------------
    Cumulative Gap as a
     % of Total Assets           9.4%            -            -
    ------------------------------------------------------------
    ------------------------------------------------------------

    December 31, 2006

    Total Assets          $   425,531  $   127,182  $ 3,902,316
    Total Liabilities
     and Equity               202,328      486,547    3,902,316
    Off-balance Sheet Items  (115,467)           -            -
    ------------------------------------------------------------
    Interest Rate
     Sensitive Gap         $  338,670 $   (359,365) $         -
    ------------------------------------------------------------
    Cumulative Gap         $  359,365 $          -  $         -
    ------------------------------------------------------------
    Cumulative Gap as a
     % of Total Assets           9.2%            -            -
    ------------------------------------------------------------
    ------------------------------------------------------------

    June 30, 2006

    Total Assets          $   426,054  $   114,103  $ 3,545,852
    Total Liabilities
     and Equity               241,950      431,299    3,545,852
    Off-balance Sheet Items  (144,803)           -            -
    ------------------------------------------------------------
    Interest Rate
     Sensitive Gap        $   328,907  $  (317,196) $         -
    ------------------------------------------------------------
    Cumulative Gap        $   317,196  $         -  $         -
    ------------------------------------------------------------
    Cumulative Gap as a
     % of Total Assets           8.9%            -            -
    ------------------------------------------------------------
    ------------------------------------------------------------

    12. EARNINGS BY BUSINESS SEGMENT

    The Company operates principally through two business segments - mortgage
    lending and consumer lending. The mortgage lending operation consists of
    core residential mortgage lending, securitization of government insured
    mortgage loans, commercial real estate lending, and the administration of
    Regency Finance Corp. second mortgage loans (secured loans). The consumer
    lending operation consists of credit card services and installment
    lending to customers of retail business. The other category includes the
    Company's treasury and securities investment activities.

    The following tables detail the earnings and assets of the Company, by
    business segment:

    -------------------------------------------------------------------------
    Thousands of Dollars (Unaudited) For the Three Months Ended
    -------------------------------------------------------------------------
                                Mortgage Lending          Consumer Lending
    -------------------------------------------------------------------------
                              June 30      June 30      June 30      June 30
                                 2007         2006         2007         2006
    -------------------------------------------------------------------------
    Net Interest Income   $    24,951  $    21,108  $     5,253  $     3,422
    Provisions for Credit
     Losses                      (626)       (790)         (376)        (498)
    Fees and Other Income       2,989         531         2,076        1,886
    Net Gain on Securities,
     Derivatives &
     Mortgage-Backed
     Securities                 5,568       5,334             -            -
    Non-interest Expense       (9,033)     (7,394)       (1,153)      (1,351)
    -------------------------------------------------------------------------
    Income Before Income
     Taxes                     23,849      18,789         5,800        3,459
    Income Taxes               (8,579)     (6,460)       (2,095)      (1,250)
    -------------------------------------------------------------------------
    Net Income            $    15,270 $    12,329  $      3,705  $     2,209
    -------------------------------------------------------------------------
    Total Assets          $ 3,414,910 $ 3,023,610  $    304,148  $   179,435
    -------------------------------------------------------------------------


                                             Other                     Total
    -------------------------------------------------------------------------
                              June 30      June 30      June 30      June 30
                                 2007         2006         2007         2006
    -------------------------------------------------------------------------
    Net Interest Income   $     6,325  $     3,803  $    36,529  $    28,333
    Provisions for Credit
     Losses                         -            -       (1,002)      (1,288)
    Fees and Other Income          74           50        5,139        2,467
    Net Gain on Securities,
     Derivatives &
     Mortgage-Backed
     Securities                   760        1,611        6,328        6,945
    Non-interest Expense       (3,196)      (2,599)     (13,382)     (11,344)
    -------------------------------------------------------------------------
    Income Before Income
     Taxes                      3,963        2,865       33,612       25,113
    Income Taxes                 (920)        (907)     (11,594)      (8,617)
    -------------------------------------------------------------------------
    Net Income            $     3,043  $     1,958  $    22,018  $    16,496
    -------------------------------------------------------------------------
    Total Assets          $   585,213  $   342,807  $ 4,304,271  $ 3,545,852
    -------------------------------------------------------------------------


    Thousands of Dollars (Unaudited) For the Six Months Ended
    -------------------------------------------------------------------------
                                 Mortgage Lending         Consumer Lending
    -------------------------------------------------------------------------
                              June 30      June 30      June 30      June 30
                                 2007         2006         2007         2006
    -------------------------------------------------------------------------
    Net Interest Income   $    47,876  $    41,399  $     9,999  $     6,407
    Provisions for Credit
     Losses                      (612)      (1,290)        (878)        (853)
    Fees and Other Income       5,370        1,070        4,128        3,646
    Net Gain on
     Securities, Derivatives
     & Mortgage-Backed
     Securities                10,764        8,689            -            -
    Non-interest Expense      (17,348)     (15,205)      (1,863)      (2,565)
    -------------------------------------------------------------------------
    Income Before Income
     Taxes                     46,050       34,663       11,386        6,635
    Income Taxes              (15,870)     (12,191)      (4,113)      (2,397)
    -------------------------------------------------------------------------
    Net Income            $    30,180  $    22,472  $     7,273  $     4,238
    -------------------------------------------------------------------------
    Total Assets          $ 3,414,910  $ 3,023,610  $   304,148  $   179,435
    -------------------------------------------------------------------------


                                            Other                     Total
    -------------------------------------------------------------------------
                              June 30      June 30      June 30      June 30
                                 2007         2006         2007         2006
    -------------------------------------------------------------------------
    Net Interest Income   $    11,988  $     7,272  $    69,863  $    55,078
    Provisions for Credit
     Losses                         -            -       (1,490)      (2,143)
    Fees and Other Income         176           76        9,674        4,792
    Net Gain on
     Securities,
     Derivatives
     & Mortgage-Backed
     Securities                 1,104        2,554       11,868       11,243
    Non-interest Expense       (6,011)      (4,517)     (25,222)     (22,287)
    -------------------------------------------------------------------------
    Income Before Income
     Taxes                      7,257        5,385       64,693       46,683
    Income Taxes               (1,534)      (1,416)     (21,517)     (16,004)
    -------------------------------------------------------------------------
    Net Income            $     5,723  $     3,969  $    43,176  $    30,679
    -------------------------------------------------------------------------
    Total Assets          $   585,213  $   342,807  $ 4,304,271  $ 3,545,852
    -------------------------------------------------------------------------


    13. FUTURE ACCOUNTING CHANGES

    The CICA issued a new accounting standard, Section 1535, Capital
    Disclosures, which requires the disclosure of both qualitative and
    quantitative information that enables users of financial statements to
    evaluate the entity's objectives, policies and processes for managing
    capital. This new standard will be effective for the Company beginning
    January 1, 2008.

    The CICA issued two new accounting standards, Section 3862, Financial
    Instruments - Disclosure, and Section 3863, Financial Instrument
    Presentation, which apply to interim and annual financial statements
    relating to fiscal years beginning on or after October 1, 2007. The
    Company intends to adopt these new standards effective January 1, 2008.


    Home Capital Group Inc. is a holding company, publicly traded on the
Toronto Stock Exchange (HCG), operating through its principal subsidiary, Home
Trust Company. Home Trust is a federally regulated trust company offering
deposit, mortgage lending, retail credit and credit card issuing services.
Licensed to conduct business across Canada, Home Trust has branch offices in
Ontario, Alberta, British Columbia, Nova Scotia and Quebec.
    





For further information:

For further information: Gerald M. Soloway, President & CEO, or Nick
Kyprianou, Sr. Vice President & COO, (416) 360-4663, www.homecapital.com


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