Home Capital Reports Strong Earnings with Net Income up 16.8% Year over Year

News provided by

Home Capital Group Inc.

May 07, 2014, 17:00 ET

  • Diluted Earnings per Share up 16.3% Year over Year to $1.00
  • Return on Equity Solid at 23.1% for the Quarter

TORONTO, May 7, 2014 /CNW/ - Home Capital today reported another quarter of growth and increased earnings.

The Company's First Quarter Report, including Management's Discussion and Analysis, is available on Home Capital's website at www.homecapital.com and the Canadian Securities Administrators' website at www.sedar.com.

 FINANCIAL HIGHLIGHTS

(Unaudited)

For the three months ended

(000s, except Per Share and Percentage Amounts)

March 31

December 31

March 31


2014

2013

2013

OPERATING RESULTS





Net Income

$

69,736

$

68,827

$

59,725

Total Revenue

247,900

246,365

231,194

Diluted Earnings per Share, adjusted for stock dividend1

$

1.00

$

0.98

$

0.86

Return on Shareholders' Equity

23.1%

23.9%

24.0%

Return on Average Assets

1.4%

1.4%

1.3%

Net Interest Margin (TEB)2

2.19%

2.22%

2.17%

Provision as a Percentage of Gross Uninsured Loans (annualized)

0.11%

0.14%

0.18%

Provision as a Percentage of Gross Loans (annualized)

0.07%

0.09%

0.11%

Efficiency Ratio (TEB)2

28.5%

28.3%

28.3%













As at


March 31

December 31

March 31


2014

2013

2013

BALANCE SHEET HIGHLIGHTS





Total Assets

$

20,284,570

$

20,075,850

$

19,358,563

Total Assets Under Administration3

22,871,407

21,997,781

20,377,074

Total Loans4

17,888,306

18,019,901

17,429,982

Securitized Loans On-Balance Sheet

4,977,211

5,210,021

6,710,556

Total Loans Under Administration3,4

20,475,143

19,941,832

18,448,493

Liquid Assets

1,606,155

1,497,680

832,263

Deposits

13,084,937

12,765,954

10,642,280

Shareholders' Equity

1,238,015

1,177,697

1,021,813

FINANCIAL STRENGTH





Capital Measures5





Risk-Weighted Assets

$

6,669,635

$

6,495,767

$

5,738,257

Common Equity Tier 1 Capital Ratio

17.22%

16.80%

16.57%

Tier 1 Capital Ratio

17.22%

16.80%

16.57%

Total Capital Ratio

20.06%

19.69%

19.82%

Assets to Regulatory Capital Multiple6

13.02

13.19

13.45

Credit Quality





Net Non-Performing Loans as a Percentage of Gross Loans

0.33%

0.35%

0.32%

Allowance as a Percentage of Gross Non-Performing Loans

57.7%

52.4%

59.9%

Share Information





Book Value per Common Share, adjusted for stock dividend1

$

17.82

$

16.95

$

14.77

Common Share Price – Close, adjusted for stock dividend1

$

44.65

$

40.47

$

29.37

Dividend paid during the quarter ended1

$

0.16

$

0.14

$

0.13

Market Capitalization

$

3,102,773

$

2,811,832

$

2,032,404

Number of Common Shares Outstanding, adjusted for stock dividend1

69,491

69,488

69,200

1During the quarter, the Board approved a stock dividend of one common share per each issued and outstanding common share.  Accordingly, diluted earnings per share is reduced to half and the number of shares disclosed is doubled for all periods presented for comparative purposes.
2See definition of Taxable Equivalent Basis (TEB) under Non-GAAP Measures of the unaudited interim consolidated financial report.
3Total assets and loans under administration include both on and off-balance sheet amounts.
4Total loans include loans held for sale.
5These figures relate to the Company's operating subsidiary, Home Trust Company.
6Commencing in Q3 2013, the Company excluded from its assets, for purposes of calculating the Assets to Regulatory Capital Multiple, mortgages that are off-balance sheet as a result of sales of residual interest in light of regulatory communications confirming this treatment.  The comparative multiple for Q1 2013 has been restated to reflect this treatment.

FIRST QUARTER 2014 HIGHLIGHTS

Key results for the first quarter of 2014 included:

  • Net income increased to $69.7 million for the first quarter, up 1.3% from Q4 2013 and 16.8% over Q1 2013.

  • Diluted earnings per share1 were $1.00 for the quarter, representing increases of 2.0% and 16.3% over the $0.98 and $0.86 earned in Q4 2013 and Q1 2013, respectively. 

  • Total net interest income, before provisions, of $110.4 million was down slightly from the $111.0 million in Q4 2013 and up 8.3% from the $101.9 million in Q1 2013. The slight decrease from last quarter reflects $3.7 million in lower net interest income on securitized loans which, consistent with the Company's business strategy, has been replaced with gains on sale of $8.1 million in the quarter compared to $4.6 million in Q4 2013 and $1.4 million in Q1 2013 (please see below). Net interest income on the non-securitized portfolio exceeded $100 million for the first time, reaching $102.8 million in the quarter, up 3.1% from last quarter and 16.7% from one year ago, reflecting strong and consistent growth in the traditional portfolio.  

  • Net interest margin (TEB) was 2.19% in the quarter, down from 2.22% last quarter and up from 2.17% one year ago.  Higher liquidity balances and lower net interest margins on securitized mortgages contributed to the decline from last quarter while spreads on traditional mortgages remained consistent

  • Securitization income, including gains on sale mentioned above, was $8.7 million compared to $5.8 million in Q4 2013 and $1.5 million in Q1 2013.  The gains consisted of $6.7 million on the sale of residual interests related to $486.2 million of underlying single-family mortgages and gains of $1.4 million on the sale of $211.5 million of multi-unit residential mortgages.

  • Return on equity was strong at 23.1% for the quarter and continues to be in excess of the Company's minimum performance objective of 20%.

  • The credit quality of the loan portfolio remains strong with continued low non-performing loans and credit losses. Net non-performing loans as a percentage of gross loans (NPL ratio) ended the quarter at 0.33% compared to 0.35% at the end of last quarter and 0.32% one year ago. Included in the non-performing loans is an insured multi-unit residential property with an outstanding amount of $9.7 million, where the Company expects no losses. In the absence of this fully insured CMHC loan the NPL ratio would have been 0.27%.  The annualized credit provision as a percentage of gross uninsured loans of 0.11% has decreased from the 0.14% in Q4 2013 and the 0.18% in Q1 2014, reflecting lower individual provisions.

  • Capital ratios remain high with Home Trust's Common Equity Tier 1 ratio (CET 1 ratio) ending the quarter at 17.22%, while Tier 1 and Total Capital ratios were 17.22% and 20.06%, respectively.  Home Trust's Assets to Capital multiple (ACM) was 13.02 at the end of the quarter compared to 13.19 at December 31, 2013 and 13.45 one year ago. The sale of residual interests and resulting off-balance sheet treatment of mortgages lowered the ACM in the quarter.

  • Total loans under administration, which includes securitized mortgages that qualify for off-balance sheet accounting, reached $20.48 billion, reflecting increases of $2.03 billion or 11.0% from $18.45 billion one year ago, and $0.53 billion or 2.7% from $19.94 billion at the end of 2013 (10.7% on an annualized basis).

  • Total mortgage originations in the quarter decreased seasonally to $1.68 billion from $1.91 billion last quarter and increased from $1.38 billion from the same quarter last year. First quarter originations, while seasonally lower as expected, remained strong despite the slow start to real estate markets which was reflective of the harsh winter conditions that kept many Canadians out of the market for much of the first quarter.  

  • Traditional residential mortgage originations of $1.07 billion in the quarter also decreased seasonally from $1.23 billion in Q4 2013 and increased from $0.99 billion in Q1 2013. The Company continues to experience strong demand for its traditional product offerings, which continue to be of high credit quality. This continues to enhance profitability and asset quality.

  • Accelerator (insured) residential mortgage originations of $289.5 million in the quarter decreased seasonally from $357.1 million in Q4 2013 and increased 138.1% from $121.6 million in Q1 2013.  The favourable regulatory ruling regarding the sale of residual interests in Q3 2013 led the Company to increase its activity in insured lending during the second half of 2013 and into 2014. 

  • Multi-unit residential mortgage originations were $213.6 million in the quarter compared to $239.9 million last quarter and $202.6 million in the same period last year.  Multi-unit residential mortgage originations are mostly insured and subsequently securitized through programs that qualify for off-balance sheet accounting resulting in the securitization gains discussed above. 

  • Commercial mortgage and other loan advances were $72.0 million for the quarter compared to $60.5 million in Q4 2013 and $38.6 million in Q1 2013. Store and apartment mortgage advances were $27.6 million in the quarter compared to $24.5 million in Q4 2013 and $23.6 million in Q1 2013.   

  • The consumer retail credit portfolio, which includes durable household goods, such as water heaters and larger-ticket home improvement items, reached $346.9 million at the end of Q1 2014, up 2.0% from $340.0 million at the end of last quarter and up 21.7% from $285.1 million at the end of Q1 2013. The Company continues to be successful at expanding relationships with its business partners to increase this portfolio which offers attractive returns for the risk profile.  

  • Total deposits reached $13.08 billion, up 2.5% from last quarter and 23.0% from one year ago.

  • The Company initiated two new programs over the last year in to further diversify its deposits from a predominately large broker funded model, a high-interest savings account and Oaken Financial, a direct-to-consumer deposit brand.  Oaken deposits at the end of the quarter increased by 25.9% over the balance at Q4 2013 and to over three times the balance one year ago.  The high-interest saving accounts also grew significantly reaching a balance at the end of the quarter of $450.9 million, representing an increase of 33.7% over the $337.2 million at the end of 2013 and over ten times the balance of $42.3 million one year ago.

Subsequent to the end of the quarter, and in light of the Company's solid performance, profitability and strong financial position, the Board of Directors approved a quarterly dividend of $0.16 per common share, payable on June 1, 2014 to shareholders of record at the close of business on May 16, 2014.

While winter and early spring real estate activity was reduced by poor weather and a limited supply of homes for sale, recent transaction levels suggest a recovery in the late spring and summer.  The slow market conditions in the early part of 2014 will have an impact on the timing and level of securitization and gains on sale of mortgages during the balance of the year.  On an overall basis, the Company anticipates growing demand for all its lending products as the year progresses and expects that it will also be able to further increase its market share through its network of brokers and its business development programs, leading to achievement of the annual goals set out in Table 1 of this press release.

The Company continues to deliver solid results in terms of growth, high returns and increased dividends. Despite the modest economic improvement in Canada, the Company's performance continues to reflect the strength and the successful execution of its core strategy. 

(signed)



(signed)





GERALD M. SOLOWAY
Chief Executive Officer
May 7, 2014



KEVIN P.D. SMITH
Chair of the Board

1 For comparative presentation purposes, the prior period diluted earnings per share amounts were restated to half of the previously reported amounts to reflect the stock dividend of one common share per outstanding share declared during the first quarter of 2014.

Additional information concerning the Company's targets and related expectations for 2014, including the risks and assumptions underlying these expectations, may be found in the Management's Discussion and Analysis (MD&A) of the quarterly report.

First Quarter Results Conference Call
The conference call will take place on Thursday, May 8, 2014 at 10:30 a.m. Participants are asked to call 5 to 15 minutes in advance, 647-427-7450 in Toronto or toll-free 1-888-231-8191 throughout North America. The call will also be accessible in listen-only mode via the Internet at www.homecapital.com.

Conference Call Archive
A telephone replay of the call will be available between 1:30 p.m. Thursday, May 8, 2014 and midnight Thursday, May 15, 2014 by calling 416-849-0833 or 1-855-859-2056 (enter passcode 26905840). 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.

Annual Meeting Notice
The Annual Meeting of Shareholders of Home Capital Group Inc. will be held at One King West, Grand Banking Hall, Toronto, Ontario, M5H 1A1, on Wednesday, May 14, 2014 at 11:00 a.m. local time. Shareholders and guests are invited to join Directors and Management for lunch and refreshments following the Annual Meeting. All shareholders are encouraged to attend.

Consolidated Statements of Income


For the three months ended

thousands of Canadian dollars, except per share amounts

March 31

December 31

March 31

(Unaudited)

2014

2013

2013

Net Interest Income Non-Securitized Assets





Interest from loans

$

171,243

$

168,045

$

148,031

Dividends from securities

2,731

2,556

3,193

Other interest

3,466

2,663

1,456



177,440

173,264

152,680

Interest on deposits

73,022

71,744

62,938

Interest on senior debt

1,580

1,793

1,583

Net interest income non-securitized assets

102,838

99,727

88,159








Net Interest Income Securitized Loans and Assets





Interest income from securitized loans and assets


45,275

51,274

61,337

Interest expense on securitization liabilities

37,726

40,034

47,610

Net interest income securitized loans and assets

7,549

11,240

13,727








Total Net Interest Income

110,387

110,967

101,886

Provision for credit losses


3,205

4,004

4,667



107,182

106,963

97,219

Non-Interest Income





Fees and other income

16,794

15,402

14,972

Securitization income


8,730

5,770

1,506

Net realized and unrealized gains on securities

752

148

1,946

Net realized and unrealized (loss) gain on derivatives


(1,091)

507

(1,247)



25,185

21,827

17,177



132,367

128,790

114,396

Non-Interest Expenses







Salaries and benefits

20,208

19,563

16,950

Premises

2,755

2,610

2,445

Other operating expenses

15,977

15,689

14,574



38,940

37,862

33,969








Income Before Income Taxes


93,427

90,928

80,427

Income taxes








Current

25,113

22,337

23,456

Deferred

(1,422)

(236)

(2,754)



23,691

22,101

20,702

NET INCOME

$

69,736

$

68,827

$

59,725








NET INCOME PER COMMON SHARE





Basic

$

1.00

$

0.99

$

0.86

Diluted

$

1.00

$

0.98

$

0.86

AVERAGE NUMBER OF COMMON SHARES OUTSTANDING







Basic

69,489

69,490

69,261

Diluted

70,072

69,939

69,649








Total number of outstanding common shares


69,491

69,488

69,200

Book value per common share

$

17.82

$

16.95

$

14.77

During the quarter ended March 31, 2014, the Board approved a stock dividend of one common share per each issued and outstanding common share. 

Accordingly, both basic and diluted net income per common share is reduced to half and the number of shares disclosed is doubled for all periods presented

for comparative purposes.

Consolidated Statements of Comprehensive Income

For the three months ended

March 31

December 31

March 31

thousands of Canadian dollars (Unaudited)

2014

2013

2013







NET INCOME

$

69,736

$

68,827

$

59,725







OTHER COMPREHENSIVE INCOME (LOSS)












Available for Sale Securities and Retained Interest





Net unrealized gains (losses)

4,003

(5,320)

7,165

Net gains reclassified to net income

(752)

(147)

(1,946)


3,251

(5,467)

5,219

Income tax expense (recovery)

860

(1,449)

1,381


2,391

(4,018)

3,838







Cash Flow Hedges







Net unrealized gains


-

897

-

Net (gains) losses reclassified to net income

(11)

247

367


(11)

1,144

367

Income tax (recovery) expense

(3)

303

95


(8)

841

272







Total other comprehensive income (loss)

$

2,383

$

(3,177)

$

4,110







COMPREHENSIVE INCOME

$

72,119

$

65,650

$

63,835








Consolidated Balance Sheets






As at


March 31

December 31

thousands of Canadian dollars (Unaudited)

2014

2013

ASSETS





Cash and Cash Equivalents

$

1,029,440

$

733,172

Available for Sale Securities

453,082

424,272

Loans Held for Sale

121,252

137,975

Loans



Securitized mortgages 

4,977,211

5,210,021

Non-securitized mortgages and loans

12,789,843

12,671,905



17,767,054

17,881,926

Collective allowance for credit losses


(32,100)

(31,500)



17,734,954

17,850,426

Other



Restricted assets


643,444

648,283

Derivative assets


33,837

29,886

Other assets

176,527

162,679

Goodwill and intangible assets

92,034

89,157



945,842

930,005


$

20,284,570

$

20,075,850

LIABILITIES AND SHAREHOLDERS' EQUITY



Liabilities



Deposits



Deposits payable on demand

$

504,308

$

429,269

Deposits payable on a fixed date

12,580,629

12,336,685



13,084,937

12,765,954

Senior Debt


148,644

147,343

Securitization Liabilities





Mortgage-backed security liabilities

613,495

660,964

Canada Mortgage Bond liabilities

4,944,605

5,112,100



5,558,100

5,773,064

Other



Derivative liabilities


1,280

3,809

Other liabilities

220,591

173,558

Deferred tax liabilities


33,003

34,425



254,874

211,792



19,046,555

18,898,153

Shareholders' Equity



Capital stock


70,324

70,233

Contributed surplus

6,600

5,984

Retained earnings

1,177,187

1,119,959

Accumulated other comprehensive loss


(16,096)

(18,479)



1,238,015

1,177,697


$

20,284,570

$

20,075,850







Consolidated Statements of Changes in Shareholders' Equity



















Net Unrealized






(Losses) Gains

Net Unrealized

Total




on Securities and

Losses on

Accumulated







Retained Interest

Cash Flow

Other

Total

thousands of Canadian dollars,

Capital

Contributed

Retained

Available

Hedges,

Comprehensive

Shareholders'

except per share amounts (Unaudited)

Stock

Surplus

Earnings

for Sale, after Tax

after Tax

(Loss) Income

Equity

Balance at December 31, 2013

$

70,233

$

5,984

$

1,119,959

$

(15,823)

$

(2,656)

$

(18,479)

$

1,177,697

Comprehensive income

-

-

69,736

2,391

(8)

2,383

72,119

Stock options settled


91

(23)

-

-

-

-

68

Amortization of fair value of













   employee stock options


-

639

-

-

-

-

639

Repurchase of shares


-

-

-

-

-

-

-

Dividends













($0.16 per share)

-

-

(12,508)

-

-

-

(12,508)

Balance at March 31, 2014

$

70,324

$

6,600

$

1,177,187

$

(13,432)

$

(2,664)

$

(16,096)

$

1,238,015















Balance at December 31, 2012

$

61,903

$

6,224

$

903,831

$

432

$

(4,177)

$

(3,745)

$

968,213

Comprehensive income

-

-

59,725

3,838

272

4,110

63,835

Stock options settled


-

-

-

-

-

-

-

Amortization of fair value of













   employee stock options


-

505

-

-

-

-

505

Repurchase of shares


(53)

-

(1,693)

-

-

-

(1,746)

Dividends













($0.13 per share)

-

-

(8,994)

-

-

-

(8,994)

Balance at March 31, 2013

$

61,850

$

6,729

$

952,869

$

4,270

$

(3,905)

$

365

$

1,021,813

During the quarter ended March 31, 2014, the Board approved a stock dividend of one common share per each issued and outstanding common share. 

Accordingly, dividends per share are reduced to half for all periods presented for comparative purposes.

Consolidated Statements of Cash Flows



For the three months ended



March 31

March 31

thousands of Canadian dollars (Unaudited)

2014

2013

CASH FLOWS FROM OPERATING ACTIVITIES



Net income for the period

$

69,736

$

59,725

Adjustments to determine cash flows relating to operating activities:




Amortization of net premium on securities

677

477

Provision for credit losses

3,205

4,667

Gain on sale of mortgages or residual interest

(8,094)

(1,408)

Net realized and unrealized gains on securities


(752)

(1,946)

Amortization of capital assets

795

686

Amortization of intangible assets

2,182

1,927

Amortization of fair value of employee stock options

639

505

Deferred income taxes

(1,422)

(2,754)

Changes in operating assets and liabilities




Loans, net of securitization and sales

137,025

(272,885)

Restricted assets

4,839

45,709

Derivative assets and liabilities

(6,491)

1,667

Accrued interest receivable

(1,396)

(2,105)

Accrued interest payable

39,852

40,909

Deposits

318,983

505,681

Securitization liabilities

(214,964)

(27,541)

Taxes receivable or payable and other

(5,601)

(24,403)

Cash flows provided by operating activities

339,213

328,911

CASH FLOWS FROM FINANCING ACTIVITIES



Repurchase of shares

-

(1,746)

Exercise of employee stock options

68

-

Dividends paid to shareholders

(11,118)

(9,003)

Cash flows used in financing activities

(11,050)

(10,749)

CASH FLOWS FROM INVESTING ACTIVITIES



Activity in securities




Purchases

(52,417)

(44,243)

Proceeds from sales

26,801

61,021

Purchases of capital assets

(1,220)

(1,299)

Capitalized intangible development costs

(5,059)

(3,117)

Cash flows (used in) provided by investing activities

(31,895)

12,362

Net increase in cash and cash equivalents during the period

296,268

330,524

Cash and cash equivalents at beginning of the period

733,172

308,846

Cash and Cash Equivalents at End of the Period

$

1,029,440

$

639,370

Supplementary Disclosure of Cash Flow Information



Dividends received on investments

$

2,065

$

1,768

Interest received

215,052

208,365

Interest paid

70,553

57,736

Income taxes paid

18,308

38,744

































Home Capital published its annual financial objectives for 2014 on page 17 of the Company's 2013 Annual Report. The following table compares actual performance to date against each of these objectives.

Table 1: 2014 Targets and Performance









For the three months ended March 31, 2014


2014 Targets

Actual Results

Amount

Increase over 2013

Growth in net income

13%-18%

16.8%

$

69,736

$

10,011

Growth in diluted earnings per share1

13%-18%

16.3%

1.00

0.14

Growth in total loans under administration2

15%-20%

10.7%

20,475,143

533,311

Return on shareholders' equity

20.0%

23.1%



Efficiency ratio (TEB)3

28.0% - 32.0%

28.5%



Provision as a percentage of gross uninsured loans (annualized)

0.15% - 0.25%

0.11%



1The Company's diluted earnings per share have been presented as if the stock dividend was retrospectively applied to all comparative periods presented.
2 Change represents growth over December 31, 2013 on an annualized basis and includes loans held for sale.
3 See definition of TEB under Non-GAAP Measures of the unaudited interim consolidated financial report.

Table 2: Reconciliation of Net Income to Adjusted Net Income

Quarter

(000s, except % and per share amounts)

Q1  

Q4  

%

Q1  

%



2014

2013

Change

2013

Change

Reconciliation of Net Income to Adjusted Net Income







Net income per above

$

69,736

$

68,827

1.3%

$

59,725

16.8%

Adjustment for derivative restructuring - IFRS conversion (net of tax)

917

850

7.9%

1,783

(48.6)%

Adjustment for disputed loans to condominium corporations (net of tax)

-

-

-

1,508

(100.0)%

Adjustment for investment tax credit benefits (net of tax)

(515)

(1,470)

(65.0)%

-

-

Adjusted Net Income2

$

70,138

$

68,207

2.8%

$

63,016

11.3%

Adjusted Basic Earnings per Share1,2

$

1.01

$

0.98

3.1%

$

0.91

11.0%

Adjusted Diluted Earnings per Share1,2

$

1.00

$

0.98

2.0%

$

0.90

11.1%

1The Company's basic and diluted earnings per share have been reduced to half for all periods reflecting the impact of the stock dividend.

2Adjusted net income and adjusted earnings per share are defined in the Non-GAAP section of the unaudited interim consolidated financial report.

Caution Regarding Forward-Looking Statements

From time to time Home Capital Group Inc. makes written and verbal forward-looking statements. These are included in the Annual Report, periodic reports to shareholders, regulatory filings, press releases, Company presentations and other Company communications. Forward-looking statements are made in connection with business objectives and targets, Company strategies, operations, anticipated financial results and the outlook for the Company, its industry, and the Canadian economy. These statements regarding expected future performance are "financial outlooks" within the meaning of National Instrument 51-102.  Please see the risk factors, which are set forth in detail on pages 54 through 67 of the Company's 2013 Annual Report, as well as its other publicly filed information, which are available on the System for Electronic Document Analysis and Retrieval (SEDAR) at www.sedar.com, for the material factors that could cause the Company's actual results to differ materially from these statements.  These risk factors are material risk factors a reader should consider, and include credit risk, funding and liquidity risk, structural interest rate risk, operational risk, investment risk, strategic and business risk, reputational risk and regulatory and legal risk along with additional risk factors that may affect future results.  Forward-looking statements can be found in the Report to the Shareholders and the Outlook Section in the quarterly report.   Forward-looking statements are typically identified by words such as "will,"  "believe," "expect," "anticipate," "estimate," "plan," "forecast," "may," and "could" or other similar expressions. 

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

These and other factors should be considered carefully and readers are cautioned not to place undue reliance on these forward-looking statements. The Company does not undertake to update any forward-looking statements, whether written or verbal, that may be made from time to time by it or on its behalf, except as required by securities laws.

Assumptions about the performance of the Canadian economy and its effect on Home Capital's business are material factors the Company considers when setting its objectives, targets and outlook.  In determining expectations for economic growth, both broadly and in the financial services sector, the Company primarily considers historical and forecasted economic data provided by the Canadian government and its agencies.  In setting and reviewing its targets, objectives and outlook for the remainder of 2014, management's expectations continue to assume:

  • The Canadian economy will continue to produce modest growth in 2014 with stable to modestly improving employment conditions in most regions, and inflation will generally be within the Bank of Canada's target of 1% to 3% leading to stable credit losses and strong demand for the Company's lending products.

  • The Canadian economy will continue to be influenced by the economic conditions in the United States and global markets; as such, the Company is prepared for the variability to plan that may result.

  • The Bank of Canada continues to indicate that increases to its target overnight interest rate are not imminent and, as such, the Company is assuming the rate will remain at its current rate, with the potential for modest increases later in the year. This is expected to continue to support relatively low mortgage interest rates for the foreseeable future.  

  • The housing market will likely remain stable with balanced supply and demand conditions in most regions supported by continued low interest rates, relatively stable to improving employment, and immigration.  There will be modest declines in housing starts and resale activity with stable prices throughout most of Canada. This supports continued stable credit losses and strong demand for the Company's lending products.

  • Consumer debt levels will remain serviceable by Canadian households.

  • The Company will have access to the mortgage and deposit markets through broker networks.

Non-GAAP Measures

The Company uses a number of financial measures to assess its performance.  Some of these measures are not calculated in accordance with GAAP, are not defined by GAAP, and do not have standardized meanings that would ensure consistency and comparability between companies using these measures.  Definitions of non-GAAP measures can be found under Non-GAAP Measures in the Management's Discussion and Analysis included in the Company's First Quarter 2014 Report.  

Regulatory Filings

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

About Home Capital

Home Capital Group Inc. is a public company, traded on the Toronto Stock Exchange (HCG), operating through its principal subsidiary, Home Trust Company. Home Trust is a federally regulated trust company offering deposits, residential and non-residential mortgage lending, securitization of insured residential first mortgage products, consumer lending and credit card services. Licensed to conduct business across Canada, Home Trust has branch offices in Ontario, Alberta, British Columbia, Nova Scotia, Quebec and Manitoba.

SOURCE: Home Capital Group Inc.

Gerald M. Soloway, CEO, or Martin Reid, President, 416-360-4663, www.homecapital.com

Organization Profile

Home Capital Group Inc.