- 10% Increase to Quarterly Dividend to $0.22 per share
- Basic Earnings per Share of $1.52; Return on Equity of 26.2%
- First Quarter Net Income Increases 21.7% over 2011 Net Income
TORONTO, May 2, 2012 /CNW/ - Home Capital today reported another quarter of strong results for the three months ended March 31, 2012. All of Home Capital's business lines produced solid results and the Company is well positioned to continue delivering strong earnings. The Company continues to observe positive real estate and mortgage markets across Canada.
The Company's First Quarter Report, including Management's Discussion and Analysis, is available on www.homecapital.com and on 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 | |||
| 2012 | 2011 | 2011 | ||||
| OPERATING RESULTS | ||||||
| Net Income | $ | 52,534 | $ | 50,280 | $ | 43,178 |
| Adjusted Net Income1 | 52,534 | 50,280 | 45,603 | |||
| Total Revenue | 214,682 | 208,400 | 184,613 | |||
| Earnings per Share - Basic/Diluted | $ | 1.52/1.52 | $ | 1.45/1.45 | $ | 1.24/1.24 |
| Adjusted Earnings per Share - Basic/Diluted1 | 1.52/1.52 | 1.45/1.45 | 1.31/1.31 | |||
| Return on Shareholders' Equity | 26.2% | 26.7% | 26.7% | |||
| Return on Average Assets | 1.2% | 1.2% | 1.1% | |||
| Net Interest Margin (TEB)2 | 2.02% | 2.06% | 1.98% | |||
| Net Interest Margin Non-Securitized Assets (TEB)2 | 3.00% | 3.03% | 2.99% | |||
| Net Interest Margin Securitized Assets | 0.97% | 1.16% | 1.20% | |||
| Provision as a Percentage of Gross Loans (annualized) | 0.11% | 0.07% | 0.03% | |||
| Efficiency Ratio (TEB)2 | 27.7% | 27.1% | 29.5% | |||
| As at | March 31 | December 31 | March 31 | |||
| 2012 | 2011 | 2011 | ||||
| BALANCE SHEET HIGHLIGHTS | ||||||
| Total Assets | $ | 17,995,256 | $ | 17,696,471 | $ | 16,010,923 |
| Total Loans | 16,403,745 | 16,089,648 | 14,956,752 | |||
| Securitized Loans | 7,953,414 | 8,243,350 | 8,649,203 | |||
| Liquid Assets | 702,581 | 837,881 | 701,372 | |||
| Deposits | 8,297,126 | 7,922,124 | 6,475,244 | |||
| Shareholders' Equity | 828,036 | 774,785 | 664,462 | |||
| FINANCIAL STRENGTH | ||||||
| Capital Measures3 | ||||||
| Risk-Weighted Assets | $ | 4,704,529 | $ | 4,549,696 | $ | 3,720,495 |
| Tier 1 Capital Ratio | 17.5% | 17.3% | 19.0% | |||
| Total Capital Ratio | 21.6% | 20.5% | 20.3% | |||
| Credit Quality | ||||||
| Non-Performing Loans as a Percentage of Gross Loans | 0.28% | 0.25% | 0.29% | |||
| Allowance as a Percentage of Gross Non-Performing Loans | 67.6% | 74.9% | 71.1% | |||
| Share Information | ||||||
| Book Value per Common Share | $ | 23.83 | $ | 22.38 | $ | 19.14 |
| Common Share Price - Close | $ | 50.34 | $ | 49.10 | $ | 56.91 |
| Market Capitalization | $ | 1,749,365 | $ | 1,700,088 | $ | 1,975,915 |
| Number of Common Shares Outstanding | 34,751 | 34,625 | 34,720 | |||
| 1 | See definition of Adjusted Net Income under Non-GAAP Measures of the unaudited interim consolidated financial report and reconciliation to net income in Table 2 of the Management's Discussion and Analysis. |
| 2 | See definition of Taxable Equivalent Basis (TEB) under Non-GAAP Measures in the unaudited interim consolidated financial report. |
| 3 | These figures relate to the Company's operating subsidiary, Home Trust Company. |
FIRST QUARTER 2012 HIGHLIGHTS
Key results for the first quarter of 2012 included:
-
Net income was $52.5 million in the first quarter, an increase of 21.7%
over first quarter 2011 net income and up 15.2% over adjusted net
income of $45.6 in the first quarter of 2011. First quarter earnings
represent an increase of 4.5%, or 17.9% annualized, over the $50.3
million recorded in the fourth quarter of 2011. These results put the
Company solidly within the 13%-18% net income growth target for 2012.
-
Basic and diluted earnings per share were $1.52 for the quarter
representing an increase of 22.6% over first quarter 2011 basic and
diluted earnings per share and 16.0% from the $1.31 adjusted basic and
diluted earnings per share in the first quarter of 2011. This is an
increase of 4.8%, or 19.3% annualized, over the $1.45 basic and diluted
earnings per share in the fourth quarter of 2011.
-
Net interest income of $88.2 million in the first quarter increased
15.2% over the $76.6 million recorded in the first quarter of 2011
reflecting strong loan growth year over year. Compared to fourth
quarter net interest income of $88.4 million, first quarter net
interest income is down marginally due to net interest margin
compression in the securitized mortgage book and lower income in the
liquidity and investment portfolio. As the Company continues to shift
the balance sheet towards higher yielding traditional mortgages within
its risk appetite and continues to grow its assets within its targets,
it expects that net interest income will increase throughout the
remainder of 2012.
-
Net interest margin was 2.02% in the first quarter up from 1.98% in the
first quarter of 2011 and down from 2.06% in the fourth quarter of
2011. Net interest margin on non-securitized assets was 3.00% compared
to 2.99% in the first quarter of 2011 and compressed marginally
compared to the 3.03% in the fourth quarter of 2011. Net interest
margin on securitized assets of 0.97% has declined from 1.20% one year
ago and 1.16% last quarter. The utilization of lower yielding assets as
replacement assets in the CMB program is the primary contributor to the
margin compression in this portfolio. The Company has initiated new
replacement asset programs that are expected to stabilize these margins
at approximately the current levels, with this initiative, and the
continuing shift to rebalance the portfolio towards the traditional
higher yielding portfolio, the Company expects total net interest
margin to remain relatively stable throughout 2012.
-
Return on equity at 26.2% remained robust in the quarter and continues
well in excess of the Company's minimum performance objective of 20%.
-
The credit performance of the loans portfolio remained strong in the
first quarter. Net non-performing loans ended the quarter at 0.28% of
the total loans portfolio compared to 0.29% at March 31, 2011 and 0.25%
at the end of 2011. The provision for credit losses in the quarter was
0.11% of gross loans on an annualized basis compared to 0.03% in the
first quarter of 2011 and 0.07% in the fourth quarter of 2011. While up
seasonally and with a continuing shift to uninsured loans, the
provision for credit losses ratio is within the Company's objective of
0.05% to 0.15% of gross loans.
-
Home Trust maintained robust Tier 1 and Total capital ratios of 17.5%
and 21.6%, respectively, at March 31, 2012 and well above the Company's
minimum targets. Home Trust's asset to capital multiple was 13.6 at
March 31, 2012 compared to 14.4 at December 31, 2011, and allows the
Company continue growing its assets, revenue and net income as
targeted. During the first quarter the Company advanced $50.0 million
of subordinated debt to Home Trust. These funds were from the Company's
$150.0 million senior debt issue. Early in the second quarter the
Company provided Home Trust with an additional $6.0 million through
subordinated debt. These amounts are expected to be sufficient for the
achievement of the Company's 2012 targets while maintaining prudent
levels of capital.
-
Total assets, which include securitized mortgages, were $18.00 billion
at the end of the first quarter, an increase of almost $2 billion or
12.4% from the $16.01 billion one year ago and $298.8 million or 1.7%
over the $17.70 billion at the end of the fourth quarter of 2011. Total
loans grew to $16.40 billion an increase of $1.45 billion or 9.7% from
the $14.96 billion one year ago and an increase of $314.1 million or
2.0% or 7.8% annualized over the fourth quarter of 2011. While
annualized loan growth in the first quarter lagged the Company's growth
target due to net reduction of insured loans, demand is strong and the
Company continues to expect year-over-year loan growth to be within the
target range of 13%-18% for 2012.
-
The total value of mortgages originated in the first quarter was $1.19
billion compared to $1.37 billion originated in the first quarter of
2011 and $1.25 billion in originations in the fourth quarter of 2011.
Origination volumes and weightings continue to reflect the Company's
strategy to reduce originations of insured mortgage products, which are
generally securitized, and to increase focus on originations of higher
yielding traditional mortgages.
-
The Company originated $921.1 million of traditional mortgages in the
first quarter, an increase of 22.2% over the $753.7 million in the
first quarter of 2011, and down on a seasonal basis from the $948.8
million originated in the fourth quarter of 2011.
-
Accelerator (insured) mortgage originations were $172.7 million in the
first quarter compared to $449.2 million in the first quarter of 2011
and $188.5 million in the fourth quarter of 2011. The Company
continued limited lending in this segment in favour of higher margin
traditional mortgages products within the Company's risk appetite. The
Company continues to explore opportunities that may lead to future
growth in this product segment in 2012.
-
Multi-unit residential originations were $27.5 million in the quarter
compared to $89.0 million in the first quarter of 2011 and $6.5 million
in the fourth quarter of 2011. The Company anticipates additional
funding of multi-residential mortgages through the second quarter and
plans to securitize these mortgages through programs that are expected
to qualify for off-balance sheet accounting.
-
Non-residential mortgage advances were $25.2 million in the quarter
compared to $48.7 million in the first quarter of 2011 and $41.5
million in the fourth quarter of 2011. The Company continues to focus
on opportunities that present strong margins and risk profiles that are
within the Company's risk tolerance.
-
Store and apartment advances were $37.9 million for the quarter compared
to $25.1 million in the first quarter of 2011 and $35.5 million last
quarter.
- The Company opened 1,383 new Visa accounts in the first quarter compared to 2,431 accounts opened in the first quarter of 2011 and 2,137 accounts last quarter. This decline reflects the Company's increased conservatism in approvals and advances.
Despite the ongoing general perception of headwinds in the financial services industry and continued fragile global economic conditions, the Company continues to deliver solid performance reflecting the strength, and its successful execution, of the Company's core strategy. Based on the Company's current observations in the real estate market and analysis of its loan portfolio performance, the Company continues to see resilient and relatively stable real estate markets across most of Canada, with a few areas of continuing concern where the Company has already scaled back. The Company expects real estate demand to remain stable in 2012, with relatively balanced conditions that should lead to continued healthy demand for the Company's products. The Company is in a strong position to take of advantage of unique opportunities in the current market environment that are within its risk appetite and growth strategy. While the ongoing stability of Canadian housing markets has allowed for renewed focus on the Company's traditional mortgage portfolio the Company remains proactive and prudent in its lending practices, taking into account local economic and market conditions. The credit quality of the loan portfolio remains strong, reflecting the Company's expertise in diligent underwriting combined with strong collection standards and loan resolution strategies.
While housing prices have increased at higher than expected rates in certain markets in Canada due, in part, to unbalanced demand versus supply conditions in those markets, the Company has not seen evidence of a "real-estate bubble" in Canada. Low interest rates and stable employment have maintained housing affordability. The Company expects interest rates to remain at current levels or experience very modest increases into 2013 and that Canadian employment levels will remain relatively stable in 2012. In the event of more than modest increases in interest rates, or a more than marginal decrease in employment levels, housing prices and demand may experience more than a modest decline. The Company believes it is well positioned and prepared to deliver reasonable results even in the case of moderate declines in real estate prices and demand. Additionally, the Company maintains a solid capital position and prudent liquidity and is confident that it is well positioned to deal with the impact of uncertainty that may affect the Canadian economy.
Enhancing risk management, governance and compliance processes remains an important focus for the Company. These enhancements are essential components in supporting the Company's strategic priorities and are key contributors to the Company's continued generation of above average shareholder returns, long-term growth and profitability. Additionally, to accommodate recent and planned growth, the Company expanded into to newly renovated accommodations in its Toronto headquarters, adding 24,500 square feet of office and meeting space.
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 declared an increased quarterly dividend of $0.22 per Common share, payable on June 1, 2012 to shareholders of record at the close of business on May 15, 2012. This represents an increase of 10% in the quarterly dividend and is the 14th increase in the last 8 years, reflecting Home Capital's ongoing commitment to enhancing long-term shareholder value.
With solid performance in all aspects of Home Capital's business, management is highly confident that the Company will generate above average earnings and shareholder performance for 2012, and will meet all of its stated objectives for 2012.
| (signed) | (signed) | |||||||
| GERALD M. SOLOWAY | KEVIN P.D. SMITH | |||||||
| Chief Executive Officer | Chairman of the Board | |||||||
| May 2, 2012 | ||||||||
Additional information concerning the Company's targets and related expectations for 2012, including the risks and assumptions underlying these expectations, may be found in Management's Discussion and Analysis (MD&A) included in the Company's First Quarter 2012 Report.
Conference Call and Webcast
First Quarter Results Conference Call
The conference call will take place on Thursday, May 3, 2012, 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 3, 2012 and midnight Thursday, May 10, 2012 by calling 416-849-0833 or 1-855-859-2056 (enter passcode 71598264). 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 and Special Meeting Notice
The Annual and Special Meeting of Shareholders of Home Capital Group Inc. will be held at the Design Exchange, Trading Floor, Second Floor, 234 Bay Street, Toronto, Ontario, on Wednesday, May 16, 2012 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.
2012 OBJECTIVES AND PERFORMANCE
Home Capital published its financial objectives for 2012 on page 15 of the Company's 2011 Annual Report. The following table compares actual performance to date against each of these objectives.
| Table 1: 2012 Targets and Performance | |||||||
| For the three months ended March 31, 2012 | |||||||
| 2012 Targets1 | Actual Results1 | Amount | Increase over 2011 | ||||
| Growth in net income | 13%-18% | 21.7% | $ | 52,534 | $ | 9,356 | |
| Growth in diluted earnings per share | 13%-18% | 22.6% | 1.52 | 0.28 | |||
| Growth in total loans2 | 13%-18% | 7.8% | 16,403,745 | 314,097 | |||
| Return on shareholders' equity | 20.0% | 26.2% | |||||
| Efficiency ratio (TEB)3 | 28.0% - 34.0% | 27.7% | |||||
| Capital ratios4 | |||||||
| Tier 1 | Minimum of 13% | 17.5% | |||||
| Total | Minimum of 14% | 21.6% | |||||
| Provision as a percentage of gross loans (annualized) | 0.05% - 0.15% | 0.11% | |||||
| 1 | Objectives and results for net income and diluted earnings per share are for the current year. |
| 2 | Change represents growth over December 31, 2011 on an annualized basis. |
| 3 | See definition of TEB under Non-GAAP Measures in the unaudited interim consolidated financial report. |
| 4 |
Based on the Company's wholly owned subsidiary, Home Trust Company. |
| Consolidated Statements of Income | |||||||
| For the three months ended | |||||||
| thousands of Canadian dollars, except per share amounts | March 31 | December 31 | March 31 | ||||
| (Unaudited) | 2012 | 2011 | 2011 | ||||
| Net Interest Income Non-Securitized Assets | |||||||
| Interest from loans | $ | 117,565 | $ | 111,066 | $ | 91,053 | |
| Dividends from securities | 3,964 | 4,559 | 4,258 | ||||
| Other interest | 1,047 | 1,241 | 1,693 | ||||
| 122,576 | 116,866 | 97,004 | |||||
| Interest on deposits | 53,128 | 51,989 | 44,966 | ||||
| Interest on senior debt | 1,653 | 1,674 | - | ||||
| Net interest income non-securitized assets | 67,795 | 63,203 | 52,038 | ||||
| Net Interest Income Securitized Loans and Assets | |||||||
| Interest income from securitized loans and assets | 76,616 | 81,876 | 80,500 | ||||
| Interest expense on securitization liabilities | 56,192 | 56,667 | 55,932 | ||||
| Net interest income securitized loans and assets | 20,424 | 25,209 | 24,568 | ||||
| Total Net Interest Income | 88,219 | 88,412 | 76,606 | ||||
| Provision for credit losses (note 5(E)) | 4,498 | 2,979 | 974 | ||||
| 83,721 | 85,433 | 75,632 | |||||
| Non-Interest Income | |||||||
| Fees and other income | 10,897 | 11,294 | 8,360 | ||||
| Realized net gains and unrealized losses on securities | 308 | (1,306) | 2,029 | ||||
| Net realized and unrealized gain (loss) on derivatives (note 14) | 4,285 | (330) | (3,280) | ||||
| 15,490 | 9,658 | 7,109 | |||||
| 99,211 | 95,091 | 82,741 | |||||
| Non-Interest Expenses | |||||||
| Salaries and benefits | 13,999 | 13,184 | 12,577 | ||||
| Premises | 1,998 | 2,007 | 1,872 | ||||
| Other operating expenses | 13,171 | 11,916 | 10,767 | ||||
| 29,168 | 27,107 | 25,216 | |||||
| Income Before Income Taxes | 70,043 | 67,984 | 57,525 | ||||
| Income taxes (note 12(A)) | |||||||
| Current | 19,055 | 15,909 | 14,075 | ||||
| Deferred | (1,546) | 1,795 | 272 | ||||
| 17,509 | 17,704 | 14,347 | |||||
| NET INCOME | $ | 52,534 | $ | 50,280 | $ | 43,178 | |
| NET INCOME PER COMMON SHARE | |||||||
| Basic | $ | 1.52 | $ | 1.45 | $ | 1.24 | |
| Diluted | $ | 1.52 | $ | 1.45 | $ | 1.24 | |
| AVERAGE NUMBER OF COMMON SHARES OUTSTANDING | |||||||
| Basic | 34,550 | 34,668 | 34,691 | ||||
| Diluted | 34,593 | 34,782 | 34,872 | ||||
| Total number of outstanding common shares (note 9(A)) | 34,751 | 34,625 | 34,720 | ||||
| Book value per common share | $ | 23.83 | $ | 22.38 | $ | 19.14 | |
| The notes contained in the Company's First Quarter 2012 Report are an integral part of these unaudited interim consolidated financial statements. | |||||||
| Consolidated Statements of Comprehensive Income | ||||||
| For the three months ended | ||||||
| March 31 | December 31 | March 31 | ||||
| thousands of Canadian dollars (Unaudited) | 2012 | 2011 | 2011 | |||
| NET INCOME | $ | 52,534 | $ | 50,280 | $ | 43,178 |
| OTHER COMPREHENSIVE INCOME (LOSS) | ||||||
| Available for Sale Securities | ||||||
| Net unrealized gains (losses) on securities available for sale | 4,393 | 700 | (501) | |||
| Net (gains) losses reclassified to net income | (364) | 1,174 | (1,828) | |||
| 4,029 | 1,874 | (2,329) | ||||
| Income tax expense (recovery) | 1,167 | 505 | (249) | |||
| 2,862 | 1,369 | (2,080) | ||||
| Cash Flow Hedges (note 14) | ||||||
| Net unrealized gains (losses) on cash flow hedges | 26 | (639) | (674) | |||
| Net losses reclassified to net income | 353 | 338 | - | |||
| 379 | (301) | (674) | ||||
| Income tax expense (recovery) | 110 | (36) | (175) | |||
| 269 | (265) | (499) | ||||
| Total other comprehensive income (loss) | 3,131 | 1,104 | (2,579) | |||
| COMPREHENSIVE INCOME | $ | 55,665 | $ | 51,384 | $ | 40,599 |
| The notes contained in the Company's First Quarter 2012 Report are an integral part of these unaudited interim consolidated financial statements. | ||||||
| Consolidated Balance Sheets | |||||
| March 31 | December 31 | ||||
| thousands of Canadian dollars (Unaudited) | 2012 | 2011 | |||
| ASSETS | |||||
| Cash Resources (note 4(A)) | $ | 421,397 | $ | 665,806 | |
| Securities (note 4(B)) | |||||
| Available for sale | 471,951 | 391,754 | |||
| Pledged securities (note 6(B)) | 493,889 | 341,588 | |||
| 965,840 | 733,342 | ||||
| Loans (note 5) | |||||
| Residential mortgages | 6,946,012 | 6,339,883 | |||
| Securitized residential mortgages (note 6) | 7,953,414 | 8,243,350 | |||
| Non-residential mortgages | 940,055 | 946,222 | |||
| Personal and credit card loans | 564,264 | 560,193 | |||
| 16,403,745 | 16,089,648 | ||||
| Collective allowance for credit losses (note 5(E)) | (29,500) | (29,440) | |||
| 16,374,245 | 16,060,208 | ||||
| Other | |||||
| Derivative assets (note 14) | 55,611 | 72,424 | |||
| Other assets (note 7) | 90,899 | 79,650 | |||
| Capital assets | 6,296 | 5,372 | |||
| Intangible assets | 65,216 | 63,917 | |||
| Goodwill | 15,752 | 15,752 | |||
| 233,774 | 237,115 | ||||
| $ | 17,995,256 | $ | 17,696,471 | ||
| LIABILITIES AND SHAREHOLDERS' EQUITY | |||||
| Liabilities | |||||
| Deposits | |||||
| Deposits payable on demand | $ | 36,220 | $ | 62,746 | |
| Deposits payable on a fixed date | 8,260,906 | 7,859,378 | |||
| 8,297,126 | 7,922,124 | ||||
| Senior Debt (note 13) | 154,129 | 153,336 | |||
| Securitization Liabilities (note 6(C)) | |||||
| Mortgage-backed security liabilities | 2,238,138 | 2,417,801 | |||
| Canada Mortgage Bond liabilities | 6,210,408 | 6,231,274 | |||
| 8,448,546 | 8,649,075 | ||||
| Other | |||||
| Obligations related to securities sold under repurchase agreement (note 5(F)) | 49,720 | - | |||
| Derivative liabilities (note 14) | 2,990 | 3,458 | |||
| Income taxes payable | 6,672 | 17,628 | |||
| Other liabilities (note 8) | 169,560 | 136,025 | |||
| Deferred tax liabilities (note 12(C)) | 38,477 | 40,040 | |||
| 267,419 | 197,151 | ||||
| 17,167,220 | 16,921,686 | ||||
| Shareholders' Equity | |||||
| Capital stock (note 9) | 61,494 | 55,104 | |||
| Contributed surplus | 5,207 | 5,873 | |||
| Retained earnings | 767,395 | 722,999 | |||
| Accumulated other comprehensive loss (note 11) | (6,060) | (9,191) | |||
| 828,036 | 774,785 | ||||
| $ | 17,995,256 | $ | 17,696,471 | ||
| The notes contained in the Company's First Quarter 2012 Report are an integral part of these unaudited interim consolidated financial statements. | |||||
| Consolidated Statements of Changes in Shareholders' Equity | ||||||||||||||
| Net Unrealized | Net Unrealized | Total | ||||||||||||
| (Losses) Gains | Losses on | Accumulated | ||||||||||||
| on Securities | Cash Flow | Other | Total | |||||||||||
| thousands of Canadian dollars, | Capital | Contributed | Retained | Available for | Hedges, | Comprehensive | Shareholders' | |||||||
| except per share amounts (Unaudited) | Stock | Surplus | Earnings | Sale, after Tax | after Tax | (Loss) Income | Equity | |||||||
| Balance at December 31, 2011 | $ | 55,104 | $ | 5,873 | $ | 722,999 | $ | (4,141) | $ | (5,050) | $ | (9,191) | $ | 774,785 |
| Comprehensive income | - | - | 52,534 | 2,862 | 269 | 3,131 | 55,665 | |||||||
| Stock options settled (note 9(A)) | 6,431 | (1,254) | - | - | - | - | 5,177 | |||||||
| Amortization of fair value of | ||||||||||||||
| employee stock options (note 10(A)) | - | 588 | - | - | - | - | 588 | |||||||
| Repurchase of shares (note 9(A)) | (41) | - | (1,159) | - | - | - | (1,200) | |||||||
| Dividends paid | ||||||||||||||
| ($0.20 per share) | - | - | (6,979) | - | - | - | (6,979) | |||||||
| Balance at March 31, 2012 | $ | 61,494 | $ | 5,207 | $ | 767,395 | $ | (1,279) | $ | (4,781) | $ | (6,060) | $ | 828,036 |
| Balance at December 31, 2010 | $ | 50,427 | $ | 4,571 | $ | 567,681 | $ | 5,906 | $ | - | $ | 5,906 | $ | 628,585 |
| Comprehensive income | - | - | 43,178 | (2,080) | (499) | (2,579) | 40,599 | |||||||
| Stock options settled (note 9(A)) | 3,955 | (858) | - | - | - | - | 3,097 | |||||||
| Amortization of fair value of | ||||||||||||||
| employee stock options (note 10(A)) | - | 452 | - | - | - | - | 452 | |||||||
| Repurchase of shares (note 9(A)) | (55) | - | (1,948) | - | - | - | (2,003) | |||||||
| Dividends paid | ||||||||||||||
| ($0.18 per share) | - | - | (6,268) | - | - | - | (6,268) | |||||||
| Balance at March 31, 2011 | $ | 54,327 | $ | 4,165 | $ | 602,643 | $ | 3,826 | $ | (499) | $ | 3,327 | $ | 664,462 |
| The notes contained in the Company's First Quarter 2012 Report are an integral part of these unaudited interim consolidated financial statements. | ||||||||||||||
| Consolidated Statements of Cash Flows | ||||||
| For the three months ended | ||||||
| March 31 | March 31 | |||||
| thousands of Canadian dollars (Unaudited) | 2012 | 2011 | ||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||
| Net income for the period | $ | 52,534 | $ | 43,178 | ||
| Adjustments to determine cash flows relating to operating activities: | ||||||
| Deferred income taxes | (1,546) | 272 | ||||
| Amortization of capital assets | 705 | 686 | ||||
| Amortization of intangible assets | 1,591 | 15 | ||||
| Amortization of net premium on securities | 929 | 718 | ||||
| Amortization of securitization and senior debt transaction costs | 3,460 | 1,558 | ||||
| Provision for credit losses (note 5(E)) | 4,498 | 974 | ||||
| Change in accrued interest payable | 39,292 | 30,189 | ||||
| Change in accrued interest receivable | (667) | (2,345) | ||||
| Realized net gains and unrealized losses on securities | (308) | (2,029) | ||||
| Settlement of derivatives | - | (1,647) | ||||
| Loss (gain) on derivatives | (4,285) | 1,819 | ||||
| Net increase in mortgages | (313,250) | (826,250) | ||||
| Net increase in personal and credit card loans | (4,810) | (39,634) | ||||
| Net increase (decrease) in deposits | 375,002 | (118,432) | ||||
| Proceeds from obligations under repurchase agreement | 49,720 | - | ||||
| Activity in securitization liabilities | ||||||
| Proceeds from securitization of mortgage-backed security liabilities | - | 729,843 | ||||
| Settlement and repayment of securitization liabilities | (181,242) | (178,183) | ||||
| Amortization of fair value of employee stock options (note 10) | 588 | 452 | ||||
| Changes in taxes payable and other | (29,472) | (15,074) | ||||
| Cash flows used in operating activities | (7,261) | (373,890) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||
| Repurchase of shares | (1,200) | (2,003) | ||||
| Exercise of employee stock options | 5,177 | 3,097 | ||||
| Dividends paid | (6,954) | (6,254) | ||||
| Cash flows used in financing activities | (2,977) | (5,160) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||
| Activity in available for sale and held for trading securities | ||||||
| Purchases | (243,855) | (123,139) | ||||
| Proceeds from sales | 7,145 | 67,671 | ||||
| Proceeds from maturities | 7,058 | 3,435 | ||||
| Purchases of capital assets | (1,629) | (735) | ||||
| Purchases of intangible assets | (2,890) | (3,592) | ||||
| Cash flows used in investing activities | (234,171) | (56,360) | ||||
| Net decrease in cash and cash equivalents during the period | (244,409) | (435,410) | ||||
| Cash and cash equivalents at beginning of the period | 665,806 | 846,824 | ||||
| Cash and Cash Equivalents at End of the Period (note 4(A)) | $ | 421,397 | $ | 411,414 | ||
| Supplementary Disclosure of Cash Flow Information | ||||||
| Dividends received | $ | 4,671 | $ | 4,189 | ||
| Interest received | 194,561 | 169,208 | ||||
| Interest paid | 74,681 | 70,709 | ||||
| Income taxes paid | 33,571 | 10,348 | ||||
| The notes contained in the Company's First Quarter 2012 Report are an integral part of these unaudited interim consolidated financial statements. | ||||||
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 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 48 through 58 of the Company's 2011 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, liquidity and funding 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 this quarterly report. Forward-looking statements are typically identified by words such as "will," "believe," "expect," "anticipate," "estimate," "plan," "may," and "could" or other similar expressions.
By their very nature, these statements require the Company to make assumptions and are subject to inherent risks and uncertainties, general and specific, which may cause actual results to differ materially from the expectations expressed in the forward-looking statements. These risks and uncertainties include, but are not limited to, global capital market activity, changes in government monetary and economic policies, changes in interest rates, inflation levels and general economic conditions, legislative and regulatory developments, competition and technological change. The preceding list is not exhaustive of possible factors.
These and other factors should be considered carefully and readers are cautioned not to place undue reliance on these forward-looking statements. The Company does not undertake to update any forward-looking statements, whether written or verbal, that may be made from time to time by it or on its behalf, except as required by securities laws.
Assumptions about the performance of the Canadian economy in 2012 and its effect on Home Capital's business are material factors the Company considers when setting its objectives and outlook. In determining expectations for economic growth, both broadly and in the financial services sector, the Company primarily considers historical economic data provided by the Canadian government and its agencies. In setting and reviewing the outlook and objectives for 2012, management's expectations continue to assume:
-
The Canadian economy will produce modest growth in 2012, but will be
heavily influenced by the economic conditions in the United States and
global markets. Inflation will generally be within the Bank of
Canada's target of 1%-3%.
-
Interest rates will remain at current rates or increase marginally in
2012 as the Bank of Canada leaves its target for the overnight rate at
its current level or modestly increases the rate later in 2012.
-
The housing market will remain resilient to global uncertainty with
balanced supply and demand conditions in most regions. Declining
housing starts and flat resale activity on stable prices through most
of Canada will continue with the market activity moderating from
previous activity levels.
-
Unemployment will remain stable or improve slightly as the economy
grows, while a larger labour force will tend to offset job growth.
Consumer debt levels will remain serviceable by Canadian households.
-
Net interest margins overall are expected to remain in the current
range. Margins are expected to remain stable as returns on the
increased traditional portfolio offset declining returns on the
securitized portfolio throughout 2012.
-
Credit quality will remain sound with actual losses within the low end
of Home Capital's historical range.
- Current Canada Mortgage and Housing Corporation (CMHC) policies remain substantially unchanged.
Non-GAAP Measures
The Company applies IFRS which are the generally accepted accounting principles (GAAP) for Canadian publically accountable enterprises. 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 used in this report can be found under Non-GAAP Measures in the Management's Discussion and Analysis included in the Company's First Quarter 2012 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.
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, Visa products and payment card services. Licensed to conduct business across Canada, Home Trust has branch offices in Ontario, Alberta, British Columbia, Nova Scotia and Quebec.
Gerald M. Soloway, CEO, or
Martin Reid, President
416-360-4663
www.homecapital.com
