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Home Capital Group Inc.

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Home Capital Updates Outlook for 2017 and Reports Second Quarter 2017 Results
Home Capital Updates Outlook for 2017 and Reports Second Quarter 2017 Results

Canada NewsWire

TORONTO, Aug. 2, 2017 /CNW/ - Home Capital Group ("Home Capital" or "the Company") (TSX: HCG) today provided a business update and reported financial results for the three and six months ended June 30, 2017. This press release should be read in conjunction with the Company's 2017 Second Quarter Report including Financial Statements and Management's Discussion and Analysis (MD&A), which are available on Home Capital's website at www.homecapital.com and on SEDAR at www.sedar.com.

Bonita Then, Interim President and Chief Executive Officer, Home Capital said, "We've made tremendous progress toward our goal of ensuring Home Capital is ready to take advantage of opportunities we see to grow our business in a sustainable way. We have achieved a strong liquidity position, named a highly experienced mortgage industry expert as our new Chief Executive Officer, added Berkshire Hathaway as a corporate sponsor and investor, and fully repaid our $2 billion backstop credit line with Berkshire. Depositors are demonstrating their confidence in us through increased inflows to our Guaranteed Investment Certificates, and we are looking forward to putting that funding to work by increasing our lending activity. Moving ahead, we will continue to look at every opportunity, including more attractive and alternate funding sources, to build our platform for future growth."

Yousry Bissada, incoming President and Chief Executive Officer, Home Capital said, "Home plays a critically important role by helping deserving Canadians realize their dream of home ownership. I am excited about the opportunity to work with the strong team at Home Capital to build on the Company's leading position in the alternative mortgage lending market. We want to be the first choice for depositors, borrowers and brokers in the markets we serve, and over the coming months I will be fully engaged in crafting a strategy to make that happen."

Going Concern Uncertainty Resolved
The Company's business plan and cash flow forecast suggest that the current liquidity and credit facilities are sufficient to support ongoing business for the foreseeable future. Management has concluded that there is no longer material uncertainty that casts significant doubt as to the ability of the Company to continue as a going concern.

Recent Highlights

  • Yousry Bissada named President and Chief Executive Officer. Search for a Chief Financial Officer is nearing completion.
  • Significantly strengthened liquidity position following stabilization and subsequent increase in deposit inflows, completion of asset sales and the closing of a $2 billion backstop credit facility, with a wholly owned subsidiary of Berkshire Hathaway Inc. (Berkshire), replacing a previous $2 billion emergency credit facility on better terms.
  • Repaid all outstanding amounts under the Berkshire credit facility subsequent to the end of Q2, giving the Company the ability to draw up to $2.0 billion going forward if required. In addition, the Company held total liquid assets of approximately $1.94 billion as of August 1, 2017. The reported liquidity position includes proceeds received from the initial equity investment by Berkshire.
  • Closed initial equity investment by Berkshire, through its wholly owned subsidiary Columbia Insurance Company, of approximately $153.2 million to acquire a 19.99% equity stake in the Company on a private placement basis, as previously announced. Investment by Berkshire of approximately $246.8 million to acquire an additional approximate 18.4% remains subject to approval at a Special Meeting of Shareholders scheduled for September 12, 2017.
  • Closed initial tranche of previously announced sale of commercial mortgage assets, receiving proceeds of approximately $1.13 billion as of July 25, 2017, with a further tranche expected to close by the end of Q3 2017.
  • Closed sales of residential mortgage assets for total proceeds of approximately $300 million.
  • Reached two agreements comprising a global settlement with the Ontario Securities Commission and a class action lawsuit subject to final approval from the Ontario Securities Commission and the Ontario Superior Court of Justice.

Second Quarter 2017 Financial Statement Highlights

Second Quarter 2017, compared with the Second Quarter 2016:

  • Reported net loss of $111.1 million and $1.73 loss per share fully diluted, compared with net income of $66.3 million and $0.99 diluted earnings per share.
  • Net loss for second quarter 2017 includes the impact of elevated expenses of approximately $233.7 million pre-tax.
  • Total loans under administration were $25.9 billion compared to $25.7 billion.
  • Mortgage portfolio continues to perform well, maintaining low provisions for credit losses. Provision for credit losses as a percentage of gross uninsured loans was 0.07% as at June 30, 2017, compared to 0.08% as at June 30, 2016. During the quarter there was an increase in the collective allowance of $1.0 million due to growth in land and development loans in the commercial portfolio.
  • Improved capital position with CET 1 ratio at 17.06%, as compared to 16.38%, well in excess of regulatory minimums. This ratio is expected to rise further after the execution of transactions previously announced.

Second Quarter 2017 Elevated Expenses
In late April 2017, the Company experienced a serious liquidity event that required the Company to take urgent and deliberate steps to liquidate assets and arrange an emergency credit facility. The costs associated with these actions are reflected in the second quarter. In addition, the Company recorded the expenses associated with the global settlement of the OSC and class action matters, net of insurance, and an increased provision for costs associated with the repositioning of the business. These expenses, which totaled $233.7 million ($173.5 million after tax) and are in addition to normal operating costs, reduced diluted earnings per share by $2.70 and were the main reason the Company reported a net loss in the second quarter. Further details regarding these elevated expenses are explained below.

  • Incremental costs incurred in connection with the liquidity event totaled $213.6 million (or $157.0 million after tax and $2.44 diluted earnings per share) and included the following: 1) $130.6 million in commitment fees and interest charges related to the emergency credit facility and Berkshire line of credit and related professional and advisory fees and 2) a $72.9 million realized loss on the urgent sale of the Company's available for sale asset portfolio.
  • The Company determined it will exit its payment card and payment processing (PsiGate) business and its prepaid card business. As a result, the Company recorded an asset impairment related to the remaining goodwill, intangible and other assets within these businesses of $7.3 million (or $6.6 million after tax and $0.10 diluted earnings per share).
  • Additional restructuring costs related to Project Expo, the Company's expense savings initiative, of $5.8 million (or $4.2 million after tax and $0.07 diluted earnings per share) were also recorded during the quarter.
  • Costs related to the OSC matter and related class action were $7.0 million (or $5.7 million after tax and $0.09 diluted earnings per share), net of expected insurance recoveries.

2017 Outlook
In the coming months, the Company's incoming President and Chief Executive Officer, along with management and the Board, will reassess business plans and set new strategic goals and objectives. In the interim, management will focus on further strengthening its financial position and returning its lending and deposit taking activities to a more normal level. The Company intends to focus on Guaranteed Investment Certificates and term deposits, while demand deposits are likely to remain limited to the current low level.

Given the events of the second quarter, the Company will cautiously increase lending activity with a view to growing the mortgage origination flow in step with the growth of deposit funding and adequate liquidity. While deposit funding has grown in recent weeks, the Company has been paying a premium rate of interest on new deposits. These rates will reduce the interest spread earned on new business and the Company will look to reduce deposit interest rates to more sustainable levels in the coming months. This may have a dampening effect on deposit growth and consequently constrain growth of mortgage originations. During the second quarter, the Company had a very low level of new loan originations and sold residential and commercial mortgage assets as well as consumer lending assets. The accompanying reduction in interest income is only partly reflected in the current quarter, as most of the asset sales took place near the quarter end. The Company closed significant commercial mortgage asset sales during July, 2017.  The proceeds from asset sales have been used to repay the Berkshire credit facility in full. Consequently, the Company will experience lower interest costs partly offset by lower interest income in the third quarter. The Company can also expect elevated non-interest expenses as it will continue to be subject to scrutiny from a wide range of stakeholders.

Guideline B-20
In July, OSFI introduced for comment and consultation a revised draft of Guideline B-20 (B-20) Residential Mortgage Underwriting Practices and Procedures. The draft revisions include a qualifying stress test for uninsured mortgages, a prohibition on certain co-lending arrangements and additional guidance on income verification and expectation to account for property price inflation when determining appropriate loan to value. Based on the Company's preliminary analysis and interpretation, the revisions to B-20, if implemented as proposed, would reduce, possibly materially, the size of the uninsured mortgage market available to the Company and its federally regulated competitors. The Company also believes that the revisions, if implemented as proposed, would increase the rate of renewals of mortgage loans with the existing lenders. The draft guideline is in the consultation stage and may be further revised before implementation, and it is unclear in any event what impact the revisions to B-20 would have on the real estate and mortgage markets as a whole. If implemented as proposed, the draft guideline would be expected to have a material impact on the Company's business strategy going forward. At this time, there can be no certainty as to the final revisions of the guideline.

(signed)

(signed)

BONITA THEN

BRENDA EPRILE

Interim President & Chief Executive Officer

Chair of the Board                          

August 2, 2017


 

The Company's 2017 Second Quarter Financial Report, including Management's Discussion and Analysis, for the three and six months ended June 30, 2017 is available at www.homecapital.com and on the Canadian Securities Administrators' website at www.sedar.com.

Second Quarter 2017 Results Conference Call and Webcast

The conference call will take place on Thursday, August 3, 2017, at 8:30 a.m. ET. Participants are asked to call approximately 10 minutes in advance at 647-427-7450 in Toronto or toll-free 1-888-231-8191 throughout North America. The call will also be accessible in listen-only mode on Home Capital's website at www.homecapital.com in the Investor Relations section of the website.

Conference Call Archive

A telephone replay of the call will be available between 11:30 a.m. ET Thursday, August 3, 2017 and 12:00 a.m. ET Thursday, August 10, 2017 by calling 416-849-0833 or 1-855-859-2056 (enter passcode 51553293). The archived audio webcast will be available for 90 days on CNW Group's website at www.newswire.ca and Home Capital's website at www.homecapital.com.

Special Meeting Notice

The Company has set the record and meeting date for the special meeting of its shareholders to consider an additional investment of 23,955,420 Common Shares of the Company by a wholly owned subsidiary of Berkshire Hathaway Inc. (Berkshire), on a private placement basis.

Shareholders of record as of the close of business on August 8, 2017 will be entitled to vote at the special meeting, which will be held on September 12, 2017 at a time and location to be announced. The additional investment by Berkshire must be approved by a majority of votes cast at the special meeting, excluding the Common Shares of the Company beneficially held by Berkshire, or over which it exercises control or direction. The Company expects to file the Management Information Circular and Form of Proxy for the special meeting no later than August 21, 2017.




Financial Highlights









(Unaudited)

For the three months ended

For the six months ended

(000s, except Percentage and Per Share Amounts)

June 30  

March 31  

June 30  

June 30  

June 30  



2017


2017


2016


2017


2016

OPERATING RESULTS











Net Income (Loss)

$

(111,116)

$

58,041

$

66,252

$

(53,075)

$

130,500

Net Interest Income (Loss)


(3,407)


125,857


122,103


122,450


244,620

Total Revenue1


(61,293)


147,742


146,761


86,449


292,267

Diluted Earnings (Loss) per Share

$

(1.73)

$

0.90

$

0.99

$

(0.83)

$

1.91

Return on Shareholders' Equity


(26.1)%


14.1%


16.5%


(6.3)%


16.4%

Return on Average Assets


(2.2)%


1.1%


1.3%


(0.5)%


1.3%

Net Interest Margin (TEB)2


(0.07)%


2.44%


2.38%


1.20%


2.38%

Provision as a Percentage of Gross Uninsured Loans (annualized)


0.07%


0.16%


0.08%


0.12%


0.06%

Provision as a Percentage of Gross Loans (annualized)


0.05%


0.13%


0.06%


0.09%


0.05%

Efficiency Ratio (TEB)2


(138.9)%


43.4%


37.2%


171.0%


38.4%









As at




June 30  


March 31  


December 31  


June 30  





2017


2017


2016


2016



BALANCE SHEET HIGHLIGHTS











Total Assets

$

20,077,150

$

20,993,385

$

20,528,777

$

20,763,147



Total Assets Under Administration3


28,292,436


29,583,545


28,917,534


28,430,730



Total Loans4


17,648,114


18,573,476


18,035,317


18,065,074



Total Loans Under Administration3,4


25,863,400


27,163,636


26,424,074


25,732,657



Liquid Assets


1,737,417


2,098,192


2,067,981


2,391,225



Deposits


13,104,606


16,249,611


15,886,030


16,022,219



Line of Credit Facility


1,396,959


-


-


-



Shareholders' Equity


1,735,692


1,665,503


1,617,192


1,555,893



FINANCIAL STRENGTH











Capital Measures5











Risk-Weighted Assets

$

8,328,024

$

9,086,886

$

8,643,267

$

8,310,406



Common Equity Tier 1 Capital Ratio


17.06%


16.34%


16.55%


16.38%



Tier 1 Capital Ratio


17.06%


16.34%


16.54%


16.38%



Total Capital Ratio


17.54%


16.77%


16.97%


16.82%



Leverage Ratio


7.19%


7.29%


7.20%


6.77%



Credit Quality











Net Non-Performing Loans as a Percentage of Gross Loans


0.23%


0.24%


0.30%


0.33%



Allowance as a Percentage of Gross Non-Performing Loans


100.5%


91.8%


73.4%


66.0%



Share Information











Book Value per Common Share

$

21.63

$

25.94

$

25.12

$

23.67



Common Share Price – Close

$

16.99

$

26.03

$

31.34

$

32.02



Dividend paid during the period ended

$

-

$

0.26

$

0.26

$

0.24



Dividend Payout Ratio


-


28.9%


32.9%


24.2%



Market Capitalization

$

1,363,380

$

1,671,230

$

2,017,920

$

2,105,027



Number of Common Shares Outstanding


80,246


64,204


64,388


65,741



1 The Company has revised its definition of Total Revenue and restated amounts in prior periods accordingly.  Please see the revised definition under Non-GAAP Measures in the Company's 2017 Second Quarter Report.

2 See definition of Taxable Equivalent Basis (TEB) under Non-GAAP Measures in the Company's 2017 Second Quarter Report.

3 Total assets and loans under administration include both on- and off-balance sheet amounts.

4 Total loans include loans held for sale.

5 These figures relate to the Company's operating subsidiary, Home Trust Company.


 

Consolidated Statements of Income (Loss)







For the three months ended

For the six months ended

thousands of Canadian dollars, except per share amounts

June 30 

March 31 

June 30 

June 30 

June 30 

(Unaudited)


2017


2017


2016


2017


2016

Net Interest Income (Loss) Non-Securitized Assets











Interest from loans

$

192,394

$

192,435

$

191,704

$

384,829

$

385,250

Dividends from securities


300


2,286


2,447


2,586


5,139

Other interest


1,627


2,920


2,985


4,547


5,513




194,321


197,641


197,136


391,962


395,902

Interest on deposits and other


71,673


77,252


78,312


148,925


157,775

Interest and fees on line of credit facility


130,630


-


-


130,630


-

Net interest income (loss) non-securitized assets


(7,982)


120,389


118,824


112,407


238,127













Net Interest Income Securitized Loans and Assets











Interest income from securitized loans and assets


22,678


21,558


20,732


44,236


40,825

Interest expense on securitization liabilities


18,103


16,090


17,453


34,193


34,332

Net interest income securitized loans and assets


4,575


5,468


3,279


10,043


6,493













Total Net Interest Income (Loss)


(3,407)


125,857


122,103


122,450


244,620

Provision for credit losses


2,420


5,919


2,760


8,339


4,154




(5,827)


119,938


119,343


114,111


240,466

Non-Interest Income (Loss)











Fees and other income


17,168


16,331


17,328


33,499


36,493

Securitization income


1,877


6,432


9,452


8,309


17,134

Gain on acquisition of CFF Bank


-


-


-


-


651

Net realized and unrealized losses on securities and loans


(76,912)


(3)


-


(76,915)


(175)

Net realized and unrealized losses on derivatives


(19)


(875)


(2,122)


(894)


(6,456)




(57,886)


21,885


24,658


(36,001)


47,647




(63,713)


141,823


144,001


78,110


288,113

Non-Interest Expenses











Salaries and benefits


29,303


29,619


24,685


58,922


53,396

Premises


3,365


3,752


3,575


7,117


7,426

Other operating expenses


52,333


31,094


26,652


83,427


52,107




85,001


64,465


54,912


149,466


112,929













Income (Loss) Before Income Taxes


(148,714)


77,358


89,089


(71,356)


175,184

Income taxes












Current


(39,616)


23,142


24,911


(16,474)


44,997


Deferred                                                                     


2,018


(3,825)


(2,074)


(1,807)


(313)




(37,598)


19,317


22,837


(18,281)


44,684

NET INCOME (LOSS)

$

(111,116)

$

58,041

$

66,252

$

(53,075)

$

130,500













NET INCOME (LOSS) PER COMMON SHARE











Basic

$

(1.73)

$

0.90

$

0.99

$

(0.83)

$

1.91

Diluted

$

(1.73)

$

0.90

$

0.99

$

(0.83)

$

1.91

AVERAGE NUMBER OF COMMON SHARES OUTSTANDING











Basic


64,378


64,263


66,663


64,321


68,324

Diluted


64,378


64,294


66,798


64,321


68,420













Total number of outstanding common shares


80,246


64,204


65,741


80,246


65,741

Book value per common share

$

21.63

$

25.94

$

23.67

$

21.63

$

23.67

 

Consolidated Statements of Comprehensive Income (Loss)











For the three months ended

For the six months ended


June 30

March 31

June 30

June 30

June 30

thousands of Canadian dollars (Unaudited)


2017


2017


2016


2017


2016












NET INCOME (LOSS)

$

(111,116)

$

58,041

$

66,252

$

(53,075)

$

130,500












OTHER COMPREHENSIVE INCOME (LOSS)






















Available for Sale Securities and Retained Interests











Net unrealized gains (losses)


550


16,414


4,272


16,964


(8,742)

Net losses reclassified to net income


46,647


3


-


46,650


204



47,197


16,417


4,272


63,614


(8,538)

Income tax expense (recovery)


12,514


4,358


1,134


16,872


(2,287)



34,683


12,059


3,138


46,742


(6,251)












Cash Flow Hedges











Net unrealized gains (losses)


(525)


(85)


(1,312)


(610)


1,909

Net losses reclassified to net income


572


329


341


901


705



47


244


(971)


291


2,614

Income tax expense (recovery)


12


72


(257)


84


694



35


172


(714)


207


1,920












Total other comprehensive income (loss)


34,718


12,231


2,424


46,949


(4,331)












COMPREHENSIVE INCOME (LOSS)

$

(76,398)

$

70,272

$

68,676

$

(6,126)

$

126,169

  

 

 

Consolidated Balance Sheets












As at



June 30 

March 31 

December 31 

thousands of Canadian dollars (Unaudited)


2017


2017


2016

ASSETS







Cash and Cash Equivalents

$

1,682,982

$

1,251,190

$

1,205,394

Available for Sale Securities


31,495


549,456


534,924

Loans Held for Sale


-


40,721


77,918

Loans







Securitized mortgages


3,257,104


2,647,014


2,526,804

Non-securitized mortgages and loans


14,391,010


15,885,741


15,430,595




17,648,114


18,532,755


17,957,399

Collective allowance for credit losses


(40,063)


(39,063)


(37,063)




17,608,051


18,493,692


17,920,336

Other







Restricted assets


216,596


140,325


265,374

Derivative assets


21,804


33,480


37,524

Other assets


384,676


347,477


348,638

Deferred tax assets


19,510


18,048


16,914

Goodwill and intangible assets


112,036


118,996


121,755




754,622


658,326


790,205



$

20,077,150

$

20,993,385

$

20,528,777

LIABILITIES AND SHAREHOLDERS' EQUITY







Liabilities







Deposits







Deposits payable on demand

$

372,912

$

2,377,400

$

2,531,803

Deposits payable on a fixed date


12,731,694


13,872,211


13,354,227




13,104,606


16,249,611


15,886,030

Line of Credit Facility


1,396,959


-


-

Securitization Liabilities







CMHC-sponsored mortgage-backed security liabilities


1,649,637


922,377


898,386

CMHC-sponsored Canada Mortgage Bond liabilities


1,474,001


1,474,539


1,637,117

Bank-sponsored securitization conduit liabilities


203,991


250,129


114,146




3,327,629


2,647,045


2,649,649

Other







Derivative liabilities


11,322


2,871


3,490

Other liabilities


466,320


394,762


336,132

Deferred tax liabilities


34,622


33,593


36,284




512,264


431,226


375,906




18,341,458


19,327,882


18,911,585

Shareholders' Equity







Capital stock


231,618


85,194


84,910

Contributed surplus


4,922


4,725


4,562

Retained earnings


1,507,268


1,618,418


1,582,785

Accumulated other comprehensive loss


(8,116)


(42,834)


(55,065)




1,735,692


1,665,503


1,617,192



$

20,077,150

$

20,993,385

$

20,528,777


 

Consolidated Statements of Changes in Shareholders' Equity




















Net Unrealized








Losses

Net Unrealized

Total






on Securities and

Losses on

Accumulated









Retained Interests

Cash Flow

Other

Total

thousands of Canadian dollars,

Capital

Contributed

Retained

Available

Hedges,

Comprehensive

Shareholders'

except per share amounts (Unaudited)

Stock

Surplus

Earnings

for Sale, after Tax

after Tax

Loss

Equity

Balance at December 31, 2016

$

84,910

$

4,562

$

1,582,785

$

(53,589)

$

(1,476)

$

(55,065)

$

1,617,192

Comprehensive income (loss)


-


-


(53,075)


46,742


207


46,949


(6,126)

Stock options settled


548


(141)


-


-


-


-


407

Amortization of fair value of
















employee stock options


-


501


-


-


-


-


501

Repurchase of shares


(267)


-


(5,732)


-


-


-


(5,999)

Issuance of shares


146,427


-


-


-


-


-


146,427

Dividends















($0.26 per share)


-


-


(16,710)


-


-


-


(16,710)

Balance at June 30, 2017

$

231,618

$

4,922

$

1,507,268

$

(6,847)

$

(1,269)

$

(8,116)

$

1,735,692
















Balance at December 31, 2015

$

90,247

$

3,965

$

1,592,438

$

(62,466)

$

(3,078)

$

(65,544)

$

1,621,106

Comprehensive income


-


-


130,500


(6,251)


1,920


(4,331)


126,169

Stock options settled


780


(182)


-


-


-


-


598

Amortization of fair value of
















employee stock options


-


472


-


-


-


-


472

Repurchase of shares


(5,514)


-


(154,309)


-


-


-


(159,823)

Dividends















($0.48 per share)


-


-


(32,629)


-


-


-


(32,629)

Balance at June 30, 2016

$

85,513

$

4,255

$

1,536,000

$

(68,717)

$

(1,158)

$

(69,875)

$

1,555,893


 


Consolidated Statements of Cash Flows








For the three months ended

For the six months ended




June 30 

June 30 

June 30 

June 30 

thousands of Canadian dollars (Unaudited)


2017


2016


2017


2016

CASH FLOWS FROM OPERATING ACTIVITIES









Net income (loss) for the period

$

(111,116)

$

66,252

$

(53,075)

$

130,500

Adjustments to determine cash flows relating to operating activities:










Amortization of net discount on securities


(137)


(182)


(223)


(317)


Provision for credit losses


2,420


2,760


8,339


4,154


Loss on sale of loan portfolios


5,005


-


5,005


-


Gain on sale of mortgages or residual interest


(360)


(7,976)


(5,098)


(13,911)


Net realized and unrealized losses on securities


71,907


-


71,910


175


Amortization and impairment losses¹


10,526


3,827


16,745


7,473


Amortization of fair value of employee stock options


197


195


501


472


Deferred income taxes


2,018


(2,074)


(1,807)


(313)

Changes in operating assets and liabilities










Loans, net of gains or losses on securitization and sales


919,162


(108,969)


381,893


214,525


Restricted assets


(76,271)


61,637


48,778


(36,079)


Derivative assets and liabilities


20,174


6,979


23,843


7,022


Accrued interest receivable


2,263


1,225


1,751


2,718


Accrued interest payable


(28,204)


(12,119)


(8,556)


5,660


Deposits


(3,145,005)


197,320


(2,781,424)


356,261


Line of credit facility


1,396,959


-


1,396,959


-


Securitization liabilities


680,584


103,647


677,980


56,923


Taxes receivable or payable and other


45,256


39,384


79,063


(7,841)

Cash flows (used in) provided by operating activities


(204,622)


351,906


(137,416)


727,422

CASH FLOWS FROM FINANCING ACTIVITIES









Issuance of shares


146,427


-


146,427


-

Repurchase of shares


(37)


(159,460)


(5,999)


(159,823)

Exercise of employee stock options


-


557


407


598

Repayment of senior debt


-


(150,000)


-


(150,000)

Dividends paid to shareholders


-


(15,834)


(16,710)


(32,629)

Cash flows provided by (used in) financing activities


146,390


(324,737)


124,125


(341,854)

CASH FLOWS FROM INVESTING ACTIVITIES









Activity in securities










Purchases


-


(103,942)


(5,803)


(189,361)


Proceeds from sales


491,883


-


491,883


-


Proceeds from maturities


1,220


76,933


10,271


114,104

Purchases of capital assets


(530)


(1,095)


(586)


(1,319)

Capitalized intangible development costs


(2,549)


(5,269)


(4,886)


(10,293)

Cash flows provided by (used in) investing activities


490,024


(33,373)


490,879


(86,869)

Net increase (decrease) in cash and cash equivalents during the period


431,792


(6,204)


477,588


298,699

Cash and cash equivalents at beginning of the period


1,251,190


1,454,752


1,205,394


1,149,849

Cash and Cash Equivalents at End of the Period

$

1,682,982

$

1,448,548

$

1,682,982

$

1,448,548

Supplementary Disclosure of Cash Flow Information









Dividends received on investments

$

1,008

$

2,772

$

4,036

$

5,551

Interest received


216,122


216,513


431,766


433,897

Interest paid


248,610


111,196


322,304


187,815

Income taxes paid


6,646


16,647


26,868


44,126

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

 

Caution Regarding Forward-looking Statements

From time to time Home Capital Group Inc. makes written and verbal forward-looking statements. These are included in the Annual Report, periodic reports to shareholders, regulatory filings, press releases, Company presentations and other Company communications. Forward-looking statements are made in connection with business objectives and targets, Company strategies, operations, anticipated financial results and the outlook for the Company, its industry, and the Canadian economy. These statements regarding expected future performance are "financial outlooks" within the meaning of National Instrument 51-102. Please see the risk factors, which are set forth in detail in the Risk Management section of the 2017 Second Quarter Report, as well as the Company's other publicly filed information, which is available on the System for Electronic Document Analysis and Retrieval (SEDAR) at www.sedar.com, for the material factors that could cause the Company's actual results to differ materially from these statements.  These risk factors are material risk factors a reader should consider, and include credit risk, liquidity and funding risk, structural interest rate risk, operational risk, investment risk, strategic risk, reputational risk, compliance risk and capital adequacy risk along with additional risk factors that may affect future results.  Forward-looking statements can be found in the Report to the Shareholders and the Overview of the Second Quarter and Outlook section in the 2017 Second Quarter Report. Forward-looking statements are typically identified by words such as "will,"  "believe," "expect," "anticipate," "intend," "should," "estimate," "plan," "forecast," "may," and "could" or other similar expressions. 

By their very nature, these statements require the Company to make assumptions and are subject to inherent risks and uncertainty, general and specific, which may cause actual results to differ materially from the expectations expressed in the forward-looking statements.  These risks and uncertainties include, but are not limited to, global capital market activity, changes in government monetary and economic policies, changes in interest rates, inflation levels and general economic conditions, legislative and regulatory developments, competition and technological change.  Please also refer to the Overview of the Second Quarter and Outlook section of the 2017 Second Quarter Report for risks and uncertainties related to the Company's going concern assessment. The preceding list is not exhaustive of possible factors.

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

Assumptions about the performance of the Canadian economy in 2017 and its effect on Home Capital's business are material factors the Company considers when setting its performance goals, strategic priorities and outlook. In determining expectations for economic growth, both broadly and in the financial services sector, the Company primarily considers historical and forecasted economic data provided by the Canadian government and its agencies. In determining the outlook for the remainder of 2017, management's expectations continue to assume:

  • The Canadian economy is expected to be relatively stable in 2017, supported by expanded Federal Government spending.

  • Generally the Company expects stable employment conditions in its established regions. Also, the Company expects inflation will generally be within the Bank of Canada's target of 1% to 3%, leading to stable credit losses and demand for the Company's lending products in its established regions.

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

  • The Company is assuming that interest rates will generally remain at the current very low rates for 2017. This is expected to continue to support relatively low mortgage interest rates for the foreseeable future.

  • The Company believes that the current and expected levels of housing activity indicate a relatively stable real estate market overall. Please see Market Conditions under the Overview of the Second Quarter and Outlook section of the 2017 Second Quarter Report for more discussion on the Company's expectations for the housing market.

  • The Company expects that consumer debt levels, while elevated, will remain serviceable by Canadian households.

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

Non-GAAP Measures

The Company has adopted IFRS as its accounting framework. IFRS are the generally accepted accounting principles (GAAP) for Canadian publicly accountable enterprises for years beginning on or after January 1, 2011. The Company uses a number of financial measures to assess its performance.  Some of these measures are not calculated in accordance with GAAP, are not defined by GAAP, and do not have standardized meanings that would ensure consistency and comparability between companies using these measures.  Definitions of non-GAAP measures can be found under Non-GAAP Measures in the Management's Discussion and Analysis included in the Company's 2017 Second Quarter Report.

Regulatory Filings

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

About Home Capital

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

SOURCE Home Capital Group Inc.

View original content: http://www.newswire.ca/en/releases/archive/August2017/02/c3610.html

Investors: Laura Lepore, Assistant Vice President, Investor Relations, (416) 933-5652, laura.lepore@hometrust.ca; Media: Boyd Erman, Longview Communications Inc., (416) 649-8007, berman@longviewcomms.ca; or Peter Block, Longview Communications Inc., (416) 649-8008, pblock@longviewcomms.caCopyright CNW Group 2017

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