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Home Capital Group Inc.

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Home Capital Reports fourth quarter and full year 2017 Results
Home Capital Reports fourth quarter and full year 2017 Results

Canada NewsWire

TORONTO, Feb. 14, 2018 /CNW/ - Home Capital Group ("Home Capital" or "the Company") (TSX: HCG) today reported financial results for the three and twelve months ended December 31, 2017. This press release should be read in conjunction with the Company's 2017 Annual and Fourth Quarter Consolidated Financial 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.

"Our improved fourth quarter performance capped an important year for Home Capital employees, customers, brokers and shareholders," said Yousry Bissada, President and Chief Executive Officer, Home Capital Group. "We have demonstrated progress towards growing our residential and commercial business lines to more normal and sustainable levels and our employees delivered improved service. The steps we have taken to ensure we provide efficient and effective service to brokers and customers will help us to drive profitable growth going forward."

"We are entering 2018 with positive momentum in our business. We have turned the corner and expect to grow from here, responsibly, with sustainable risk management practices embedded in our culture," Mr. Bissada continued. "We have a strong capital position and balance sheet. We will use our position of strength to seize opportunities to invest in, and grow, our business to create value."

Fourth Quarter 2017, compared with the Third Quarter 2017:

  • Net income of $30.6 million, an increase of 2.1% or $0.6 million from $30.0 million.
  • Diluted earnings per share of $0.38, an increase of 2.7% from $0.37.
  • Non-interest expense of $65.5 million, an increase of 9.3% or $5.6 million from $59.9 million.
  • Non-securitized single-family residential mortgages of $10.04 billion, a decrease of 3.5% or $0.36 billion from
    $10.40 billion
  • Total mortgage originations of $872.1 million, an increase of 126% or $487.0 million from $385.1 million.
  • Provision for credit losses as a percentage of gross uninsured loans of 0.12%, compared to (0.14)% where Q3 2017 included a reduction of $6.5 million in the collective allowance (0.07% in the absence of this reduction).

Fourth Quarter 2017, compared with the Fourth Quarter 2016:

  • Net income of $30.6 million, a decrease of 39.6% or $20.1 million from $50.7 million.
  • Net income in Q4 2017 includes the impact of reduced loan balances and lower securitization income, partially offset by lower non-interest expenses.
  • Diluted earnings per share of $0.38, a decrease of 51.9% from $0.79.
  • Non-interest expenses were $65.5 million, a $5.5 million decline and 7.8% improvement from $71.0 million.
  • Total mortgage originations of $872.1 million, a decrease of 64.1% or $1.56 billion from $2.43 billion
  • Provision for credit losses as a percentage of gross uninsured loans was 0.12% compared to 0.07%.

Year Ended December 31, 2017, compared with the Year Ended December 31, 2016:

  • Net income of $7.5 million, compared with $247.4 million.
  • Net income includes $223.6 million of expenses directly associated with the Q2 2017 liquidity event.
  • Diluted earnings per share of $0.10 compared to diluted earnings per share of $3.71.
  • Total loans under administration of $22.51 billion, a decrease of 14.8% or $3.91 billion from $26.42 billion.
  • Provision for credit losses as a percentage of gross uninsured loans was 0.07%, compared to 0.05%.

Corporate Update

Home Capital ended 2017 with a strong capital position, poised for sustainable growth and with a clear goal of regaining its leading market share position in Canada's Alt-A mortgage market.

Management and the Board of Directors are focused on completing a strategy that will take advantage of the Company's capital position and balance sheet to invest in the business, drive profitable growth and create long-term shareholder value. 

In the near term, management's key areas of focus are:

1.

Profitably growing residential and commercial business lines to more sustainable levels and increasing market share.

2.

Improving service levels through training initiatives that will empower employees to deliver best-in-class service.

3.

Increasing renewal and retention rates.

4.

Increasing broker outreach to advance higher-quality applications.

5.

Maintaining competitive product offerings.

6.

Innovating and applying technology in the mortgage business to enhance customer and broker experiences.               

 

In addition, the Company is operating in the context of an evolving regulatory landscape that will affect its primary residential mortgage market, although the extent of any impact is not yet clear. Management and the Board of Directors will continue to assess opportunities for the business as it relates to the current environment during the first and second quarters of 2018.

Fourth Quarter 2017 Financial Position

  • Total loans under administration of $22.51 billion, which includes securitized mortgages that qualify for off-balance sheet accounting, decreased by 14.8% or $3.91 billion from $26.42 billion at the end of 2016, and 3.1% or $719.2 million from $23.23 billion at the end of Q3 2017.
  • Total loans of $15.06 billion declined 16.5% from $18.04 billion at the end of 2016, and 2.4% from $15.43 billion at the end of Q3 2017. 
    • Total mortgages originated of $872.1 million, compared to $2.43 billion in Q4 2016 and $385.1 million in Q3 2017. 
    • Single-family residential mortgage originations of $566.0 million in Q4 2017, compared with $1.78 billion in Q4 2016 and $224.0 million in Q3 2017.
    • Multi-unit residential mortgage originations of $194.8 million, compared to $371.5 million in Q4 2016 and $99.1 million in Q3 2017. Multi-unit residential mortgage originations are mostly insured and subsequently securitized through programs that qualify for off-balance sheet accounting.
    • Non-residential commercial mortgage originations, which include store and apartment mortgages, of $111.2 million, compared to $277.3 million in Q4 2016 and $62.0 million in Q3 2017.
  • Liquid assets were $1.65 billion, compared to $2.07 billion at the end of 2016 and $2.66 billion at September 30, 2017.  The Company maintains a prudent level of liquidity, given the current level of operations, loan balances and the Company's obligations.
  • Total deposits were $12.17 billion, compared to $15.89 billion at the end of 2016 and $13.36 billion at the end of Q3 2017.
    • The decrease in deposits from the end of last year reflects the elevated level of redemptions of the Company's High-Interest Savings Accounts during the Q2 2017 liquidity event and lower funding requirements due to lower loan balances. 
    • The decrease in deposits from the end of last quarter reflects the Company's intentional actions to slow the inflow of deposits to match expected mortgage originations.  During the third quarter, the Company decided to offer premium rates on deposits to increase inflows following the Q2 2017 liquidity event.  The growth of deposits outpaced loan growth and created a drag on earnings. Consequently, by the end of the third quarter, the Company reduced interest rates on new deposits to intentionally lower deposits until mortgage balances began to grow.
    • The Company created net deposits inflows mid-way through the fourth quarter by increasing interest rates paid on new and renewed deposits to meet expected mortgage funding requirements.  It is expected that the Company may be required to offer higher interest rates on new deposits in future periods.  It is assumed that any such increases could be offset by increased interest rates charged on mortgages originated or renewed in future periods. Any inability to pass on any increased funding costs would negatively impact net interest margins.

Credit Quality

The loan portfolio remained strong with the level of credit losses and non-performing loans remaining low. Provision for credit losses (PCL) for the quarter was $3.4 million, compared to $2.4 million in Q4 2016 and a $4.3 million release in Q3 2017.

  • The annualized credit provision as a percentage of gross uninsured loans was 0.12%, compared to 0.07% in Q4 2016 and (0.14)% in Q3 2017. 
    • The increase in the PCL ratio over last year resulted from a specific provision of $2.2 million against one non-residential commercial mortgage.  The negative PCL ratio in the third quarter resulted from the reduction of $6.5 million in the collective allowance for the non-residential commercial portfolio related to asset sales (see Note 5(H) of the consolidated financial statements for more information).  In the absence of this reduction, the PCL ratio in Q3 2017 would have been 0.07%.
  • Net non-performing loans as a percentage of gross loans ended 2017 at 0.30%, compared to 0.28% at the end of Q3 2017 and unchanged from the end of 2016. 
    • Although the percentage of net non-performing loans over gross loans was consistent year over year and sequentially, there was a significant change in the mix of net non-performing residential and commercial mortgages. 
    • The net amount of non-performing non-residential commercial mortgages increased to $13.7 million at Q4 2017 from $4.5 million at Q4 2016 and $6.2 million at Q3 2017, and the net amount of non-performing single-family residential mortgages decreased to $30.1 million from $47.9 million at Q4 2016 and $36.1 million at Q3 2017.
    • Total net non-performing loan balances decreased to $45.4 million at Q4 2017 from $53.7 million at Q4 2016 and increased from $43.6 million at Q3 2017.
  • The Company adopted IFRS 9 beginning January 1, 2018. The impact of the adoption of IFRS 9 is not expected to be significant. Additional information on the impacts of IFRS 9 will be made available in the Company's Report to Shareholders for the first quarter of 2018.

Capital Position

The Company maintained strong capital ratios well above Company targets and regulatory minimums at the end of 2017. Management continues to review opportunities to deploy capital in the most efficient manner to maximize shareholder value.

  • Home Trust's Common Equity Tier 1 and Total capital ratios remained very strong at 23.17% and 23.68%, respectively, at December 31, 2017. The comparative balances were 16.55% and 16.97%, respectively, at December 31, 2016.
  • Home Trust's Leverage ratio was 8.70% at December 31, 2017 and 7.20% at December 31, 2016.

Looking Forward

Looking to 2018, the Company's strong capital position and balance sheet, stable deposit funding base and ample liquidity provide a solid foundation for future investment in the business and to be competitive in the Canadian market.

Management is confident it is well-positioned to deliver sustainable loan growth as well as improved execution and service levels to increase market share. As the business grows, management and the Board are committed to the ongoing enhancement of risk management and corporate governance practices to grow the business responsibly. Creating long-term shareholder value and resuming Home Capital's nearly 30-year track record of profitable growth are priorities for the Company.

(signed)

(signed)

YOUSRY BISSADA   

BRENDA EPRILE                                             

President & Chief Executive Officer

Chair of the Board

February 14, 2018


 

The Company's 2017 Annual and Fourth Quarter Consolidated Financial Report, including Management's Discussion and Analysis, for the three and twelve months ended December 31, 2017 is available at www.homecapital.com and on the Canadian Securities Administrators' website at www.sedar.com.

Fourth Quarter and Year-End 2017 Results Conference Call and Webcast

The conference call will take place on Thursday, February 15, 2018, at 8:00 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. A webcast slide presentation 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 11:00 a.m. ET Thursday, February 15, 2018 and 12:00 a.m. ET Thursday, February 22, 2018 by calling 416-849-0833 or 1-855-859-2056 (enter passcode 8574149). 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.

Financial Highlights

 












For the three months ended

For the year ended

(000s, except Percentage and Per Share Amounts)

December 31

September 30

December 31

December 31

December 31



2017


2017


2016


2017


2016

OPERATING RESULTS











Net Income

$

30,619

$

29,983

$

50,706

$

7,527

$

247,396

Net Interest Income


91,718


88,762


120,620


302,930


485,164

Total Revenue1


109,455


95,407


144,597


291,311


581,959

Diluted Earnings per Share

$

0.38

$

0.37

$

0.79

$

0.10

$

3.71

Return on Shareholders' Equity


6.8%


6.8%


12.6%


0.4%


15.1%

Return on Average Assets


0.7%


0.6%


1.0%


0.0%


1.2%

Net Interest Margin (TEB)2


2.02%


1.85%


2.38%


1.55%


2.37%

Provision as a Percentage of Gross Uninsured Loans (annualized)3


0.12%


(0.14)%


0.07%


0.07%


0.05%

Provision as a Percentage of Gross Loans (annualized)3


0.09%


(0.11)%


0.05%


0.05%


0.04%

Efficiency Ratio (TEB)2


59.8%


62.7%


48.8%


94.0%


40.8%







As at






December 31

September 30

December 31







2017


2017


2016





BALANCE SHEET HIGHLIGHTS











Total Assets

$

17,591,143

$

18,856,294

$

20,528,777





Total Assets Under Administration4


25,040,182


26,659,330


28,917,534





Total Loans5


15,064,424


15,429,650


18,035,317





Total Loans Under Administration4,5


22,513,463


23,232,686


26,424,074





Liquid Assets


1,654,718


2,657,055


2,067,981





Deposits


12,170,454


13,358,618


15,886,030





Shareholders' Equity


1,813,505


1,781,741


1,632,587





FINANCIAL STRENGTH











Capital Measures6











Risk-Weighted Assets

$

6,532,130

$

6,890,938

$

8,643,267





Common Equity Tier 1 Capital Ratio


23.17%


21.25%


16.55%





Tier 1 Capital Ratio


23.17%


21.25%


16.54%





Total Capital Ratio


23.68%


21.74%


16.97%





Leverage Ratio


8.70%


7.89%


7.20%





Credit Quality











Net Non-Performing Loans as a Percentage of Gross Loans


0.30%


0.28%


0.30%





Allowance as a Percentage of Gross Non-Performing Loans


79.5%


82.6%


73.4%





Share Information











Book Value per Common Share

$

22.60

$

22.20

$

25.36





Common Share Price – Close

$

17.31

$

13.89

$

31.34





Dividend paid during the period ended

$

-

$

-

$

0.26





Dividend Payout Ratio


-


-


32.9%





Market Capitalization

$

1,389,058

$

1,114,617

$

2,017,920





Number of Common Shares Outstanding


80,246


80,246


64,388






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

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

3Provision as a percentage of both gross uninsured loans and gross loans for the three months ended September 30, 2017 include a release of $6.5 million in the collective allowance (please see Note 5(H) to the audited consolidated financial statements included in the Company's 2017 Annual and Fourth Quarter Consolidated Financial Report). In the absence of this release, annualized provision for credit losses was 0.07% of gross uninsured loans and 0.06% of gross loans for the three months ended September 30, 2017.

4Total assets and loans under administration include both on- and off-balance sheet amounts.

5Total loans include loans held for sale.

6These figures relate to the Company's operating subsidiary, Home Trust Company.

 

Consolidated Balance Sheets












As at




December 31


September 30


December 31

thousands of Canadian dollars


2017


2017


2016

ASSETS







Cash and Cash Equivalents

$

1,336,138

$

1,058,940

$

1,205,394

Available for Sale Securities


332,468


523,482


534,924

Loans Held for Sale


165,947


74,207


77,918

Loans







Securitized mortgages


2,993,250


2,549,205


2,526,804

Non-securitized mortgages and loans


11,905,227


15,378,826


15,430,595



14,898,477


17,928,031


17,957,399

Collective allowance for credit losses


(33,563)


(37,063)


(37,063)



14,864,914


17,890,968


17,920,336

Other







Restricted assets


437,011


231,235


265,374

Derivative assets


7,325


52,178


37,524

Other assets


336,770


336,077


348,638

Deferred tax assets


9,577


16,362


16,914

Goodwill and intangible assets


100,993


133,581


121,755



891,676


769,433


790,205


$

17,591,143

$

20,317,030

$

20,528,777

LIABILITIES AND SHAREHOLDERS' EQUITY







Liabilities







Deposits







Deposits payable on demand

$

539,364

$

2,432,283

$

2,531,803

Deposits payable on a fixed date


11,631,090


13,261,819


13,354,227



12,170,454


15,694,102


15,886,030

Securitization Liabilities







CMHC-sponsored mortgage-backed security liabilities


1,562,152


930,614


898,386

CMHC-sponsored Canada Mortgage Bond liabilities


1,473,318


1,610,482


1,637,117

Bank-sponsored securitization conduit liabilities


142,279


139,115


114,146



3,177,749


2,680,211


2,649,649

Other







Derivative liabilities


38,728


959


3,490

Other liabilities


360,477


324,070


320,737

Deferred tax liabilities


30,230


38,210


36,284



429,435


363,239


360,511



15,777,638


18,737,552


18,896,190

Shareholders' Equity







Capital stock


231,156


83,975


84,910

Contributed surplus


4,978


4,588


4,562

Retained earnings


1,583,265


1,554,258


1,598,180

Accumulated other comprehensive loss


(5,894)


(63,343)


(55,065)



1,813,505


1,579,478


1,632,587


$

17,591,143

$

20,317,030

$

20,528,777

 

Consolidated Statements of Income














For the three months ended


For the year ended




December 31


September 30


December 31


December 31


December 31

thousands of Canadian dollars, except per share amounts


2017


2017


2016


2017


2016

Net Interest Income Non-Securitized Assets











Interest from loans

$

158,938

$

167,159

$

190,389

$

710,926

$

768,034

Dividends from securities


278


253


2,614


3,117


10,112

Other interest


6,417


4,303


2,514


15,267


11,073




165,633


171,715


195,517


729,310


789,219

Interest on deposits and other


70,330


75,430


78,868


294,685


318,162

Interest and fees on line of credit facility


6,215


11,368


-


148,213


-

Net interest income non-securitized assets


89,088


84,917


116,649


286,412


471,057













Net Interest Income Securitized Loans and Assets











Interest income from securitized loans and assets


22,563


23,130


19,923


89,929


81,705

Interest expense on securitization liabilities


19,933


19,285


15,952


73,411


67,598

Net interest income securitized loans and assets


2,630


3,845


3,971


16,518


14,107













Total Net Interest Income


91,718


88,762


120,620


302,930


485,164

Provision for credit losses


3,434


(4,257)


2,400


7,516


7,890




88,284


93,019


118,220


295,414


477,274

Non-Interest Income (Loss)











Fees and other income


16,346


18,087


17,613


67,932


71,329

Securitization income


1,695


2,525


9,064


12,529


33,797

Gain on acquisition of CFF Bank


-


-


-


-


651

Net realized and unrealized losses on securities


-


(13,155)


-


(90,070)


(175)

Net realized and unrealized losses on derivatives


(304)


(812)


(2,700)


(2,010)


(8,807)



17,737


6,645


23,977


(11,619)


96,795



106,021


99,664


142,197


283,795


574,069












Non-Interest Expenses











Salaries and benefits


17,063


22,610


24,134


98,595


101,880

Premises


3,478


3,283


3,607


13,878


14,505

Other operating expenses


44,949


34,031


43,287


162,407


122,554



65,490


59,924


71,028


274,880


238,939












Income Before Income Taxes


40,531


39,740


71,169


8,915


335,130

Income taxes












Current


8,160


5,839


22,941


(2,475)


90,895


Deferred


1,752


3,918


(2,478)


3,863


(3,161)



9,912


9,757


20,463


1,388

-

87,734

NET INCOME

$

30,619

$

29,983

$

50,706

$

7,527

$

247,396












NET INCOME PER COMMON SHARE











Basic

$

0.38

$

0.37

$

0.79

$

0.10

$

3.71

Diluted

$

0.38

$

0.37

$

0.79

$

0.10

$

3.71

AVERAGE NUMBER OF COMMON SHARES OUTSTANDING











Basic


80,246


80,246


64,479


72,349


66,601

Diluted


80,286


80,246


64,519


72,358


66,668












Total number of outstanding common shares


80,246


80,246


64,388


80,246


64,388

Book value per common share

$

22.60

$

22.20

$

25.36

$

22.60

$

25.36

 

Consolidated Statements of Comprehensive Income







For the three months ended


For the year ended


December 31

September 30

December 31

December 31

December 31

thousands of Canadian dollars

2017

2017

2016

2017

2016












NET INCOME

$

30,619

$

29,983

$

50,706

$

7,527

$

247,396












OTHER COMPREHENSIVE INCOME






















Available for Sale Securities and Retained Interests











Net unrealized gains


1,431


1,483


12,774


19,878


11,852

Net losses reclassified to net income


-


-


-


46,650


204



1,431


1,483


12,774


66,528


12,056

Income tax expense


378


394


3,391


17,644


3,179



1,053


1,089


9,383


48,884


8,877












Cash Flow Hedges











Net unrealized gains (losses) 


356


(467)


(1,677)


(721)


1,035

Net (gains) losses reclassified to net income


(68)


287


174


1,120


1,147



288


(180)


(1,503)


399


2,182

Income tax expense (recovery)


78


(50)


(398)


112


580



210


(130)


(1,105)


287


1,602












Total other comprehensive income


1,263


959


8,278


49,171


10,479












COMPREHENSIVE INCOME

$

31,882

$

30,942

$

58,984

$

56,698

$

257,875

 

Consolidated Statements of Changes in Shareholders' Equity




















Net Unrealized








Losses

Net Unrealized

Total






on Securities and

Losses on

Accumulated






Retained

Cash Flow

Other

Total

thousands of Canadian dollars,

Capital

Contributed

Retained

Interests Available

Hedges,

Comprehensive

Shareholders'

except per share amounts

Stock

Surplus

Earnings

for Sale, After Tax

After Tax

Loss

Equity
















Balance at December 31, 2016

$

84,910

$

4,562

$

1,598,180

$

(53,589)

$

(1,476)

$

(55,065)

$

1,632,587

Comprehensive income


-


-


7,527


48,884


287


49,171


56,698

Stock options settled


548


(141)


-


-


-


-


407

Amortization of fair value of
















employee stock options


-


557


-


-


-


-


557

Repurchase of shares


(267)


-


(5,732)


-


-


-


(5,999)

Issuance of shares


145,965


-


-


-


-


-


145,965

Dividends















($0.26 per share)


-


-


(16,710)


-


-


-


(16,710)

Balance at December 31, 2017

$

231,156

$

4,978

$

1,583,265

$

(4,705)

$

(1,189)

$

(5,894)

$

1,813,505
















Balance at December 31, 2015

$

90,247

$

3,965

$

1,607,833

$

(62,466)

$

(3,078)

$

(65,544)

$

1,636,501

Comprehensive income


-


-


247,396


8,877


1,602


10,479


257,875

Stock options settled


1,984


(530)


-


-


-


-


1,454

Amortization of fair value of
















employee stock options


-


1,127


-


-


-


-


1,127

Repurchase of shares


(7,321)


-


(191,875)


-


-


-


(199,196)

Dividends















($0.98 per share)


-


-


(65,174)


-


-


-


(65,174)

Balance at December 31, 2016

$

84,910

$

4,562

$

1,598,180

$

(53,589)

$

(1,476)

$

(55,065)

$

1,632,587

 

Consolidated Statements of Cash Flows




For the three months ended

For the year ended





December 31


December 31


December 31


December 31

thousands of Canadian dollars


2017


2016


2017


2016

CASH FLOWS FROM OPERATING ACTIVITIES









Net income for the year

$

30,619

$

50,706

$

7,527

$

247,396

Adjustments to determine cash flows relating to operating activities:










Amortization of net discount on securities


-


(79)


(330)


(458)


Provision for credit losses


3,434


2,400


7,516


7,890


Loss on sale of loan portfolio


-


-


18,160


-


Gain on sale of mortgages or residual interest


(163)


(7,006)


(5,695)


(26,972)


Net realized and unrealized losses on securities


-


-


71,910


175


Amortization and impairment losses¹


12,035


18,104


34,345


29,686


Amortization of fair value of employee stock options


(118)


322


557


1,127


Deferred income taxes


1,752


(2,478)


3,863


(3,161)

Changes in operating assets and liabilities










Loans, net of gains or losses on securitization and sales


361,955


(28,184)


2,947,462


253,837


Restricted assets


(147,141)


(34,139)


(171,637)


(69,453)


Derivative assets and liabilities


10,676


15,682


65,836


27,497


Accrued interest receivable


1,385


(506)


10,613


2,668


Accrued interest payable


5,435


(1,855)


3,666


(1,312)


Deposits


(1,188,164)


191,928


(3,715,576)


220,072


Securitization liabilities


(76,930)


(30,562)


528,100


(130,907)


Taxes receivable or payable and other


(13,922)


(1,489)


13,086


2,757

Cash flows (used in) provided by operating activities


(999,147)


172,844


(180,597)


560,842

CASH FLOWS FROM FINANCING ACTIVITIES









Issuance of shares


-


-


145,965


-

Repurchase of shares


-


(5,678)


(5,999)


(199,196)

Exercise of employee stock options


-


856


407


1,454

Repayment of senior debt


-


-


-


(150,000)

Dividends paid to shareholders


-


(16,770)


(16,710)


(65,174)

Cash flows (used in) provided by financing activities


-


(21,592)


123,663


(412,916)

CASH FLOWS FROM INVESTING ACTIVITIES









Activity in securities










Purchases


(73,168)


(2,978)


(378,123)


(203,674)


Proceeds from sales


-


-


491,883


-


Proceeds from maturities


73,701


3,992


84,919


132,932

Purchases of capital assets


(314)


(460)


(1,715)


(2,550)

Capitalized intangible development costs and acquisition of intangible assets


(2,693)


(5,352)


(9,286)


(19,089)

Cash flows (used in) provided by investing activities


(2,474)


(4,798)


187,678


(92,381)

Net increase in cash and cash equivalents during the year


(1,001,621)


146,454


130,744


55,545

Cash and cash equivalents at beginning of the year


-


612,218


1,205,394


1,149,849

Cash and Cash Equivalents at End of the Year

$

(1,001,621)

$

758,672

$

1,336,138

$

1,205,394

Supplementary Disclosure of Cash Flow Information









Dividends received on investments

$

274

$

1,898

$

4,542

$

10,037

Interest received


189,307


212,920


825,030


863,321

Interest paid


95,413


96,675


512,643


388,440

Income taxes paid


6,988


16,314


3,002


84,559

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

 


Net Interest Margin




For the three months ended

For the year ended


December 31

September 30

December 31

December 31

December 31


2017

2017

2016

2017

2016

Net interest margin non-securitized interest-earning assets (non-TEB)

2.46%

2.21%

2.71%

1.79%

2.71%

Net interest margin non-securitized interest-earning assets (TEB)

2.46%

2.21%

2.73%

1.80%

2.73%

Net interest margin CMHC-sponsored securitized assets

0.30%

0.43%

0.53%

0.48%

0.47%

Net interest margin bank-sponsored securitization conduit assets

0.99%

1.17%

1.90%

1.37%

1.90%

Total net interest margin (non-TEB)

2.02%

1.85%

2.36%

1.54%

2.35%

Total net interest margin (TEB)

2.02%

1.85%

2.38%

1.55%

2.37%

Spread of non-securitized loans over deposits and credit facilities

2.84%

2.62%

2.86%

1.96%

2.91%


 

Net Interest Income












For the three months ended


December 31, 2017

September 30, 2017

December 31, 2016

(000s, except %)


Income/

Average


Income/

Average


Income/

Average



Expense

Rate1


Expense

Rate1


Expense

Rate1

Assets










Cash resources and securities

$

6,695

1.12%

$

4,556

0.75%

$

5,128

1.31%

Traditional single-family residential mortgages


115,118

4.88%


122,489

4.82%


131,029

4.75%

ACE Plus single-family residential mortgages


3,732

3.94%


3,612

3.62%


3,344

3.38%

Accelerator single-family residential mortgages2


3,442

3.72%


2,763

3.98%


6,505

2.24%

Residential commercial mortgages


1,881

4.98%


2,063

5.98%


4,291

3.99%

Non-residential commercial mortgages


16,257

6.25%


18,777

6.12%


28,233

5.93%

Credit card loans and lines of credit


8,021

9.03%


8,327

8.99%


8,389

9.02%

Other consumer retail loans


10,487

11.39%


9,128

10.11%


8,598

9.32%

Total non-securitized loans


158,938

5.25%


167,159

5.16%


190,389

4.86%

Taxable equivalent adjustment


100

-


91

-


944

-

Total non-securitized assets


165,733

4.57%


171,806

4.47%


196,461

4.56%

CMHC-sponsored securitized single-family residential mortgages


13,891

2.40%


13,718

2.27%


11,115

2.50%

CMHC-sponsored securitized multi-unit residential mortgages


7,115

5.04%


7,718

5.31%


7,197

4.63%

Assets pledged as collateral for CMHC-sponsored securitization


343

1.20%


122

0.68%


495

1.35%

Total CMHC-sponsored securitized residential mortgages


21,349

2.85%


21,558

2.81%


18,807

2.96%

Bank-sponsored securitization conduit assets


1,214

2.98%

$

1,572

3.26%

$

1,116

3.53%

Total assets

$

188,296

4.15%


194,936

4.06%


216,384

4.24%

Liabilities and shareholders' equity










Deposits and credit facilities

$

76,545

2.41%

$

86,798

2.54%

$

78,868

2.00%

CMHC-sponsored securitization liabilities


19,121

2.51%


18,277

2.37%


15,438

2.41%

Bank-sponsored securitization conduit liabilities


812

2.04%


1,008

2.16%


514

1.61%

Other liabilities and shareholders' equity


-

-


-

-


-

-

Total liabilities and shareholders' equity

$

96,478

2.13%

$

106,083

2.21%

$

94,820

1.86%

Net Interest Income (TEB)

$

91,818


$

88,853


$

121,564


Taxable Equivalent Adjustment


(100)



(91)



(944)


Net Interest Income per Financial Statements

$

91,718


$

88,762


$

120,620



 




2017



2016

(000s, except %)


Income/

Average


Income/

Average



Expense

Rate1


Expense

Rate1

Assets







Cash resources and securities

$

18,384

0.94%

$

21,185

1.25%

Traditional single-family residential mortgages


500,278

4.75%


540,522

4.84%

ACE Plus single-family residential mortgages


14,284

3.61%


11,490

3.31%

Accelerator single-family residential mortgages2


13,974

2.81%


30,935

2.38%

Residential commercial mortgages


13,173

4.84%


17,614

4.12%

Non-residential commercial mortgages


97,421

6.03%


102,465

6.01%

Credit card loans and lines of credit


33,328

8.93%


33,536

8.99%

Other consumer retail loans


38,468

10.11%


31,472

9.22%

Total non-securitized loans


710,926

5.05%


768,034

4.90%

Taxable equivalent adjustment


1,125

-


3,654

-

Total non-securitized assets


730,435

4.56%


792,873

4.56%

CMHC-sponsored securitized single-family residential mortgages


52,053

2.35%


46,642

2.60%

CMHC-sponsored securitized multi-unit residential mortgages


30,782

5.25%


29,866

4.58%

Assets pledged as collateral for CMHC-sponsored securitization


943

1.17%


2,246

0.96%

Total CMHC-sponsored securitized residential mortgages


83,778

2.91%


78,754

2.94%

Bank-sponsored securitization conduit assets


6,151

3.22%


2,951

3.43%

Total assets

$

820,364

4.19%

$

874,578

4.24%

Liabilities and shareholders' equity







Deposits and credit facilities

$

442,898

3.09%

$

315,919

1.99%

Senior debt


-

-


2,243

3.91%

CMHC-sponsored securitization liabilities


69,872

2.41%


66,278

2.44%

Bank-sponsored securitization conduit liabilities


3,539

1.88%


1,320

1.58%

Other liabilities and shareholders' equity


-

-


-

-

Total liabilities and shareholders' equity

$

516,309

2.64%

$

385,760

1.87%

Net Interest Income (TEB)

$

304,055


$

488,818


Taxable Equivalent Adjustment


(1,125)



(3,654)


Net Interest Income per Financial Statements

$

302,930


$

485,164


1 The average is calculated with reference to opening and closing monthly asset and liability and shareholders' equity balances.

2 Residential commercial mortgages include non-securitized multi-unit residential mortgages and commercial mortgages secured by residential property types.

 












Mortgage Advances
















For the three months ended


For the year ended




December 31


September 30


December 31


December 31


December 31

(000s)


2017


2017


2016


2017


2016

Single-family residential mortgages












Traditional

$

515,699

$

201,131

$

1,325,896

$

2,875,535

$

4,991,051


ACE Plus


21,713


1,541


106,477


185,283


407,767


Accelerator


28,635


21,292


346,690


281,773


1,622,003

Residential commercial mortgages












Multi-unit uninsured residential mortgages


17,568


-


53,999


71,854


142,026


Multi-unit insured residential mortgages


177,224


99,054


293,306


599,843


956,406


Other1


-


-


24,179


6,815


50,772

Non-residential commercial mortgages












Stores and apartments


1,870


-


14,878


45,499


80,888


Commercial


109,343


62,047


262,423


654,247


974,864

Total mortgage advances

$

872,052

$

385,065

$

2,427,848

$

4,720,849

$

9,225,777

1 Other residential commercial mortgages include mortgages such as builders' inventory.

 

Provision for Credit Losses and Net Write-offs as a Percentage of Gross Loans on an Annualized Basis



For the three months ended

(000s, except %)

 December 31, 2017

 September 30, 2017

 December 31, 2016



% of Gross


% of Gross


% of Gross


Amount

Loans 1

Amount

Loans1

Amount

Loans1

Provision2










Single-family residential mortgages

$

266

0.01%

$

1,165

0.04%

$

1,029

0.03%

Residential commercial mortgages


(9)

(0.03)%


6

0.02%


2

0.00%

Non-residential commercial mortgages3


2,584

0.99%


202

0.08%


45

0.01%

Credit card loans and lines of credit


485

0.55%


756

0.83%


1,164

1.26%

Other consumer retail loans


108

0.12%


114

0.12%


160

0.17%

Securitized single-family residential mortgages


-

-


-

-


-

-

Securitized multi-unit residential mortgages


-

-


-

-


-

-

Total individual provision


3,434

0.09%


2,243

0.06%


2,400

0.05%

Total collective provision


-

-


(6,500)

(0.17)%


-

-

Total provision

$

3,434

0.09%

$

(4,257)

(0.11)%

$

2,400

0.05%

Net Write-Offs2










Single-family residential mortgages

$

489

0.02%

$

506

0.02%

$

440

0.01%

Residential commercial mortgages


17

0.06%


4

0.02%


2

0.00%

Non-residential commercial mortgages


14

0.01%


33

0.01%


(5)

(0.00)%

Credit card loans and lines of credit4


3,288

3.74%


637

0.70%


469

0.51%

Other consumer retail loans


138

0.15%


73

0.08%


48

0.05%

Securitized single-family residential mortgages


-

-


-

-


-

-

Securitized multi-unit residential mortgages


-

-


-

-


-

-

Net write-offs

$

3,946

0.11%

$

1,253

0.03%

$

954

0.02%


 





(000s, except %)


2017

2016






% of Gross


% of Gross





Amount

Loans1

Amount

Loans1

Provision2










Single-family residential mortgages




$

1,891

0.02%

$

3,917

0.03%

Residential commercial mortgages





16

0.01%


2

0.00%

Non-residential commercial mortgages3





3,196

0.31%


246

0.01%

Credit card loans and lines of credit





5,387

1.53%


2,379

0.64%

Other consumer retail loans





526

0.15%


532

0.14%

Securitized single-family residential mortgages





-

-


-

-

Securitized multi-unit residential mortgages





-

-


-

-

Total individual provision





11,016

0.07%


7,076

0.04%

Total collective provision





(3,500)

(0.02)%


814

0.00%

Total provision




$

7,516

0.05%

$

7,890

0.04%

Net Write-Offs2










Single-family residential mortgages




$

2,467

0.02%

$

3,087

0.02%

Residential commercial mortgages





16

0.01%


2

0.00%

Non-residential commercial mortgages





96

0.01%


515

0.03%

Credit card loans and lines of credit4





5,710

1.62%


1,928

0.52%

Other consumer retail loans





666

0.18%


275

0.07%

Securitized single-family residential mortgages





-

-


-

-

Securitized multi-unit residential mortgages





-

-


-

-

Net write-offs




$

8,955

0.06%

$

5,807

0.03%

1 Gross loans used in the calculation of total Company ratio include securitized on-balance sheet loans.

2 There were no individual provisions, allowances or net write-offs on securitized mortgages.

3 Provision for credit losses includes an individual provision of $2.2 million in Q4 2017 and $2.5 million for the year resulting from a non-residential commercial property that is not considered to be indicative of increased credit exposure in the remainder of the portfolio.

4 Write-offs for credit card loans for the three months ended December 31, 2017 includes $2.3 million related to the non-core prepaid card business which was recognized in provision for credit losses in the first quarter of 2017.

 

Loans by Geographic Region and Type (net of individual allowances for credit losses)














(000s, except %)




As at December 31, 2017


British








Columbia

Alberta

Ontario

Quebec


Other


Total

Securitized single-family residential mortgages1

$

228,024

$

278,110

$

1,666,337

$

84,977

$

177,760

$

2,435,208

Securitized multi-unit residential mortgages


84,860


44,728


227,686


45,664


155,104


558,042

Total securitized mortgages


312,884


322,838


1,894,023


130,641


332,864


2,993,250

Single-family residential mortgages


525,998


366,537


8,687,274


251,240


204,473


10,035,522

Residential commercial mortgages2


9,819


1,924


96,817


3,037


2,760


114,357

Non-residential commercial mortgages


18,853


10,638


986,723


24,190


2,449


1,042,853

Credit card loans and lines of credit


6,193


17,183


321,114


1,473


5,642


351,605

Other consumer retail loans


1,948


11,476


330,119


195


17,152


360,890

Total non-securitized mortgages and loans3


562,811


407,758


10,422,047


280,135


232,476


11,905,227


$

875,695

$

730,596

$

12,316,070

$

410,776

$

565,340

$

14,898,477

As a % of portfolio


5.9%


4.9%


82.6%


2.8%


3.8%


100.0%














(000s, except %)










As at September 30, 2017



British













Columbia


Alberta


Ontario


Quebec


Other


Total

Securitized single-family residential mortgages1

$

243,686

$

278,181

$

1,776,505

$

89,518

$

175,379

$

2,563,269

Securitized multi-unit residential mortgages


85,277


45,009


238,250


46,168


155,933


570,637

Total securitized mortgages


328,963


323,190


2,014,755


135,686


331,312


3,133,906

Single-family residential mortgages


554,951


359,120


9,044,266


261,728


179,204


10,399,269

Residential commercial mortgages2


9,751


3,789


83,033


3,039


75


99,687

Non-residential commercial mortgages


3,783


13,631


997,287


15,738


2,510


1,032,949

Credit card loans and lines of credit


6,515


17,674


330,256


1,549


5,793


361,787

Other consumer retail loans


2,088


16,963


330,142


218


12,321


361,732

Total non-securitized mortgages and loans3


577,088


411,177


10,784,984


282,272


199,903


12,255,424


$

906,051

$

734,367

$

12,799,739

$

417,958

$

531,215

$

15,389,330

As a % of portfolio


5.9%


4.8%


83.2%


2.7%


3.5%


100.0%














(000s, except %)










As at December 31, 2016



British













Columbia


Alberta


Ontario


Quebec


Other


Total

Securitized single-family residential mortgages1

$

200,882

$

211,131

$

1,298,919

$

68,229

$

127,450

$

1,906,611

Securitized multi-unit residential mortgages


86,479


45,819


281,923


47,638


158,334


620,193

Total securitized mortgages


287,361


256,950


1,580,842


115,867


285,784


2,526,804

Single-family residential mortgages


688,939


401,820


10,796,570


326,253


208,426


12,422,008

Residential commercial mortgages2


15,387


21,271


232,819


24,058


11,653


305,188

Non-residential commercial mortgages


48,335


58,688


1,795,461


35,820


16,516


1,954,820

Credit card loans and lines of credit


7,548


20,265


333,903


1,253


6,709


369,678

Other consumer retail loans


950


20,492


354,356


-


3,103


378,901

Total non-securitized mortgages and loans3


761,159


522,536


13,513,109


387,384


246,407


15,430,595


$

1,048,520

$

779,486

$

15,093,951

$

503,251

$

532,191

$

17,957,399

As a % of portfolio


5.8%


4.3%


84.1%


2.8%


3.0%


100.0%

1 Securitized single-family residential mortgages include both CMHC-sponsored securitized insured mortgages and bank-sponsored securitization conduit uninsured mortgages.

2 Residential commercial mortgages include non-securitized multi-unit residential mortgages and commercial mortgages secured by residential property types.

3 Loans exclude mortgages held for sale.

 

Impaired Loans and Individual Allowances for Credit Losses




















(000s, except %)






As at December 31, 2017


Single-family


Residential

Non-residential


Credit Card


Other





Residential


Commercial


Commercial


Loans and


Consumer





 Mortgages


 Mortgages


 Mortgages

Lines of Credit

Retail Loans


Total

Gross amount of impaired loans

$

31,836

$

-

$

16,489

$

2,038

$

276

$

50,639

Individual allowances on principal


(1,729)


-


(2,750)


(457)


(276)


(5,212)

Net amount of impaired loans

$

30,107

$

-

$

13,739

$

1,581

$

-

$

45,427

Net impaired loans as a % of gross loans


0.30%


-


1.31%


0.45%


-


0.30%














(000s, except %)









As at September 30, 2017



Single-family


Residential

Non-residential


Credit Card


Other





Residential


Commercial


Commercial


Loans and


Consumer





 Mortgages


 Mortgages


 Mortgages

Lines of Credit

Retail Loans


Total

Gross amount of impaired loans

$

37,978

$

337

$

6,521

$

4,230

$

304

$

49,370

Individual allowances on principal


(1,860)


-


(300)


(3,260)


(304)


(5,724)

Net amount of impaired loans

$

36,118

$

337

$

6,221

$

970

$

-

$

43,646

Net impaired loans as a % of gross loans


0.35%


-


0.60%


0.27%


-


0.28%














(000s, except %)









As at December 31, 2016



Single-Family


Residential

Non-Residential


Credit Card


Other





Residential


Commercial


Commercial


Loans and


Consumer





 Mortgages


 Mortgages


 Mortgages

Lines of Credit

Retail Loans


Total

Gross amount of impaired loans

$

49,834

$

-

$

4,577

$

2,049

$

411

$

56,871

Individual allowances on principal


(1,980)


-


(30)


(780)


(411)


(3,201)

Net amount of impaired loans

$

47,854

$

-

$

4,547

$

1,269

$

-

$

53,670

Net impaired loans as a % of gross loans


0.39%


0.00%


0.23%


0.34%


-


0.30%

 

Allowance for Credit Losses


















(000s)






For the three months ended December 31, 2017


Single-family

Residential

Non-residential


Credit Card


Other




Residential

Commercial


Commercial


Loans and

Consumer





Mortgages

Mortgages


Mortgages

Lines of Credit

Retail Loans


Total

Individual allowances













Allowance on loan principal













Balance at the beginning of the period

$

1,860

$

-

$

300

$

3,260

$

304

$

5,724

Provision for credit losses


358


17


2,464


485


110


3,434

Write-offs1


(760)


(17)


(21)


(3,366)


(186)


(4,350)

Recoveries


271


-


7


78


48


404



1,729


-


2,750


457


276


5,212

Allowance on accrued interest receivable













Balance at the beginning of the period


1,108


26


358


-


9


1,501

Provision for credit losses


(92)


(26)


120


-


(2)


-



1,016


-


478


-


7


1,501

Total individual allowance


2,745


-


3,228


457


283


6,713

Collective allowance













Balance at the beginning of the period


23,032


327


6,000


3,904


300


33,563

Provision for credit losses2


(2,692)


-


-


(808)


3,500


-



20,340


327


6,000


3,096


3,800


33,563

Total allowance

$

23,085

$

327

$

9,228

$

3,553

$

4,083

$

40,276

Total provision

$

(2,426)

$

(9)

$

2,584

$

(323)

$

3,608

$

3,434














(000s)






For the three months ended September 30, 2017


Single-family

Residential

Non-residential


Credit Card


Other




Residential

Commercial


Commercial


Loans and

Consumer





Mortgages

Mortgages


Mortgages

Lines of Credit

Retail Loans


Total

Individual allowances













Allowance on loan principal













Balance at the beginning of the period

$

1,302

$

-

$

141

$

3,141

$

264

$

4,848

Provision for credit losses


1,064


4


192


756


113


2,129

Write-offs


(651)


(4)


(33)


(705)


(136)


(1,529)

Recoveries


145


-


-


68


63


276



1,860


-


300


3,260


304


5,724

Allowance on accrued interest receivable













Balance at the beginning of the period


1,007


24


348


-


8


1,387

Provision for credit losses


101


2


10


-


1


114



1,108


26


358


-


9


1,501

Total individual allowance


2,968


26


658


3,260


313


7,225

Collective allowance













Balance at the beginning of the period


23,032


327


12,500


3,904


300


40,063

Provision for credit losses2


-


-


(6,500)


-


-


(6,500)



23,032


327


6,000


3,904


300


33,563

Total allowance

$

26,000

$

353

$

6,658

$

7,164

$

613

$

40,788

Total provision

$

1,165

$

6

$

(6,298)

$

756

$

114

$

(4,257)














(000s)






For the three months ended December 31, 2016


Single-family


Residential

Non-residential


Credit Card


Other





Residential


Commercial


Commercial


Loans and


Consumer





Mortgages


Mortgages


Mortgages

Lines of Credit

Retail Loans


Total

Individual allowances













Allowance on loan principal













Balance at the beginning of the period

$

1,637

$

-

$

20

$

85

$

302

$

2,044

Provision for credit losses


783


2


5


1,164


157


2,111

Write-offs


(619)


(2)


(5)


(493)


(126)


(1,245)

Recoveries


179


-


10


24


78


291



1,980


-


30


780


411


3,201

Allowance on accrued interest receivable













Balance at the beginning of the period


1,095


-


58


-


9


1,162

Provision for credit losses


246


-


40


-


3


289



1,341


-


98


-


12


1,451

Total individual allowance


3,321


-


128


780


423


4,652

Collective allowance













Balance at the beginning of the period


23,032


327


9,500


3,904


300


37,063

Provision for credit losses


-


-


-


-


-


-



23,032


327


9,500


3,904


300


37,063

Total allowance

$

26,353

$

327

$

9,628

$

4,684

$

723

$

41,715

Total provision

$

1,029

$

2

$

45

$

1,164

$

160

$

2,400














(000s)






2017


Single-family

Residential

Non-residential


Credit Card


Other





Residential

Commercial

Commercial


Loans and


Consumer





Mortgages

Mortgages

Mortgages

Lines of Credit

Retail Loans


Total

Individual allowances













Allowance on loan principal













Balance at the beginning of the year

$

1,980

$

-

$

30

$

780

$

411

$

3,201

Provision for credit losses


2,216


16


2,816


5,387


531


10,966

Write-offs


(3,120)


(21)


(103)


(5,968)


(847)


(10,059)

Recoveries


653


5


7


258


181


1,104



1,729


-


2,750


457


276


5,212

Allowance on accrued interest receivable













Balance at the beginning of the year


1,341


-


98


-


12


1,451

Provision for credit losses


(325)


-


380


-


(5)


50



1,016


-


478


-


7


1,501

Total individual allowance


2,745


-


3,228


457


283


6,713

Collective allowance













Balance at the beginning of the year


23,032


327


9,500


3,904


300


37,063

Provision for credit losses2


(2,692)


-


(3,500)


(808)


3,500


(3,500)



20,340


327


6,000


3,096


3,800


33,563

Total allowance

$

23,085

$

327

$

9,228

$

3,553

$

4,083

$

40,276

Total provision

$

(801)

$

16

$

(304)

$

4,579

$

4,026

$

7,516














(000s)






2016


Single-family

Residential

Non-residential


Credit Card


Other





Residential

Commercial

Commercial


Loans and


Consumer





Mortgages

Mortgages

Mortgages

Lines of Credit

Retail Loans


Total

Individual allowances













Allowance on loan principal













Balance at the beginning of the year

$

1,652

$

-

$

340

$

329

$

161

$

2,482

Provision for credit losses


3,415


2


205


2,379


525


6,526

Write-offs


(3,608)


(2)


(537)


(2,117)


(519)


(6,783)

Recoveries


521


-


22


189


244


976



1,980


-


30


780


411


3,201

Allowance on accrued interest receivable













Balance at the beginning of the year


839


-


57


-


5


901

Provision for credit losses


502


-


41


-


7


550



1,341


-


98


-


12


1,451

Total individual allowance


3,321


-


128


780


423


4,652

Collective allowance













Balance at the beginning of the year


22,232


327


9,500


3,890


300


36,249

Provision for credit losses


800


-


-


14


-


814



23,032


327


9,500


3,904


300


37,063

Total allowance

$

26,353

$

327

$

9,628

$

4,684

$

723

$

41,715

Total provision

$

4,717

$

2

$

246

$

2,393

$

532

$

7,890


1 Write-offs in the credit card and line of credit portfolio include $2.3 million related to the non-core prepaid card business that was recognized as provision for credit losses in Q1 2017.

2 The following changes were recognized in the collective allowance:

Single-family residential mortgage portfolio – reduction of $2.7 million reflecting the decrease in the portfolio size, decreased loss rates and continued low levels of loans in arrears.

Non-residential commercial mortgages portfolio – net reduction of $3.5 million comprises a reduction of $6.5 million reflecting the sale of mortgages from this portfolio (please see Note 5(H) to the audited consolidated financial statements included in the Company's 2017 Annual and Fourth Quarter Consolidated Financial Report) offset partially by an increase of $3.0 million reflecting an increase in the construction and land segment of that portfolio.

Credit card loans and lines of credit portfolio – reduction of $0.8 million reflecting the decrease in the portfolio size, decreased loss rates and continued low levels of loans in arrears.

Other consumer retail loans portfolio – increase of $3.5 million reflects recent settlement experience related to cash reserves on certain programs within this portfolio.          

There were no individual provisions, allowances or net write-offs on securitized residential mortgages.

Securitization Activities


























(000s)










For the three months ended





December 31



September 30







2017






2017


Single-family

Multi-unit



Single-family

Multi-unit




Residential MBS

Residential MBS

Total MBS

Residential MBS

Residential MBS

Total MBS

Carrying value of underlying mortgages derecognized

$

-

$

51,869

$

51,869

$

-

$

58,905

$

58,905

Net gains on sale of mortgages or residual interest1


-


163


163


-


434


434

Retained interests recorded


-


2,730


2,730


-


2,349


2,349

Servicing liability recorded


-


444


444


-


480


480














(000s)








For the three months ended








December 31













2016






Single-family

Multi-unit








Residential MBS

Residential MBS

Total MBS

Carrying value of underlying mortgages derecognized







$

392,298

$

314,985

$

707,283

Net gains on sale of mortgages or residual interest1








4,284


2,722


7,006

Retained interests recorded








-


10,004


10,004

Servicing liability recorded








-


2,408


2,408














(000s)


2017


2016


Single-family

Multi-Unit



Single Family

Multi-Unit




Residential MBS

Residential MBS

Total MBS

Residential MBS

Residential MBS

Total MBS

Carrying value of underlying mortgages derecognized

$

288,458

$

510,813

$

799,271

$

1,490,850

$

1,046,457

$

2,537,307

Net gains on sale of mortgages or residual interest1


2,084


3,611


5,695


17,368


9,604


26,972

Retained interests recorded


-


20,815


20,815


-


41,900


41,900

Servicing liability recorded


-


4,943


4,943


-


8,955


8,955

1 Gains on sale of mortgages and residual interest are net of hedging impact.

 





(000s)



For the three months ended


December 31, 2017

September 30, 2017

December 31, 2016

Net gain on sale of mortgages and residual interest1


$

163

$

434

$

7,006

Net change in unrealized gain or loss on hedging activities



(137)


349


276

Servicing income



1,669


1,742


1,782

Total securitization income


$

1,695

$

2,525

$

9,064








(000s)




2017


2016

Net gain on sale of mortgages and residual interest 1



$

5,695

$

26,972

Net change in unrealized gain or loss on hedging activities




(247)


399

Servicing income




7,081


6,426

Total securitization income



$

12,529

$

33,797

1 Gains on sale of mortgages and residual interest are net of hedging impact.

Management's Responsibility for Financial Information

The Company's Audit Committee reviewed this document along with the Company's 2017 Annual and Fourth Quarter Consolidated Financial Report.  The Company's Board of Directors approved both documents prior to their release. A full description of management's responsibility for financial information is included in the Company's 2017 Annual and Fourth Quarter 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 in the Risk Management section of the Company's 2017 Annual and Fourth Quarter Consolidated Financial 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 Outlook section in the Annual 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. 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 2018 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 setting and reviewing its strategic priorities and outlook for 2018, management's expectations continue to assume:

  • The Canadian economy is expected to be relatively stable in 2018, 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.
  • While the Company is assuming that interest rates will experience modest increases in 2018, the impact of such increases is not expected to be material. The level of interest rates 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 2018 Overall Outlook section of the Company's 2017 Annual and Fourth Quarter Consolidated Financial 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 of the Company's 2017 Annual and Fourth Quarter Consolidated Financial 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/February2018/14/c4251.html

Laura Lepore, Assistant Vice President, Investor Relations, (416) 933-5652, laura.lepore@hometrust.caCopyright CNW Group 2018

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