Home Capital Reports Solid Fourth Quarter and Annual Results

  • Basic earnings per share were $1.70 for the quarter and $6.40 for 2012, up 17.2% and 16.8%, respectively, from the $1.45 and $5.48 in the comparative periods.
  • Net income for 2012 was $222.0 million, an increase of 16.8% over 2011.
  • Return on equity for the year was 25.5%, surpassing 20% for the 15th consecutive year and 25% for the 10th consecutive year.

TORONTO, Feb. 13, 2013 /CNW/ - Home Capital Group Inc. (TSX: HCG) today reported strong results for the fourth quarter and for the year, meeting the Company's targets for growth in net income and earnings per share and recording annual return on equity in excess of 25% for 10 consecutive years and surpassing 20% for 15 consecutive years.

"Despite a slowing housing market, tighter mortgage lending rules and challenging economic conditions in the US and Europe, the Canadian economy has proved resilient. The Company was well positioned in 2012 to deliver strong growth in our core business and consistent net interest margins that led to increased profits." commented CEO Gerald Soloway.  "We have a proven business model and continue to execute well on our strategy."

The Company's Annual and Fourth Quarter Consolidated Financial Report, including Management's Discussion and Analysis, for each of the three- and twelve-month periods ended December 31, 2012 is available at www.homecapital.com and on the Canadian Securities Administrators' website at www.sedar.com.

Financial Highlights                    
                     
(000s, except Per Share and Percentage Amounts)       For the three months ended   For the year ended
    December 31   September 30   December 31   December 31   December 31
    2012    2012    2011    2012    2011 
OPERATING RESULTS                    
Net Income $ 58,965  $ 57,254  $ 50,280  $ 221,983  $ 190,080 
Total Revenue   227,649    226,603    208,399    887,685    790,274 
Earnings per Share - Basic $ 1.70  $ 1.65  $ 1.45  $ 6.40  $ 5.48 
Earnings per Share - Diluted   1.70    1.65    1.45    6.38    5.46 
Return on Shareholders' Equity   25.0%   25.6%   26.7%   25.5%   27.1%
Return on Average Assets   1.2%   1.2%   1.2%   1.2%   1.1%
Net Interest Margin (TEB)   2.13%   2.14%   2.06%   2.09%   2.06%
Net Interest Margin Non-Securitized Assets (TEB)   3.11%   3.17%   3.03%   3.10%   3.04%
Net Interest Margin Securitized Assets   0.79%   0.89%   1.16%   0.93%   1.24%
Provision as a Percentage of Gross Loans (annualized)   0.09%   0.10%   0.07%   0.09%   0.05%
Efficiency Ratio (TEB)   27.3%   28.1%   27.1%   27.7%   27.9%
As at   December 31   September 30   December 31        
    2012    2012    2011         
BALANCE SHEET HIGHLIGHTS                    
Total Assets $ 18,800,079  $ 19,241,999  $ 17,696,471         
Total Assets Under Administration   19,681,750    19,410,132    17,696,471         
Total Loans   16,904,435    17,292,395    16,089,648         
Securitized Loans On-Balance Sheet   6,450,682    7,238,946    8,243,350         
Total Loans Under Administration   17,786,106    17,460,528    16,089,648         
Liquid Assets   771,772    998,219    808,222         
Deposits   10,136,599    9,870,691    7,922,124         
Shareholders' Equity   968,213    919,618    774,785         
FINANCIAL STRENGTH                    
Capital Measures                    
Risk-Weighted Assets $ 5,491,513  $ 5,271,674  $ 4,549,696         
Tier 1 Capital Ratio   17.01%   16.97%   17.29%        
Total Capital Ratio   20.68%   20.78%   20.46%        
Assets to Regulatory Capital Multiple   13.98    14.07    14.44         
Credit Quality                    
Net Non-Performing Loans as a Percentage of Gross Loans   0.33%   0.28%   0.25%        
Allowance as a Percentage of Gross Non-Performing Loans   57.0%   64.7%   74.9%        
Share Information                    
Book Value per Common Share $ 27.96  $ 26.53  $ 22.38         
Common Share Price - Close $ 59.07  $ 51.44  $ 49.10         
Market Capitalization $ 2,045,594  $ 1,783,322  $ 1,700,088         
Number of Common Shares Outstanding   34,630    34,668    34,625         
1 See definition of Taxable Equivalent Basis (TEB) under Non-GAAP Measures in the Company's 2012 Annual and Fourth Quarter Consolidated Financial Report.
2 Total assets under administration include total on-balance sheet assets and off-balance sheet loans
3 Total loans include loans held for sale.
4 Total Loans under administration include total loans and off-balance sheet loans.
5 These figures relate to the Company's operating subsidiary, Home Trust Company.
             
2012 Targets and Performance            
               
        For the year ended December 31, 2012
  2012 Targets Actual Results   Amount Increase over 2011
Growth in net income 13%-18% 16.8% $ 221,983  $ 31,903 
Growth in diluted earnings per share 13%-18% 16.8%   6.38    0.92 
Growth in total loans 13%-18% 5.1%   16,904,435    814,787 
Return on shareholders' equity 20.0% 25.5%        
Efficiency ratio (TEB) 28.0%-34.0% 27.7%        
Capital ratios            
  Tier 1 Minimum of 13% 17.01%        
  Total Minimum of 14% 20.68%        
Provision as a percentage of gross loans 0.05%-0.15% 0.09%        
1     Includes loans held for sale.
2 See definition of Taxable Equivalent Basis (TEB) under Non-GAAP Measures in the Management's Discussion and Analysis included in the Company's 2012 Annual and Fourth Quarter Consolidated Financial Report.
3 Based on the Company's wholly owned subsidiary, Home Trust Company.

The Company was successful in meeting or exceeding all of its performance targets in 2012 except for growth in total loans. The Company was able to achieve its profit objectives with lower loan growth by focusing on higher yielding core mortgages, balancing its profit objectives with maintaining strong capital ratios under the Basel II and upcoming Basel III frameworks.  Total loans were also reduced during the year by $896.0 million for loans that qualified for off-balance sheet treatment in 2012.  Including these loans, growth was 10.5% over 2011.

FOURTH QUARTER AND 2012 HIGHLIGHTS

The Company recorded another period of solid performance in the fourth quarter of 2012 and for the year. Key results for the fourth quarter of 2012 and the year are as follows:

Net income was $59.0 million in the fourth quarter and $222.0 million for the year, increasing 17.3% over the comparable quarter of 2011 and 16.8% over 2011. Sequentially in 2012, fourth quarter net income increased by 3.0% over third quarter net income. The annual results were well within the Company's 2012 objective of 13% to 18% growth in net income over 2011, and reflect the strong loan growth in the traditional portfolio, strengthening total net interest margin, continued low provisions for credit losses and a low efficiency ratio.
 
Basic and diluted earnings per share reached $1.70 for the fourth quarter and $6.40 and $6.38, respectively, for the year.  This represents an increase of 17.2% from the $1.45 basic and diluted earnings per share in the fourth quarter of 2011 and increases of 16.8% over the $5.48 and $5.46 basic and diluted earnings per share earned in 2011. These results are well within the Company's 2012 annual objective of 13% to 18% growth in diluted earnings per share.
 
Return on equity was 25.0% in the quarter and 25.5% for 2012, well in excess of the Company's minimum performance objective of 20% for the fifteenth consecutive year and exceeding 25% for the tenth consecutive year.
 
During the fourth quarter of 2012 the Company completed the sale of residual interests in National Housing Authority (NHA) mortgage-backed security (MBS) loan securitizations related to $662.2 million in existing on-balance sheet mortgages, leading to off-balance accounting for the mortgages and a gain on sale of $4.8 million. As of the date of the Management's Discussion and Analysis (MD&A) the regulatory treatment for these transactions has not been confirmed. For purposes of the calculation of the assets to capital multiple (ACM) the Company has included these off-balance sheet mortgages in the determination of regulatory balance sheet assets. While the ultimate regulatory treatment will impact the Company's volume of sales of residual interests in securitization transactions, it expects to continue sales when the economic returns are favourable.
 
The securitization gains were partly offset by $3.6 million in charges recorded in derivative gains and losses.  These charges relate to the reversal of gains on derivatives recorded prior to adoption of International Financial Reporting Standards (IFRS) and are charged to income as the related CMB bonds mature.  See the Non-Interest Income section of the MD&A report for a discussion of the derivative gains and losses.
 
Net interest income rose to $99.9 million in the fourth quarter and to $381.5 million for the year. This represents an increase of 13.0% over the $88.4 million recorded in the fourth quarter of 2011 and 14.2% over the $334.0 million recorded in 2011. Net interest income increased marginally over the $99.5 million recorded in the third quarter of 2012. The growth in total net interest income quarter over quarter was reduced as a result of the sale of the residual interests in securitization transactions discussed above, as the interest income associated with such securitized mortgages is no longer reflected in interest income.  Net interest income on non-securitized assets of $85.1 million in the fourth quarter was up 3.8% from $81.9 million in the third quarter and 34.6% from the $63.2 million reported in the fourth quarter of 2011.
 
Net interest margin (TEB) was 2.13% in the fourth quarter and 2.09% for the year 2012 compared to 2.06% in the fourth quarter of 2011 and for the year 2011. Net interest margin (TEB) was 2.14% in the third quarter of 2012. Total net interest margin is influenced by the mix of the loan portfolio between securitized and non-securitized mortgages and the net interest margin on each of these portfolios. Beginning in 2011 and continuing through 2012 the weighting of lower yielding securitized mortgages in the total portfolio declined, generally leading to higher total net interest margins. The net interest margin on the non-securitized portfolio also generally improved over that period, with some fluctuations quarter to quarter. The fourth quarter net interest margin for non-securitized mortgages was 3.11%, a decline from 3.17% in the third quarter. This is due to a change in the mix of the non-securitized portfolio and the spreads achieved in the quarter. The securitized net interest margin was 0.79% in the fourth quarter compared to 0.89% in the third quarter, which reflects the maturity of higher yielding Canada Mortgage Bond (CMB) mortgages during the quarter and lower yielding replacement assets in the program.
 
The credit performance of the loans portfolio remained strong in the fourth quarter and for the year. Net non-performing loans ended 2012 at 0.33% of the total loans portfolio compared to 0.25% at the end of 2011 and 0.28% at the end of the third quarter of 2012, with the increase reflecting the relatively higher proportion of uninsured mortgages in the total portfolio in the portfolio. The provision for credit losses for the fourth quarter was 0.09% of gross loans on an annualized basis and 0.09% for the year compared to 0.07% in the comparable quarter of 2011 and 0.05% in 2011 and 0.10% in the third quarter of 2012.  This reflects a year-over-year increase in the proportion of uninsured mortgages. The 2012 results are within the Company's objective of provisions being 0.05% to 0.15% of gross loans. Total write-offs remain low and were $3.6 million in the quarter compared to $5.1 million the comparable quarter of 2011 and $3.4 million last quarter.
 
Home Trust's Tier 1 and Total capital ratios remained very strong at 17.01% and 20.68%, respectively, at December 31, 2012, and well above Company and regulatory minimum targets.  Home Trust's ACM was 13.98 at December 31, 2012 compared to 14.44 at December 31, 2011 and 14.07 at September 30, 2012. In the first quarter of 2013, the Company will be required to adopt the new capital requirements known as Basel III. Based on the Office of the Superintendent of Financial Institutions Canada's (OSFI) implementation requirements, the Company remains well capitalized under Basel III measurements. At December 31, 2012, the Company's  Basel III ratios are as follows:
 
  "all-in" Common Equity Tier 1 capital ratio of 16.09%,  
 
  "all-in" Tier 1 Capital Ratio of 16.11%,  
 
  "all-in" Total Capital Ratio of 19.82%  
 
  transitional ACM of 14.12  
   
  The Basel III capital ratios remain well in excess of the targets set out by OSFI for 2013 and 2014. Please see the Capital Management section of the annual MD&A for further information.
   
Total loans increased by $0.81 billion in 2012 to $16.90 billion, representing growth of 5.1% over the $16.09 billion at the end of 2011 and decreased by 2.2% or $0.39 billion from the $17.29 billion at the end of the third quarter of 2012.  Total loans under administration (which includes all loans carried on the balance sheet plus off-balance sheet securitized loans) increased by $1.70 billion in 2012 to $17.79 billion, representing growth of 10.5% over the $16.09 billion at the end of 2011 and 1.9% or $0.33 billion from the $17.46 billion at the end of the third quarter of 2012. Loan growth was below the Company's 2012 objective of 13% to 18%, while profitability was within targets due to additional focus on the Company's traditional mortgages portfolio.
   
The total value of mortgages originated in the fourth quarter of 2012 was $1.47 billion and $6.01 billion for the year, compared to $1.25 billion in the fourth quarter of 2011 and $5.12 billion for the year.  Total originations were $1.68 billion in the third quarter of 2012. The year-over-year increase in originations reflects increased focus on and increased demand for the Company's traditional mortgage products. Compared to the third quarter, a decline in originations reflects normal and expected seasonal factors.  The Company has generally observed increased credit quality on new originations.
 
The Company originated $1.16 billion of traditional mortgages in the fourth quarter and $4.56 billion for the year, compared to $0.95 billion and $3.51 billion in the comparative periods of 2011 and $1.26 billion in the third quarter of 2012.
   
Accelerator (insured) mortgage originations were $174.2 million in the fourth quarter of 2012 and $804.7 million for the year, compared to $188.5 million and $1.10 billion in the comparative periods of 2011 and $236.7 million in the third quarter of 2012.
   
Multi-unit residential originations were $57.2 million for the fourth quarter of 2012 and $286.9 million for the year, compared to $6.5 million and $137.0 million in the same periods of 2011 and $114.3 million in the third quarter of 2012. A significant portion of multi-unit residential mortgages originated in 2012 are insured and securitized through programs that qualify for off-balance sheet accounting. The Company sold $64.6 million through these programs in the fourth quarter and recognized $0.8 million in gains and $233.9 million for $3.3 million in gains for the year. The Company did not participate in this program in 2011.
   
Non-residential mortgage advances were $52.4 million in the fourth quarter of 2012 and $210.2 million for the year, compared to $41.5 million and $182.2 million in the comparative periods of 2011 and $46.6 million in the third quarter of 2012. The Company continues to maintain a cautious approach to increases in this portfolio.
   
Store and apartment advances were $24.8 million for the quarter and $118.7 million for the year, compared to $35.5 million and $123.0 million in the same periods in 2011 and $18.2 million in the third quarter of 2012.
   
The mortgage lending segment recorded net income of $53.7 million in the fourth quarter and $198.4 million for 2012, increasing from $42.7 million and $155.3 million in the same periods in 2011. This reflects strong originations in the traditional portfolio coupled with strong net interest margins in that portfolio. The securitized mortgage portfolio balance, while declining, continues to contribute to the net income of the segment.
   
The consumer lending segment recorded net income of $8.4 million in the fourth quarter and $32.7 million for the year compared to $7.6 million and $30.1 million in the comparative periods of 2011. The Company opened 716 new Equityline Visa accounts in the fourth quarter and 3,484 for the year compared to 1,814 accounts and 7,697 accounts opened in the same periods in 2011. The consumer lending segment also added $49.9 million in receivables in the retail credit portfolio in the fourth quarter and $98.7 million for the year, compared to $14.5 million and $57.1 million in the comparative periods of 2011.

Subsequent to the end of the quarter, and in light of the Company's solid performance, profitability and strong financial position, the Board of Directors declared a quarterly dividend of $0.26 per Common share, payable on March 1, 2013 to shareholders of record at the close of business on February 25, 2013.

2013 Overall Outlook

Supported by the stable Canadian economy and healthy real estate market in 2012, the Company continued to reposition the lending portfolio to take advantage of the attractive returns available in the alternative mortgage space, the Company's traditional business. This business, which is within the Company's risk appetite, provides superior returns on the allocated capital. In 2013, the continued expansion of the traditional business will be accompanied by commensurate strengthening of governance, risk management and control processes, through further investment in tools, technology and people. The Company will continue to offer insured mortgages through the Accelerator program, supporting the Company's "one-stop" and "flexible lending solutions" strategies. The Company will also continue to increase its presence in suitable urban and suburban markets across Canada. Additional focus will be placed on growth of the Company's high margin non-residential and consumer lending portfolios within the Company's risk tolerance.

The Company expects supply and demand in the real estate market to remain balanced in 2013, with softening conditions in most markets when compared to the activity levels of recent years. The Company believes that uncertainty in global economic conditions will continue to pose risks to the Canadian economy. The tightening of mortgage underwriting requirements and changes in mortgage insurance qualification rules in 2012 can be expected to continue to dampen the level of activity in the real estate market in 2013.  The Company believes that slowing housing activity will lead to healthier real estate markets overall that are supported by continued low interest rates, stable to improving employment, stable net immigration and good housing affordability. The Company expects continued strong demand for its traditional mortgage and other retail products, reflecting balanced real estate markets and increased market share.

In view of the continued uncertainty and risk within the global financial environment, the Company will continue to maintain relatively high levels of liquidity and low overall leverage, as measured by the ACM, to provide safety and soundness for depositors. To support this conservative approach to liquidity and leverage, the Company will continue to pursue opportunities for revenue contributions from fees, loan sales and sales of residual interests in loan securitizations.

The Company expects that the rate of growth in the Company's non-securitized loan portfolio in 2013 will be relatively consistent with the growth rate experienced in 2012. The traditional mortgage business is expected to maintain strong net interest margin and net interest income levels, while net interest margins on securitized assets continue to decline as older securitization programs reach maturity. The decline primarily reflects a combination of two factors: spreads on new securitization transactions are generally lower than the spreads earned on the maturing programs and the assets provided as replacement assets in the CMB program are generally lower yielding as compared to the maturing or discharging assets. While the Company actively hedges the CMB reinvestment risk, the structure of the hedges will become less effective as the programs mature. This dynamic will tend to put pressure on the overall net interest margin. The increased weighting of the Company's traditional uninsured mortgages will tend to offset this downward pressure, as the margins on these products are more favourable and risk levels are well within the Company's tolerance.

The Company will increase its marketing and sales activities related to the development of more diversified sources of deposits and additional costs will be incurred in this initiative. Reductions in other areas and increases in net interest income will tend to mitigate these increases and other costs and the Company expects that its efficiency ratio for 2013 will continue to be in the target range of 28% to 34%.

Conference Call and Webcast

Fourth Quarter Results Conference Call

The conference call will take place on Thursday, February 14, 2013, at 10:30 a.m. Participants are asked to call 5 to 15 minutes in advance, 647-427-7450 in Toronto or toll-free 1-888-231-8191 throughout North America. The call will also be accessible in listen-only mode via the Internet at www.homecapital.com.

Conference Call Archive

A telephone replay of the call will be available between 1:30 p.m. Thursday, February 14, 2013 and midnight Thursday, February 21, 2013 by calling 416-849-0833 or 1-855-859-2056 (enter passcode 89405755). The archived audio web cast will be available for 90 days on CNW Group's website at www.newswire.ca and Home Capital's website at www.homecapital.com.

Annual Meeting Notice

The Annual Meeting of Shareholders of Home Capital Group Inc. will be held at the Design Exchange, Trading Floor, Second Floor, 234 Bay Street, Toronto, Ontario, on Wednesday, May 15, 2013 at 11:00 a.m. local time. Shareholders and guests are invited to join Directors and Management for lunch and refreshments following the Annual Meeting. All shareholders are encouraged to attend.

Consolidated Balance Sheets        
              As at
      December 31   September 30   December 31
thousands of Canadian dollars   2012    2012    2011 
ASSETS            
Cash Resources and Restricted Cash $ 439,287  $ 543,825  $ 665,806 
Securities            
Available for sale   414,344    401,830    391,754 
Pledged securities   843,547    784,098    341,588 
      1,257,891    1,185,928    733,342 
Loans Held for Sale   21,921    36,405   
Loans            
Residential mortgages   8,843,923    8,456,791    6,339,883 
Securitized residential mortgages   6,450,682    7,238,946    8,243,350 
Non-residential mortgages   988,416    993,174    946,222 
Personal and credit card loans   599,493    567,079    560,193 
      16,882,514    17,255,990    16,089,648 
Collective allowance for credit losses   (30,000)   (29,800)   (29,440)
      16,852,514    17,226,190    16,060,208 
Other            
Derivative assets   45,388    57,651    72,424 
Other assets   94,405    102,741    79,650 
Capital assets   6,578    7,165    5,372 
Intangible assets   66,343    66,342    63,917 
Goodwill   15,752    15,752    15,752 
      228,466    249,651    237,115 
    $ 18,800,079  $ 19,241,999  $ 17,696,471 
LIABILITIES AND SHAREHOLDERS' EQUITY            
Liabilities            
Deposits            
  Deposits payable on demand $ 105,923  $ 49,835  $ 75,965 
  Deposits payable on a fixed date   10,030,676    9,820,856    7,846,159 
      10,136,599    9,870,691    7,922,124 
Senior Debt   150,684    153,724    153,336 
Securitization Liabilities            
  Mortgage-backed security liabilities   1,301,693    1,923,017    2,417,801 
  Canada Mortgage Bond liabilities   6,034,202    6,155,475    6,231,274 
      7,335,895    8,078,492    8,649,075 
Other            
Derivative liabilities   2,386    3,767    3,458 
Income taxes payable   21,912    8,689    17,628 
Other liabilities   148,590    168,743    136,025 
Deferred tax liabilities   35,800    38,275    40,040 
      208,688    219,474    197,151 
      17,831,866    18,322,381    16,921,686 
Shareholders' Equity            
Capital stock   61,903    61,873    55,104 
Contributed surplus   6,224    5,847    5,873 
Retained earnings   903,831    857,339    722,999 
Accumulated other comprehensive loss   (3,745)   (5,441)   (9,191)
      968,213    919,618    774,785 
    $ 18,800,079  $ 19,241,999  $ 17,696,471 

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)   2012    2012    2011    2012    2011 
Net Interest Income Non-Securitized Assets                    
Interest from loans $ 144,310  $ 138,271  $ 111,065  $ 525,722  $ 400,997 
Dividends from securities   3,502    3,172    4,559    14,171    18,417 
Other interest   949    1,093    1,241    4,019    5,487 
      148,761    142,536    116,865    543,912    424,901 
Interest on deposits   61,873    58,962    51,989    230,006    192,357 
Interest on senior debt   1,825    1,648    1,673    6,831    4,364 
Net interest income non-securitized assets   85,063    81,926    63,203    307,075    228,180 
                       
Net Interest Income Securitized Loans and Assets                    
Interest income from securitized loans and assets   64,351    70,618    81,876    287,871    330,491 
Interest expense on securitization liabilities   49,506    53,053    56,667    213,474    224,719 
Net interest income securitized loans and assets   14,845    17,565    25,209    74,397    105,772 
                       
Total Net Interest Income   99,908    99,491    88,412    381,472    333,952 
Provision for credit losses   3,685    4,239    2,979    14,720    7,519 
      96,223    95,252    85,433    366,752    326,433 
Non-Interest Income                    
Fees and other income   11,059    11,281    11,294    43,994    37,997 
Securitization income   5,659    1,204      8,131   
Net realized and unrealized (losses) gains on securities and mortgages   (883)   (1,172)   (1,306)   (71)   4,088 
Net realized and unrealized (loss) gain on derivatives   (1,298)   2,136    (330)   3,848    (7,203)
      14,537    13,449    9,658    55,902    34,882 
      110,760    108,701    95,091    422,654    361,315 
Non-Interest Expenses                    
Salaries and benefits   14,991    15,465    13,184    58,956    52,523 
Premises   2,562    2,296    2,007    8,833    7,776 
Other operating expenses   14,067    14,304    11,916    54,946    44,703 
      31,620    32,065    27,107    122,735    105,002 
                       
Income Before Income Taxes   79,140    76,636    67,984    299,919    256,313 
Income taxes                    
  Current   22,649    19,904    15,909    82,176    66,270 
  Deferred   (2,474)   (522)   1,795    (4,240)   (37)
      20,175    19,382    17,704    77,936    66,233 
NET INCOME $ 58,965  $ 57,254  $ 50,280  $ 221,983  $ 190,080 
                       
NET INCOME PER COMMON SHARE                    
Basic $ 1.70  $ 1.65  $ 1.45  $ 6.40  $ 5.48 
Diluted $ 1.70  $ 1.65  $ 1.45  $ 6.38  $ 5.46 
AVERAGE NUMBER OF COMMON SHARES OUTSTANDING                    
Basic   34,655    34,697    34,668    34,692    34,677 
Diluted   34,779    34,803    34,782    34,820    34,787 
                       
Total number of outstanding common shares   34,630    34,668    34,625    34,630    34,625 
Book value per common share $ 27.96  $ 26.53  $ 22.38  $ 27.96  $ 22.38 

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 2012  2012  2011  2012  2011 
                     
NET INCOME $ 58,965  $ 57,254  $ 50,280  $ 221,983  $ 190,080 
                     
OTHER COMPREHENSIVE INCOME (LOSS)                    
                     
Available for Sale Securities                    
Net unrealized gains (losses) on securities available for sale   1,471    1,667    700    6,462    (8,602)
Net losses (gains) reclassified to net income   457    1,141    1,174    (114)   (4,815)
    1,928    2,808    1,874    6,348    (13,417)
Income tax expense (recovery)   509    742    505    1,775    (3,370)
    1,419    2,066    1,369    4,573    (10,047)
                     
Cash Flow Hedges                    
Net unrealized losses on cash flow hedges       (639)   (370)   (7,386)
Net losses reclassified to net income   376    376    338    1,462    618 
    376    376    (301)   1,092    (6,768)
Income tax expense (recovery)   99    99    (36)   219    (1,718)
    277    277    (265)   873    (5,050)
                     
Total other comprehensive income (loss)   1,696    2,343    1,104    5,446    (15,097)
                     
COMPREHENSIVE INCOME $ 60,661  $ 59,597  $ 51,384  $ 227,429  $ 174,983 

Consolidated Statements of Changes in Shareholders' Equity
                                           
                Net Unrealized   Net Unrealized   Total    
                (Losses) Gains   Losses on   Accumulated    
                on Securities   Cash Flow   Other   Total
thousands of Canadian dollars,   Capital   Contributed   Retained   Available for   Hedges,   Comprehensive   Shareholders'
except per share amounts   Stock   Surplus   Earnings   Sale, After Tax   After Tax   (Loss) Income   Equity
                                           
Balance at December 31, 2011   $ 55,104    $ 5,873    $ 722,999    $ (4,141)   $ (5,050)   $ (9,191)   $ 774,785 
Comprehensive income             221,983      4,573      873      5,446      227,429 
Stock options settled     7,088      (1,408)                     5,680 
Amortization of fair value of                                          
employee stock options         1,759                      1,759 
Repurchase of shares     (289)         (7,828)                 (8,117)
Dividends paid                                          
($0.90 per share)             (33,323)                 (33,323)
Balance at December 31, 2012   $ 61,903    $ 6,224    $ 903,831    $ 432    $ (4,177)   $ (3,745)   $ 968,213 
                                           
Balance at December 31, 2010   $ 50,427    $ 4,571    $ 567,681    $ 5,906    $   $ 5,906    $ 628,585 
Comprehensive income             190,080      (10,047)     (5,050)     (15,097)     174,983 
Stock options settled     4,921      (1,098)                     3,823 
Amortization of fair value of                                          
employee stock options         2,400                      2,400 
Repurchase of shares     (244)         (7,702)                 (7,946)
Dividends paid                                          
($0.76 per share)             (27,060)                 (27,060)
Balance at December 31, 2011   $ 55,104   $ 5,873    $ 722,999    $ (4,141)   $ (5,050)   $ (9,191)   $ 774,785 

Consolidated Statements of Cash Flows
      For the year ended
        December 31   December 31
thousands of Canadian dollars   2012    2011 
CASH FLOWS FROM OPERATING ACTIVITIES        
Net income for the year $ 221,983  $ 190,080 
Adjustments to determine cash flows relating to operating activities:        
  Deferred income taxes   (4,240)   (37)
  Amortization of capital assets   3,118    3,052 
  Amortization of intangible assets   6,715    679 
  Amortization of net premium (discount) on securities   2,460    (49)
  Amortization of securitization and senior debt transaction costs   13,396    14,153 
  Provision for credit losses   14,720    7,519 
  Change in accrued interest payable   13,519    4,993 
  Change in accrued interest receivable   (5,449)   (6,686)
  Net realized and unrealized losses (gains) on securities and mortgages   71    (4,088)
  Realized gain on securitization   (8,131)  
  Settlement of derivatives   (370)   (7,385)
  (Gain) loss on derivatives   (3,848)   7,203 
  Net increase in mortgages   (1,687,717)   (1,897,308)
  Net increase in personal and credit card loans   (40,858)   (107,817)
  Net increase in deposits   2,214,475    1,326,145 
  Activity in securitization liabilities        
  Proceeds from sale of mortgage-back securities   242,009   
    Proceeds from securitization of mortgage-backed security liabilities   641,696    1,233,754 
    Settlement and repayment of securitization liabilities   (1,278,521)   (753,085)
  Amortization of fair value of employee stock options   1,759    2,400 
  Changes in taxes payable and other   (6,732)   23,293 
Cash flows provided by operating activities   340,055    36,816 
CASH FLOWS FROM FINANCING ACTIVITIES        
Repurchase of shares   (8,117)   (7,946)
Exercise of employee stock options   5,680    3,823 
Issuance of senior debt     149,052 
Dividends paid to shareholders   (31,244)   (26,371)
Cash flows (used in) provided by financing activities   (33,681)   118,558 
CASH FLOWS FROM INVESTING ACTIVITIES        
Activity in securities        
  Purchases   (4,291,902)   (1,641,985)
  Proceeds from sales   381,049    389,978 
  Proceeds from maturities   3,391,425    935,824 
Purchases of capital assets   (4,324)   (3,530)
Purchases of intangible assets   (9,141)   (16,679)
Cash flows used in investing activities   (532,893)   (336,392)
Net decrease in cash resources and restricted cash during the year   (226,519)   (181,018)
Cash resources and restricted cash at beginning of the year   665,806    846,824 
Cash Resources and Restricted Cash at End of the Year $ 439,287  $ 665,806 
Supplementary Disclosure of Cash Flow Information        
Dividends received on investments $ 12,626  $ 17,318 
Interest received   518,537    725,476 
Interest paid   223,318    416,764 
Income taxes paid   87,184    36,636 

Net Interest Margin
   
  For the three months ended For the year ended
  December 31 September 30 December 31 December 31 December 31
  2012  2012  2011  2012  2011 
Net interest margin non-securitized interest earning assets (TEB) 3.11% 3.17% 3.03% 3.10% 3.04%
Net interest margin non-securitized interest earning assets (non-TEB) 3.07% 3.13% 2.95% 3.05% 2.96%
Net interest margin securitized assets 0.79% 0.89% 1.16% 0.93% 1.24%
Total net interest margin (TEB) 2.13% 2.14% 2.06% 2.09% 2.06%
Total net interest margin (non-TEB) 2.11% 2.11% 2.02% 2.07% 2.01%
Spread of non-securitized loans over deposits only 3.13% 3.16% 3.16% 3.13% 3.09%

Net Interest Income
  For the three months ended December 31, 2012 For the three months ended September 30, 2012
(000s, except %) Average Income/ Average Average Income/ Average
  Balance Expense Rate Balance Expense Rate
Assets                    
Cash resources and securities $ 817,669  $ 4,451  2.18% $ 731,533  $ 4,265  2.33%
Traditional single-family residential mortgages   8,017,732    109,208  5.45%   7,386,369    102,660  5.56%
Accelerator single-family residential mortgages   582,728    4,470  3.07%   646,033    5,219  3.23%
Multi-unit residential mortgages   107,658    1,274  4.73%   141,761    1,187  3.35%
Non-residential mortgages   981,483    15,789  6.43%   1,017,194    15,685  6.17%
Personal and credit card loans   578,116    13,569  9.39%   567,186    13,520  9.53%
Total non-securitized loans   10,267,717    144,310  5.62%   9,758,543    138,271  5.67%
Taxable equivalent adjustment   -   1,243  -   -   1,126  -
Total on non-securitized interest earning assets   11,085,386    150,004  5.41%   10,490,076    143,662  5.48%
Securitized loans and pledged assets   7,627,113    64,351  3.37%   8,073,588    70,618  3.50%
Other assets   294,020    -   249,064    -
Total Assets $ 19,006,519  $ 214,355  4.51% $ 18,812,728  $ 214,280  4.56%
Liabilities and Shareholders' Equity                    
Deposits $ 9,944,774  $ 61,873  2.49% $ 9,400,930  $ 58,962  2.51%
Securitization liabilities   7,661,311    49,506  2.58%   8,123,804    53,053  2.61%
Other liabilities and shareholders' equity   1,400,434    1,825  0.52%   1,287,994    1,648  0.51%
Total Liabilities and Shareholders' Equity $ 19,006,519  $ 113,204  2.38% $ 18,812,728  $ 113,663  2.42%
Net Interest Income (TEB)     $ 101,151        $ 100,617   
Tax Equivalent Adjustment       (1,243)         (1,126)  
Net Interest Income per Financial Statements     $ 99,908        $ 99,491   
                     
            For the three months ended December 31, 2011
(000s, except %)           Average Income/ Average
            Balance Expense Rate
Assets                    
Cash resources and securities           $ 987,740  $ 5,800  2.35%
Traditional single-family residential mortgages             5,513,181    77,933  5.65%
Accelerator single-family residential mortgages             436,066    3,304  3.03%
Multi-unit residential mortgages             112,288    1,562  5.56%
Non-residential mortgages             957,859    14,998  6.26%
Personal and credit card loans             555,359    13,268  9.56%
Total non-securitized loans             7,574,753    111,065  5.87%
Taxable equivalent adjustment             -   1,785  -
Total on non-securitized interest earning assets             8,562,493    118,650  5.54%
Securitized loans and pledged assets             8,703,077    81,876  3.76%
Other assets             254,958    -
Total Assets           $ 17,520,528  $ 200,526  4.58%
Liabilities and Shareholders' Equity                    
Deposits           $ 7,662,457  $ 51,989  2.71%
Securitization liabilities             8,725,546    56,667  2.60%
Other liabilities and shareholders' equity             1,132,525    1,673  0.59%
Total Liabilities and Shareholders' Equity           $ 17,520,528  $ 110,329  2.52%
Net Interest Income (TEB)               $ 90,197   
Tax Equivalent Adjustment                 (1,785)  
Net Interest Income per Financial Statements               $ 88,412   

Mortgage Production                    
        For the three months ended   For the year ended
    December 31   September 30   December 31   December 31   December 31
(000s)   2012    2012    2011    2012    2011 
Traditional single family residential mortgages $ 1,164,037  $ 1,257,379  $ 948,848  $ 4,556,379  $ 3,514,430 
Accelerator single family residential mortgages   174,214    236,673    188,484    804,692    1,103,555 
Multi-unit residential mortgages   57,245    114,279    6,522    286,879    137,005 
Non-residential mortgages   52,417    46,624    41,508    210,228    182,163 
Store and apartment mortgages   24,835    18,175    35,544    118,689    122,957 
Warehouse commercial mortgages     6,000    27,000    28,500    56,750 
Total mortgage advances $ 1,472,748  $ 1,679,130  $ 1,247,906  $ 6,005,367  $ 5,116,860 

Provision for Credit Losses                     
        For the three months ended For the year ended
(000s, except %) December 31 September 30 December 31 December 31 December 31
    2012    2012    2011    2012    2011 
Collective provision $ 200  $ 300  $ 50  $ 560  $ 287 
Individual provision   3,485    3,939    2,929    14,160    7,232 
Total provision $ 3,685  $ 4,239  $ 2,979  $ 14,720  $ 7,519 
Provision as a % of gross loans (annualized)   0.09%   0.10%   0.07%   0.09%   0.05%
Net write-offs $ 3,294  $ 3,075  $ 4,843  $ 12,381  $ 10,673 
Net write-offs as a % of gross loans (annualized)   0.08%   0.07%   0.12%   0.07%   0.07%

Net Non-Performing Loans and Allowances    
          As at
(000s, except %)   December 31   September 30   December
    2012    2012    2011 
Net non-performing loans $ 56,308  $ 48,817  $ 40,297 
Gross loans (excluding allowances)   16,885,233    17,258,569    16,091,162 
Net non-performing loans as % of gross loans   0.33%   0.28%   0.25%
Collective allowance $ 30,000  $ 29,800  $ 29,440 
Individual allowance   3,638    3,447    1,859 
Total allowance $ 33,638  $ 33,247  $ 31,299 

Impaired Loans                    
                     
(000s)               As at December 31, 2012
      Securitized            
  Residential Residential Non-residential Personal and    
  Mortgages Mortgages Mortgages Credit Card Loans Total
Gross amount of impaired loans $ 54,696  $ $ 501  $ 3,830  $ 59,027 
Individual allowances on principal   (2,381)       (338)   (2,719)
Net $ 52,315  $ $ 501  $ 3,492  $ 56,308 
                     
(000s)               As at December 31, 2011
        Securitized            
  Residential   Residential   Non-residential Personal and    
  Mortgages Mortgages Mortgages Credit Card Loans   Total
Gross amount of impaired loans $ 36,845  $ $ 822  $ 4,144  $ 41,811 
Individual allowances on principal   (742)     (78)   (694)   (1,514)
Net $ 36,103  $ $ 744  $ 3,450  $ 40,297 

Allowance for Credit Losses
                   
(000s)       For the three months ended December 31, 2012
    Residential Non-Residential Personal and  
    Mortgages Mortgages Credit Card Loans Total
Individual allowances                
Allowance on loan principal                
  Balance at the beginning of the period $ 1,660  $ $ 919  $ 2,579 
  Provision for credit losses   3,413      21    3,434 
  Write-offs   (2,848)     (794)   (3,642)
  Recoveries   156      192    348 
      2,381      338    2,719 
Allowance on accrued interest receivable                
  Balance at the beginning of the period   868        868 
  Provision for credit losses   51        51 
      919        919 
Total individual allowance   3,300      338    3,638 
Collective allowance                
  Balance at the beginning of the period   16,659    9,300    3,841    29,800 
  Provision for credit losses   200        200 
      16,859    9,300    3,841    30,000 
Total allowance $ 20,159  $ 9,300  $ 4,179  $ 33,638 
Total provision $ 3,664  $ $ 21  $ 3,685 
                   
(000s)       For the three months ended September 30, 2012
    Residential Non-Residential Personal and  
    Mortgages Mortgages Credit Card Loans Total
Individual allowances                
Allowance on loan principal                
  Balance at the beginning of the period $ 1,179  $ $ 663  $ 1,842 
  Provision for credit losses   3,216      596    3,812 
  Write-offs   (2,898)     (464)   (3,362)
  Recoveries   163      124    287 
      1,660      919    2,579 
Allowance on accrued interest receivable                
  Balance at the beginning of the period   741        741 
  Provision for credit losses   127        127 
      868        868 
Total individual allowance   2,528      919    3,447 
Collective allowance                
  Balance at the beginning of the period   16,359    9,300    3,841    29,500 
  Provision for credit losses   300        300 
      16,659    9,300    3,841    29,800 
Total allowance $ 19,187  $ 9,300  $ 4,760  $ 33,247 
Total provision $ 3,643  $ $ 596  $ 4,239 
                   
(000s)       For the three months ended December 31, 2011
    Residential Non-Residential Personal and  
    Mortgages Mortgages Credit Card Loans Total
Individual allowances                
Allowance on loan principal                
  Balance at the beginning of the period $ 1,312  $ 33  $ 1,854  $ 3,199 
  Provision for credit losses   2,108    45    1,005    3,158 
  Write-offs   (2,874)     (2,223)   (5,097)
  Recoveries   196      58    254 
      742    78    694    1,514 
Allowance on accrued interest receivable                
  Balance at the beginning of the period   574        574 
  Provision for credit losses   (229)       (229)
      345        345 
Total individual allowance   1,087    78    694    1,859 
Collective allowance                
  Balance at the beginning of the period   16,919    8,334    4,137    29,390 
  Provision for credit losses   (620)   966    (296)   50 
      16,299    9,300    3,841    29,440 
Total allowance $ 17,386  $ 9,378  $ 4,535  $ 31,299 
Total provision $ 1,259  $ 1,011  $ 709  $ 2,979 
                   
(000s)       For the year ended December 31, 2012
    Residential Non-residential Personal and  
    Mortgages Mortgages Credit Card Loans Total
Individual allowances                
Allowance on loan principal                
  Balance at the beginning of the year $ 742  $ 78  $ 694  $ 1,514 
  Provision for credit losses   12,107    (78)   1,557    13,586 
  Write-offs   (10,921)     (2,332)   (13,253)
  Recoveries   453      419    872 
      2,381      338    2,719 
Allowance on accrued interest receivable                
  Balance at the beginning of the year   345        345 
  Provision for credit losses   574        574 
      919        919 
Total individual allowance   3,300      338    3,638 
Collective allowance                
  Balance at the beginning of the year   16,299    9,300    3,841    29,440 
  Provision for credit losses   560        560 
      16,859    9,300    3,841    30,000 
Total allowance $ 20,159  $ 9,300  $ 4,179  $ 33,638 
Total provision $ 13,241  $ (78) $ 1,557  $ 14,720 
                   
(000s)       For the year ended December 31, 2011
    Residential Non-residential Personal and  
    Mortgages Mortgages Credit Card Loans Total
Individual allowances                
Allowance on loan principal                
  Balance at the beginning of the year $ 1,757  $ $ 3,140  $ 4,897 
  Provision for credit losses   6,248    78    964    7,290 
  Write-offs   (7,754)     (3,574)   (11,328)
  Recoveries   491      164    655 
      742    78    694    1,514 
Allowance on accrued interest receivable                
  Balance at the beginning of the year   403        403 
  Provision for credit losses   (58)       (58)
      345        345 
Total individual allowance   1,087    78    694    1,859 
Collective allowance                
  Balance at the beginning of the year   16,299    9,357    3,497    29,153 
  Provision for credit losses     (57)   344    287 
      16,299    9,300    3,841    29,440 
Total allowance $ 17,386  $ 9,378  $ 4,535  $ 31,299 
Total provision $ 6,190  $ 21  $ 1,308  $ 7,519 

Earnings by Business Segment                
                 
        For the three months ended December 31, 2012
(000s) Mortgage Lending Consumer Lending Other Total
Net interest income $ 86,650  $ 11,002  $ 2,256  $ 99,908 
Provision for credit losses   (3,664)   (21)     (3,685)
Fees and other income   7,318    3,739      11,059 
Securitization income   5,659        5,659 
Net (loss) gain on securities and other   (2,557)     376    (2,181)
Non-interest expenses   (20,203)   (3,350)   (8,067)   (31,620)
Income before income taxes   73,203    11,370    (5,433)   79,140 
Income taxes   (19,532)   (3,018)   2,375    (20,175)
Net income (loss) $ 53,671  $ 8,352  $ (3,058) $ 58,965 
Goodwill $ 2,324  $ 13,428  $ $ 15,752 
Total assets $ 17,198,250  $ 769,098  $ 832,731  $ 18,800,079 
                 
        For the three months ended September 30, 2012
(000s) Mortgage Lending Consumer Lending Other Total
Net interest income $ 86,523  $ 10,874  $ 2,094  $ 99,491 
Provision for credit losses   (3,644)   (595)     (4,239)
Fees and other income   7,128    4,087    66    11,281 
Securitization income   1,204        1,204 
Net gain (loss) on securities and other   1,447      (483)   964 
Non-interest expenses   (20,200)   (3,277)   (8,588)   (32,065)
Income before income taxes   72,458    11,089    (6,911)   76,636 
Income taxes   (19,110)   (2,951)   2,679    (19,382)
Net income (loss) $ 53,348  $ 8,138  $ (4,232) $ 57,254 
Goodwill $ 2,324  $ 13,428  $ $ 15,752 
Total assets $ 17,623,833  $ 717,386  $ 900,780  $ 19,241,999 
                 
        For the three months ended December 31, 2011
(000s) Mortgage Lending Consumer Lending Other Total
Net interest income $ 74,164  $ 10,639  $ 3,609  $ 88,412 
Provision for credit losses   (1,975)   (1,004)     (2,979)
Fees and other income   6,829    4,343    122    11,294 
Net loss on securities and other   (1,095)     (541)   (1,636)
Non-interest expenses   (18,824)   (3,417)   (4,866)   (27,107)
Income before income taxes   59,099    10,561    (1,676)   67,984 
Income taxes   (16,370)   (2,987)   1,653    (17,704)
Net income (loss) $ 42,729  $ 7,574  $ (23) $ 50,280 
Goodwill $ 2,324  $ 13,428  $ $ 15,752 
Total assets $ 15,997,106  $ 614,626  $ 1,084,739  $ 17,696,471 
                 
      For the year ended December 31, 2012
(000s) Mortgage Lending Consumer Lending Other Total
Net interest income $ 328,087  $ 43,598  $ 9,787  $ 381,472 
Provision for credit losses   (13,164)   (1,556)     (14,720)
Fees and other income   27,465    16,527      43,994 
Securitization income   8,131        8,131 
Net gain on securities and other   944      2,833    3,777 
Non-interest expenses   (78,573)   (14,056)   (30,106)   (122,735)
Income before income taxes   272,890    44,513    (17,484)   299,919 
Income taxes   (74,534)   (11,821)   8,419    (77,936)
Net income (loss) $ 198,356  $ 32,692  $ (9,065) $ 221,983 
Goodwill $ 2,324  $ 13,428  $ $ 15,752 
Total assets $ 17,198,250  $ 769,098  $ 832,731  $ 18,800,079 
                 
      For the year ended December 31, 2011
(000s) Mortgage Lending Consumer Lending Other Total
Net interest income $ 273,738  $ 41,782  $ 18,432  $ 333,952 
Provision for credit losses   (5,916)   (1,603)     (7,519)
Fees and other income   19,457    18,051    489    37,997 
Net (loss) gain on securities and other   (4,821)     1,706    (3,115)
Non-interest expenses   (67,851)   (16,255)   (20,896)   (105,002)
Income before income taxes   214,607    41,975    (269)   256,313 
Income taxes   (59,331)   (11,872)   4,970    (66,233)
Net income $ 155,276  $ 30,103  $ 4,701  $ 190,080 
Goodwill $ 2,324  $ 13,428  $ $ 15,752 
Total assets $ 15,997,106  $ 614,626  $ 1,084,739  $ 17,696,471 

Management's Responsibility for Financial Information

The Company's Audit Committee reviewed this document along with the Company's 2012 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 2012 Annual and Fourth Quarter Consolidated Financial Report.

Caution Regarding Forward-looking Statements

From time to time Home Capital makes written and verbal forward-looking statements. These are included in the Annual Report, periodic reports to shareholders, regulatory filings, press releases, Company presentations and other Company communications. Forward-looking statements are made in connection with business objectives and targets, Company strategies, operations, anticipated financial results and the outlook for the Company, its industry, and the Canadian economy. These statements regarding expected future performance are "financial outlooks" within the meaning of National Instrument 51-102.  Please see the risk factors, which are set forth in detail in the Risk Management and Other Risks sections of the Company's 2012 Annual and Fourth Quarter Consolidated Financial Report, as well as its other publicly filed information, which are available on the System for Electronic Document Analysis and Retrieval (SEDAR) at www.sedar.com, for the material factors that could cause the Company's actual results to differ materially from these statements.  These risk factors are material risk factors a reader should consider, and include credit risk, liquidity and funding risk, structural interest rate risk, operational risk, investment risk, strategic and business risk, reputational risk and regulatory and legal risk along with additional risk factors that may affect future results. Forward-looking statements can be found in the Report to the Shareholders and the Outlook sections in the Annual Report.   Forward-looking statements are typically identified by words such as "will,"  "believe," "expect," "anticipate," "estimate," "plan," "forecast," "may," and "could" or other similar expressions.

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

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

Assumptions about the performance of the Canadian economy in 2013 and its effect on Home Capital's business are material factors the Company considers when setting its objectives and outlook.  In determining expectations for economic growth, both broadly and in the financial services sector, the Company primarily considers historical and forecasted economic data provided by the Canadian government and its agencies.  In setting and reviewing the outlook and objectives for 2013, management's expectations assume:

  • The Canadian economy will produce modest growth in 2013 with stable to modestly improving employment conditions in most regions. The economy will continue to be heavily influenced by the economic conditions in the United States and global markets.  Inflation will generally be within the Bank of Canada's target of 1%-3%.

  • The Bank of Canada has indicated that increases to its target overnight interest rate are not imminent and, as such, the Company is assuming the rate will remain at its current level for most of 2013. This is expected to continue to support low mortgage interest rates.

  • The housing market will remain stable with balanced supply and demand conditions in most regions supported by continued low interest rates, stable to improving employment and immigration.  There will be declines in housing starts and resale activity with stable to modestly declining prices through most of Canada.

  • Consumer debt levels will remain serviceable by Canadian households.

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 used in this report can be found under Non-GAAP Measures in the Management's Discussion and Analysis included in the Company's 2012 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.

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

 

 

 

SOURCE Home Capital Group Inc.



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