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Press release from CNW Group

Home Capital Reports Another Record Quarter and Dividend Increase

Wednesday, November 07, 2012

Home Capital Reports Another Record Quarter and Dividend Increase17:00 EST Wednesday, November 07, 2012Diluted Earnings per Share of $1.65 up 18.7% Year over Year;Dividend Increase of 18.2%, or 4 Cents per Share to $0.26 Quarterly;Return on Equity Continues Strong at 25.6% for the Quarter and 25.7% Year to DateTORONTO, Nov. 7, 2012 /CNW/ - Home Capital Group (TSX: HCG) today reported another quarter of strong results for the three months ended September 30, 2012.The Company's Third Quarter Report, including Management's Discussion and Analysis, is available on www.homecapital.com and on the Canadian Securities Administrators' website at www.sedar.com.FINANCIAL HIGHLIGHTS           (Unaudited)For the three months endedFor the nine months ended(000s, except Per Share and Percentage Amounts)September 30June 30September 30September 30September 30  2012  2012  2011  2012  2011 OPERATING RESULTS          Net Income$57,254$53,230$48,417$163,018$139,747Adjusted Net Income1  57,254 53,230 48,417 163,018 142,172Total Revenue 226,603 218,751 198,694 660,036 581,875Earnings per Share - Basic/Diluted$1.65/1.65$1.54/1.54$1.40/1.39$4.70/4.68$4.03/4.02Adjusted Earnings per Share - Basic/Diluted1  1.65/1.65 1.54/1.54 1.40/1.39 4.70/4.68 4.10/4.09Return on Shareholders' Equity 25.6% 25.1% 27.0% 25.7% 27.4%Return on Average Assets 1.2% 1.2% 1.2% 1.2% 1.1%Net Interest Margin (TEB)2  2.14% 2.09% 2.14% 2.08% 2.06%Net Interest Margin Non-Securitized Assets (TEB)2  3.17% 3.05% 3.11% 3.09% 3.04%Net Interest Margin Securitized Assets 0.89% 1.05% 1.35% 0.97% 1.28%Provision as a Percentage of Gross Loans (annualized) 0.10% 0.05% 0.06% 0.09% 0.04%Efficiency Ratio (TEB)2  28.1% 27.8% 27.4% 27.9% 28.2%As atSeptember 30June 30December 31September 30    2012  2012  2011  2011   BALANCE SHEET HIGHLIGHTS          Total Assets$19,241,999 $18,526,458 $17,696,471 $17,072,125   Total Loans3  17,292,395  16,966,961  16,089,648  15,782,646   Securitized Loans On-Balance Sheet 7,238,946  7,582,154  8,243,350  8,502,466   Loans Under Administration4  17,460,528  17,039,727  16,089,648  15,782,646   Liquid Assets 998,219  669,681  808,222  646,695   Deposits 9,870,691  9,007,464  7,922,124  7,220,517   Shareholders' Equity 919,618  869,439  774,785  731,216   FINANCIAL STRENGTH          Capital Measures5           Risk-Weighted Assets$5,271,674 $5,003,579 $4,549,696 $4,269,175   Tier 1 Capital Ratio 16.97% 17.09% 17.29% 17.67%  Total Capital Ratio 20.78% 21.09% 20.46% 21.05%  Credit Quality          Non-Performing Loans as a Percentage of Gross Loans 0.28% 0.31% 0.25% 0.32%  Allowance as a Percentage of Gross Non-Performing Loans 64.7% 58.7% 74.9% 62.6%  Share Information          Book Value per Common Share$26.53 $25.05 $22.38 $21.10   Common Share Price - Close$51.44 $45.18 $49.10 $43.60   Market Capitalization$1,783,322 $1,568,243 $1,700,088 $1,510,696   Number of Common Shares Outstanding 34,668  34,711  34,625  34,649              1 See definition of Adjusted Net Income under Non-GAAP Measures of the unaudited interim consolidated financial report and reconciliation to net income in Table 2 of the Management's Discussion and Analysis.2 See definition of Taxable Equivalent Basis (TEB) under Non-GAAP Measures of the unaudited interim consolidated financial report.3 Total loans include loans held for sale.4 Loans under administration includes total loans and off-balance sheet loans.5 These figures relate to the Company's operating subsidiary, Home Trust CompanyTHIRD QUARTER 2012 HIGHLIGHTSKey results for the third quarter of 2012 included:Net income increased to $57.3 million in the third quarter and to $163.0 million for the nine months ended September 30, 2012, representing increases of 18.3% and 16.7% over the $48.4 million and $139.7 million earned in the comparable periods of 2011. The second quarter included an unfavourable tax adjustment of $2.0 million related to Ontario tax rate adjustments and, excluding this adjustment, net income is up 18.1% year over year. Net income for the third quarter is also up 7.6% from the $53.2 million recorded in the second quarter of 2012. These results put the Company solidly within the 13%-18% net income growth target for 2012.Diluted earnings per share were $1.65 for the quarter and $4.68 for the first nine months of 2012 representing increases of 18.7% and 16.4% from $1.39 and $4.02 for the respective periods of 2011.Net interest income, before provisions, continued its upward trend, reaching $99.5 million in the third quarter and $281.6 million year to date. This represents increases of 13.6% over the $87.6 million recorded in the third quarter of 2011 and 14.7% over the $245.5 million earned in the first nine months of 2011 and reflects solid loan growth and continued strong demand for the Company's products.Net interest margin (TEB) of 2.14% in the third quarter was consistent with 2.14% in the third quarter of 2011 and up from 2.09% in the second quarter of 2012.  On a year-to-date basis, net interest margin (TEB) increased to 2.08% compared to 2.06% in the same period last year.  Net interest margin (TEB) on non-securitized assets rose to 3.17% compared to 3.11% in the third quarter of 2011 and 3.05% in the second quarter of 2012.Net interest margin on securitized assets was 0.89%, a decline from 1.35% one year ago and 1.05% last quarter. During the second quarter the Company benefited from higher than expected prepayment penalties in the securitized portfolio producing an increase in the net interest margin. Compared to a year ago, the utilization of lower yielding assets as replacement assets in the CMB program and the maturity of higher yielding MBS portfolios are the primary contributors to lower margins in the securitized asset group.Return on equity at 25.6% for the quarter and 25.7% year to date remains solid and continues well in excess of the Company's minimum performance objective of 20%.The credit quality of the loans portfolio remains solid and credit losses are well within expected levels. Net non-performing loans ended the quarter at 0.28% of the total loans portfolio, up marginally from 0.25% at the end of 2011 and down from 0.31% at the end of the second quarter. The provision for credit losses remains within expectations at 0.10% of gross loans on an annualized basis, compared to 0.06% in the third quarter of 2011 and 0.05% in the second quarter of 2012. The provision for credit losses ratio is within the Company's objective of 0.05% to 0.15% of gross loans. The increase in provisions reflects the repositioning of the portfolio to a higher proportion of uninsured loans.Tier 1 and Total capital ratios of 16.97% and 20.78%, respectively, at September 30, 2012 remain well above the Company's minimum targets.  Home Trust's asset to capital multiple was 14.07 at the end of the quarter compared to 14.44 at December 31, 2011 and 13.78 at the end of the second quarter. The Company continues growing its assets, revenue and net income while maintaining prudent levels of capital.Total loans grew to $17.29 billion, reflecting increases of $1.51 billion or 9.6% from $15.78 billion one year ago, $1.20 billion or 7.5% from $16.09 billion at the end of 2011 (10.0% on an annualized basis) and $325.4 million or 1.9% over $16.97 billion at the end of last quarter. Total loans under administration, which includes mortgages securitized that qualify for off-balance sheet accounting, were $17.46 billion, representing an annualized increase of 11.4%. Annualized growth of loans and loans under administration year to date remains below the Company's growth target due to a higher than planned net reduction of insured loans which repositioned the loan portfolio to a smaller than planned, yet more profitable, total portfolio. The Company expects year-over-year loan growth to remain below the target range of 13%-18% for the balance of 2012, while net income remains solidly within the target range.The total value of mortgages originated in the third quarter grew to $1.68 billion from $1.30 billion originated in the third quarter of 2011. Originations were $4.53 billion for the first nine months of the year compared to $3.87 billion in the same period last year.Originations of traditional mortgages increased to $1.26 billion in the third quarter and $3.39 billion year to date from $941.1 million and $2.57 billion in the comparable periods of 2011. The Company is experiencing strong demand for its traditional product offerings combined with high credit quality. This continues to enhance profitability.Accelerator (insured) mortgage originations declined to $236.7 million in the third quarter and $630.5 million year to date from $293.5 million and $915.1 million in the comparative periods of 2011. The Company expects to increase the rate of origination of Accelerator mortgages in the coming months.Multi-unit residential mortgage originations were $114.3 million in the quarter and $229.6 million year to date compared to $7.0 million and $130.5 million in the comparable periods of 2011. The Company securitized and sold $96.5 million of multi-unit residential mortgages in the quarter and $72.8 million last quarter.  These transactions qualified for off-balance sheet and gain on sale accounting and resulted in securitization gains of $1.2 million in the quarter and $1.3 million last quarter. This securitization program was initiated in the second quarter of this year.  The Company is pleased with the results and anticipates that this program will experience modest growth going forward.Non-residential mortgage advances were $46.6 million in the quarter and $157.8 million year to date compared to $32.4 million and $140.7 million in the comparable periods of 2011. The Company continues to be very selective and focuses on opportunities that present strong credit and risk profiles and that are within the Company's risk tolerance.Store and apartment advances were $18.2 million for the quarter and $93.9 million year to date compared to $26.8 million and $87.4 million in the comparable periods of 2011.The Company opened 847 new Visa accounts in the third quarter compared to 2,108 accounts opened in the third quarter of 2011 and 1,793 accounts last quarter. The decline through the current year reflects the Company's caution in marketing, approvals and advances and the anticipated adoption of OSFI's B-20 draft guideline provisions.  After further review and confirmation of the requirements of B-20, the Company is pleased that it can resume prudent growth of its Equityline Visa program within the requirements of Guideline B-20 and the Company's risk appetite.  The Company will again increase focus on this product segment and expects growth to resume within its risk tolerance and OSFI's guidelines, beginning in the fourth quarter.Favourable market opportunities continue to support the Company's strategy and the Company has been able to expand the loans portfolio while generally improving credit quality. The average credit score for traditional mortgage originations for the first nine months of 2012 is up from the same period of 2011, while loan to value ratios are relatively stable. The Company remains proactive and prudent in its lending practices, taking into account local economic and market conditions.  Continued low levels of loan losses reflect the Company's diligent underwriting combined with strong collection standards and loan resolution strategies. As mentioned last quarter, OSFI released Final Guideline B-20 - Residential Mortgage Underwriting Practices and Procedures requiring full implementation by the end of 2012. The Company has already made changes, where required, to comply with a significant number of the B-20 provisions and will be fully compliant before the end of 2012. The changes required for B-20 are not expected to materially affect the Company's growth or progress.This quarter marked the beginning of two exciting new initiatives for the Company, a high interest savings account and a preferred Visa product. The high interest savings account provides an alternative to financial advisors for their clients who are looking for higher interest savings. This initiative is an important part of a wider strategy to diversify funding sources over time. Late in the third quarter, the Company also launched a new preferred Visa card product focused exclusively on existing mortgage customers of the Company. The program offers an unsecured Visa with modest credit limits at attractive rates to customers who have demonstrated good credit behavior. This product further broadens the array of products and services available to the Company's customers.  These initiatives further position the Company for growth, but did not have a significant impact on quarterly results.Also during the quarter, OSFI released the anticipated draft guidelines for Basel III, which will become effective in January 2013. The changes that affect Home Trust primarily relate to the components and definitions of regulatory capital, minimum capital targets and new liquidity requirements. The Company's analysis indicates that Home Trust presently meets the requirements of Basel III. Please see the Capital Management section of the MD&A for further discussion.Subsequent to the end of the quarter, and in light of the Company's solid performance, profitability and strong financial position, the Board of Directors declared an increase of $0.04 in the quarterly dividend to $0.26 per Common share, payable on December 1, 2012 to shareholders of record at the close of business on November 16, 2012.The Company continues to deliver solid results in terms of growth, increased returns and increased dividends. Despite the persistent international economic instability and modest economic improvement in Canada, the Company's performance continues to reflect the strength and the successful execution of the Company's core strategy.With solid performance in all aspects of Home Capital's business, management expects that the positive performance the Company experienced during the first three quarters of 2012 will continue in the fourth quarter and into 2013.(signed)(signed)GERALD M. SOLOWAY     KEVIN P.D. SMITH Chief Executive Officer     Chairman of the BoardNovember 7, 2012                        Additional information concerning the Company's targets and related expectations for 2012, including the risks and assumptions underlying these expectations, may be found in Management's Discussion and Analysis (MD&A) of this quarterly report.Conference Call and WebcastThird Quarter Results Conference CallThe conference call will take place on Thursday, November 8, 2012, at 10:30 a.m. Participants are asked to call 5 to 15 minutes in advance, 647-427-7450 in Toronto or toll-free 1-888-231-8191 throughout North America. The call will also be accessible in listen-only mode via the Internet at www.homecapital.com.Conference Call ArchiveA telephone replay of the call will be available between 1:30 p.m. Thursday, November 8, 2012 and midnight Thursday, November 15, 2012 by calling 416-849-0833 or 1-855-859-2056 (enter passcode 39208745). 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.2012 OBJECTIVES AND PERFORMANCEHome Capital published its financial objectives for 2012 on page 15 of the Company's 2011 Annual Report. The following table compares actual performance to date against each of these objectives.        Table 1: 2012 Targets and Performance                 For the nine months ended September 30, 2012 2012 Targets1 Actual Results1  AmountIncrease over 2011Growth in net income13%-18%16.7%$163,018 $23,271Growth in diluted earnings per share13%-18%16.4% 4.68  0.66Growth in total loans2 13%-18%10.0% 17,292,395  1,202,747Return on shareholders' equity20.0%25.7%    Efficiency ratio (TEB)3 28.0% - 34.0%27.9%    Capital ratios4        Tier 1Minimum of 13%16.97%     TotalMinimum of 14%20.78%    Provision as a percentage of gross loans (annualized)0.05% - 0.15%0.09%            1 Objectives and results for net income and diluted earnings per share are for the current year.2 Change represents growth over December 31, 2011 on an annualized basis and includes loans held for sale.3 See definition of TEB under Non-GAAP Measures in the unaudited interim consolidated financial report.4 Based on the Company's wholly owned subsidiary, Home Trust Company.     Consolidated Statements of Income        For the three months endedFor the nine months endedthousands of Canadian dollars, except per share amountsSeptember 30June 30September 30September 30September 30(Unaudited)  2012  2012  2011  2012  2011 Net Interest Income Non-Securitized Assets           Interest from loans$138,271 $125,576 $102,617 $381,412 $289,932 Dividends from securities 3,172  3,533  4,887  10,669  13,858 Other interest 1,093  930  1,334  3,070  4,246      142,536  130,039  108,838  395,151  308,036 Interest on deposits 58,962  56,043  48,160  168,133  140,368 Interest on senior debt 1,648  1,705  1,644  5,006  2,691 Net interest income non-securitized assets 81,926  72,291  59,034  222,012  164,977               Net Interest Income Securitized Loans and Assets          Interest income from securitized loans and assets 70,618  76,286  84,195  223,520  248,615 Interest expense on securitization liabilities 53,053  54,723  55,617  163,968  168,052 Net interest income securitized loans and assets 17,565  21,563  28,578  59,552  80,563               Total Net Interest Income  99,491  93,854  87,612  281,564  245,540 Provision for credit losses (note 5(E)) 4,239  2,298  2,349  11,035  4,540      95,252  91,556  85,263  270,529  241,000 Non-Interest Income           Fees and other income 12,485  12,025  9,697  35,407  26,703 Realized net gains and unrealized losses on securities and mortgages (1,172) 1,676  1,224  812  5,394 Net realized and unrealized gain (loss) on derivatives (note 14) 2,136  (1,275) (5,260) 5,146  (6,873)     13,449  12,426  5,661  41,365  25,224      108,701  103,982  90,924  311,894  266,224 Non-Interest Expenses            Salaries and benefits 15,465  14,501  13,509  43,965  39,339 Premises 2,296  1,977  1,997  6,271  5,769 Other operating expenses 14,304  13,404  10,530  40,879  32,787      32,065  29,882  26,036  91,115  77,895               Income Before Income Taxes   76,636  74,100  64,888  220,779  188,329 Income taxes (note 12(A))           Current 19,904  20,568  18,249  59,527  50,414  Deferred (522) 302  (1,778) (1,766) (1,832)     19,382  20,870  16,471  57,761  48,582 NET INCOME $57,254 $53,230 $48,417 $163,018 $139,747               NET INCOME PER COMMON SHARE           Basic$1.65 $1.54 $1.40 $4.70 $4.03 Diluted$1.65 $1.54 $1.39 $4.68 $4.02 AVERAGE NUMBER OF COMMON SHARES OUTSTANDING            Basic 34,697  34,476  34,682  34,705  34,691 Diluted 34,803  34,509  34,804  34,825  34,804               Total number of outstanding common shares (note 9(A)) 34,668  34,711  34,649  34,668  34,649 Book value per common share$26.53 $25.05 $21.10 $26.53 $21.10               The accompanying notes are an integral part of these unaudited interim consolidated financial statements.                Consolidated Statements of Comprehensive Income       For the three months endedFor the nine months ended   September 30June 30September 30September 30September 30thousands of Canadian dollars (Unaudited)  2012  2012  2011  2012  2011              NET INCOME $57,254 $53,230 $48,417 $163,018 $139,747              OTHER COMPREHENSIVE INCOME (LOSS)                        Available for Sale Securities (note 4(B))          Net unrealized gains (losses) on securities available for sale 1,667  (1,069) (9,221) 4,991  (9,302)Net losses (gains) reclassified to net income 1,141  (1,348) (1,499) (571) (5,989)    2,808  (2,417) (10,720) 4,420  (15,291)Income tax expense (recovery) 742  (643) (2,707) 1,266  (3,875)    2,066  (1,774) (8,013) 3,154  (11,416)             Cash Flow Hedges (note 14)          Net unrealized losses on cash flow hedges -  (396) (3,430) (370) (6,747)Net losses reclassified to net income 376  357  189  1,086  280     376  (39) (3,241) 716  (6,467)Income tax expense (recovery) 99  (89) (843) 120  (1,682)    277  50  (2,398) 596  (4,785)             Total other comprehensive income (loss) 2,343  (1,724) (10,411) 3,750  (16,201)             COMPREHENSIVE INCOME $59,597 $51,506 $38,006 $166,768 $123,546              The accompanying notes are an integral part of these unaudited interim consolidated financial statements.               Consolidated Balance Sheets                  September 30June 30December 31thousands of Canadian dollars (Unaudited) 2012  2012  2011 ASSETS        Cash Resources (note 4(A))$543,825 $301,330 $665,806 Securities (note 4(B))      Available for sale 401,830  425,834  391,754 Pledged securities (notes 4(C) and 6(B)) 784,098  628,836  341,588      1,185,928  1,054,670  733,342 Loans held for sale 36,405  29,811  - Loans (note 5)      Residential mortgages 8,456,791  7,749,484  6,339,883 Securitized residential mortgages (note 6) 7,238,946  7,582,154  8,243,350 Non-residential mortgages 993,174  1,037,385  946,222 Personal and credit card loans 567,079  568,127  560,193      17,255,990  16,937,150  16,089,648 Collective allowance for credit losses (note 5(E)) (29,800) (29,500) (29,440)     17,226,190  16,907,650  16,060,208 Other       Derivative assets (note 14) 57,651  59,284  72,424 Other assets (note 7) 102,741  84,534  79,650 Capital assets 7,165  7,278  5,372 Intangible assets 66,342  66,149  63,917 Goodwill 15,752  15,752  15,752      249,651  232,997  237,115     $19,241,999 $18,526,458 $17,696,471 LIABILITIES AND SHAREHOLDERS' EQUITY       Liabilities       Deposits        Deposits payable on demand$31,736 $42,098 $62,746  Deposits payable on a fixed date 9,838,955  8,965,366  7,859,378      9,870,691  9,007,464  7,922,124 Senior Debt (note 13) 153,724  152,524  153,336 Securitization Liabilities (note 6(C))       Mortgage-backed security liabilities 1,923,017  2,078,300  2,417,801  Canada Mortgage Bond liabilities 6,155,475  6,160,259  6,231,274      8,078,492  8,238,559  8,649,075 Other       Obligations related to securities sold under repurchase agreement (notes 4(C) and 5(F)) -  43,418  - Derivative liabilities (note 14) 3,767  4,043  3,458 Income taxes payable 8,689  15,893  17,628 Other liabilities (note 8) 168,743  156,320  136,025 Deferred tax liabilities (note 12(C)) 38,275  38,798  40,040      219,474  258,472  197,151      18,322,381  17,657,019  16,921,686 Shareholders' Equity       Capital stock (note 9) 61,873  61,662  55,104 Contributed surplus 5,847  5,543  5,873 Retained earnings 857,339  810,018  722,999 Accumulated other comprehensive loss (note 11) (5,441) (7,784) (9,191)     919,618  869,439  774,785     $19,241,999 $18,526,458 $17,696,471           The accompanying notes are an integral part of these unaudited interim consolidated financial statements.          Consolidated Statements of Changes in Shareholders' Equity                     Net UnrealizedNet UnrealizedTotal     (Losses) GainsLosses onAccumulated     on SecuritiesCash FlowOtherTotalthousands of Canadian dollars,CapitalContributedRetainedAvailable forHedges,ComprehensiveShareholders'except per share amounts (Unaudited)StockSurplusEarningsSale, after Taxafter Tax(Loss) IncomeEquityBalance at December 31, 2011$55,104 $5,873 $722,999 $(4,141)$(5,050)$(9,191)$774,785 Comprehensive income -  -  163,018  3,154  596  3,750  166,768 Stock options settled (note 9(A)) 6,988  (1,379) -  -  -  -  5,609 Amortization of fair value of              employee stock options (note 10(A)) -  1,353  -  -  -  -  1,353 Repurchase of shares (note 9(A)) (219) -  (5,743) -  -  -  (5,962)Dividends paid              ($0.64 per share) -  -  (22,935) -  -  -  (22,935)Balance at September 30, 2012$61,873 $5,847 $857,339 $(987)$(4,454)$(5,441)$919,618                Balance at December 31, 2010$50,427 $4,571 $567,681 $5,906 $- $5,906 $628,585 Comprehensive income -  -  139,747  (11,416) (4,785) (16,201) 123,546 Stock options settled (note 9(A)) 4,237  (933) -  -  -  -  3,304 Amortization of fair value of              employee stock options (note 10(A)) -  1,815  -  -  -  -  1,815 Repurchase of shares (note 9(A)) (175) -  (5,724) -  -  -  (5,899)Dividends paid              ($0.56 per share) -  -  (20,135) -  -  -  (20,135)Balance at September 30, 2011$54,489 $5,453 $681,569 $(5,510)$(4,785)$(10,295)$731,216                  The accompanying notes are an integral part of these unaudited interim consolidated financial statements.                Consolidated Statements of Cash Flows     For the nine months ended     September 30September 30thousands of Canadian dollars (Unaudited)  2012  2011 CASH FLOWS FROM OPERATING ACTIVITIES     Net income for the period$163,018 $139,747 Adjustments to determine cash flows relating to operating activities:     Deferred income taxes (1,766) (1,832) Amortization of capital assets 2,477  2,181  Amortization of intangible assets  4,854  65  Amortization of net premium on securities 2,046  33  Amortization of securitization and senior debt transaction costs 10,141  6,736  Provision for credit losses 11,035  4,540  Change in accrued interest payable 31,090  21,581  Change in accrued interest receivable (6,733) (3,647) Realized net gains and unrealized losses on securities and mortgages (812) (5,394) Settlement of derivatives (370) (6,747) (Gain) loss on derivatives (5,147) 6,265  Net increase in mortgages (1,205,378) (1,602,452) Net increase in personal and credit card loans (7,112) (92,742) Net increase in deposits 1,948,567  624,538  Activity in securitization liabilities      Proceeds from securitization of mortgage-backed security liabilities 152,303  1,044,863   Settlement and repayment of securitization liabilities (710,644) (456,891) Amortization of fair value of employee stock options 1,353  1,815  Changes in taxes payable and other (28,162) 8,720 Cash flows provided by (used in) operating activities 360,760  (308,621)CASH FLOWS FROM FINANCING ACTIVITIES     Repurchase of shares (5,962) (5,899)Exercise of employee stock options 5,609  3,304 Issuance of senior debt -  149,072 Dividends paid to shareholders (22,233) (19,440)Cash flows (used in) provided by financing activities (22,586) 127,037 CASH FLOWS FROM INVESTING ACTIVITIES     Activity in securities     Purchases (2,912,033) (592,802) Proceeds from sales 325,515  273,078  Proceeds from maturities 2,137,912  87,158 Purchases of capital assets (4,270) (1,774)Purchases of intangible assets (7,279) (13,199)Cash flows used in investing activities (460,155) (247,539)Net decrease in cash and cash equivalents during the period (121,981) (429,123)Cash and cash equivalents at beginning of the period 665,806  846,824 Cash and Cash Equivalents at End of the Period (note 4(A))$543,825 $417,701 Supplementary Disclosure of Cash Flow Information     Dividends received on investments$8,898 $13,034 Interest received 372,892  536,701 Interest paid 142,049  291,124 Income taxes paid 72,262  27,952          The accompanying notes are an integral part of these unaudited interim consolidated financial statements.       Caution Regarding Forward-Looking StatementsFrom time to time Home Capital Group Inc. (the "Company" or "Home Capital") makes written and verbal forward-looking statements. These are included in the Annual Report, periodic reports to shareholders, regulatory filings, press releases, Company presentations and other Company communications. Forward-looking statements are made in connection with business objectives and targets, Company strategies, operations, anticipated financial results and the outlook for the Company, its industry, and the Canadian economy. These statements regarding expected future performance are "financial outlooks" within the meaning of National Instrument 51-102.  Please see the risk factors, which are set forth in detail on pages 48 through 58 of the Company's 2011 Annual Report, as well as its other publicly filed information, which are available on the System for Electronic Document Analysis and Retrieval (SEDAR) at www.sedar.com, for the material factors that could cause the Company's actual results to differ materially from these statements.  These risk factors are material risk factors a reader should consider, and include credit risk, liquidity and funding risk, structural interest rate risk, operational risk, investment risk, strategic and business risk, reputational risk and regulatory and legal risk along with additional risk factors that may affect future results.  Forward-looking statements can be found in the Report to the Shareholders and the Outlook Section in the quarterly report.   Forward-looking statements are typically identified by words such as "will,"  "believe," "expect," "anticipate," "estimate," "plan," "may," and "could" or other similar expressions.By their very nature, these statements require the Company to make assumptions and are subject to inherent risks and uncertainties, general and specific, which may cause actual results to differ materially from the expectations expressed in the forward-looking statements.  These risks and uncertainties include, but are not limited to, global capital market activity, changes in government monetary and economic policies, changes in interest rates, inflation levels and general economic conditions, legislative and regulatory developments, competition and technological change. The preceding list is not exhaustive of possible factors.These and other factors should be considered carefully and readers are cautioned not to place undue reliance on these forward-looking statements. The Company does not undertake to update any forward-looking statements, whether written or verbal, that may be made from time to time by it or on its behalf, except as required by securities laws.Assumptions about the performance of the Canadian economy in 2012 and its effect on Home Capital's business are material factors the Company considers when setting its objectives and outlook.  In determining expectations for economic growth, both broadly and in the financial services sector, the Company primarily considers historical economic data provided by the Canadian government and its agencies.  In setting and reviewing the outlook and objectives for 2012, management's expectations assume:The Canadian economy will continue to produce modest growth in 2012, but will be heavily influenced by the economic conditions in the United States and global markets.  Inflation will generally be within the Bank of Canada's target of 1%-3%.Interest rates will remain at current rates for the balance of 2012 as the Bank of Canada leaves its target for the overnight rate at its current level.The housing market will remain resilient to global uncertainty with balanced supply and demand conditions in most regions.  Declining housing starts and softening resale activity on stable prices through most of Canada will continue with the market moderating from previous activity levels.Unemployment will remain stable or improve slightly as the economy grows, while a larger labour force will tend to offset job growth.Consumer debt levels will remain serviceable by Canadian households.Net interest margins overall are expected to remain in the current range.  Margins are expected to remain stable as returns on the increased traditional portfolio offset declining returns on the securitized portfolio throughout 2012.Credit quality will remain sound with actual losses within the low end of Home Capital's historical range.The recent changes to Canada Mortgage and Housing Corporation (CMHC) policies will continue to temper the real estate market.Non-GAAP MeasuresThe Company applies International Financial Reporting Standards (IFRS) which are the generally accepted accounting principles (GAAP) for Canadian publically accountable enterprises. The Company uses a number of financial measures to assess its performance.  Some of these measures are not calculated in accordance with GAAP, are not defined by GAAP, and do not have standardized meanings that would ensure consistency and comparability between companies using these measures.  Definitions of non-GAAP measures can be found under Non-GAAP Measures in the Management's Discussion and Analysis included in the Company's Third Quarter 2012 Report.Regulatory FilingsThe 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 branch offices in Ontario, Alberta, British Columbia, Nova Scotia, Quebec and Manitoba.    SOURCE: Home Capital Group Inc.For further information: Gerald M. Soloway, CEO, or Martin Reid, President 416-360-4663 www.homecapital.com