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Press release from CNW Group

Home Capital Reports Solid Fourth Quarter and Annual Results

Wednesday, February 13, 2013

Home Capital Reports Solid Fourth Quarter and Annual Results17:00 EST Wednesday, February 13, 2013Basic 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)1  2.13% 2.14% 2.06% 2.09% 2.06%Net Interest Margin Non-Securitized Assets (TEB)1  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)1  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 Administration2  19,681,750  19,410,132  17,696,471     Total Loans3  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 Administration4  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 Measures5           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 loans3 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 TargetsActual Results  AmountIncrease over 2011Growth in net income13%-18%16.8%$221,983 $31,903 Growth in diluted earnings per share13%-18%16.8% 6.38  0.92 Growth in total loans1 13%-18%5.1% 16,904,435  814,787 Return on shareholders' equity20.0%25.5%    Efficiency ratio (TEB)2 28.0%-34.0%27.7%    Capital ratios3        Tier 1Minimum of 13%17.01%     TotalMinimum of 14%20.68%    Provision as a percentage of gross loans0.05%-0.15%0.09%    1    Includes loans held for sale.2See 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.3Based 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 HIGHLIGHTSThe 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 OutlookSupported 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 WebcastFourth Quarter Results Conference CallThe 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 ArchiveA 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 NoticeThe 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 31thousands 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 31September 30December 31December 31December 31thousands of Canadian dollars2012 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 Totalthousands 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 31thousands 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 endedFor the year ended December 31September 30December 31December 31December 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 assets0.79%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 only3.13%3.16%3.16%3.13%3.09%Net Interest Income For the three months ended December 31, 2012For the three months ended September 30, 2012(000s, except %)AverageIncome/AverageAverageIncome/Average Balance1 ExpenseRate1 Balance 1 ExpenseRate1 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 %)     AverageIncome/Average      Balance 1 ExpenseRate 1 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 endedFor the year ended(000s, except %)December 31September 30December 31December 31December 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       ResidentialResidentialNon-residentialPersonal and   MortgagesMortgagesMortgagesCredit Card LoansTotalGross 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-residentialPersonal and   MortgagesMortgagesMortgagesCredit Card Loans TotalGross 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  ResidentialNon-ResidentialPersonal and   MortgagesMortgagesCredit Card LoansTotalIndividual 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  ResidentialNon-ResidentialPersonal and   MortgagesMortgagesCredit Card LoansTotalIndividual 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  ResidentialNon-ResidentialPersonal and   MortgagesMortgagesCredit Card LoansTotalIndividual 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  ResidentialNon-residentialPersonal and   MortgagesMortgagesCredit Card LoansTotalIndividual 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  ResidentialNon-residentialPersonal and   MortgagesMortgagesCredit Card LoansTotalIndividual 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 LendingConsumer LendingOtherTotalNet 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  2  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 LendingConsumer LendingOtherTotalNet 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 LendingConsumer LendingOtherTotalNet 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 LendingConsumer LendingOtherTotalNet 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  2  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 LendingConsumer LendingOtherTotalNet 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 StatementsFrom 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.For further information: Gerald M. Soloway, CEO, or Martin Reid, President 416-360-4663 www.homecapital.com