Skip to main content
Unchecking box will stop auto data updates
TSX Real-Time Last Sale CAD
Today's Change
Volume
Price Quote as of

More stories below advertisement

Home Capital Reports Second Quarter 2018 Results

BusinessWire - Mon Aug 13, 5:14PM CDT

Home Capital Group Inc. ("Home Capital" or "the Company") (TSX:HCG.TO) today reported financial results for the three and six months ended June 30, 2018. This press release should be read in conjunction with the Company's 2018 Second Quarter Report including Financial Statements and Management's Discussion and Analysis (MD&A), which are available on Home Capital's website at www.homecapital.com and on SEDAR at www.sedar.com.

"Our second quarter results were markedly improved with solid year-over-year earnings growth, taking into account last year's liquidity event, and with a third straight quarter of mortgage origination volume growth," said Yousry Bissada, President and Chief Executive Officer, Home Capital. "We are pleased with the progress our team has made on our journey to sustainably grow our business. Our core residential and commercial lending business continued to demonstrate resilience in the face of a challenging and competitive operating environment influenced by regulatory changes, rising interest rates and a softer Canadian housing market."

"In this environment, we believe the right long-term path is to maintain pricing discipline across all our product offerings, keep a sharp focus on productivity and originate the best quality loans possible. We are confident that by providing improved customer service and innovative solutions, together with investing in emerging digital technology, we will enhance broker relationships, attract new customers and retain existing clients."

Second Quarter 2018, compared with the Second Quarter 2017:

-- Net income of $29.6 million, compared to a net loss of $111.1 million.

-- Net loss in Q2 2017 includes the impact of $130.6 million of interest and fees on a line of credit facility, losses of $76.9 million on the sales of securities and loans and increased professional and legal fees.

-- Diluted earnings per share of $0.37, compared to a diluted loss per share of $1.73.

-- Total mortgage originations of $1.23 billion, an increase of 10.0% or $112.1 million from $1.12 billion.

-- Non-interest expense of $55.4 million, a $29.6 million decline and a 34.8% improvement from $85.0 million.

-- Provision for credit losses as a percentage of gross uninsured loans was 0.22% compared to 0.07%.

-- The $2 billion credit facility provided by a wholly owned subsidiary of Berkshire Hathaway Inc. matured on June 29, 2018 and was replaced with a $500 million credit facility provided by a syndicate of Canadian chartered banks. This will have a favourable impact on the Company's 2018 net interest margin in future periods compared with the cost of the matured facility.

Second Quarter 2018, compared with the First Quarter 2018:

-- Net income of $29.6 million, a decrease of 14.4% or $5.0 million, from $34.6 million.

-- Diluted earnings per share of $0.37, a decrease of 14.0% from $0.43.

-- Total mortgage originations of $1.23 billion, an increase of 6.1% or $71.0 million from $1.16 billion.

-- Non-interest expense of $55.4 million, an increase of $4.0 million from $51.4 million.

-- Non-securitized single-family residential mortgages of $10.21 billion, a 0.5% decrease or $56.1 million from $10.26 billion.

-- Provision for credit losses as a percentage of gross uninsured loans of 0.22%, compared to 0.20%.

First Six Months of 2018, compared with the First Six Months of 2017:

-- Net income of $64.2 million, compared with a net loss of $53.1 million.

-- Diluted earnings per share of $0.80, compared with a diluted loss per share of $0.83.

-- Total mortgage originations of $2.39 billion, a decrease of 31.0% or $1.07 billion, from $3.46 billion.

-- Non-interest expense of $106.8 million, a decrease of $42.7 million or 28.5%, from $149.5 million.

-- Provision for credit losses as a percentage of gross uninsured loans of 0.21% compared to 0.12%.

Second Quarter 2018 Financial Position

-- Total loans under administration of $22.51 billion, which includes securitized mortgages that qualify for off-balance sheet accounting, remained essentially unchanged from $22.54 billion at the end of Q1 2018, and $22.52 billion at the end of Q4 2017.

-- Total loans of $15.45 billion increased 1.5% from $15.22 billion at the end of Q1 2018 and increased 2.5% from $15.07 billion at the end of Q4 2017. -- Single-family residential mortgage originations of $949.3 million compared with $869.7 million in Q1 2018, and $840.2 million in Q2 2017.

-- Residential commercial mortgage originations of $129.4 million compared to $104.9 million in Q1 2018, and $89.8 million in Q2 2017.

-- Non-residential commercial mortgage originations, which include store and apartment mortgages, of $151.4 million compared to $184.7 million in Q1 2018, and $188.1 million in Q2 2017.

-- Liquid assets were $1.82 billion, compared to $1.45 billion at the end of Q1 2018 and $1.65 billion at the end of Q4 2017. The Company maintains a prudent level of liquidity, given the current level of operations, loan balances and the Company's obligations.

-- Total deposits were $12.50 billion compared to $12.08 billion at the end of Q1 2018 and $12.17 billion at the end of Q4 2017. -- Brokered GICs totaled $9.55 billion compared with $9.34 billion at the end of Q1 2018 and $9.35 billion at the end of Q4 2017.

-- Oaken GICs totaled $2.23 billion compared with $1.97 billion at the end of Q1 2018 and $1.81 billion at the end of Q4 2017.

Credit Quality

Credit losses and delinquencies are expected to remain low in the second half of 2018; however, the Company is prepared for volatility in this performance that may result from uncertainty in the macroeconomic environment.

-- Total provision for credit losses of $6.5 million in Q2 2018 compared with $6.0 million in Q1 2018, and $2.4 million in Q2 2017(1).

-- Provision as a percentage of gross uninsured loans remained low at 0.22% compared to 0.20% in Q1 2018 and 0.07% in Q2 2017(1). Provision for credit losses in Q2 2018 resulted primarily from one specific non-performing commercial loan included in Stage 3 under IFRS 9.

-- Net write-offs were $1.8 million and represented 0.05% of gross loans compared to 0.03% in Q1 2018 and 0.05% in Q2 2017.

-- Net non-performing loans (represented by Stage 3 loans under IFRS 9) as a percentage of gross loans remained low at 0.34% at the end of Q2 2018 up from 0.29% at the end of Q1 2018 and 0.30% at the end of Q4 2017.

(1) Provisions for credit losses were calculated under IFRS 9 for 2018 and under IAS 39 for 2017. As provisions for credit losses for 2017 were not restated, comparability is reduced to some extent.

Non-Interest Expenses

Non-interest expenses increased by $4.0 million or 7.9% from Q1 2018, primarily due to increased salaries and benefits expenses as the Company increased the number of active employees. That increase was partially offset by a reversal of $1.8 million of estimated severance expenses related to the Project EXPO expense savings initiative completed at the end of 2017.

Non-interest expenses declined $29.6 million or 34.8% from Q2 2017 mainly due to a decrease in both salaries and benefits, and other operating expenses related to a liquidity event in Q2 2017, including asset impairment charges, and resolving OSC and class action matters in Q2 2017.

Capital Position

The Company maintained capital ratios well above Company targets and regulatory minimums at the end of Q2 2018. Management continues to review opportunities to deploy capital to maximize long-term shareholder value.

-- Common Equity Tier 1 and Total capital ratios were 23.21% and 23.67%, respectively, at June 30, 2018. The comparative balances were 23.64% and 24.12%, respectively, at March 31, 2018 and 23.17% and 23.68%, respectively, at December 31, 2017.

-- Leverage ratio was 8.96% at June 30, 2018, 9.02% at March 31, 2018 and 8.70% at December 31, 2017.

Corporate Update

"Over the past several months, Home's senior executive team, with the support of our Board, has undertaken a detailed review of our strategy. Together, we have determined that the best path forward is to remain focused on our core business in the markets we serve to drive future growth. Looking towards the future, we believe we have the right strategic objectives in place to grow sustainably and attain the leading market share position in Canada's Alt-A mortgage market," concluded Yousry Bissada, President and Chief Executive Officer, Home Capital.

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

-- Leveraging the Company's strong and sustainable risk culture as a strategic advantage.

-- Being the leader in the Alt-A marketplace, in service, technology and solutions.

-- Developing robust and diverse liquidity sources and maintaining a strong balance sheet.

-- Profitably growing residential and commercial business lines and increasing market share, relative to market conditions.

-- Maintaining strong renewal and retention rates.

-- Deepening broker relationships and increasing outreach to advance higher-quality applications.

-- Assessing opportunities for the business in an evolving regulatory environment.

YOUSRY BISSADA President and Chief Executive Officer

PAUL DERKSEN Chair of the Board

August 13, 2018

The Company's 2018 Second Quarter Financial Report, including Management's Discussion and Analysis, for the six months ended June 30, 2018 is available at www.homecapital.com and on the Canadian Securities Administrators' website at www.sedar.com.

Second Quarter 2018 Results Conference Call and Slide Presentation Webcast

The conference call will take place on Tuesday, August 14, 2018, at 8:00 a.m. ET. Participants are asked to call approximately 10 minutes in advance at toll-free 1-866-393-4306 throughout North America. Participants calling from outside of North America may dial 1-734-385-2616. The call will also be accessible in listen-only mode on Home Capital's website at www.homecapital.com in the Investor Relations section of the website.

Conference Call Archive

A telephone replay of the call will be available between 11:00 a.m. ET Tuesday, August 14, 2018 and midnight ET Tuesday, August 21, 2018 by calling 1-855-859-2056 or 1-404-537-3406 (enter passcode 6684137). The archived audio webcast will be available for 90 days on Home Capital's website at www.homecapital.com.

FINANCIAL HIGHLIGHTS

---------------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------- -------------------- --------------------------------------------------------------------------------------------------------------------
(Unaudited)                                                                                                                                                                                                                                                         For the three months ended                                                                                                  For the six months ended
---------------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------- -------------------- --------------------------------------------------------------------------------------------------------------------
(000s, except Percentage and Per Share Amounts)                                                                June 30                                      March 31                                       June 30                               June 30                                       June 30
                                                                            2018                       2018                       2017               2018                       2017
---------------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- ---------- -------------------- -------------------- -------------------- --------------------
OPERATING RESULTS(1)
Net Income (Loss)                                                                                                                                        $               29,606                                                              $               34,586                                                              $            (111,116)                                                                                   $     64,192                                                              $             (53,075)
Net Interest Income (Loss)                                                                                                                                               84,129                                                                              88,100                                                                             (3,407)                                                                                        172,229                                                                             122,450
Total Revenue                                                                                                                                                           101,625                                                                             103,765                                                                            (61,293)                                                                                        205,390                                                                              86,449
Diluted Earnings (Loss) per Share                                                                                                                        $                 0.37                                                              $                 0.43                                                              $               (1.73)                                                                                   $       0.80                                                              $               (0.83)
Return on Shareholders' Equity (annualized)                                                                                                     6.4%                                                                                7.6%                                                                             (25.9)%                                                                                           7.0%                                                                              (6.3)%
Return on Average Assets (annualized)                                                                                                                                      0.7%                                                                                0.8%                                                                              (2.2)%                                                                                           0.7%                                                                              (0.5)%
Net Interest Margin (TEB)(2)                                                                                                                                              1.91%                                                                               2.02%                                                                             (0.07)%                                                                                          1.97%                                                                               1.20%
Provision as a Percentage of Gross Uninsured Loans (annualized)                                                                                                           0.22%                                                                               0.20%                                                                               0.07%                                                                                          0.21%                                                                               0.12%
Provision as a Percentage of Gross Loans (annualized)                                                                                                                     0.17%                                                                               0.16%                                                                               0.05%                                                                                          0.16%                                                                               0.09%
Efficiency Ratio (TEB)(2)                                                                     54.5%                      49.5%                   (138.9)%              52.0%                     171.0%
---------------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- ---------- -------------------- -------------------- -------------------- --------------------
                                                                                           As at
---------------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- ----------
                                                                                                                                                                        June 30                                                                            March 31                                                                         December 31                                                                                        June 30
                                                                            2018                       2018                       2017               2017
---------------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- ----------
BALANCE SHEET HIGHLIGHTS(1)
Total Assets                                                                                                                                             $           17,935,799                                                              $           17,458,034                                                              $           17,591,143                                                                                   $ 20,077,150
Total Assets Under Administration(3)                                                                                                                                 25,001,732                                                                          24,776,803                                                                          25,040,182                                                                                     28,292,436
Total Loans(4)                                                                                                                                                       15,447,928                                                                          15,222,310                                                                          15,069,636                                                                                     17,652,962
Total Loans Under Administration(3,4)                                                                                                                                22,513,861                                                                          22,541,079                                                                          22,518,675                                                                                     25,868,248
Liquid Assets                                                                                                                                                         1,816,720                                                                           1,454,313                                                                           1,654,718                                                                                      1,737,417
Deposits                                                                                                                                                             12,496,704                                                                          12,084,408                                                                          12,170,454                                                                                     13,104,606
Line of Credit Facility                                                                                                                                                       -                                                                                   -                                                                                   -                                                                                      1,396,959
Shareholders' Equity                                           1,877,731                  1,849,067                  1,813,505          1,751,087
---------------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- ----------
FINANCIAL STRENGTH(1)
Capital Measures(5)
Risk-Weighted Assets                                                                                                                                     $            6,879,863                                                              $            6,604,744                                                              $            6,532,130                                                                                   $  8,328,024
Common Equity Tier 1 Capital Ratio                                                                                                                                       23.21%                                                                              23.64%                                                                              23.17%                                                                                         17.06%
Tier 1 Capital Ratio                                                                                                                                                     23.21%                                                                              23.64%                                                                              23.17%                                                                                         17.06%
Total Capital Ratio                                                                                                                                                      23.67%                                                                              24.12%                                                                              23.68%                                                                                         17.54%
Leverage Ratio                                                                                                                                                            8.96%                                                                               9.02%                                                                               8.70%                                                                                          7.19%
Credit Quality
Net Non-Performing Loans as a Percentage of Gross Loans                                                                                                                   0.34%                                                                               0.29%                                                                               0.30%                                                                                          0.23%
Allowance as a Percentage of Gross Non-Performing Loans                                                                                                                   71.0%                                                                               78.1%                                                                               79.5%                                                                                         100.5%
Share Information
Book Value per Common Share                                                                                                                              $                23.40                                                              $                23.04                                                              $                22.60                                                                                   $      21.82
Common Share Price - Close                                                                                                                  $                15.01                                                              $                13.56                                                              $                17.31                                                                                   $      16.99
Market Capitalization                                                                                                                                    $            1,204,492                                                              $            1,088,136                                                              $            1,389,058                                                                                   $  1,363,380
Number of Common Shares Outstanding                                                          80,246                     80,246                     80,246             80,246
---------------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- ----------

(1)The amounts as at and for the periods ended June 30, 2018 and March 31, 2018 have been prepared in accordance with IFRS 9 Financial Instruments (IFRS 9); prior period amounts have not been restated and have been prepared in accordance with IAS 39 Financial Instruments: Recognition and Measurement (IAS 39). Please see Note 2 in the unaudited interim consolidated financial statements included in the 2018 Second Quarter Report for further information. (2)See definition of Taxable Equivalent Basis (TEB) under Non-GAAP Measures in the 2018 Second Quarter Report. (3)Total assets and loans under administration include both on- and off-balance sheet amounts. (4)Total loans include loans held for sale and are presented gross of allowance for credit losses, for all periods presented. (5)These figures relate to the Company's operating subsidiary, Home Trust Company.

Consolidated Statements of Income (Loss)

------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                                                                             For the three months ended                                                                                               For the six months ended
----------------------------------------------------------------------- -------------------- -------------------- -------------------- ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------- -------------------- -----------------------------------------------------------------------------------------------------------------
thousands of Canadian dollars, except per share amounts                                            June 30                         March 31                            June 30                            June 30                                       June 30
(Unaudited)                                                                        2018          2018            2017            2018                       2017
----------------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- --------------------
Net Interest Income (Loss) Non-Securitized Assets
Interest from loans(1)                                                                                                                 $ 156,543                                                              $ 154,934                                                              $   192,394                                                                                   $ 311,477                                                              $              384,829
Dividends from securities                                                                                                                                       307                                                                    286                                                                      300                                                                                         593                                                                               2,586
Other interest                                                                    6,933         4,480           1,627          11,413                      4,547
----------------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- --------------------
                                                                                                                                                            163,783                                                                159,700                                                                  194,321                                                                                     323,483                                                                             391,962
Interest on deposits and other                                                                                                                               76,520                                                                 68,367                                                                   71,673                                                                                     144,887                                                                             148,925
Interest and fees on line of credit facility                                      6,045         6,007         130,630          12,052                    130,630
----------------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- --------------------
Net interest income (loss) non-securitized assets                                81,218        85,326         (7,982)         166,544                    112,407
----------------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- --------------------
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
Net Interest Income Securitized Loans and Assets
Interest income from securitized loans and assets(1)                                                                                      23,365                                                                 22,059                                                                   22,678                                                                                      45,424                                                                              44,236
Interest expense on securitization liabilities                                   20,454        19,285          18,103          39,739                     34,193
----------------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- --------------------
Net interest income securitized loans and assets                                  2,911         2,774           4,575           5,685                     10,043
----------------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- --------------------
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
Total Net Interest Income (Loss)                                                                                                                             84,129                                                                 88,100                                                                  (3,407)                                                                                     172,229                                                                             122,450
Provision for credit losses(1)                                 6,487         5,968           2,420          12,455                      8,339
----------------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- --------------------
                                                              77,642        82,132         (5,827)         159,774                    114,111
----------------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- --------------------
Non-Interest Income (Loss)
Fees and other income                                                                                                                                        11,468                                                                 12,041                                                                   17,168                                                                                      23,509                                                                              33,499
Securitization income                                                                                                                                         2,063                                                                  2,691                                                                    1,877                                                                                       4,754                                                                               8,309
Gain on sale of PSiGate                                                                                                                                           -                                                                    950                                                                        -                                                                                         950                                                                                   -
Net realized and unrealized gains (losses) on securities and loans                                                                                            1,998                                                                  1,000                                                                 (76,912)                                                                                       2,998                                                                            (76,915)
Net realized and unrealized gains (losses) on derivatives                         1,967       (1,017)            (19)             950                      (894)
----------------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- --------------------
                                                              17,496        15,665        (57,886)          33,161                   (36,001)
----------------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- --------------------
                                                              95,138        97,797        (63,713)         192,935                     78,110
----------------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- --------------------
Non-Interest Expenses
Salaries and benefits                                                                                                                                        19,225                                                                 16,229                                                                   29,303                                                                                      35,454                                                                              58,922
Premises                                                                                                                                                      2,560                                                                  2,402                                                                    3,365                                                                                       4,962                                                                               7,117
Other operating expenses                                                         33,641        32,756          52,333          66,397                     83,427
----------------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- --------------------
                                                              55,426        51,387          85,001         106,813                    149,466
----------------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- --------------------
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
Income (Loss) Before Income Taxes                                                39,712        46,410       (148,714)          86,122                   (71,356)
----------------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- --------------------
Income taxes
                                                                                                                                           9,113                                                                  7,423                                                                 (39,616)                                                                                      16,536                                                                            (16,474)
   Current
                                                                                    993         4,401           2,018           5,394                    (1,807)
   Deferred
----------------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- --------------------
                                                              10,106        11,824        (37,598)          21,930                   (18,281)
----------------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- --------------------
NET INCOME (LOSS)                                                                                $  29,606                        $  34,586                        $ (111,116)                          $  64,192                        $             (53,075)
----------------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- --------------------
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
NET INCOME (LOSS) PER COMMON SHARE
Basic                                                                                                                                                     $    0.37                                                              $    0.43                                                              $    (1.73)                                                                                   $    0.80                                                              $               (0.83)
Diluted                                                                                          $    0.37                        $    0.43                        $    (1.73)                          $    0.80                        $               (0.83)
----------------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- --------------------
AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
Basic                                                                                                                                                        80,246                                                                 80,246                                                                   64,378                                                                                      80,246                                                                              64,321
Diluted                                                                          80,246        80,246          64,378          80,246                     64,321
----------------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- --------------------
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
Total number of outstanding common shares                                                                                                                    80,246                                                                 80,246                                                                   80,246                                                                                      80,246                                                                              80,246
Book value per common share                                                                      $   23.40                        $   23.04                        $     21.82                          $   23.40                        $                21.82
----------------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- --------------------

(1)The amounts for the periods ended June 30, 2018 and March 31, 2018 have been prepared in accordance with IFRS 9 Financial Instruments (IFRS 9); prior period amounts have not been restated and have been prepared in accordance with IAS 39 Financial Instruments: Recognition and Measurement (IAS 39). Please see Note 2 in the unaudited interim consolidated financial statements included in the 2018 Second Quarter Report for further information.

Consolidated Statements of Comprehensive Income (Loss)

------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------              -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
                                                                                                                                                                                                   For the three months ended                                                                                                            For the six months ended
-------------------------------------------------------------- -------------------- -------------------- -------------------- ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ -------------------- -------------------- ------------------------------------------------------------------------------------------------------------------------------
                                                                                          June 30                        March 31                            June 30                                         June 30                                       June 30
thousands of Canadian dollars (Unaudited)                                 2018         2018            2017                         2018                       2017
-------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
NET INCOME (LOSS)                                                                       $  29,606                        $ 34,586                        $ (111,116)                          $               64,192                        $             (53,075)
-------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
OTHER COMPREHENSIVE INCOME (LOSS)
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
ITEMS THAT WILL NOT BE SUBSEQUENTLY RECLASSIFIED TO NET INCOME
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
 Equity Securities Designated at FVOCI(1)
 Change in net unrealized gains or losses                                                                                                            (108)                                                                   931                                                                      N/A                                                                                                      823                                                                                 N/A
 Income tax (recovery) expense                                            (29)          248             N/A                          219                        N/A
-------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
                                                       (79)          683             N/A                          604                        N/A
-------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
ITEMS THAT WILL BE SUBSEQUENTLY RECLASSIFIED TO NET INCOME
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
Available for Sale Securities and Retained Interests(1)
Net change in unrealized gains or losses                                                                                                               N/A                                                                   N/A                                                                      550                                                                                                      N/A                                                                              16,964
Net losses reclassified to net income                                      N/A          N/A          46,647                          N/A                     46,650
-------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
                                                                                                                                                       N/A                                                                   N/A                                                                   47,197                                                                                                      N/A                                                                              63,614
Income tax expense                                                         N/A          N/A          12,514                          N/A                     16,872
-------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
                                                        N/A          N/A          34,683                          N/A                     46,742
-------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
Debt Instruments at FVOCI(1)
Net change in unrealized gains or losses                                                                                                             (791)                                                                 1,018                                                                      N/A                                                                                                      227                                                                                 N/A
Net gains or losses reclassified to net income                               -            -             N/A                            -                        N/A
-------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
                                                                                                                                                     (791)                                                                 1,018                                                                      N/A                                                                                                      227                                                                                 N/A
Income tax (recovery) expense                                            (211)          280             N/A                           69                        N/A
-------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
                                                      (580)          738             N/A                          158                        N/A
-------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
Cash Flow Hedges
Net change in unrealized gains or losses                                                                                                             (872)                                                                 (348)                                                                    (525)                                                                                                  (1,220)                                                                               (610)
Net losses reclassified to net income                                      298          287             572                          585                        901
-------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
                                                                                                                                                     (574)                                                                  (61)                                                                       47                                                                                                    (635)                                                                                 291
Income tax (recovery) expense                                            (152)         (26)              12                        (178)                         84
-------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
                                                      (422)         (35)              35                        (457)                        207
-------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
Total other comprehensive (loss) income                                (1,081)        1,386          34,718                          305                     46,949
-------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
COMPREHENSIVE INCOME (LOSS)                                                             $  28,525                        $ 35,972                        $  (76,398)                          $               64,497                        $              (6,126)
-------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------

(1)The amounts for the periods ended June 30, 2018 and March 31, 2018 have been prepared in accordance with IFRS 9; prior period amounts have not been restated and have been prepared in accordance with IAS 39. N/A indicates not applicable under the accounting policy for the respective period. FVOCI indicates fair value through other comprehensive income. Please see Note 2 in the unaudited interim consolidated financial statements included in the 2018 Second Quarter Report for further information.

Consolidated Balance Sheets

--------------------------------------------------------------- -------------------- -------------------- ------------------------------------------------------------   -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
                                                                                    As at
--------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
                                                                                                        June 30                                      March 31                                   December 31
thousands of Canadian dollars (Unaudited)                                               2018                       2018                       2017
--------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
ASSETS
Cash and Cash Equivalents                                                                $            1,375,850                        $            1,013,945                        $            1,336,138
--------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Securities                                                                           392,632                    332,899                    332,468
--------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Loans Held for Sale                                                                    6,788                     75,748                    165,947
--------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Loans
Securitized mortgages                                                                                                                                          3,075,283                                                                           2,873,343                                                                           2,993,250
Non-securitized mortgages and loans                                               12,365,857                 12,273,219                 11,910,439
--------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
                                                               15,441,140                 15,146,562                 14,903,689
--------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Allowance for credit losses(1)                                   (49,806)                   (45,140)                   (38,775)
--------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
                                                               15,391,334                 15,101,422                 14,864,914
--------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Other
Restricted assets                                                                                                                                                300,757                                                                             504,113                                                                             437,011
Derivative assets                                                                                                                                                  2,836                                                                               4,069                                                                               7,325
Other assets                                                                                                                                                     368,433                                                                             325,040                                                                             336,770
Deferred tax assets                                                                                                                                                2,860                                                                               3,107                                                                               9,577
Goodwill and intangible assets                                                        94,309                     97,691                    100,993
--------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
                                                                  769,195                    934,020                    891,676
--------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
                                                                      $           17,935,799                        $           17,458,034                        $           17,591,143
--------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits
Deposits payable on demand                                                                                                                        $              411,056                                                              $              476,038                                                              $              539,364
Deposits payable on a fixed date                                                  12,085,648                 11,608,370                 11,631,090
--------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
                                                               12,496,704                 12,084,408                 12,170,454
--------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Securitization Liabilities
CMHC-sponsored mortgage-backed security liabilities                                                                                                            1,556,312                                                                           1,550,183                                                                           1,562,152
CMHC-sponsored Canada Mortgage Bond liabilities                                                                                                                1,471,172                                                                           1,473,472                                                                           1,473,318
Bank-sponsored securitization conduit liabilities                                     85,984                    106,192                    142,279
--------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
                                                                3,113,468                  3,129,847                  3,177,749
--------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Other
Derivative liabilities                                                                                                                                            44,672                                                                              43,759                                                                              38,728
Other liabilities                                                                                                                                                374,317                                                                             322,792                                                                             360,477
Deferred tax liabilities                                                              28,907                     28,161                     30,230
--------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
                                                                  447,896                    394,712                    429,435
--------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
                                                               16,058,068                 15,608,967                 15,777,638
--------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Shareholders' Equity
Capital stock                                                                                                                                                    231,156                                                                             231,156                                                                             231,156
Contributed surplus                                                                                                                                                4,707                                                                               4,568                                                                               4,978
Retained earnings                                                                                                                                              1,647,457                                                                           1,617,851                                                                           1,583,265
Accumulated other comprehensive loss                                                 (5,589)                    (4,508)                    (5,894)
--------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
                                                                1,877,731                  1,849,067                  1,813,505
--------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
                                                                      $           17,935,799                        $           17,458,034                        $           17,591,143
--------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------

(1)The allowance for credit losses as at June 30, 2018 and March 31, 2018 represents expected credit losses and have been prepared in accordance with IFRS 9. The allowance for credit losses as at December 31, 2017 represents the total of individual and collective allowances on loan principal as prepared in accordance with the incurred loss model under IAS 39. Please see Note 2 in the unaudited interim consolidated financial statements included in 2018 Second Quarter Report for further information including information on reclassification of comparative balances.

Consolidated Statements of Changes in Shareholders' Equity(1)

------------------------------------ -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
                                                                                                                                                                                                                                                                                                                                                           Net Unrealized Gains (Losses), After Tax, on:                                           Total                                         Total
                                                                                                                                                                                                                                                                                                                                                                                     ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
thousands of Canadian dollars                                                                                                         Capital                                                                         Contributed                                                                            Retained                                                                                        Equity Securities                              Debt Instruments                                     Cash Flow                                                                                        Accumulated Other                                                                       Shareholders'
(Unaudited)                                                                    Stock                                       Surplus                                      Earnings                             Designated at FVOCI                                      at FVOCI                                        Hedges                              Comprehensive Loss                                        Equity
------------------------------------ -------------------- -------------------- -------------------- -------------------------------------------------------------- -------------------- -------------------------------------------------------------- -------------------- -------------------------------------------------------------- -------------------- -------------------- -------------------------------------------------------------- -------------------- -------------------------------------------------------------- -------------------- -------------------------------------------------------------- -------------------- -------------------- -------------------------------------------------------------- -------------------- ------------------------------------------
Balance at January 1, 2018(2)                                                                                          $              231,156                                                              $                4,978                                                              $            1,583,265                                                                                   $              (6,902)                                                              $                2,197                                                              $              (1,189)                                                                                   $              (5,894)                                                              $            1,813,505
Comprehensive income                                                                                                                        -                                                                                   -                                                                              64,192                                                                                                      604                                                                                 158                                                                               (457)                                                                                                      305                                                                              64,497
Amortization of fair value of
  employee stock options                                        -                      (271)                          -                            -                          -                          -                            -                      (271)
------------------------------------ -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Balance at June 30, 2018                                      $              231,156                        $                4,707                        $            1,647,457                          $              (6,298)                        $                2,355                        $              (1,646)                          $              (5,589)                        $            1,877,731
------------------------------------ -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
                                                                                       
------------------------------------ -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    Net Unrealized
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            Losses                                                                      Net Unrealized                                                                                                    Total
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 on Securities and                                                                           Losses on                                                                                              Accumulated
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                Retained Interests                                                                           Cash Flow                                                                                                    Other                                                                               Total
thousands of Canadian dollars,                                                                                                        Capital                                                                         Contributed                                                                            Retained                                                                                                                                                                          Available for Sale,                                                                             Hedges,                                                                                            Comprehensive                                                                       Shareholders'
except per share amounts (Unaudited)                                           Stock                                       Surplus                                      Earnings                                                                  After Tax                                     after Tax                                            Loss                                        Equity
------------------------------------ -------------------- -------------------- -------------------- -------------------------------------------------------------- -------------------- -------------------------------------------------------------- -------------------- -------------------------------------------------------------- -------------------- -------------------- -------------------------------------------------------------- -------------------- -------------------------------------------------------------- -------------------- -------------------------------------------------------------- -------------------- -------------------- -------------------------------------------------------------- -------------------- ------------------------------------------
Balance at December 31, 2016                                                                                           $               84,910                                                              $                4,562                                                              $            1,598,180                                                                                                                                                                       $             (53,589)                                                              $              (1,476)                                                                                   $             (55,065)                                                              $            1,632,587
Comprehensive loss                                                                                                                          -                                                                                   -                                                                            (53,075)                                                                                                                                                                                       46,742                                                                                 207                                                                                                   46,949                                                                             (6,126)
Stock options settled                                                                                                                     548                                                                               (141)                                                                                   -                                                                                                                                                                                            -                                                                                   -                                                                                                        -                                                                                 407
Amortization of fair value of
   employee stock options                                                                                                                   -                                                                                 501                                                                                   -                                                                                                                                                                                            -                                                                                   -                                                                                                        -                                                                                 501
Repurchase of shares                                                                                                                    (267)                                                                                   -                                                                             (5,732)                                                                                                                                                                                            -                                                                                   -                                                                                                        -                                                                             (5,999)
Issuance of shares                                                                                                                    146,427                                                                                   -                                                                                   -                                                                                                                                                                                            -                                                                                   -                                                                                                        -                                                                             146,427
Dividends ($0.26 per share)                                     -                          -                   (16,710)                                    -                          -                            -                   (16,710)
------------------------------------ -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Balance at June 30, 2017                                      $              231,618                        $                4,922                        $            1,522,663                                  $              (6,847)                        $              (1,269)                          $              (8,116)                        $            1,751,087
------------------------------------ -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------

(1)The amounts for the period ended June 30, 2018 have been prepared in accordance with IFRS 9; prior period amounts have not been restated and have been prepared in accordance with IAS 39. (2)Please see Note 2 in the unaudited interim consolidated financial statements included in the 2018 Second Quarter Report for information on transition of balances as at December 31, 2017 to balances as at January 1, 2018 upon adoption of IFRS 9.

Consolidated Statements of Cash Flows

------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------            -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
                                                                                                    For the three months ended                                                                                                            For the six months ended
----------------------- ----------------------- ----------------------- -------------------- -------------------- -------------------- ------------------------------------------------------------------------------------------------------------------------------ -------------------- -------------------- ------------------------------------------------------------------------------------------------------------------------------
                                                               June 30                              June 30                                         June 30                                       June 30
thousands of Canadian dollars (Unaudited)                                            2018              2017                         2018                       2017
-------------------------------------------------------------------------------------------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- ----------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) for the period                                                                                                                          $    29,606                                                              $   (111,116)                                                                                   $               64,192                                                              $             (53,075)
Adjustments to determine cash flows relating to operating activities:
   Amortization of net premium (discount) on securities                                                                                                           274                                                                      (137)                                                                                                      385                                                                               (223)
   Provision for credit losses                                                                                                                                  6,487                                                                      2,420                                                                                                   12,455                                                                               8,339
   (Recovery) loss on sale of loan portfolios                                                                                                                 (1,900)                                                                      5,005                                                                                                  (2,900)                                                                               5,005
   Gain on sale of PSiGate                                                                                                                                          -                                                                          -                                                                                                    (950)                                                                                   -
   Gain on sale of mortgages or residual interest                                                                                                             (1,075)                                                                      (360)                                                                                                  (2,397)                                                                             (5,098)
   Net realized and unrealized (gains) losses on securities                                                                                                      (98)                                                                     71,907                                                                                                     (98)                                                                              71,910
   Amortization and impairment losses(1)                                                                                                     5,362                                                                     10,526                                                                                                   10,695                                                                              16,745
   Amortization of fair value of employee stock options                                                                                                           139                                                                        197                                                                                                    (271)                                                                                 501
   Deferred income taxes                                                                                                                                          993                                                                      2,018                                                                                                    5,394                                                                             (1,807)
Changes in operating assets and liabilities
   Loans, net of gains or losses on securitization and sales                                                                                                (226,364)                                                                    919,162                                                                                                (377,319)                                                                             381,893
   Restricted assets                                                                                                                                          203,356                                                                   (76,271)                                                                                                  136,254                                                                              48,778
   Derivative assets and liabilities                                                                                                                            1,572                                                                     20,174                                                                                                    9,798                                                                              23,843
   Accrued interest receivable                                                                                                                                  (418)                                                                      2,263                                                                                                  (2,328)                                                                               1,751
   Accrued interest payable                                                                                                                                  (14,762)                                                                   (28,204)                                                                                                  (3,527)                                                                             (8,556)
   Deposits                                                                                                                                                   412,296                                                                (3,145,005)                                                                                                  326,250                                                                         (2,781,424)
   Line of credit facility                                                                                                                                          -                                                                  1,396,959                                                                                                        -                                                                           1,396,959
   Securitization liabilities                                                                                                                                (16,379)                                                                    680,584                                                                                                 (64,281)                                                                             677,980
   Taxes receivable or payable and other                                           24,191            45,256                      (9,681)                     79,063
-------------------------------------------------------------------------------------------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- ----------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Cash flows provided by (used in) operating activities                             423,280         (204,622)                      101,671                  (137,416)
-------------------------------------------------------------------------------------------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- ----------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of shares                                                                                                                                                  -                                                                    146,427                                                                                                        -                                                                             146,427
Repurchase of shares                                                                                                                                                -                                                                       (37)                                                                                                        -                                                                             (5,999)
Exercise of employee stock options                                                                                                                                  -                                                                          -                                                                                                        -                                                                                 407
Dividends paid to shareholders                                                          -                 -                            -                   (16,710)
-------------------------------------------------------------------------------------------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- ----------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Cash flows provided by financing activities                                             -           146,390                            -                    124,125
-------------------------------------------------------------------------------------------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- ----------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Activity in securities
   Purchases                                                                                                                                                 (70,247)                                                                          -                                                                                                 (70,247)                                                                             (5,803)
   Proceeds from sales                                                                                                                                         10,151                                                                    491,883                                                                                                   10,151                                                                             491,883
   Proceeds from maturities                                                                                                                                       300                                                                      1,220                                                                                                      599                                                                              10,271
Net proceeds from sale of PSiGate                                                                                                                                   -                                                                          -                                                                                                      310                                                                                   -
Purchases of capital assets                                                                                                                                     (437)                                                                      (530)                                                                                                    (459)                                                                               (586)
Capitalized intangible development costs                                          (1,142)           (2,549)                      (2,313)                    (4,886)
-------------------------------------------------------------------------------------------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- ----------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Cash flows (used in) provided by investing activities                            (61,375)           490,024                     (61,959)                    490,879
-------------------------------------------------------------------------------------------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- ----------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Net increase in cash and cash equivalents during the period                                                                                                   361,905                                                                    431,792                                                                                                   39,712                                                                             477,588
Cash and cash equivalents at beginning of the period                            1,013,945         1,251,190                    1,336,138                  1,205,394
-------------------------------------------------------------------------------------------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- ----------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Cash and Cash Equivalents at End of the Period                                                   $ 1,375,850                        $   1,682,982                          $            1,375,850                        $            1,682,982
-------------------------------------------------------------------------------------------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- ----------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Supplementary Disclosure of Cash Flow Information
Dividends received on investments                                                                                                                         $       316                                                              $       1,008                                                                                   $                  589                                                              $                4,036
Interest received                                                                                                                                             186,688                                                                    216,122                                                                                                  366,375                                                                             431,766
Interest paid                                                                                                                                                 117,781                                                                    248,610                                                                                                  200,205                                                                             322,304
Income taxes paid                                                                  12,732             6,646                       25,813                     26,868
-------------------------------------------------------------------------------------------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- ----------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------

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

Caution Regarding Forward-looking Statements

From time to time Home Capital Group Inc. makes written and verbal forward-looking statements. These are included in the Annual Report, periodic reports to shareholders, regulatory filings, press releases, Company presentations and other Company communications. Forward-looking statements are made in connection with business objectives and targets, Company strategies, operations, anticipated financial results and the outlook for the Company, its industry, and the Canadian economy. These statements regarding expected future performance are "financial outlooks" within the meaning of National Instrument 51-102. Please see the risk factors, which are set forth in detail in the Risk Management section of the 2018 Second Quarter Report, as well as the Company's other publicly filed information, which is available on the System for Electronic Document Analysis and Retrieval (SEDAR) at www.sedar.com, for the material factors that could cause the Company's actual results to differ materially from these statements. These risk factors are material risk factors a reader should consider, and include credit risk, liquidity and funding risk, structural interest rate risk, operational risk, investment risk, strategic risk, reputational risk, compliance risk and capital adequacy risk along with additional risk factors that may affect future results. Forward-looking statements can be found in the Report to the Shareholders and the Outlook section in the 2018 Second Quarter Report. Forward-looking statements are typically identified by words such as "will," "believe," "expect," "anticipate," "intend," "should," "estimate," "plan," "forecast," "may," and "could" or other similar expressions.

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

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

Assumptions about the performance of the Canadian economy in 2018 and its effect on Home Capital's business are material factors the Company considers when setting strategic priorities and outlook. In determining expectations for economic growth, both broadly and in the financial services sector, the Company primarily considers historical and forecasted economic data provided by the Canadian government and its agencies and other third party providers. In setting and reviewing its strategic priorities and outlook for the remainder of 2018, management's expectations continue to assume:

-- The Canadian economy is expected to be relatively stable for the remainder of 2018 but is vulnerable to trade related uncertainties.

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

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

-- While the Company is assuming that interest rates will experience increases in 2018, the impact of such increases is not expected to be material. The level of interest rates is expected to continue to support relatively low mortgage interest rates for the remainder of 2018.

-- Current and expected levels of housing activity indicate a relatively stable real estate market overall. Please see Market Conditions under the 2018 Outlook in the Company's 2018 Second Quarter Report for more discussion on the Company's expectations for the housing market.

-- Debt service levels will remain manageable by Canadian households in 2018, however high levels of consumer debt make the economy more vulnerable to rising interest rates and any economic weaknesses resulting from trade disputes.

-- Access to the mortgage and deposit markets through broker networks will be maintained.

Non-GAAP Measures

The Company has adopted IFRS as its accounting framework. IFRS are the generally accepted accounting principles (GAAP) for Canadian publicly accountable enterprises for years beginning on or after January 1, 2011. The Company uses a number of financial measures to assess its performance. Some of these measures are not calculated in accordance with GAAP, are not defined by GAAP, and do not have standardized meanings that would ensure consistency and comparability between companies using these measures. Definitions of non-GAAP measures can be found under Non-GAAP Measures in the Management's Discussion and Analysis included in the Company's 2018 Second Quarter Report.

Regulatory Filings

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

About Home Capital

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

http://cts.businesswire.com/ct/CT?id=bwnews&sty=20180813005686r1&sid=cmtx6&distro=nx&lang=en

View source version on businesswire.com: https://www.businesswire.com/news/home/20180813005686/en/

SOURCE: Home Capital Group Inc.

Home Capital Group Inc. 
Laura Lepore, 416-933-5652 
Assistant Vice President, Investor Relations 
laura.lepore@hometrust.ca

All market data (will open in new tab) is provided by Barchart Solutions. Copyright © 2018.

Information is provided 'as is' and solely for informational purposes, not for trading purposes or advice. For exchange delays and terms of use, please read disclaimer (will open in new tab).

More stories below advertisement