Home Capital Reports Q2 Earnings

• Diluted Earnings per Share of $1.03
• Quarterly Dividend of $0.22 per Common Share

TORONTO, July 29, 2015 /CNW/ - Home Capital today reported results for the second quarter ended June 30, 2015.

This press release should be read in conjunction with the Company's Second Quarter Report, including Financial Statements and Management's Discussion and Analysis. In addition, this press release should be read in conjunction with the Company's press release entitled "Home Capital Group Inc. Provides Additional Disclosures Regarding Broker Suspensions and Revises Material Change Report," issued July 29, 2015. These materials are available on Home Capital's website at www.homecapital.com and the Canadian Securities Administrators' website at www.sedar.com.

 FINANCIAL HIGHLIGHTS

(Unaudited)	For the three months ended						For the six months ended
(000s, except Percentage, Multiples and Per Share Amounts)	June 30		March 31		June 30		June 30		June 30
		2015		2015		2014		2015		2014
OPERATING RESULTS
Net Income	$	72,317	$	72,286	$	73,745	$	144,603	$	143,481
Net Interest Income		117,210		115,524		115,143		232,734		225,530
Total Revenue	$	250,879	$	249,232	$	255,448	$	500,111	$	503,348
Diluted Earnings per Share		1.03		1.03		1.05		2.05		2.04
Return on Shareholders' Equity		19.1%		19.7%		23.1%		19.4%		23.0%
Return on Average Assets		1.4%		1.4%		1.4%		1.4%		1.4%
Net Interest Margin (TEB)1		2.29%		2.28%		2.26%		2.28%		2.23%
Provision as a Percentage of Gross Uninsured Loans (annualized)		0.07%		0.07%		0.10%		0.07%		0.10%
Provision as a Percentage of Gross Loans (annualized)		0.05%		0.05%		0.07%		0.05%		0.07%
Efficiency Ratio (TEB)1		32.2%		30.4%		28.3%		31.3%		28.4%
								As at
	June 30			March 31		December 31		June 30
		2015		2015		2014		2014
BALANCE SHEET HIGHLIGHTS
Total Assets	$	20,516,247	$	20,514,613	$	20,082,744	$	20,503,526
Total Assets Under Administration2		25,456,212		25,066,234		24,281,366		23,716,585
Total Loans3		17,982,475		18,190,841		18,364,910		18,022,175
Total Loans Under Administration2,3		22,922,440		22,742,462		22,563,532		21,235,234
Liquid Assets		1,815,817		1,825,775		1,058,297		1,766,314
Deposits		14,966,544		14,741,902		13,939,971		13,747,625
Shareholders' Equity		1,536,099		1,487,259		1,448,633		1,313,159
FINANCIAL STRENGTH
Capital Measures4
Risk-Weighted Assets	$	7,634,392	$	7,454,175	$	7,186,132	$	6,874,353
Common Equity Tier 1 Capital Ratio		18.03%		17.95%		18.30%		17.45%
Tier 1 Capital Ratio		18.03%		17.94%		18.30%		17.45%
Total Capital Ratio		20.53%		20.50%		20.94%		20.20%
Leverage Ratio5		6.94		6.75		N/A		N/A
Credit Quality
Net Non-Performing Loans as a Percentage of Gross Loans		0.33%		0.25%		0.30%		0.32%
Allowance as a Percentage of Gross Non-Performing Loans		62.9%		78.2%		64.4%		60.4%
Share Information
Book Value per Common Share	$	21.87	$	21.18	$	20.67	$	18.74
Common Share Price – Close	$	43.28	$	42.56	$	47.99	$	47.83
Dividend paid during the quarter ended	$	0.22	$	0.22	$	0.20	$	0.16
Market Capitalization	$	3,040,290	$	2,988,819	$	3,363,907	$	3,350,922
Number of Common Shares Outstanding		70,247		70,226		70,096		70,059

¹ See definition of Taxable Equivalent Basis (TEB) under Non-GAAP Measures in the unaudited interim consolidated financial report.
² Total assets and loans under administration include both on and off-balance sheet amounts.
³ Total loans include loans held for sale.
⁴ These figures relate to the Company's operating subsidiary, Home Trust Company.
⁵ Effective Q1 2015, the Assets to Regulatory Capital Multiple has been replaced with the Basel III leverage ratio.  See definition of the leverage ratio under Non-GAAP Measures in the unaudited interim consolidated financial report.

SECOND QUARTER 2015 HIGHLIGHTS

Home Capital today reported financial results for the second quarter ended June 30, 2015. The Company continued to deliver strong results across its business, including a stable net interest margin, a healthy loan portfolio evidenced by low non-performing loans and credit losses, and a strong capital position, despite lower residential mortgage originations in the first half of 2015.

Home Capital continues to expect that it will meet its three to five year mid-term targets, reflecting the continued strength of the overall business, its diverse sources of growth and the Company's expectation of improving origination volumes for the remainder of the year. 

Q2 Financial Highlights:

• Q2 2015 reported net income of $72.3 million and $144.6 million for the first six months of 2015, down 1.9% compared to $73.7 million in Q2 2014 and up 0.8% compared to $143.5 million in the first half of 2014. Q2 2015 net income was in line with $72.3 million earned in Q1 2015.
  
  
• Q2 2015 reported diluted earnings per share (EPS) of $1.03 and $2.05 for the first six months of 2015, compared to $1.05 and $2.04 earned in the comparable periods of 2014. Q2 2015 diluted EPS was consistent with $1.03 earned in Q1 2015.
  
  
• Return on common shareholders' equity was 19.1% for Q2 2015 and 19.4% for the first six months of 2015.
  
  
• Provision for credit losses as a percentage of gross uninsured loans of 0.07% on an annualized basis for both Q2 2015 and the first six months of 2015, down from 0.10% in both the comparable periods of 2014 and stable as compared to Q1 2015.
  
  
• Q2 2015 Common Equity Tier 1 ratio of 18.03% and Tier 1 and Total capital ratios of 18.03% and 20.53%, respectively.

Growing Our Core Business

Home Capital, through its principal subsidiary Home Trust Company, continued in Q2 2015 to build on its presence as Canada's leading alternative financial institution serving an established, but underserved and growing, market niche.

The Company's results reflect its continued profitability as measured by a stable net interest margin in the quarter of 2.29%, a healthy loan portfolio as evidenced by continued low non-performing loans and credit losses, and a strong capital position.

Home Capital reported Q2 2015 traditional (uninsured single-family) residential mortgage originations of $1.29 billion, as compared to $1.53 billion in Q2 2014, and Accelerator originations of $279.5 million for Q2 2015, as compared to $619.6 million for Q2 2014, decreases of 15.4% and 54.9%, respectively.

Mortgage originations were impacted directly by, among other things, the Company suspending, during the period of September 2014 to March 2015, its relationship with 18 independent mortgage brokers and 2 brokerages, for a total of approximately 45 individual mortgage brokers, and a loss of originations from these sources.

Mortgages originated by this group in 2014 could be expected to contribute approximately $6 million to the Company's net income over a full year, or approximately 2% of the total net income of $313.2 million reported in 2014. This group of brokers originated $960.4 million of single-family residential mortgages in 2014, or 5.3% of the outstanding loan assets on the Company's balance sheet. The majority (approximately 60%) of loans originated by this group were the Company's lower margin Accelerator mortgages. The total value of single-family residential mortgage originations for 2014 was $7.65 billion.

The Company continues to actively monitor the subject mortgages and notes that there have been no unusual credit issues.

Home Capital also continuously revises its underwriting procedures to ensure best practices. Following the suspension of brokers, the Company further enhanced its income verification procedures to ensure new loans continue to reflect Home Capital's risk appetite, which remains unchanged. These enhancements include requests for more detailed documentation and income verification from brokers, which may have increased approval time for some applications and led some customers to turn to other funding sources in the short-term.

In addition to these factors, originations were also affected by the current competitive market for prime insured mortgages and the Company's conservative approach to growing its residential mortgage business in the current Canadian economic environment.

Home Capital has taken several steps to improve origination volumes in the second half of 2015, including sales measures to build on the Company's pipeline for residential mortgage originations and to leverage the solid demand for its traditional mortgages within its established regions. Home Capital also expects origination volumes to improve as brokers adjust to the Company's enhanced approval processes.

The Company has already seen an increase in originations near the end of the reporting period compared to the first half of 2015, and expects this trend to continue.

Building on Operational Excellence

Home Capital continues to experience strong credit performance, with net non-performing loans as a percentage of gross loans (NPL ratio) at 0.33% at the end of Q2 2015, compared to 0.32% at the end of Q2 2014. These results reflect the high credit quality of the Company's loan portfolio and were supported by the Company's continued investments in its risk oversight and control functions.

Home Capital also continued to make disciplined and measured investments in other areas related to the longer-term growth of the business. These investments include, among other things, continuing to update the Company's loans-origination platform, which is designed for more efficient processing of loan applications, as well as ongoing investments to build an IT security platform for its fast growing online banking service, which we view as vital to protecting our customers and maintaining their trust.

Overall, expenses, while higher for these reasons, remain in line with the Company's financial plan.

While most of the increase in expenses incurred by the Company continue to be associated with ongoing efforts to build on Home Capital's operational excellence and dedication to providing service to clients and business partners, the Company has incurred additional expenses of less than $1 million cumulatively from Q4 2014 related to its efforts to realign some of its business partnerships following the suspension of a small number of brokers.

Home Capital's efficiency ratio rose in Q2 to 32.2% (Q2 2014 28.3%), reflecting the increased expenses in the quarter set against the flat revenue numbers. As revenues increase, the Company expects the efficiency ratio to return to levels more in line with historical averages and to remain relatively consistent.

Strong Shareholder Returns, Strong and Conservative Financial Position

Home Capital continued to focus on maintaining its strong and conservative financial position in Q2 2015 and delivered a return on average shareholders' equity of 19.1%.

Subsequent to the end of the quarter, and in light of the Company's performance, profitability and strong financial position, the Board of Directors approved a quarterly dividend of $0.22 per common share, payable on September 1, 2015 to shareholders of record at the close of business on August 14, 2015.

In summary, the Company has maintained its solid fundamentals, despite the short-term impact of decreased originations. Home Capital's focus remains on providing the best service and support to our customers and valued partners, generating future growth that is sustainable and prudent, and making the investments in our business that help us to achieve those goals.

Looking ahead, the Board of Directors and management expect that Home Capital will continue generating solid shareholder returns in 2015 and beyond.

GERALD M. SOLOWAY	KEVIN P.D. SMITH
Chief Executive Officer	Chair of the Board
July 29, 2015

Additional information concerning the Company's targets and related expectations for 2015, including the risks and assumptions underlying these expectations, may be found in the Management's Discussion & Analysis (MD&A) of the quarterly report.

Second Quarter Results Conference Call
The conference call will take place on Thursday, July 30, 2015 at 10:30 a.m. Participants are asked to call 5 to 15 minutes in advance, 647-427-7450 in Toronto or toll-free 1-888-231-8191 throughout North America. The call will also be accessible in listen-only mode via the Internet at www.homecapital.com.

Conference Call Archive
A telephone replay of the call will be available between 1:30 p.m. Thursday, July 30, 2015 and midnight Thursday, August 6, 2015 by calling 416-849-0833 or 1-855-859-2056 (enter passcode 79685033). The archived audio web cast will be available for 90 days on CNW Group's website at www.newswire.ca and Home Capital's website at www.homecapital.com.

Supplemental Financial Information
Home Capital has provided a Supplemental Financial Information package available at the Company's website at www.homecapital.com to improve readers' understanding of the financial position and performance of the Company.  This information should be used in conjunction with the Company's second quarter unaudited interim consolidated financial report, as well as the Company's 2014 Annual Report.  

Consolidated Statements of Income
		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)			2015		2015		2014		2015		2014
Net Interest Income Non-Securitized Assets
Interest from loans		$	190,559	$	186,900	$	176,182	$	377,459	$	347,425
Dividends from securities			2,677		2,738		2,898		5,415		5,629
Other interest			2,303		2,108		4,109		4,411		7,575
			195,539		191,746		183,189		387,285		360,629
Interest on deposits and other			80,669		79,395		76,718		160,064		149,740
Interest on senior debt			1,516		1,544		1,542		3,060		3,122
Net interest income non-securitized assets			113,354		110,807		104,929		224,161		207,767
Net Interest Income Securitized Loans and Assets
Interest income from securitized loans and assets			26,279		30,394		45,494		56,673		90,769
Interest expense on securitization liabilities			22,423		25,677		35,280		48,100		73,006
Net interest income securitized loans and assets			3,856		4,717		10,214		8,573		17,763
Total Net Interest Income			117,210		115,524		115,143		232,734		225,530
Provision for credit losses			2,266		2,403		3,232		4,669		6,437
			114,944		113,121		111,911		228,065		219,093
Non-Interest Income
Fees and other income			21,390		21,219		18,439		42,609		35,233
Securitization income			9,251		5,409		7,494		14,660		16,224
Net realized and unrealized gains on securities			-		1,444		1,187		1,444		1,939
Net realized and unrealized losses on derivatives			(1,580)		(980)		(355)		(2,560)		(1,446)
			29,061		27,092		26,765		56,153		51,950
			144,005		140,213		138,676		284,218		271,043
Non-Interest Expenses
Salaries and benefits			21,603		22,014		19,872		43,617		40,080
Premises			3,260		3,134		3,014		6,394		5,769
Other operating expenses			22,511		18,515		17,636		41,026		33,613
			47,374		43,663		40,522		91,037		79,462
Income Before Income Taxes			96,631		96,550		98,154		193,181		191,581
Income taxes
	Current		25,193		24,551		24,405		49,744		49,518
	Deferred		(879)		(287)		4		(1,166)		(1,418)
			24,314		24,264		24,409		48,578		48,100
NET INCOME		$	72,317	$	72,286	$	73,745	$	144,603	$	143,481
NET INCOME PER COMMON SHARE
Basic		$	1.03	$	1.03	$	1.06	$	2.06	$	2.06
Diluted		$	1.03	$	1.03	$	1.05	$	2.05	$	2.04
AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
Basic			70,230		70,137		69,743		70,184		69,617
Diluted			70,488		70,467		70,496		70,488		70,352
Total number of outstanding common shares			70,247		70,226		70,059		70,247		70,059
Book value per common share		$	21.87	$	21.18	$	18.74	$	21.87	$	18.74

 

Consolidated Statements of Comprehensive Income
	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)		2015		2015		2014		2015		2014
NET INCOME	$	72,317	$	72,286	$	73,745	$	144,603	$	143,481
OTHER COMPREHENSIVE (LOSS) INCOME
Available for Sale Securities and Retained Interest
Net unrealized (losses) gains	$	(12,860)	$	(25,572)	$	5,265	$	(38,432)	$	9,268
Net gains reclassified to net income		-		(1,443)		(1,187)		(1,443)		(1,939)
		(12,860)		(27,015)		4,078		(39,875)		7,329
Income tax (recovery) expense		(3,422)		(7,156)		1,080		(10,578)		1,940
		(9,438)		(19,859)		2,998		(29,297)		5,389
Cash Flow Hedges
Net unrealized gains (losses)		345		(814)		(295)		(469)		(670)
Net losses reclassified to net income		370		366		362		736		726
		715		(448)		67		267		56
Income tax expense (recovery)		188		(119)		18		69		15
		527		(329)		49		198		41
Total other comprehensive (loss) income	$	(8,911)	$	(20,188)	$	3,047	$	(29,099)	$	5,430
COMPREHENSIVE INCOME	$	63,406	$	52,098	$	76,792	$	115,504	$	148,911

 

Consolidated Balance Sheets
							As at
		June 30		March 31		December 31
thousands of Canadian dollars (Unaudited)			2015		2015		2014
ASSETS
Cash and Cash Equivalents		$	915,674	$	882,252	$	360,746
Available for Sale Securities			449,216		463,669		582,819
Loans Held for Sale			21,304		55,068		102,094
Loans
Securitized mortgages			2,814,301		3,313,567		3,945,654
Non-securitized mortgages and loans			15,146,870		14,822,206		14,317,162
			17,961,171		18,135,773		18,262,816
Collective allowance for credit losses			(35,300)		(34,700)		(34,100)
			17,925,871		18,101,073		18,228,716
Other
Restricted assets			733,185		539,033		421,083
Derivative assets			63,123		82,452		38,534
Other assets			287,598		274,848		235,616
Goodwill and intangible assets			120,276		116,218		113,136
			1,204,182		1,012,551		808,369
		$	20,516,247	$	20,514,613	$	20,082,744
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits
Deposits payable on demand		$	1,435,924	$	1,187,517	$	1,064,152
Deposits payable on a fixed date			13,530,620		13,554,385		12,875,819
			14,966,544		14,741,902		13,939,971
Senior Debt			151,930		154,280		152,026
Securitization Liabilities
Mortgage-backed security liabilities			365,884		388,078		471,551
Canada Mortgage Bond liabilities			3,144,960		3,436,112		3,831,912
			3,510,844		3,824,190		4,303,463
Other
Derivative liabilities			3,059		3,578		2,266
Other liabilities			312,383		267,137		199,831
Deferred tax liabilities			35,388		36,267		36,554
			350,830		306,982		238,651
			18,980,148		19,027,354		18,634,111
Shareholders' Equity
Capital stock			89,603		88,862		84,687
Contributed surplus			3,474		3,285		3,989
Retained earnings			1,490,726		1,433,905		1,378,562
Accumulated other comprehensive loss			(47,704)		(38,793)		(18,605)
			1,536,099		1,487,259		1,448,633
		$	20,516,247	$	20,514,613	$	20,082,744

 
 

Consolidated Statements of Changes in Shareholders' Equity
								Net Unrealized
								Losses		Net Unrealized		Total
								on Securities and		Losses on		Accumulated
								Retained Interest		Cash Flow		Other		Total
thousands of Canadian dollars,		Capital		Contributed		Retained		Available		Hedges,		Comprehensive		Shareholders'
except per share amounts (Unaudited)		Stock		Surplus		Earnings		for Sale, after Tax		after Tax		Loss		Equity
Balance at December 31, 2014		$	84,687	$	3,989	$	1,378,562	$	(16,242)	$	(2,363)	$	(18,605)	$	1,448,633
Comprehensive income			-		-		144,603		(29,297)		198		(29,099)		115,504
Stock options settled			4,920		(1,323)		-		-		-		-		3,597
Amortization of fair value of
	employee stock options		-		808		-		-		-		-		808
Repurchase of shares			(4)		-		(124)		-		-		-		(128)
Dividends
($0.44 per share)			-		-		(32,315)		-		-		-		(32,315)
Balance at June 30, 2015		$	89,603	$	3,474	$	1,490,726	$	(45,539)	$	(2,165)	$	(47,704)	$	1,536,099
Balance at December 31, 2013		$	70,233	$	5,984	$	1,119,959	$	(15,823)	$	(2,656)	$	(18,479)	$	1,177,697
Comprehensive income			-		-		143,481		5,389		41		5,430		148,911
Stock options settled			12,615		(3,388)		-		-		-		-		9,227
Amortization of fair value of
	employee stock options		-		1,088		-		-		-		-		1,088
Repurchase of shares (note 8(A))			-		-		-		-		-		-		-
Dividends
($0.32 per share)			-		-		(23,764)		-		-		-		(23,764)
Balance at June 30, 2014		$	82,848	$	3,684	$	1,239,676	$	(10,434)	$	(2,615)	$	(13,049)	$	1,313,159

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)				2015		2014		2015		2014
CASH FLOWS FROM OPERATING ACTIVITIES
Net income for the period			$	72,317	$	73,745	$	144,603	$	143,481
Adjustments to determine cash flows relating to operating activities:
	Amortization of net premium on securities			29		517		23		1,194
	Provision for credit losses			2,266		3,232		4,669		6,437
	Gain on sale of mortgages or residual interest			(7,804)		(6,971)		(12,231)		(14,901)
	Net realized and unrealized gains on securities			-		(1,187)		(1,444)		(1,939)
	Amortization of capital and intangible assets			3,423		3,219		6,347		6,196
	Amortization of fair value of employee stock options			389		449		808		1,088
	Deferred income taxes			(879)		4		(1,166)		(1,418)
Changes in operating assets and liabilities
	Loans, net of securitization and sales			214,733		(129,338)		391,509		7,523
	Restricted assets			(194,152)		33,634		(312,102)		38,473
	Derivative assets and liabilities			19,525		3,936		(23,529)		(2,555)
	Accrued interest receivable			1,274		2,021		1,320		625
	Accrued interest payable			(15,426)		(14,623)		20,780		25,229
	Deposits			224,642		662,688		1,026,573		981,671
	Securitization liabilities			(313,346)		(567,496)		(792,619)		(782,460)
	Taxes receivable or payable and other			46,108		38,151		47,167		32,550
Cash flows provided by operating activities				53,099		101,981		500,708		441,194
CASH FLOWS FROM FINANCING ACTIVITIES
Repurchase of shares				(43)		-		(128)		-
Exercise of employee stock options				543		9,159		3,597		9,227
Dividends paid to shareholders				(15,450)		(11,165)		(30,880)		(22,283)
Cash flows used in financing activities				(14,950)		(2,006)		(27,411)		(13,056)
CASH FLOWS FROM INVESTING ACTIVITIES
Activity in securities
	Purchases			-		(371,493)		-		(423,910)
	Proceeds from sales			-		153,047		76,924		154,848
	Proceeds from maturities			2,932		60,562		19,593		85,562
Purchases of capital assets				(870)		367		(2,693)		(853)
Capitalized intangible development costs				(6,789)		(7,510)		(12,193)		(12,569)
Cash flows (used in) provided by investing activities				(4,727)		(165,027)		81,631		(196,922)
Net increase (decrease) in cash and cash equivalents during the period				33,422		(65,052)		554,928		231,216
Cash and cash equivalents at beginning of the period				882,252		1,029,440		360,746		733,172
Cash and Cash Equivalents at End of the Period (note 4(A))			$	915,674	$	964,388	$	915,674	$	964,388
Supplementary Disclosure of Cash Flow Information
Dividends received on investments			$	2,463	$	2,448	$	4,948	$	4,513
Interest received				220,829		231,197		440,619		446,249
Interest paid				121,989		130,118		190,476		200,671
Income taxes paid				27,351		20,421		75,506		38,729

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 quarterly report, as well as its other publicly filed information, which are available on the System for Electronic Document Analysis and Retrieval (SEDAR) at www.sedar.com, for the material factors that could cause the Company's actual results to differ materially from these statements.  These risk factors are material risk factors a reader should consider, and include credit risk, funding and liquidity risk, structural interest rate risk, operational risk, investment risk, strategic and business risk, reputational risk and regulatory and legislative risk along with additional risk factors that may affect future results.  Forward-looking statements can be found in the Report to the Shareholders and the Outlook Section in the quarterly report.   Forward-looking statements are typically identified by words such as "will,"  "believe," "expect," "anticipate," "estimate," "plan," "forecast," "may," and "could" or other similar expressions. 

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

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

Assumptions about the performance of the Canadian economy in 2015 and its effect on Home Capital's business are material factors the Company considers when setting its objectives, targets and outlook.  In determining expectations for economic growth, both broadly and in the financial services sector, the Company primarily considers historical and forecasted economic data provided by the Canadian government and its agencies.  In setting and reviewing its targets, objectives and outlook for the remainder of 2015, management's expectations continue to assume:

• The Canadian economy is expected to produce modest growth on balance in 2015; however, there continues to be some uncertainty about the full impact of the oil price adjustment. While the Company has limited exposure in energy producing regions, it has plans for geographic expansion in Canada. There is some uncertainty as to the timing and extent of expansion given the economic conditions.
• Generally the Company expects stable employment conditions in its established regions. Unemployment rates in energy producing regions are expected to continue to increase through 2015. 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 consistent demand for the Company's lending products in its established regions. Credit losses and delinquencies in the energy producing regions may see an increase, but given the Company's limited exposure and lending practices, this is not expected to be significant. 
• The Canadian economy will continue to be influenced by the economic conditions in the United States and global markets and further adjustments in commodity prices; as such, the Company is prepared for the variability to plan that may result.
• The Company is assuming that overnight interest rates will remain at the current very low rate for 2015. This is expected to continue to support relatively low mortgage interest rates for the foreseeable future.
• In the Company's established regions the expectation is the housing market will remain stable with balanced supply supported by continued low interest rates, relatively stable employment, and immigration. There will be stable housing starts and resale activity with relatively stable prices, with regional disparities, throughout most of Canada. This supports continued stable credit losses and stable demand for the Company's lending products in its established regions.
• Consumer debt levels, while elevated, will remain serviceable by Canadian households.
• The Company will have access to the mortgage and deposit markets through broker networks.

Non-GAAP Measures

The Company 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 Second Quarter 2015 Report. 

Regulatory Filings

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

About Home Capital

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

SOURCE Home Capital Group Inc.

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