Home Capital Reports Q1 Earnings: Diluted Earnings per Share of $0.92; adjusted diluted earnings per share of $0.96 Dividend of $0.24 per common share. Toronto, May 4, 2016 - Home Capital today reported financial results for the first quarter ended March 31, 2016. This press release should be read in conjunction with the Company s First Quarter Report, including Financial Statements and Management s Discussion and Analysis, which 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 (000s, except Per Share and Percentage Amounts) March 31 December 31 March 31 2016 2015 2015 OPERATING RESULTS Net Income $ 64,248 $ 70,239 $ 72,286 Adjusted Net Income 1 67,497 71,811 72,286 Net Interest Income 122,517 126,658 115,524 Total Adjusted Revenue 1 241,197 246,406 249,232 Diluted Earnings per Share $ 0.92 $ 1.00 $ 1.03 Adjusted Diluted Earnings per Share 1 $ 0.96 $ 1.02 $ 1.03 Return on Shareholders Equity 15.7% 17.6% 19.7% Adjusted Return on Shareholders' Equity 1 16.4% 18.0% 19.7% Return on Average Assets 1.2% 1.4% 1.4% Net Interest Margin (TEB) 2 2.38% 2.46% 2.28% Provision as a Percentage of Gross Uninsured Loans (annualized) 0.04% 0.04% 0.07% Provision as a Percentage of Gross Loans (annualized) 0.03% 0.03% 0.05% Efficiency Ratio (TEB) 2 39.6% 36.0% 30.4% Adjusted Efficiency Ratio (TEB) 1,2 36.3% 33.7% 30.4% As at March 31 December 31 March 31 2016 2015 2015 BALANCE SHEET HIGHLIGHTS Total Assets $ 20,672,422 $ 20,512,019 $ 20,514,613 Total Assets Under Administration 3 27,945,030 27,301,433 25,066,234 Total Loans 4 17,949,915 18,268,708 18,190,841 Total Loans Under Administration 3,4 25,222,523 25,058,122 22,742,462 Liquid Assets 2,459,859 2,095,145 1,825,775 Deposits 15,824,899 15,665,958 14,741,902 Shareholders Equity 1,661,759 1,621,106 1,487,259 FINANCIAL STRENGTH Capital Measures 5 Risk-Weighted Assets $ 8,169,818 $ 7,985,498 $ 7,454,175 Common Equity Tier 1 Capital Ratio 18.28% 18.31% 17.95% Tier 1 Capital Ratio 18.28% 18.30% 17.94% Total Capital Ratio 20.63% 20.70% 20.50% Leverage Ratio 7.46% 7.36% 6.75% Credit Quality Net Non-Performing Loans as a Percentage of Gross Loans 0.34% 0.28% 0.25% Allowance as a Percentage of Gross Non-Performing Loans 62.9% 74.0% 78.2% Share Information Book Value per Common Share $ 23.75 $ 23.17 $ 21.18 Common Share Price Close $ 35.06 $ 26.92 $ 42.56 Dividend paid during the period ended $ 0.24 $ 0.22 $ 0.22 Market Capitalization $ 2,453,008 $ 1,883,808 $ 2,988,819 Number of Common Shares Outstanding 69,966 69,978 70,226
1 See definition of Adjusted Net Income, Total Adjusted Revenue, Adjusted Diluted Earnings per Share, Adjusted Return on Shareholders Equity and Adjusted Efficiency Ratio under Non-GAAP Measures in the Company s unaudited interim consolidated financial report and the Reconciliation of Net Income to Adjusted Net Income in the following table. 2 See definition of Taxable Equivalent Basis (TEB) under Non-GAAP Measures in the Company s unaudited interim consolidated financial report. 3 Total assets and loans under administration include both on- and off-balance sheet amounts. 4 Total loans include loans held for sale. 5 These figures relate to the Company s operating subsidiary, Home Trust Company. Reconciliation of Net Income to Adjusted Net Income (000s, except % and per share amounts) Q1 Q4 Q1 2016 2015 Change 2015 Change Net income under GAAP $ 64,248 $ 70,239 (8.5)% $ 72,286 (11.1)% Adjustment for gain recognized on acquisition of CFF Bank (net of tax) (478) 1,572 (130.4)% - - Adjustment for severance and other related costs (net of tax) 3,727 - - - - Adjusted Net Income 1 $ 67,497 $ 71,811 (6.0)% $ 72,286 (6.6)% Adjusted Basic Earnings per Share 1 $ 0.96 $ 1.02 (5.9)% $ 1.03 (6.8)% Adjusted Diluted Earnings per Share 1 $ 0.96 $ 1.02 (5.9)% $ 1.03 (6.8)% 1 Adjusted Net Income and Adjusted Earnings per share are defined in the Non-GAAP section of the Company's unconsolidated interim financial report. The Company s results were affected by the following items of note that aggregated to a negative impact on after-tax net income of $3.2 million or $0.04 diluted earnings per share in Q1 2016. The items of note identified in the above table include the following: Adjustment to gain recognized on the acquisition of CFF Bank in the amount of $651 thousand ($478 thousand, after tax). Expenses including severance and other related costs in the amount of $5.1 million ($3.7 million, after tax), that are not expected to be indicative of future results. The Company s results were affected by the following items of note that aggregated to a negative impact on after-tax net income of $1.6 million or $0.02 diluted earnings per share in Q4 2015: $0.7 million in acquisition costs and $3.5 million in integration costs, less $2.1 million in relation to a bargain purchase gain, for net of $2.1 million related to the acquisition of CFF Bank in 2015 ($1.6 million after tax). FIRST QUARTER 2016 HIGHLIGHTS Home Capital today reported financial results for the first quarter ended March 31, 2016. The Company delivered solid results across its business, including strong net interest margins, a healthy loan portfolio evidenced by low non-performing loans and credit losses, year-over-year single-family mortgage originations growth, and a continued strong capital position. On February 29, 2016, Home Capital announced the planned retirement of Chief Executive Officer (CEO) Gerald (Jerry) M. Soloway. Under Jerry s leadership for the past 30 years, the Company has delivered truly outstanding performance and Home Capital will continue to benefit from Jerry s wisdom and entrepreneurial keenness as a member of the Company s Board. Following the Company s Annual Meeting on May 11, 2016, the Company will welcome Martin Reid as its next CEO. Martin is an outstanding executive with a strong track record, having spent the past six years in his role as president of the Company. Martin will continue to build on the Company s strong foundations and existing strategic vision. 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 and its diverse sources of growth. Q1 Financial Highlights: Reported Q1 2016 net income was $64.2 million, compared to $70.2 million in Q4 2015 and $72.3 million in Q1 2015. Adjusted Q1 2016 net income was $67.5 million, compared to adjusted net income of $71.8 million in Q4 2015 and $72.3 million in the first three months of 2015. Reported Q1 2016 diluted earnings per share were $0.92, compared to $1.00 in Q4 2015 and $1.03 in Q1 2015. Adjusted Q1 2016 diluted earnings per share was $0.96, compared to $1.02 earned in Q4 2015 and $1.03 in Q1 2015. Included in Q1 2016 reported net income of $64.2 million and reported diluted earnings per share of $0.92 is $5.1 million ($3.7 million after tax and $0.05 diluted earnings per share) related to certain severance and other related costs, $2.0 million of losses ($1.4 million, after tax and $0.02 diluted earnings per share) from continuing operations of CFF Bank and $3.8 million ($2.8 million, after tax and $0.04 diluted earnings per share) of derivative losses related to the senior debt, which was retired early in Q2 2016. These amounts are offset by an adjustment to the gain recognized on acquisition of CFF Bank in the amount of $651 thousand ($478 thousand, after tax and
$0.01 diluted earnings per share). The total impact to reported diluted earnings per share of the above amounts is $0.10. Adjusted Return on common shareholders equity was 16.4% for Q1 2016. Adjusted efficiency ratio of 36.3%, compared to 33.7% in Q4 2015 and 30.4% in Q1 2015. During Q1 2016, the Company incurred additional expenses related to severance and other related costs that are not reflective of ongoing operations. Net non-performing loans as a percentage of gross loans (NPL ratio) were 0.34% at the end of Q1 2016, compared to 0.28% at the end of Q4 2015, and 0.25% at the end of Q1 2015. Included in the Q1 2016 non-performing loans are $9.3 million of non-residential and residential commercial loans that became non-performing in the quarter, with relatively high collateral and accordingly no associated individual allowance. In the absence of these loans, the NPL ratio would have been 0.29%. Q1 2016 Common Equity Tier 1 ratio was 18.28% and Tier 1 and Total capital ratios were 18.28% and 20.63%, respectively. Growing Our Core Business Home Capital s first quarter results reflect its continued profitability as measured by its strong net interest margin (TEB) of 2.38%, a healthy loan portfolio as evidenced by continued low non-performing loans and credit losses, and a strong capital position. Total originations in Q1 2016 were $1.78 billion, an increase of 28.8% from $1.38 billion in Q1 2015. The Company reported traditional (uninsured single-family) residential mortgage originations of $1.06 billion as compared to $961.3 million in Q1 2015, an increase of 10.7%. Accelerator originations increased 102.1% to $363.8 million in Q1 2016 when compared to Q1 2015. Originations from all other sources increased 45.9% to $354.0 million when compared to the same quarter in 2015. The Company continues to take a prudent approach to growing its traditional residential mortgage business. On a quarter-over-quarter basis, total mortgage originations in Q1 2016 were down 17.3% from Q4 2015, reflecting expected seasonality trends. The Company is approaching three-quarters of the way through its review and re-validation of income documentation related to the suspension of 45 individual mortgage brokers last year, which will be completed at the end of 2016. The Company has not experienced any unusual credit issues with respect to the identified mortgages. Home Capital will continue to focus on growing its origination volumes, specifically to take advantage of the solid demand for its traditional mortgages within its established regions. On April 1, 2016, the Company launched its new broker partnership program, Spire, with all broker partners now participating in the program. Through the first half of 2016, the Company will continue with its roll out of its broker portal technology, Loft, in an effort to enhance the broker experience. The Company s commercial lending products continue to demonstrate strength in origination volumes through the first quarter of the year. Other lending, comprising credit cards, lines of credit and other consumer retail loans, continues to be an important source of loan assets with attractive returns. While representing 3.9% of the total on-balance sheet loan portfolio, these assets generated 7.2% of the interest income from loans for the quarter. The balance of Oaken deposits at the end of the quarter was $1.23 billion, up 12.6% from the balance at the end of 2015, demonstrating progress in the Company s efforts towards deposit diversification. Building on Operational Excellence Home Capital continues to experience strong credit performance, with an NPL ratio at 0.34% at the end of Q1 2016, compared to 0.28% at the end of Q4 2015 and 0.25% at the end of Q1 2015. 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. In conjunction with the announcement of the succession plan for the Company s CEO, the Company realigned certain resources and incurred certain expenses in order to execute on its strategy and achieve future growth. Specifically, these items included certain severance and other related costs in the amount of $5.1 million, reducing diluted earnings per share by $0.05, which have been excluded from the Company s adjusted metrics. The Company does not expect these expenses to be indicative of the Company s ongoing expense base. Home Capital continued to make disciplined and measured investments related to the long-term growth of the business, including ongoing investments in information technology to move the Company towards operating as a digital enterprise. In addition, the Company incurred expenses of approximately $0.5 million during the quarter related to its efforts to realign some of its business partnerships. In 2015, the Company, through its subsidiary Home Trust Company, acquired all of the outstanding common shares of CFF Bank for a purchase price of $23.2 million. The integration of CFF Bank is proceeding to plan, as the Company
decommissions redundant systems and facilities in order to realize cost savings and to facilitate growth. The operating losses of CFF Bank reduced diluted earnings per share by $0.02 in Q1 2016. Solid Shareholder Returns, Strong and Conservative Financial Position Home Capital continued to focus on maintaining its strong and conservative financial position while delivering value to shareholders in Q1 2016. Home Capital delivered an adjusted return on average shareholders equity of 16.4% for the first quarter. On April 18, 2016, Home Capital announced that it had taken up and paid for 3,989,361 common shares at a price of $37.60 per share under the Company s previously announced substantial issuer bid to repurchase for cancellation up to $150 million of the Company s common shares. Subsequent to the repurchase, the number of issued and outstanding shares was reduced to 65,976,819 and there was a reduction in capital of $150 million. In addition, today, the Company repaid and retired its senior debt in the principal amount of $150 million, resulting in future savings of the related interest expense of $1.8 million per quarter. 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 $0.24 per common share, payable on June 1, 2016 to shareholders of record at the close of business on May 16, 2016. In summary, the Company will continue to focus on delivering success over the long-term, by providing the best service and support to its customers and valued partners, generating future growth that is sustainable and prudent, and making investments in the business that help us to achieve those goals. Looking ahead, the Board of Directors and management expect that Home Capital will continue generating solid returns for shareholders for the remainder of 2016 and beyond. GERALD M. SOLOWAY Chief Executive Officer May 4, 2016 KEVIN P.D. SMITH Chair of the Board Additional information concerning the Company s targets and related expectations for 2016, including the risks and assumptions underlying these expectations, may be found in the MD&A of the quarterly report. First Quarter Results Conference Call The conference call will take place on Thursday, May 5, 2016 at 10:30 a.m. Participants are asked to call 5 to 10 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, May 5, 2016 and midnight Thursday, May 12, 2016 by calling 416-849-0833 or 1-855-859-2056 (enter passcode 94488806). 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 first quarter unaudited interim consolidated financial report, as well as the Company s 2015 Annual Report.
Consolidated Statements of Income For the three months ended thousands of Canadian dollars, except per share amounts March 31 December 31 March 31 (Unaudited) 2016 2015 2015 Net Interest Income Non-Securitized Assets Interest from loans $ 193,546 $ 197,052 $ 186,900 Dividends from securities 2,692 2,608 2,738 Other interest 2,528 1,694 2,108 198,766 201,354 191,746 Interest on deposits and other 77,685 77,762 79,395 Interest on senior debt 1,778 1,824 1,544 Net interest income non-securitized assets 119,303 121,768 110,807 Net Interest Income Securitized Loans and Assets Interest income from securitized loans and assets 20,093 22,853 30,394 Interest expense on securitization liabilities 16,879 17,963 25,677 Net interest income securitized loans and assets 3,214 4,890 4,717 Total Net Interest Income 122,517 126,658 115,524 Provision for credit losses 1,394 1,415 2,403 121,123 125,243 113,121 Non-Interest Income Fees and other income 19,165 19,927 21,219 Securitization income 7,682 5,760 5,409 Gain on acquisition of CFF Bank 651 2,056 - Net realized and unrealized (losses) gains on securities (175) (66) 1,444 Net realized and unrealized losses on derivatives (4,334) (3,422) (980) 22,989 24,255 27,092 144,112 149,498 140,213 Non-Interest Expenses Salaries and benefits 28,711 25,874 22,014 Premises 3,851 2,731 3,134 Other operating expenses 25,455 26,076 18,515 58,017 54,681 43,663 Income Before Income Taxes 86,095 94,817 96,550 Income taxes Current 20,086 25,548 24,551 Deferred 1,761 (970) (287) 21,847 24,578 24,264 NET INCOME $ 64,248 $ 70,239 $ 72,286 NET INCOME PER COMMON SHARE Basic $ 0.92 $ 1.00 $ 1.03 Diluted $ 0.92 $ 1.00 $ 1.03 AVERAGE NUMBER OF COMMON SHARES OUTSTANDING Basic 69,972 70,157 70,137 Diluted 70,047 70,237 70,467 Total number of outstanding common shares 69,966 69,978 70,226 Book value per common share $ 23.75 $ 23.17 $ 21.18
Consolidated Statements of Comprehensive Income For the three months ended March 31 December 31 March 31 thousands of Canadian dollars (Unaudited) 2016 2015 2015 NET INCOME $ 64,248 $ 70,239 $ 72,286 OTHER COMPREHENSIVE INCOME (LOSS) Available for Sale Securities and Retained Interests Net unrealized (losses) gains (13,014) 6,171 (25,572) Net losses (gains) reclassified to net income 204 66 (1,443) (12,810) 6,237 (27,015) Income tax (recovery) expense (3,421) 1,654 (7,156) (9,389) 4,583 (19,859) Cash Flow Hedges Net unrealized gains (losses) 3,221 (2,110) (814) Net losses reclassified to net income 364 369 366 3,585 (1,741) (448) Income tax expense (recovery) 951 (462) (119) 2,634 (1,279) (329) Total other comprehensive (loss) income $ (6,755) $ 3,304 $ (20,188) COMPREHENSIVE INCOME $ 57,493 $ 73,543 $ 52,098
Consolidated Balance Sheets As at March 31 December 31 thousands of Canadian dollars (Unaudited) 2016 2015 ASSETS Cash and Cash Equivalents $ 1,454,752 $ 1,149,849 Available for Sale Securities 488,211 453,230 Loans Held for Sale 70,187 135,043 Loans Securitized mortgages 2,516,944 2,674,475 Non-securitized mortgages and loans 15,362,784 15,459,190 17,879,728 18,133,665 Collective allowance for credit losses (36,463) (36,249) 17,843,265 18,097,416 Other Restricted assets 293,637 195,921 Derivative assets 63,931 64,796 Other assets 328,013 287,417 Goodwill and intangible assets 130,426 128,347 816,007 676,481 $ 20,672,422 $ 20,512,019 LIABILITIES AND SHAREHOLDERS EQUITY Liabilities Deposits Deposits payable on demand $ 2,321,093 $ 1,986,136 Deposits payable on a fixed date 13,503,806 13,679,822 15,824,899 15,665,958 Senior Debt 153,283 151,480 Securitization Liabilities Mortgage-backed security liabilities 863,284 531,326 Canada Mortgage Bond liabilities 1,870,548 2,249,230 2,733,832 2,780,556 Other Derivative liabilities 1,040 5,447 Other liabilities 273,317 264,941 Deferred tax liabilities 24,292 22,531 298,649 292,919 19,010,663 18,890,913 Shareholders Equity Capital stock 90,283 90,247 Contributed surplus 4,230 3,965 Retained earnings 1,639,545 1,592,438 Accumulated other comprehensive loss (72,299) (65,544) 1,661,759 1,621,106 $ 20,672,422 $ 20,512,019
Consolidated Statements of Changes in Shareholders' Equity 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 Hedges, Comprehensive Shareholders' except per share amounts (Unaudited) Stock Surplus Earnings for Sale, after Tax after Tax Loss Equity Balance at December 31, 2015 $ 90,247 $ 3,965 $ 1,592,438 $ (62,466) $ (3,078) $ (65,544) $ 1,621,106 Comprehensive income - - 64,248 (9,389) 2,634 (6,755) 57,493 Stock options settled 53 (12) - - - - 41 Amortization of fair value of employee stock options - 277 - - - - 277 Repurchase of shares (17) - (346) - - - (363) Dividends ($0.24 per share) - - (16,795) - - - (16,795) Balance at March 31, 2016 $ 90,283 $ 4,230 $ 1,639,545 $ (71,855) $ (444) $ (72,299) $ 1,661,759 Balance at December 31, 2014 $ 84,687 $ 3,989 $ 1,378,562 $ (16,242) $ (2,363) $ (18,605) $ 1,448,633 Comprehensive income - - 72,286 (19,859) (329) (20,188) 52,098 Stock options settled 4,177 (1,123) - - - - 3,054 Amortization of fair value of employee stock options - 419 - - - - 419 Repurchase of shares (2) - (83) - - - (85) Dividends ($0.22 per share) - - (16,860) - - - (16,860) Balance at March 31, 2015 $ 88,862 $ 3,285 $ 1,433,905 $ (36,101) $ (2,692) $ (38,793) $ 1,487,259
Consolidated Statements of Cash Flows For the three months ended March 31 March 31 thousands of Canadian dollars (Unaudited) 2016 2015 CASH FLOWS FROM OPERATING ACTIVITIES Net income for the period $ 64,248 $ 72,286 Adjustments to determine cash flows relating to operating activities: Amortization of net discount on securities (135) (6) Provision for credit losses 1,394 2,403 Gain on sale of mortgages or residual interest (5,935) (4,427) Net realized and unrealized gains (losses) on securities 175 (1,444) Amortization of capital and intangible assets 3,646 2,924 Amortization of fair value of employee stock options 277 419 Deferred income taxes 1,761 (287) Changes in operating assets and liabilities Loans, net of securitization and sales 323,494 176,776 Restricted assets (97,716) (117,950) Derivative assets and liabilities 43 (43,054) Accrued interest receivable 1,493 46 Accrued interest payable 17,779 36,206 Deposits 158,941 801,931 Securitization liabilities (46,724) (479,273) Taxes receivable or payable and other (47,225) 1,059 Cash flows provided by operating activities 375,516 447,609 CASH FLOWS FROM FINANCING ACTIVITIES Repurchase of shares (363) (85) Exercise of employee stock options 41 3,054 Dividends paid to shareholders (16,795) (15,430) Cash flows used in financing activities (17,117) (12,461) CASH FLOWS FROM INVESTING ACTIVITIES Activity in securities Purchases (85,419) (1,545) Proceeds from sales - 76,929 Proceeds from maturities 37,171 18,201 Purchases of capital assets (224) (1,823) Capitalized intangible development costs (5,024) (5,404) Cash flows (used in) provided by investing activities (53,496) 86,358 Net increase in cash and cash equivalents during the period 304,903 521,506 Cash and cash equivalents at beginning of the period 1,149,849 360,746 Cash and Cash Equivalents at End of the Period $ 1,454,752 $ 882,252 Supplementary Disclosure of Cash Flow Information Dividends received on investments $ 2,779 $ 2,485 Interest received 217,384 219,790 Interest paid 76,619 68,487 Income taxes paid 27,479 48,155
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 this 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, 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 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 forwardlooking 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 2016 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 2016, management s expectations continue to assume: The Canadian economy is expected to be relatively stable in 2016, supported by expanded Federal Government spending; however, it will continue to be impacted by adverse effects related to fluctuations in oil prices and other commodities. The Company has limited exposure in energy producing regions. Generally the Company expects stable employment conditions, in its established regions; however, unemployment rates in energy producing regions are expected to continue to increase in 2016. 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 increase, but given the Company s limited exposure, 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 2016. This is expected to continue to support relatively low mortgage interest rates for the foreseeable future. In the Company s established regions, the Company expects that the housing market will remain stable with reduced, but balanced supply supported by continued low interest rates, and relatively stable employment, depending on location and level of immigration. There will be moderately easing housing starts and resale activity with relatively stable prices throughout most of Canada, with continued regional disparities. This supports continued low credit losses and stable demand for the Company s lending products in its established regions. The Company expects that 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 First Quarter 2016 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 nonresidential 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 brand, Oaken Financial. Home Trust also conducts business through its wholly owned subsidiary, CFF Bank. Licensed to conduct business across Canada, Home Trust has offices in Ontario, Alberta, British Columbia, Nova Scotia, Quebec and Manitoba. For Additional Information: Gerald M. Soloway, CEO, or Martin Reid, President 416-360-4663 www.homecapital.com