Wednesday, November 7, 2012

HCG - Home Capital Reports Another Record Quarter and Dividend Increase (CAD 0.26)

Company: Home Capital Group Inc.
Stock Name: HCG
Amount: CAD 0.26
Announcement Date: 07/11/2012
Record Date: 14/11/2012

Dividend Detail:








  • Diluted Earnings per Share of $1.65 up 18.7% Year over Year;


  • Dividend Increase of 18.2%, or 4 Cents per Share to $0.26 Quarterly;


  • Return on Equity Continues Strong at 25.6% for the Quarter and 25.7%
    Year to Date



TORONTO, Nov. 7, 2012 /CNW/ - Home Capital Group (TSX: HCG) today
reported another quarter of strong results for the three months ended
September 30, 2012.



The Company's Third Quarter Report, including Management's Discussion
and Analysis, is available on www.homecapital.com and on the Canadian
Securities Administrators' website at www.sedar.com.



FINANCIAL HIGHLIGHTS








































































































































































































































































































































































































































































































































��

��

��

��

��

��

��

��

��

��

��

(Unaudited)

For the three months ended

For the nine months ended

(000s, except Per Share and Percentage Amounts)

September 30

June 30

September 30

September 30

September 30

��

��

2012��

��

2012��

��

2011��

��

2012��

��

2011��

OPERATING RESULTS

��

��

��

��

��

��

��

��

��

��

Net Income

$

57,254

$

53,230

$

48,417

$

163,018

$

139,747

Adjusted Net Income1��

��

57,254

��

53,230

��

48,417

��

163,018

��

142,172

Total Revenue

��

226,603

��

218,751

��

198,694

��

660,036

��

581,875

Earnings per Share - Basic/Diluted

$

1.65/1.65

$

1.54/1.54

$

1.40/1.39

$

4.70/4.68

$

4.03/4.02

Adjusted Earnings per Share - Basic/Diluted1��

��

1.65/1.65

��

1.54/1.54

��

1.40/1.39

��

4.70/4.68

��

4.10/4.09

Return on Shareholders' Equity

��

25.6%

��

25.1%

��

27.0%

��

25.7%

��

27.4%

Return on Average Assets

��

1.2%

��

1.2%

��

1.2%

��

1.2%

��

1.1%

Net Interest Margin (TEB)2��

��

2.14%

��

2.09%

��

2.14%

��

2.08%

��

2.06%

Net Interest Margin Non-Securitized Assets (TEB)2��

��

3.17%

��

3.05%

��

3.11%

��

3.09%

��

3.04%

Net Interest Margin Securitized Assets

��

0.89%

��

1.05%

��

1.35%

��

0.97%

��

1.28%

Provision as a Percentage of Gross Loans (annualized)

��

0.10%

��

0.05%

��

0.06%

��

0.09%

��

0.04%

Efficiency Ratio (TEB)2��

��

28.1%

��

27.8%

��

27.4%

��

27.9%

��

28.2%

As at

September 30

June 30

December 31

September 30

��

��

��

��

2012��

��

2012��

��

2011��

��

2011��

��

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BALANCE SHEET HIGHLIGHTS

��

��

��

��

��

��

��

��

��

��

Total Assets

$

19,241,999��

$

18,526,458��

$

17,696,471��

$

17,072,125��

��

��

Total Loans3��

��

17,292,395��

��

16,966,961��

��

16,089,648��

��

15,782,646��

��

��

Securitized Loans On-Balance Sheet

��

7,238,946��

��

7,582,154��

��

8,243,350��

��

8,502,466��

��

��

Loans Under Administration4��

��

17,460,528��

��

17,039,727��

��

16,089,648��

��

15,782,646��

��

��

Liquid Assets

��

998,219��

��

669,681��

��

808,222��

��

646,695��

��

��

Deposits

��

9,870,691��

��

9,007,464��

��

7,922,124��

��

7,220,517��

��

��

Shareholders' Equity

��

919,618��

��

869,439��

��

774,785��

��

731,216��

��

��

FINANCIAL STRENGTH

��

��

��

��

��

��

��

��

��

��

Capital Measures5��

��

��

��

��

��

��

��

��

��

��

Risk-Weighted Assets

$

5,271,674��

$

5,003,579��

$

4,549,696��

$

4,269,175��

��

��

Tier 1 Capital Ratio

��

16.97%

��

17.09%

��

17.29%

��

17.67%

��

��

Total Capital Ratio

��

20.78%

��

21.09%

��

20.46%

��

21.05%

��

��

Credit Quality

��

��

��

��

��

��

��

��

��

��

Non-Performing Loans as a Percentage of Gross Loans

��

0.28%

��

0.31%

��

0.25%

��

0.32%

��

��

Allowance as a Percentage of Gross Non-Performing Loans

��

64.7%

��

58.7%

��

74.9%

��

62.6%

��

��

Share Information

��

��

��

��

��

��

��

��

��

��

Book Value per Common Share

$

26.53��

$

25.05��

$

22.38��

$

21.10��

��

��

Common Share Price - Close

$

51.44��

$

45.18��

$

49.10��

$

43.60��

��

��

Market Capitalization

$

1,783,322��

$

1,568,243��

$

1,700,088��

$

1,510,696��

��

��

Number of Common Shares Outstanding

��

34,668��

��

34,711��

��

34,625��

��

34,649��

��

��

��

��

��

��

��

��

��

��

��

��

��


1 See definition of Adjusted Net Income under Non-GAAP Measures of the
unaudited interim consolidated financial report and reconciliation to
net income in Table 2 of the Management's Discussion and Analysis.

2 See definition of Taxable Equivalent Basis (TEB) under Non-GAAP Measures
of the unaudited interim consolidated financial report.

3 Total loans include loans held for sale.

4 Loans under administration includes total loans and off-balance sheet
loans.

5 These figures relate to the Company's operating subsidiary, Home Trust
Company






THIRD QUARTER 2012 HIGHLIGHTS



Key results for the third quarter of 2012 included:




  • Net income increased to $57.3 million in the third quarter and to $163.0
    million
    for the nine months ended September 30, 2012, representing
    increases of 18.3% and 16.7% over the $48.4 million and $139.7 million
    earned in the comparable periods of 2011. The second quarter included
    an unfavourable tax adjustment of $2.0 million related to Ontario tax
    rate adjustments and, excluding this adjustment, net income is up 18.1%
    year over year. Net income for the third quarter is also up 7.6% from
    the $53.2 million recorded in the second quarter of 2012. These results
    put the Company solidly within the 13%-18% net income growth target for
    2012.






  • Diluted earnings per share were $1.65 for the quarter and $4.68 for the
    first nine months of 2012 representing increases of 18.7% and 16.4%
    from $1.39 and $4.02 for the respective periods of 2011.






  • Net interest income, before provisions, continued its upward trend,
    reaching $99.5 million in the third quarter and $281.6 million year to
    date. This represents increases of 13.6% over the $87.6 million
    recorded in the third quarter of 2011 and 14.7% over the $245.5 million
    earned in the first nine months of 2011 and reflects solid loan growth
    and continued strong demand for the Company's products.






  • Net interest margin (TEB) of 2.14% in the third quarter was consistent
    with 2.14% in the third quarter of 2011 and up from 2.09% in the second
    quarter of 2012.�� On a year-to-date basis, net interest margin (TEB)
    increased to 2.08% compared to 2.06% in the same period last year.�� Net
    interest margin (TEB) on non-securitized assets rose to 3.17% compared
    to 3.11% in the third quarter of 2011 and 3.05% in the second quarter
    of 2012.






  • Net interest margin on securitized assets was 0.89%, a decline from
    1.35% one year ago and 1.05% last quarter. During the second quarter
    the Company benefited from higher than expected prepayment penalties in
    the securitized portfolio producing an increase in the net interest
    margin. Compared to a year ago, the utilization of lower yielding
    assets as replacement assets in the CMB program and the maturity of
    higher yielding MBS portfolios are the primary contributors to lower
    margins in the securitized asset group.






  • Return on equity at 25.6% for the quarter and 25.7% year to date remains
    solid and continues well in excess of the Company's minimum performance
    objective of 20%.






  • The credit quality of the loans portfolio remains solid and credit
    losses are well within expected levels. Net non-performing loans ended
    the quarter at 0.28% of the total loans portfolio, up marginally from
    0.25% at the end of 2011 and down from 0.31% at the end of the second
    quarter. The provision for credit losses remains within expectations at
    0.10% of gross loans on an annualized basis, compared to 0.06% in the
    third quarter of 2011 and 0.05% in the second quarter of 2012. The
    provision for credit losses ratio is within the Company's objective of
    0.05% to 0.15% of gross loans. The increase in provisions reflects the
    repositioning of the portfolio to a higher proportion of uninsured
    loans.






  • Tier 1 and Total capital ratios of 16.97% and 20.78%, respectively, at
    September 30, 2012 remain well above the Company's minimum targets.��
    Home Trust's asset to capital multiple was 14.07 at the end of the
    quarter compared to 14.44 at December 31, 2011 and 13.78 at the end of
    the second quarter. The Company continues growing its assets, revenue
    and net income while maintaining prudent levels of capital.






  • Total loans grew to $17.29 billion, reflecting increases of $1.51
    billion
    or 9.6% from $15.78 billion one year ago, $1.20 billion or 7.5%
    from $16.09 billion at the end of 2011 (10.0% on an annualized basis)
    and $325.4 million or 1.9% over $16.97 billion at the end of last
    quarter. Total loans under administration, which includes mortgages
    securitized that qualify for off-balance sheet accounting, were $17.46
    billion
    , representing an annualized increase of 11.4%. Annualized
    growth of loans and loans under administration year to date remains
    below the Company's growth target due to a higher than planned net
    reduction of insured loans which repositioned the loan portfolio to a
    smaller than planned, yet more profitable, total portfolio. The Company
    expects year-over-year loan growth to remain below the target range of
    13%-18% for the balance of 2012, while net income remains solidly
    within the target range.






  • The total value of mortgages originated in the third quarter grew to
    $1.68 billion from $1.30 billion originated in the third quarter of
    2011. Originations were $4.53 billion for the first nine months of the
    year compared to $3.87 billion in the same period last year.






  • Originations of traditional mortgages increased to $1.26 billion in the
    third quarter and $3.39 billion year to date from $941.1 million and
    $2.57 billion in the comparable periods of 2011. The Company is
    experiencing strong demand for its traditional product offerings
    combined with high credit quality. This continues to enhance
    profitability.






  • Accelerator (insured) mortgage originations declined to $236.7 million
    in the third quarter and $630.5 million year to date from $293.5
    million
    and $915.1 million in the comparative periods of 2011. The
    Company expects to increase the rate of origination of Accelerator
    mortgages in the coming months.






  • Multi-unit residential mortgage originations were $114.3 million in the
    quarter and $229.6 million year to date compared to $7.0 million and
    $130.5 million in the comparable periods of 2011. The Company
    securitized and sold $96.5 million of multi-unit residential mortgages
    in the quarter and $72.8 million last quarter.�� These transactions
    qualified for off-balance sheet and gain on sale accounting and
    resulted in securitization gains of $1.2 million in the quarter and
    $1.3 million last quarter. This securitization program was initiated in
    the second quarter of this year.�� The Company is pleased with the
    results and anticipates that this program will experience modest growth
    going forward.






  • Non-residential mortgage advances were $46.6 million in the quarter and
    $157.8 million year to date compared to $32.4 million and $140.7
    million
    in the comparable periods of 2011. The Company continues to be
    very selective and focuses on opportunities that present strong credit
    and risk profiles and that are within the Company's risk tolerance.






  • Store and apartment advances were $18.2 million for the quarter and
    $93.9 million year to date compared to $26.8 million and $87.4 million
    in the comparable periods of 2011.






  • The Company opened 847 new Visa accounts in the third quarter compared to 2,108 accounts opened in the
    third quarter of 2011 and 1,793 accounts last quarter. The decline
    through the current year reflects the Company's caution in marketing,
    approvals and advances and the anticipated adoption of OSFI's B-20
    draft guideline provisions.�� After further review and confirmation of
    the requirements of B-20, the Company is pleased that it can resume
    prudent growth of its Equityline Visa program within the requirements of Guideline B-20 and the Company's
    risk appetite.�� The Company will again increase focus on this product
    segment and expects growth to resume within its risk tolerance and
    OSFI's guidelines, beginning in the fourth quarter.



Favourable market opportunities continue to support the Company's
strategy and the Company has been able to expand the loans portfolio
while generally improving credit quality. The average credit score for
traditional mortgage originations for the first nine months of 2012 is
up from the same period of 2011, while loan to value ratios are
relatively stable. The Company remains proactive and prudent in its
lending practices, taking into account local economic and market
conditions.�� Continued low levels of loan losses reflect the Company's
diligent underwriting combined with strong collection standards and
loan resolution strategies. As mentioned last quarter, OSFI released
Final Guideline B-20 - Residential Mortgage Underwriting Practices and
Procedures requiring full implementation by the end of 2012. The
Company has already made changes, where required, to comply with a
significant number of the B-20 provisions and will be fully compliant
before the end of 2012. The changes required for B-20 are not expected
to materially affect the Company's growth or progress.



This quarter marked the beginning of two exciting new initiatives for
the Company, a high interest savings account and a preferred Visa product. The high interest savings account provides an alternative to
financial advisors for their clients who are looking for higher
interest savings. This initiative is an important part of a wider
strategy to diversify funding sources over time. Late in the third
quarter, the Company also launched a new preferred Visa card product focused exclusively on existing mortgage customers of the
Company. The program offers an unsecured Visa with modest credit limits at attractive rates to customers who have
demonstrated good credit behavior. This product further broadens the
array of products and services available to the Company's customers.��
These initiatives further position the Company for growth, but did not
have a significant impact on quarterly results.



Also during the quarter, OSFI released the anticipated draft guidelines
for Basel III, which will become effective in January 2013. The changes
that affect Home Trust primarily relate to the components and
definitions of regulatory capital, minimum capital targets and new
liquidity requirements. The Company's analysis indicates that Home
Trust presently meets the requirements of Basel III. Please see the
Capital Management section of the MD&A for further discussion.



Subsequent to the end of the quarter, and in light of the Company's
solid performance, profitability and strong financial position, the
Board of Directors declared an increase of $0.04 in the quarterly
dividend to $0.26 per Common share, payable on December 1, 2012 to
shareholders of record at the close of business on November 16, 2012.



The Company continues to deliver solid results in terms of growth,
increased returns and increased dividends. Despite the persistent
international economic instability and modest economic improvement in
Canada, the Company's performance continues to reflect the strength and
the successful execution of the Company's core strategy.



With solid performance in all aspects of Home Capital's business,
management expects that the positive performance the Company
experienced during the first three quarters of 2012 will continue in
the fourth quarter and into 2013.






















(signed)

(signed)

GERALD M. SOLOWAY����������

KEVIN P.D. SMITH

Chief Executive Officer����������

Chairman of the Board

November 7, 2012������������������������������������������������





Additional information concerning the Company's targets and related
expectations for 2012, including the risks and assumptions underlying
these expectations, may be found in Management's Discussion and
Analysis (MD&A) of this quarterly report.



Conference Call and Webcast



Third Quarter Results Conference Call

The conference call will take place on Thursday, November 8, 2012, at
10:30 a.m. Participants are asked to call 5 to 15 minutes in advance,
647-427-7450 in Toronto or toll-free 1-888-231-8191 throughout North
America
. The call will also be accessible in listen-only mode via the
Internet at www.homecapital.com.



Conference Call Archive

A telephone replay of the call will be available between 1:30 p.m.
Thursday, November 8, 2012 and midnight Thursday, November 15, 2012 by
calling 416-849-0833 or 1-855-859-2056 (enter passcode 39208745). The
archived audio web cast will be available for 90 days on CNW Group's
website at www.newswire.ca and Home Capital's website at www.homecapital.com.






2012 OBJECTIVES AND PERFORMANCE



Home Capital published its financial objectives for 2012 on page 15 of
the Company's 2011 Annual Report. The following table compares actual
performance to date against each of these objectives.












































































































































��

��

��

��

��

��

��

��

Table 1: 2012 Targets and Performance

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

For the nine months ended September 30, 2012

��

2012 Targets1��

Actual Results1��

��

Amount

Increase over 2011

Growth in net income

13%-18%

16.7%

$

163,018��

$

23,271

Growth in diluted earnings per share

13%-18%

16.4%

��

4.68��

��

0.66

Growth in total loans2��

13%-18%

10.0%

��

17,292,395��

��

1,202,747

Return on shareholders' equity

20.0%

25.7%

��

��

��

��

Efficiency ratio (TEB)3��

28.0% - 34.0%

27.9%

��

��

��

��

Capital ratios4��

��

��

��

��

��

��

��

Tier 1

Minimum of 13%

16.97%

��

��

��

��

��

Total

Minimum of 14%

20.78%

��

��

��

��

Provision as a percentage of gross loans (annualized)

0.05% - 0.15%

0.09%

��

��

��

��

��

��

��

��

��

��

��

��


1 Objectives and results for net income and diluted earnings per share
are for the current year.

2 Change represents growth over December 31, 2011 on an annualized basis
and includes loans held for sale.

3 See definition of TEB under Non-GAAP Measures in the unaudited interim
consolidated financial report.

4 Based on the Company's wholly owned subsidiary, Home Trust Company.









































































































































































































































































































































































































































































































































































































































































































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��

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Consolidated Statements of Income

��

��

��

��

��

�� ��

For the three months ended

For the nine months ended

thousands of Canadian dollars, except per share amounts

September 30

June 30

September 30

September 30

September 30

(Unaudited)

��

2012��

��

2012��

��

2011��

��

2012��

��

2011��

Net Interest Income Non-Securitized Assets

��

��

��

��

��

��

��

��

��

��

Interest from loans

$

138,271��

$

125,576��

$

102,617��

$

381,412��

$

289,932��

Dividends from securities

��

3,172��

��

3,533��

��

4,887��

��

10,669��

��

13,858��

Other interest

��

1,093��

��

930��

��

1,334��

��

3,070��

��

4,246��

��

�� ��

��

142,536��

��

130,039��

��

108,838��

��

395,151��

��

308,036��

Interest on deposits

��

58,962��

��

56,043��

��

48,160��

��

168,133��

��

140,368��

Interest on senior debt

��

1,648��

��

1,705��

��

1,644��

��

5,006��

��

2,691��

Net interest income non-securitized assets

��

81,926��

��

72,291��

��

59,034��

��

222,012��

��

164,977��

��

�� ��

��

��

��

��

��

��

��

��

��

��

Net Interest Income Securitized Loans and Assets

��

��

��

��

��

��

��

��

��

��

Interest income from securitized loans and assets

��

70,618��

��

76,286��

��

84,195��

��

223,520��

��

248,615��

Interest expense on securitization liabilities

��

53,053��

��

54,723��

��

55,617��

��

163,968��

��

168,052��

Net interest income securitized loans and assets

��

17,565��

��

21,563��

��

28,578��

��

59,552��

��

80,563��

��

�� ��

��

��

��

��

��

��

��

��

��

��

Total Net Interest Income

��

99,491��

��

93,854��

��

87,612��

��

281,564��

��

245,540��

Provision for credit losses (note 5(E))

��

4,239��

��

2,298��

��

2,349��

��

11,035��

��

4,540��

��

�� ��

��

95,252��

��

91,556��

��

85,263��

��

270,529��

��

241,000��

Non-Interest Income

��

��

��

��

��

��

��

��

��

��

Fees and other income

��

12,485��

��

12,025��

��

9,697��

��

35,407��

��

26,703��

Realized net gains and unrealized losses on securities and mortgages

��

(1,172)

��

1,676��

��

1,224��

��

812��

��

5,394��

Net realized and unrealized gain (loss) on derivatives (note 14)

��

2,136��

��

(1,275)

��

(5,260)

��

5,146��

��

(6,873)

��

�� ��

��

13,449��

��

12,426��

��

5,661��

��

41,365��

��

25,224��

��

�� ��

��

108,701��

��

103,982��

��

90,924��

��

311,894��

��

266,224��

Non-Interest Expenses��

��

��

��

��

��

��

��

��

��

��

Salaries and benefits

��

15,465��

��

14,501��

��

13,509��

��

43,965��

��

39,339��

Premises

��

2,296��

��

1,977��

��

1,997��

��

6,271��

��

5,769��

Other operating expenses

��

14,304��

��

13,404��

��

10,530��

��

40,879��

��

32,787��

��

�� ��

��

32,065��

��

29,882��

��

26,036��

��

91,115��

��

77,895��

��

�� ��

��

��

��

��

��

��

��

��

��

��

Income Before Income Taxes��

��

76,636��

��

74,100��

��

64,888��

��

220,779��

��

188,329��

Income taxes (note 12(A))

��

��

��

��

��

��

��

��

��

��

��

Current

��

19,904��

��

20,568��

��

18,249��

��

59,527��

��

50,414��

��

Deferred

��

(522)

��

302��

��

(1,778)

��

(1,766)

��

(1,832)

��

�� ��

��

19,382��

��

20,870��

��

16,471��

��

57,761��

��

48,582��

NET INCOME

$

57,254��

$

53,230��

$

48,417��

$

163,018��

$

139,747��

��

�� ��

��

��

��

��

��

��

��

��

��

��

NET INCOME PER COMMON SHARE

��

��

��

��

��

��

��

��

��

��

Basic

$

1.65��

$

1.54��

$

1.40��

$

4.70��

$

4.03��

Diluted

$

1.65��

$

1.54��

$

1.39��

$

4.68��

$

4.02��

AVERAGE NUMBER OF COMMON SHARES OUTSTANDING��

��

��

��

��

��

��

��

��

��

��

Basic

��

34,697��

��

34,476��

��

34,682��

��

34,705��

��

34,691��

Diluted

��

34,803��

��

34,509��

��

34,804��

��

34,825��

��

34,804��

��

�� ��

��

��

��

��

��

��

��

��

��

��

Total number of outstanding common shares (note 9(A))

��

34,668��

��

34,711��

��

34,649��

��

34,668��

��

34,649��

Book value per common share

$

26.53��

$

25.05��

$

21.10��

$

26.53��

$

21.10��

��

�� ��

��

��

��

��

��

��

��

��

��

��

The accompanying notes are an integral part of these unaudited interim
consolidated financial statements.

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��






































































































































































































































































































































































Consolidated Statements of Comprehensive Income

��

��

��

��

�� ��

For the three months ended

For the nine months ended

�� ��

September 30

June 30

September 30

September 30

September 30

thousands of Canadian dollars (Unaudited)

��

2012��

��

2012��

��

2011��

��

2012��

��

2011��

�� ��

��

��

��

��

��

��

��

��

��

��

NET INCOME

$

57,254��

$

53,230��

$

48,417��

$

163,018��

$

139,747��

�� ��

��

��

��

��

��

��

��

��

��

��

OTHER COMPREHENSIVE INCOME (LOSS)

��

��

��

��

��

��

��

��

��

��

�� ��

��

��

��

��

��

��

��

��

��

��

Available for Sale Securities (note 4(B))

��

��

��

��

��

��

��

��

��

��

Net unrealized gains (losses) on securities available for sale

��

1,667��

��

(1,069)

��

(9,221)

��

4,991��

��

(9,302)

Net losses (gains) reclassified to net income

��

1,141��

��

(1,348)

��

(1,499)

��

(571)

��

(5,989)

�� ��

��

2,808��

��

(2,417)

��

(10,720)

��

4,420��

��

(15,291)

Income tax expense (recovery)

��

742��

��

(643)

��

(2,707)

��

1,266��

��

(3,875)

�� ��

��

2,066��

��

(1,774)

��

(8,013)

��

3,154��

��

(11,416)

�� ��

��

��

��

��

��

��

��

��

��

��

Cash Flow Hedges (note 14)

��

��

��

��

��

��

��

��

��

��

Net unrealized losses on cash flow hedges

��

-��

��

(396)

��

(3,430)

��

(370)

��

(6,747)

Net losses reclassified to net income

��

376��

��

357��

��

189��

��

1,086��

��

280��

�� ��

��

376��

��

(39)

��

(3,241)

��

716��

��

(6,467)

Income tax expense (recovery)

��

99��

��

(89)

��

(843)

��

120��

��

(1,682)

�� ��

��

277��

��

50��

��

(2,398)

��

596��

��

(4,785)

�� ��

��

��

��

��

��

��

��

��

��

��

Total other comprehensive income (loss)

��

2,343��

��

(1,724)

��

(10,411)

��

3,750��

��

(16,201)

�� ��

��

��

��

��

��

��

��

��

��

��

COMPREHENSIVE INCOME

$

59,597��

$

51,506��

$

38,006��

$

166,768��

$

123,546��

�� ��

��

��

��

��

��

��

��

��

��

��

The accompanying notes are an integral part of these unaudited interim
consolidated financial statements.

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��








































































































































































































































































































































































































































































































































Consolidated Balance Sheets

��

��

��

��

��

�� ��

��

��

��

��

��

��

��

�� ��

September 30

June 30

December 31

thousands of Canadian dollars (Unaudited)

��

2012��

��

2012��

��

2011��

ASSETS��

��

��

��

��

��

��

Cash Resources (note 4(A))

$

543,825��

$

301,330��

$

665,806��

Securities (note 4(B))

��

��

��

��

��

��

Available for sale

��

401,830��

��

425,834��

��

391,754��

Pledged securities (notes 4(C) and 6(B))

��

784,098��

��

628,836��

��

341,588��

��

�� ��

��

1,185,928��

��

1,054,670��

��

733,342��

Loans held for sale

��

36,405��

��

29,811��

��

-��

Loans (note 5)

��

��

��

��

��

��

Residential mortgages

��

8,456,791��

��

7,749,484��

��

6,339,883��

Securitized residential mortgages (note 6)

��

7,238,946��

��

7,582,154��

��

8,243,350��

Non-residential mortgages

��

993,174��

��

1,037,385��

��

946,222��

Personal and credit card loans

��

567,079��

��

568,127��

��

560,193��

��

�� ��

��

17,255,990��

��

16,937,150��

��

16,089,648��

Collective allowance for credit losses (note 5(E))

��

(29,800)

��

(29,500)

��

(29,440)

��

�� ��

��

17,226,190��

��

16,907,650��

��

16,060,208��

Other

��

��

��

��

��

��

Derivative assets (note 14)

��

57,651��

��

59,284��

��

72,424��

Other assets (note 7)

��

102,741��

��

84,534��

��

79,650��

Capital assets

��

7,165��

��

7,278��

��

5,372��

Intangible assets

��

66,342��

��

66,149��

��

63,917��

Goodwill

��

15,752��

��

15,752��

��

15,752��

��

�� ��

��

249,651��

��

232,997��

��

237,115��

��

�� ��

$

19,241,999��

$

18,526,458��

$

17,696,471��

LIABILITIES AND SHAREHOLDERS' EQUITY

��

��

��

��

��

��

Liabilities

��

��

��

��

��

��

Deposits

��

��

��

��

��

��

��

Deposits payable on demand

$

31,736��

$

42,098��

$

62,746��

��

Deposits payable on a fixed date

��

9,838,955��

��

8,965,366��

��

7,859,378��

��

�� ��

��

9,870,691��

��

9,007,464��

��

7,922,124��

Senior Debt (note 13)

��

153,724��

��

152,524��

��

153,336��

Securitization Liabilities (note 6(C))

��

��

��

��

��

��

��

Mortgage-backed security liabilities

��

1,923,017��

��

2,078,300��

��

2,417,801��

��

Canada Mortgage Bond liabilities

��

6,155,475��

��

6,160,259��

��

6,231,274��

��

�� ��

��

8,078,492��

��

8,238,559��

��

8,649,075��

Other

��

��

��

��

��

��

Obligations related to securities sold under repurchase agreement (notes
4(C) and 5(F))

��

-��

��

43,418��

��

-��

Derivative liabilities (note 14)

��

3,767��

��

4,043��

��

3,458��

Income taxes payable

��

8,689��

��

15,893��

��

17,628��

Other liabilities (note 8)

��

168,743��

��

156,320��

��

136,025��

Deferred tax liabilities (note 12(C))

��

38,275��

��

38,798��

��

40,040��

��

�� ��

��

219,474��

��

258,472��

��

197,151��

��

�� ��

��

18,322,381��

��

17,657,019��

��

16,921,686��

Shareholders' Equity

��

��

��

��

��

��

Capital stock (note 9)

��

61,873��

��

61,662��

��

55,104��

Contributed surplus

��

5,847��

��

5,543��

��

5,873��

Retained earnings

��

857,339��

��

810,018��

��

722,999��

Accumulated other comprehensive loss (note 11)

��

(5,441)

��

(7,784)

��

(9,191)

��

�� ��

��

919,618��

��

869,439��

��

774,785��

��

�� ��

$

19,241,999��

$

18,526,458��

$

17,696,471��

��

�� ��

��

��

��

��

��

��

The accompanying notes are an integral part of these unaudited interim
consolidated financial statements.

��

��

��

��

��

��

��

��

��

��





















































































































































































































































































































































































































































Consolidated Statements of Changes in Shareholders' Equity

�� ��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

Net Unrealized

Net Unrealized

Total

��

��

��

��

��

(Losses) Gains

Losses on

Accumulated

��

��

��

��

��

on Securities

Cash Flow

Other

Total

thousands of Canadian dollars,

Capital

Contributed

Retained

Available for

Hedges,

Comprehensive

Shareholders'

except per share amounts (Unaudited)

Stock

Surplus

Earnings

Sale, after Tax

after Tax

(Loss) Income

Equity

Balance at December 31, 2011

$

55,104��

$

5,873��

$

722,999��

$

(4,141)

$

(5,050)

$

(9,191)

$

774,785��

Comprehensive income

��

-��

��

-��

��

163,018��

��

3,154��

��

596��

��

3,750��

��

166,768��

Stock options settled (note 9(A))

��

6,988��

��

(1,379)

��

-��

��

-��

��

-��

��

-��

��

5,609��

Amortization of fair value of

��

��

��

��

��

��

��

��

��

��

��

��

��

��

employee stock options (note 10(A))

��

-��

��

1,353��

��

-��

��

-��

��

-��

��

-��

��

1,353��

Repurchase of shares (note 9(A))

��

(219)

��

-��

��

(5,743)

��

-��

��

-��

��

-��

��

(5,962)

Dividends paid

��

��

��

��

��

��

��

��

��

��

��

��

��

��

($0.64 per share)

��

-��

��

-��

��

(22,935)

��

-��

��

-��

��

-��

��

(22,935)

Balance at September 30, 2012

$

61,873��

$

5,847��

$

857,339��

$

(987)

$

(4,454)

$

(5,441)

$

919,618��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

Balance at December 31, 2010

$

50,427��

$

4,571��

$

567,681��

$

5,906��

$

-��

$

5,906��

$

628,585��

Comprehensive income

��

-��

��

-��

��

139,747��

��

(11,416)

��

(4,785)

��

(16,201)

��

123,546��

Stock options settled (note 9(A))

��

4,237��

��

(933)

��

-��

��

-��

��

-��

��

-��

��

3,304��

Amortization of fair value of

��

��

��

��

��

��

��

��

��

��

��

��

��

��

employee stock options (note 10(A))

��

-��

��

1,815��

��

-��

��

-��

��

-��

��

-��

��

1,815��

Repurchase of shares (note 9(A))

��

(175)

��

-��

��

(5,724)

��

-��

��

-��

��

-��

��

(5,899)

Dividends paid

��

��

��

��

��

��

��

��

��

��

��

��

��

��

($0.56 per share)

��

-��

��

-��

��

(20,135)

��

-��

��

-��

��

-��

��

(20,135)

Balance at September 30, 2011

$

54,489��

$

5,453��

$

681,569��

$

(5,510)

$

(4,785)

$

(10,295)

$

731,216��

�� ��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

The accompanying notes are an integral part of these unaudited interim
consolidated financial statements.

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��





































































































































































































































































































































































































Consolidated Statements of Cash Flows

��

��

�� ��

For the nine months ended

��

��

�� ��

September 30

September 30

thousands of Canadian dollars (Unaudited)

��

2012��

��

2011��

CASH FLOWS FROM OPERATING ACTIVITIES

��

��

��

��

Net income for the period

$

163,018��

$

139,747��

Adjustments to determine cash flows relating to operating activities:

��

��

��

��

��

Deferred income taxes

��

(1,766)

��

(1,832)

��

Amortization of capital assets

��

2,477��

��

2,181��

��

Amortization of intangible assets��

��

4,854��

��

65��

��

Amortization of net premium on securities

��

2,046��

��

33��

��

Amortization of securitization and senior debt transaction costs

��

10,141��

��

6,736��

��

Provision for credit losses

��

11,035��

��

4,540��

��

Change in accrued interest payable

��

31,090��

��

21,581��

��

Change in accrued interest receivable

��

(6,733)

��

(3,647)

��

Realized net gains and unrealized losses on securities and mortgages

��

(812)

��

(5,394)

��

Settlement of derivatives

��

(370)

��

(6,747)

��

(Gain) loss on derivatives

��

(5,147)

��

6,265��

��

Net increase in mortgages

��

(1,205,378)

��

(1,602,452)

��

Net increase in personal and credit card loans

��

(7,112)

��

(92,742)

��

Net increase in deposits

��

1,948,567��

��

624,538��

��

Activity in securitization liabilities

��

��

��

��

��

��

Proceeds from securitization of mortgage-backed security liabilities

��

152,303��

��

1,044,863��

��

��

Settlement and repayment of securitization liabilities

��

(710,644)

��

(456,891)

��

Amortization of fair value of employee stock options

��

1,353��

��

1,815��

��

Changes in taxes payable and other

��

(28,162)

��

8,720��

Cash flows provided by (used in) operating activities

��

360,760��

��

(308,621)

CASH FLOWS FROM FINANCING ACTIVITIES

��

��

��

��

Repurchase of shares

��

(5,962)

��

(5,899)

Exercise of employee stock options

��

5,609��

��

3,304��

Issuance of senior debt

��

-��

��

149,072��

Dividends paid to shareholders

��

(22,233)

��

(19,440)

Cash flows (used in) provided by financing activities

��

(22,586)

��

127,037��

CASH FLOWS FROM INVESTING ACTIVITIES

��

��

��

��

Activity in securities

��

��

��

��

��

Purchases

��

(2,912,033)

��

(592,802)

��

Proceeds from sales

��

325,515��

��

273,078��

��

Proceeds from maturities

��

2,137,912��

��

87,158��

Purchases of capital assets

��

(4,270)

��

(1,774)

Purchases of intangible assets

��

(7,279)

��

(13,199)

Cash flows used in investing activities

��

(460,155)

��

(247,539)

Net decrease in cash and cash equivalents during the period

��

(121,981)

��

(429,123)

Cash and cash equivalents at beginning of the period

��

665,806��

��

846,824��

Cash and Cash Equivalents at End of the Period (note 4(A))

$

543,825��

$

417,701��

Supplementary Disclosure of Cash Flow Information

��

��

��

��

Dividends received on investments

$

8,898��

$

13,034��

Interest received

��

372,892��

��

536,701��

Interest paid

��

142,049��

��

291,124��

Income taxes paid

��

72,262��

��

27,952��

��

��

�� ��

��

��

��

��

The accompanying notes are an integral part of these unaudited interim
consolidated financial statements.

��

��

��

��

��

��

��


Caution Regarding Forward-Looking Statements



From time to time Home Capital Group Inc. (the "Company" or "Home
Capital") makes written and verbal forward-looking statements. These
are included in the Annual Report, periodic reports to shareholders,
regulatory filings, press releases, Company presentations and other
Company communications. Forward-looking statements are made in
connection with business objectives and targets, Company strategies,
operations, anticipated financial results and the outlook for the
Company, its industry, and the Canadian economy. These statements
regarding expected future performance are "financial outlooks" within
the meaning of National Instrument 51-102.�� Please see the risk
factors, which are set forth in detail on pages 48 through 58 of the
Company's 2011 Annual Report, as well as its other publicly filed
information, which are available on the System for Electronic Document
Analysis and Retrieval (SEDAR) at www.sedar.com, for the material factors that could cause the Company's actual results
to differ materially from these statements.�� These risk factors are
material risk factors a reader should consider, and include credit
risk, liquidity and funding risk, structural interest rate risk,
operational risk, investment risk, strategic and business risk,
reputational risk and regulatory and legal risk along with additional
risk factors that may affect future results.�� Forward-looking
statements can be found in the Report to the Shareholders and the
Outlook Section in the quarterly report.���� Forward-looking statements
are typically identified by words such as "will,"�� "believe," "expect,"
"anticipate," "estimate," "plan," "may," and "could" or other similar
expressions.



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



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



Assumptions about the performance of the Canadian economy in 2012 and
its effect on Home Capital's business are material factors the Company
considers when setting its objectives and outlook.�� In determining
expectations for economic growth, both broadly and in the financial
services sector, the Company primarily considers historical economic
data provided by the Canadian government and its agencies.�� In setting
and reviewing the outlook and objectives for 2012, management's
expectations assume:




  • The Canadian economy will continue to produce modest growth in 2012, but
    will be heavily influenced by the economic conditions in the United
    States
    and global markets.�� Inflation will generally be within the Bank
    of Canada's target of 1%-3%.


  • Interest rates will remain at current rates for the balance of 2012 as
    the Bank of Canada leaves its target for the overnight rate at its
    current level.


  • The housing market will remain resilient to global uncertainty with
    balanced supply and demand conditions in most regions.�� Declining
    housing starts and softening resale activity on stable prices through
    most of Canada will continue with the market moderating from previous
    activity levels.


  • Unemployment will remain stable or improve slightly as the economy
    grows, while a larger labour force will tend to offset job growth.


  • Consumer debt levels will remain serviceable by Canadian households.


  • Net interest margins overall are expected to remain in the current
    range.�� Margins are expected to remain stable as returns on the
    increased traditional portfolio offset declining returns on the
    securitized portfolio throughout 2012.


  • Credit quality will remain sound with actual losses within the low end
    of Home Capital's historical range.


  • The recent changes to Canada Mortgage and Housing Corporation (CMHC)
    policies will continue to temper the real estate market.



Non-GAAP Measures



The Company applies International Financial Reporting Standards (IFRS)
which are the generally accepted accounting principles (GAAP) for
Canadian publically accountable enterprises. The Company uses a number
of financial measures to assess its performance.�� Some of these
measures are not calculated in accordance with GAAP, are not defined by
GAAP, and do not have standardized meanings that would ensure
consistency and comparability between companies using these measures.��
Definitions of non-GAAP measures can be found under Non-GAAP Measures
in the Management's Discussion and Analysis included in the Company's
Third Quarter 2012 Report.



Regulatory Filings



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



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



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SOURCE: Home Capital Group Inc.







For further information:

Gerald M. Soloway, CEO, or
Martin Reid, President
416-360-4663
www.homecapital.com









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