Home Capital Reports Another Record Quarter and Dividend Increase

• 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 Income^1		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/Diluted^1		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
BALANCE SHEET HIGHLIGHTS
Total Assets	$	19,241,999	$	18,526,458	$	17,696,471	$	17,072,125
Total Loans^3		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 Administration^4		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 Measures^5
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 Targets^1	Actual Results^1		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 loans^2		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 ratios^4
	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.

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.

 

 

 

 

SOURCE: Home Capital Group Inc.

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