Home Capital Reports Strong Performance for the Second Quarter

• Basic Earnings per Share of $1.54, or $1.60 excluding second quarter tax adjustments
• Return on Equity of 25.1%
• Second Quarter Net Income Increases 10.4%, or 14.5% excluding second quarter tax adjustments, over 2011 Net Income

TORONTO, Aug. 1, 2012 /CNW/ - Home Capital Group (TSX: HCG) today reported another quarter of strong results for the three months ended June 30, 2012.

The Company's Second 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 six months ended
(000s, except Per Share and Percentage Amounts)	June 30 2012		March 31 2012		June 30 2011		June 30 2012		June 30 2011
OPERATING RESULTS
Net Income	$	53,230	$	52,534	$	48,206	$	105,764	$	91,384
Adjusted Net Income^1		53,230		52,534		48,206		105,764		93,809
Total Revenue		218,751		214,682		198,568		433,433		383,181
Earnings per Share - Basic/Diluted	$	1.54/1.54	$	1.52/1.52	$	1.39/1.38	$	3.07/3.07	$	2.63/2.62
Adjusted Earnings per Share - Basic/Diluted^1		1.54/1.54		1.52/1.52		1.39/1.38		3.07/3.07		2.70/2.69
Return on Shareholders' Equity		25.1%		26.2%		28.2%		25.7%		27.5%
Return on Average Assets		1.2%		1.2%		1.2%		1.2%		1.1%
Net Interest Margin (TEB)^2		2.09%		2.02%		2.06%		2.05%		2.03%
Net Interest Margin Non-Securitized Assets (TEB)^2		3.05%		3.06%		3.04%		3.06%		3.00%
Net Interest Margin Securitized Assets		1.05%		0.97%		1.28%		1.00%		1.24%
Provision as a Percentage of Gross Loans (annualized)		0.05%		0.11%		0.03%		0.08%		0.03%
Efficiency Ratio (TEB)^2		27.8%		27.7%		27.9%		27.8%		28.6%
As at	June 30 2012		March 31 2012		December 31 2011		June 30 2011
BALANCE SHEET HIGHLIGHTS
Total Assets	$	18,526,458	$	17,995,256	$	17,696,471	$	16,434,599
Total Loans^3		16,966,961		16,403,745		16,089,648		15,319,145
Securitized Loans On-Balance Sheet		7,582,154		7,953,414		8,243,350		8,623,284
Loans Under Administration		17,039,727		16,403,745		16,089,648		15,319,145
Liquid Assets		677,908		691,416		814,918		864,142
Deposits		9,007,464		8,297,126		7,922,124		6,734,129
Shareholders' Equity		869,439		828,036		774,785		701,935
FINANCIAL STRENGTH
Capital Measures^4
Risk-Weighted Assets	$	5,003,579	$	4,704,529	$	4,549,696	$	3,981,958
Tier 1 Capital Ratio		17.1%		17.5%		17.3%		18.4%
Total Capital Ratio		21.1%		21.6%		20.5%		22.1%
Credit Quality
Non-Performing Loans as a Percentage of Gross Loans		0.31%		0.28%		0.25%		0.23%
Allowance as a Percentage of Gross Non-Performing Loans		58.7%		67.6%		74.9%		86.1%
Share Information
Book Value per Common Share	$	25.05	$	23.83	$	22.38	$	20.24
Common Share Price - Close	$	45.18	$	50.34	$	49.10	$	51.75
Market Capitalization	$	1,568,243	$	1,749,365	$	1,700,088	$	1,794,897
Number of Common Shares Outstanding		34,711		34,751		34,625		34,684

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. The net interest margin non-securitized assets for March 31, 2012 was amended from the previously disclosed amount of 3.00%.
³ Total loans include loans held for sale.
⁴ These figures relate to the Company's operating subsidiary, Home Trust Company.

SECOND QUARTER 2012 HIGHLIGHTS

Key results for the second quarter of 2012 included:

• Net income increased to $53.2 million in the second quarter and to $105.8 million for the six months ended June 30, 2012. Second quarter results included an unfavourable adjustment to taxes of $2.0 million due to Ontario tax rate changes announced earlier this year and substantively enacted during the quarter. Excluding this tax adjustment, net income for the quarter was $55.2 million representing an increase of 14.5% over 2011 second quarter net income of $48.2 million, and 5.1% (or 20.4% annualized) over first quarter of 2012 net income of $52.5 million. Net income of $107.8 million, excluding the tax adjustment, for the six months ending June 30, 2012 increased 17.9% over the $91.4 million recorded in the same period last year. Including the tax adjustment net income is up 15.7% year over year.  These results put the Company solidly within the 13%-18% net income growth target for 2012.
  
  
• Diluted earnings per share were $1.54 for the quarter and $3.07 for the first six months of 2012 representing increases of 11.6% and 17.2% from $1.38 and $2.62 of the respective periods of 2011. Excluding the tax adjustment, diluted earnings per share were $1.60 for the quarter and $3.13 for the first six months of 2012 representing increases of 15.9% and 19.5% over the respective periods of 2011. Diluted earnings per share for the second quarter, excluding the tax adjustment, also increased by 5.3% from $1.52 diluted earnings per share in the first quarter of 2012.
  
  
• Net interest income reached record levels of $93.9 million in the second quarter, increasing 15.4% over the $81.3 million recorded in the second quarter of 2011 and 6.4% over the $88.2 million earned last quarter, reflecting solid loan growth and strong demand for the Company's products.
  
  
• Net interest margin (TEB) rose to 2.09% in the second quarter from 2.06% in the second quarter of 2011 and 2.02% in the first quarter of 2012, primarily due to the benefit of the rebalancing of the portfolio towards the higher yielding traditional mortgage portfolio.  On a year to date basis, net interest margin (TEB) increased to 2.05% compared to 2.03% in the same period last year.  Net interest margin (TEB) on non-securitized assets was 3.05% compared to 3.04% in the second quarter of 2011 and 3.06% in the first quarter of 2012.
  
  
• Net interest margin on securitized assets was 1.05%, representing a decline from 1.28% one year ago and an increase from 0.97% last quarter. During the second quarter the Company benefited from higher than expected prepayment penalties in the securitized portfolio resulting in 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 is the primary contributor to lower margins.
  
  
• Return on equity at 25.1% 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%.
  
  
• During the quarter the Company securitized and sold $72.8 million in insured multi-unit residential mortgages that qualified for off-balance sheet and gain on sale accounting under current accounting standards. This resulted in a securitization gain of $1.3 million in the quarter.
  
  
• The credit quality of the loans portfolio remains solid. Net non-performing loans ended the quarter at 0.31% of the total loans portfolio and, while up from 0.25% at December 31, 2011 and 0.28% at the end of the first quarter of 2012, the ratio remains well within the Company's expectations and reflects the strategic shift towards a higher proportion of traditional mortgages. The provision for credit losses continues at a low level and was 0.05% of gross loans on an annualized basis in the quarter, compared to 0.03% in the second quarter of 2011 and 0.11% in the first quarter of 2012. The provision for credit losses ratio is within the Company's objective of 0.05% to 0.15% of gross loans.
  
  
• Tier 1 and Total capital ratios of 17.1% and 21.1%, respectively, at June 30, 2012 remain very conservative and well above the Company's minimum targets. Home Trust's asset to capital multiple was 13.8 at the end of the quarter compared to 14.4 at December 31, 2011 and 13.6 at the end of the first quarter. The Company is well positioned to continue growing its assets, revenue and net income while meeting or exceeding the Company's 2012 targets and maintaining prudent levels of capital.
  
  
• Total assets were $18.53 billion at the end of the second quarter, an increase of $2.09 billion or 12.7% from $16.43 billion one year ago, $0.83 billion or 4.7% from $17.70 billion at the end of 2011 and $0.53 billion or 3.0% over $18.0 billion at the end of the first quarter of 2012.
  
  
• Total loans grew to $16.97 billion, an increase of $1.65 billion or 10.8% from $15.32 billion one year ago, $0.88 billion or 5.5% from $16.09 billion at the end of 2011 (10.9% on an annualized basis) and $0.56 billion or 3.4% over $16.40 billion at the end of last quarter. While annualized loan growth year to date has been below the Company's growth target due to net reduction of insured loans, demand is strong and the Company continues to expect year-over-year loan growth to be within the target range of 13%-18% for 2012.
  
  
• The total value of mortgages originated in the second quarter rose to $1.67 billion from $1.20 billion originated in the second quarter of 2011 and $1.19 billion in originations in the first quarter of 2012. Originations were $2.85 billion for the first six months of the year compared to $2.57 billion in the same period last year. Origination volumes and weightings continue to reflect the Company's strategy to increase focus on originations of higher yielding traditional mortgages.
  
  
• Originations of traditional mortgages increased to $1.21 billion in the second quarter from $870.8 million in the second quarter of 2011 and $921.1 million originated in the first quarter of 2012. 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 increased to $221.1 million in the second quarter from $172.4 million in the second quarter of 2011 and from $172.7 million in the first quarter of 2012. The Company continues to pursue opportunities that may lead to future growth in this product segment in 2012.
  
  
• Multi-unit residential originations were $87.8 million in the quarter compared to $34.5 million in the second quarter of 2011 and $27.5 million in the first quarter of 2012. The Company anticipates continued funding of multi-unit residential mortgages through the second half of 2012 and plans to securitize these mortgages through programs that qualify for off-balance sheet accounting.
  
  
• Non-residential mortgage advances were $86.0 million in the quarter compared to $59.5 million in the second quarter of 2011 and $25.2 million in the first quarter of 2012. The Company continues to be very selective and focuses on opportunities that present strong margins and risk profiles that are within the Company's risk tolerance.
  
  
• Store and apartment advances were $37.8 million for the quarter compared to $35.5 million in the second quarter of 2011 and $37.9 million last quarter.
  
  
• The Company opened 1,793 new Visa accounts in the second quarter compared to 2,389 accounts opened in the second quarter of 2011 and 1,383 accounts last quarter. The decline through the current year reflects the Company's increased conservatism in approvals and advances and the anticipated adoption of OSFI's B-20 draft guideline provisions limiting home equity lines of credit (HELOC). The final guideline is less restrictive than the Company's expectation and the Company is exploring strategies, within its risk tolerance and OSFI's guidelines, to enhance growth in this portfolio.

Consistent with the first quarter of 2012, the Company is delivering solid performance despite the persistent international economic instability and muted economic improvement in Canada. The Company's performance reflects the strength, and the successful execution, of the Company's core strategy.

As discussed in the first quarter of 2012, the Company continues to see resilient and relatively stable real estate markets across most of Canada, with a few areas of continuing concern, where the Company has already scaled back. The Company expects real estate demand to remain relatively stable in 2012 with potentially modest declines in some of the larger markets. This is expected to result in relatively balanced real estate market conditions and lead to continued healthy demand for the Company's products, consistent with the first half of the year. The Company has not seen evidence of a "real-estate bubble" in Canada. Low interest rates and stable employment have maintained housing affordability. The Company expects interest rates to remain at current levels or experience very modest increases into 2013 and that Canadian employment levels will remain relatively stable in 2012. The Company maintains a solid capital position and prudent liquidity and expects that it is well positioned to deal with the impact of uncertainty that may affect the Canadian economy.

Favourable market opportunities have supported the Company's strategy of renewed focus on the traditional mortgage portfolio with record levels of originations in this product category. While the Company has increased lending in this product category it has been able to do so with improving credit quality. The average credit score for traditional mortgage originations for the first half of 2012 is up from the same period of 2011 while loan to value ratios are down. The Company remains proactive and prudent in its lending practices, taking into account local economic and market conditions. The credit quality of the loan portfolio remains strong, reflecting the Company's focus on diligent underwriting combined with strong collection standards and loan resolution strategies.

During the second quarter, OSFI released Final Guideline B-20 - Residential Mortgage Underwriting Practices and Procedures requiring full implementation by the end of 2012. Additionally, the Canadian government announced rule changes associated with mortgages insured through CMHC that became effective in early July 2012. The Company supports the changes announced and expects that these measures will serve to enhance the safety and soundness of the Canadian real estate market, mortgage insurers and the economy, while potentially tempering real estate demand in the short term. The Company has already made changes, where required, to comply with a significant number of the B-20 guidelines 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. There may be a small segment of the Company's borrowers who will be impacted by the B-20 changes and may need to seek alternative funding. The Company was fully compliant with the required changes to the insured mortgage rules before the early July 2012 deadline.

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 a quarterly dividend of $0.22 per Common share, payable on September 1, 2012 to shareholders of record at the close of business on August 15, 2012. 

With solid performance in all aspects of Home Capital's business, management expects that the Company will continue to generate above average earnings and shareholder performance for 2012, and will meet or exceed all of its stated objectives for 2012. 

(signed) GERALD M. SOLOWAY  Chief Executive Officer  August 1, 2012	(signed) KEVIN P.D. SMITH Chairman of the Board

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

Second Quarter Results Conference Call
The conference call will take place on Thursday, August 2, 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, August 2, 2012 and midnight Thursday, August 9, 2012 by calling 416-849-0833 or 1-855-859-2056 (enter passcode 99419730). 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 six months ended June 30, 2012
		2012 Targets^1	Actual Results^1		Amount	Increase over 2011
Growth in net income		13%-18%	15.7%	$	105,764	$	14,380
Growth in diluted earnings per share		13%-18%	17.2%		3.07		0.45
Growth in total loans^2		13%-18%	10.9%		16,966,961		877,313
Return on shareholders' equity		20.0%	25.7%
Efficiency ratio (TEB)^3		28.0% - 34.0%	27.8%
Capital ratios^4
Tier 1		Minimum of 13%	17.1%
Total		Minimum of 14%	21.1%
Provision as a percentage of gross loans (annualized)		0.05% - 0.15%	0.08%

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 six months ended
thousands of Canadian dollars, except per share amounts (Unaudited)		June 30 2012		March 31 2012		June 30 2011		June 30 2012		June 30 2011
Net Interest Income Non-Securitized Assets
Interest from loans		$	125,576	$	117,565	$	96,262	$	243,141	$	187,315
Dividends from securities			3,533		3,964		4,713		7,497		8,971
Other interest			930		1,047		1,219		1,977		2,912
			130,039		122,576		102,194		252,615		199,198
Interest on deposits			56,043		53,128		47,242		109,171		92,208
Interest on senior debt			1,705		1,653		1,047		3,358		1,047
Net interest income non-securitized assets			72,291		67,795		53,905		140,086		105,943
Net Interest Income Securitized Loans and Assets
Interest income from securitized loans and assets			76,286		76,616		83,920		152,902		164,420
Interest expense on securitization liabilities			54,723		56,192		56,503		110,915		112,435
Net interest income securitized loans and assets			21,563		20,424		27,417		41,987		51,985
Total Net Interest Income			93,854		88,219		81,322		182,073		157,928
Provision for credit losses (note 5(E))			2,298		4,498		1,217		6,796		2,191
			91,556		83,721		80,105		175,277		155,737
Non-Interest Income
Fees and other income			12,025		10,897		8,646		22,922		17,006
Realized net gains and unrealized losses on securities and mortgages			1,676		308		2,141		1,984		4,170
Net realized and unrealized (loss) gain on derivatives (note 14)			(1,275)		4,285		1,667		3,010		(1,613)
			12,426		15,490		12,454		27,916		19,563
			103,982		99,211		92,559		203,193		175,300
Non-Interest Expenses
Salaries and benefits			14,501		13,999		13,253		28,500		25,830
Premises			1,977		1,998		1,900		3,975		3,772
Other operating expenses			13,404		13,171		11,490		26,575		22,257
			29,882		29,168		26,643		59,050		51,859
Income Before Income Taxes			74,100		70,043		65,916		144,143		123,441
Income taxes (note 12(A))
Current			20,568		19,055		18,036		39,623		32,111
Deferred			302		(1,546)		(326)		(1,244)		(54)
			20,870		17,509		17,710		38,379		32,057
NET INCOME		$	53,230	$	52,534	$	48,206	$	105,764	$	91,384
NET INCOME PER COMMON SHARE
Basic		$	1.54	$	1.52	$	1.39	$	3.07	$	2.63
Diluted		$	1.54	$	1.52	$	1.38	$	3.07	$	2.62
AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
Basic			34,476		34,550		34,695		34,486		34,699
Diluted			34,509		34,593		34,843		34,491		34,843
Total number of outstanding common shares (note 9(A))			34,711		34,751		34,684		34,711		34,684
Book value per common share		$	25.05	$	23.83	$	20.24	$	25.05	$	20.24

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 six months ended
thousands of Canadian dollars (Unaudited)		June 30 2012		March 31 2012		June 30 2011		June 30 2012		June 30 2011
NET INCOME	$	53,230	$	52,534	$	48,206	$	105,764	$	91,384
OTHER COMPREHENSIVE INCOME (LOSS)
Available for Sale Securities
Net unrealized (losses) gains on securities available for sale		(1,069)		4,393		420		3,324		(81)
Net gains reclassified to net income		(1,348)		(364)		(2,662)		(1,712)		(4,490)
		(2,417)		4,029		(2,242)		1,612		(4,571)
Income tax (recovery) expense		(643)		1,167		(919)		524		(1,168)
		(1,774)		2,862		(1,323)		1,088		(3,403)
Cash Flow Hedges (note 14)
Net unrealized (losses) gains on cash flow hedges		(396)		26		(2,643)		(370)		(3,317)
Net losses reclassified to net income		357		353		91		710		91
		(39)		379		(2,552)		340		(3,226)
Income tax (recovery) expense		(89)		110		(664)		21		(839)
		50		269		(1,888)		319		(2,387)
Total other comprehensive (loss) income		(1,724)		3,131		(3,211)		1,407		(5,790)
COMPREHENSIVE INCOME	$	51,506	$	55,665	$	44,995	$	107,171	$	85,594

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

Consolidated Balance Sheets

thousands of Canadian dollars (Unaudited)			June 30 2012		March 31 2012		December 31 2011
ASSETS
Cash Resources (note 4(A))		$	301,330	$	421,397	$	665,806
Securities (note 4(B))
Available for sale			425,834		471,951		391,754
Pledged securities (notes 4(C) and 6(B))			628,836		493,889		341,588
			1,054,670		965,840		733,342
Loans held for sale			29,811		-		-
Loans (note 5)
Residential mortgages			7,749,484		6,946,012		6,339,883
Securitized residential mortgages (note 6)			7,582,154		7,953,414		8,243,350
Non-residential mortgages			1,037,385		940,055		946,222
Personal and credit card loans			568,127		564,264		560,193
			16,937,150		16,403,745		16,089,648
Collective allowance for credit losses (note 5(E))			(29,500)		(29,500)		(29,440)
			16,907,650		16,374,245		16,060,208
Other
Derivative assets (note 14)			59,284		55,611		72,424
Other assets (note 7)			84,534		90,899		79,650
Capital assets			7,278		6,296		5,372
Intangible assets			66,149		65,216		63,917
Goodwill			15,752		15,752		15,752
			232,997		233,774		237,115
		$	18,526,458	$	17,995,256	$	17,696,471
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits
Deposits payable on demand		$	42,098	$	36,220	$	62,746
Deposits payable on a fixed date			8,965,366		8,260,906		7,859,378
			9,007,464		8,297,126		7,922,124
Senior Debt (note 13)			152,524		154,129		153,336
Securitization Liabilities (note 6(C))
Mortgage-backed security liabilities			2,078,300		2,238,138		2,417,801
Canada Mortgage Bond liabilities			6,160,259		6,210,408		6,231,274
			8,238,559		8,448,546		8,649,075
Other
Obligations related to securities sold under repurchase agreement (notes 4(C) and 5(F))			43,418		49,720		-
Derivative liabilities (note 14)			4,043		2,990		3,458
Income taxes payable			15,893		6,672		17,628
Other liabilities (note 8)			156,320		169,560		136,025
Deferred tax liabilities (note 12(C))			38,798		38,477		40,040
			258,472		267,419		197,151
			17,657,019		17,167,220		16,921,686
Shareholders' Equity
Capital stock (note 9)			61,662		61,494		55,104
Contributed surplus			5,543		5,207		5,873
Retained earnings			810,018		767,395		722,999
Accumulated other comprehensive loss (note 11)			(7,784)		(6,060)		(9,191)
			869,439		828,036		774,785
		$	18,526,458	$	17,995,256	$	17,696,471

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

Consolidated Statements of Changes in Shareholders' Equity

thousands of Canadian dollars, except per share amounts (Unaudited)	Capital Stock		Contributed Surplus		Retained Earnings		Net Unrealized (Losses) Gains on Securities Available for Sale, after Tax		Net Unrealized Losses on Cash Flow Hedges, after Tax		Total Accumulated Other Comprehensive (Loss) Income		Total Shareholders' Equity
Balance at December 31, 2011	$	55,104	$	5,873	$	722,999	$	(4,141)	$	(5,050)	$	(9,191)	$	774,785
Comprehensive income		-		-		105,764		1,088		319		1,407		107,171
Stock options settled (note 9(A))		6,692		(1,302)		-		-		-		-		5,390
Amortization of fair value of
employee stock options (note 10(A))		-		972		-		-		-		-		972
Repurchase of shares (note 9(A))		(134)		-		(3,436)		-		-		-		(3,570)
Dividends paid
($0.42 per share)		-		-		(15,309)		-		-		-		(15,309)
Balance at June 30, 2012	$	61,662	$	5,543	$	810,018	$	(3,053)	$	(4,731)	$	(7,784)	$	869,439
Balance at December 31, 2010	$	50,427	$	4,571	$	567,681	$	5,906	$	-	$	5,906	$	628,585
Comprehensive income		-		-		91,384		(3,403)		(2,387)		(5,790)		85,594
Stock options settled (note 9(A))		4,237		(933)		-		-		-		-		3,304
Amortization of fair value of
employee stock options (note 10(A))		-		1,231		-		-		-		-		1,231
Repurchase of shares (note 9(A))		(121)		-		(4,147)		-		-		-		(4,268)
Dividends paid
($0.36 per share)		-		-		(12,511)		-		-		-		(12,511)
Balance at June 30, 2011	$	54,543	$	4,869	$	642,407	$	2,503	$	(2,387)	$	116	$	701,935

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

Consolidated Statements of Cash Flows

			For the six months ended
thousands of Canadian dollars (Unaudited)				June 30 2012		June 30 2011
CASH FLOWS FROM OPERATING ACTIVITIES
Net income for the period			$	105,764	$	91,384
Adjustments to determine cash flows relating to operating activities:
	Deferred income taxes			(1,244)		(54)
	Amortization of capital assets			1,569		1,430
	Amortization of intangible assets			3,218		30
	Amortization of net premium on securities			1,461		295
	Amortization of securitization and senior debt transaction costs			6,604		5,711
	Provision for credit losses			6,796		2,191
	Change in accrued interest payable			20,108		17,721
	Change in accrued interest receivable			(3,104)		(2,198)
	Realized net gains and unrealized losses on securities and mortgages			(1,984)		(4,170)
	Settlement of derivatives			(370)		(3,828)
	(Gain) loss on derivatives			(3,010)		1,613
	Net increase in mortgages			(875,750)		(1,161,993)
	Net increase in personal and credit card loans			(7,904)		(67,351)
	Net increase in deposits			1,085,340		133,979
	Proceeds from obligations under repurchase agreement			43,418		-
	Activity in securitization liabilities
		Proceeds from securitization of mortgage-backed security liabilities		53,153		811,189
		Settlement and repayment of securitization liabilities		(454,516)		(271,097)
	Amortization of fair value of employee stock options			972		1,231
	Changes in taxes payable and other			(4,031)		10,398
Cash flows used in operating activities				(23,510)		(433,519)
CASH FLOWS FROM FINANCING ACTIVITIES
Repurchase of shares				(3,570)		(4,268)
Exercise of employee stock options				5,390		3,304
Issuance of senior debt				-		149,043
Dividends paid to shareholders				(14,598)		(12,504)
Cash flows used in financing activities				(12,778)		135,575
CASH FLOWS FROM INVESTING ACTIVITIES
Activity in securities
	Purchases			(531,589)		(224,431)
	Proceeds from sales			185,453		174,235
	Proceeds from maturities			26,873		54,268
Purchases of capital assets				(3,475)		(1,381)
Purchases of intangible assets				(5,450)		(8,509)
Cash flows used in investing activities				(328,188)		(5,818)
Net decrease in cash and cash equivalents during the period				(364,476)		(303,762)
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))			$	301,330	$	543,062
Supplementary Disclosure of Cash Flow Information
Dividends received on investments			$	6,227	$	7,575
Interest received				240,433		349,357
Interest paid				333,836		187,969
Income taxes paid				43,874		19,851

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 continue to assume:

• The Canadian economy will 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 or increase marginally in 2012 as the Bank of Canada leaves its target for the overnight rate at its current level or modestly increases the rate later in 2012. 
• The housing market will remain resilient to global uncertainty with balanced supply and demand conditions in most regions. Declining housing starts and flat resale activity on stable prices through most of Canada will continue with the market activity 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 help to temper the real estate market.

Non-GAAP Measures

The Company applies 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 Second 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, Visa products and payment 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