Home Capital Updates Outlook for 2017 and Reports Second Quarter 2017 Results

TORONTO, Aug. 2, 2017 /CNW/ - Home Capital Group ("Home Capital" or "the Company") (TSX: HCG) today provided a business update and reported financial results for the three and six months ended June 30, 2017. This press release should be read in conjunction with the Company's 2017 Second Quarter Report including Financial Statements and Management's Discussion and Analysis (MD&A), which are available on Home Capital's website at www.homecapital.com and on SEDAR at www.sedar.com.

Bonita Then, Interim President and Chief Executive Officer, Home Capital said, "We've made tremendous progress toward our goal of ensuring Home Capital is ready to take advantage of opportunities we see to grow our business in a sustainable way. We have achieved a strong liquidity position, named a highly experienced mortgage industry expert as our new Chief Executive Officer, added Berkshire Hathaway as a corporate sponsor and investor, and fully repaid our $2 billion backstop credit line with Berkshire. Depositors are demonstrating their confidence in us through increased inflows to our Guaranteed Investment Certificates, and we are looking forward to putting that funding to work by increasing our lending activity. Moving ahead, we will continue to look at every opportunity, including more attractive and alternate funding sources, to build our platform for future growth."

Yousry Bissada, incoming President and Chief Executive Officer, Home Capital said, "Home plays a critically important role by helping deserving Canadians realize their dream of home ownership. I am excited about the opportunity to work with the strong team at Home Capital to build on the Company's leading position in the alternative mortgage lending market. We want to be the first choice for depositors, borrowers and brokers in the markets we serve, and over the coming months I will be fully engaged in crafting a strategy to make that happen."

Going Concern Uncertainty Resolved
The Company's business plan and cash flow forecast suggest that the current liquidity and credit facilities are sufficient to support ongoing business for the foreseeable future. Management has concluded that there is no longer material uncertainty that casts significant doubt as to the ability of the Company to continue as a going concern.

Recent Highlights

• Yousry Bissada named President and Chief Executive Officer. Search for a Chief Financial Officer is nearing completion.
• Significantly strengthened liquidity position following stabilization and subsequent increase in deposit inflows, completion of asset sales and the closing of a $2 billion backstop credit facility, with a wholly owned subsidiary of Berkshire Hathaway Inc. (Berkshire), replacing a previous $2 billion emergency credit facility on better terms.
• Repaid all outstanding amounts under the Berkshire credit facility subsequent to the end of Q2, giving the Company the ability to draw up to $2.0 billion going forward if required. In addition, the Company held total liquid assets of approximately $1.94 billion as of August 1, 2017. The reported liquidity position includes proceeds received from the initial equity investment by Berkshire.
• Closed initial equity investment by Berkshire, through its wholly owned subsidiary Columbia Insurance Company, of approximately $153.2 million to acquire a 19.99% equity stake in the Company on a private placement basis, as previously announced. Investment by Berkshire of approximately $246.8 million to acquire an additional approximate 18.4% remains subject to approval at a Special Meeting of Shareholders scheduled for September 12, 2017.
• Closed initial tranche of previously announced sale of commercial mortgage assets, receiving proceeds of approximately $1.13 billion as of July 25, 2017, with a further tranche expected to close by the end of Q3 2017.
• Closed sales of residential mortgage assets for total proceeds of approximately $300 million.
• Reached two agreements comprising a global settlement with the Ontario Securities Commission and a class action lawsuit subject to final approval from the Ontario Securities Commission and the Ontario Superior Court of Justice.

Second Quarter 2017 Financial Statement Highlights

Second Quarter 2017, compared with the Second Quarter 2016:

• Reported net loss of $111.1 million and $1.73 loss per share fully diluted, compared with net income of $66.3 million and $0.99 diluted earnings per share.
• Net loss for second quarter 2017 includes the impact of elevated expenses of approximately $233.7 million pre-tax.
• Total loans under administration were $25.9 billion compared to $25.7 billion.
• Mortgage portfolio continues to perform well, maintaining low provisions for credit losses. Provision for credit losses as a percentage of gross uninsured loans was 0.07% as at June 30, 2017, compared to 0.08% as at June 30, 2016. During the quarter there was an increase in the collective allowance of $1.0 million due to growth in land and development loans in the commercial portfolio.
• Improved capital position with CET 1 ratio at 17.06%, as compared to 16.38%, well in excess of regulatory minimums. This ratio is expected to rise further after the execution of transactions previously announced.

Second Quarter 2017 Elevated Expenses
In late April 2017, the Company experienced a serious liquidity event that required the Company to take urgent and deliberate steps to liquidate assets and arrange an emergency credit facility. The costs associated with these actions are reflected in the second quarter. In addition, the Company recorded the expenses associated with the global settlement of the OSC and class action matters, net of insurance, and an increased provision for costs associated with the repositioning of the business. These expenses, which totaled $233.7 million ($173.5 million after tax) and are in addition to normal operating costs, reduced diluted earnings per share by $2.70 and were the main reason the Company reported a net loss in the second quarter. Further details regarding these elevated expenses are explained below.

• Incremental costs incurred in connection with the liquidity event totaled $213.6 million (or $157.0 million after tax and $2.44 diluted earnings per share) and included the following: 1) $130.6 million in commitment fees and interest charges related to the emergency credit facility and Berkshire line of credit and related professional and advisory fees and 2) a $72.9 million realized loss on the urgent sale of the Company's available for sale asset portfolio.
• The Company determined it will exit its payment card and payment processing (PsiGate) business and its prepaid card business. As a result, the Company recorded an asset impairment related to the remaining goodwill, intangible and other assets within these businesses of $7.3 million (or $6.6 million after tax and $0.10 diluted earnings per share).
• Additional restructuring costs related to Project Expo, the Company's expense savings initiative, of $5.8 million (or $4.2 million after tax and $0.07 diluted earnings per share) were also recorded during the quarter.
• Costs related to the OSC matter and related class action were $7.0 million (or $5.7 million after tax and $0.09 diluted earnings per share), net of expected insurance recoveries.

2017 Outlook
In the coming months, the Company's incoming President and Chief Executive Officer, along with management and the Board, will reassess business plans and set new strategic goals and objectives. In the interim, management will focus on further strengthening its financial position and returning its lending and deposit taking activities to a more normal level. The Company intends to focus on Guaranteed Investment Certificates and term deposits, while demand deposits are likely to remain limited to the current low level.

Given the events of the second quarter, the Company will cautiously increase lending activity with a view to growing the mortgage origination flow in step with the growth of deposit funding and adequate liquidity. While deposit funding has grown in recent weeks, the Company has been paying a premium rate of interest on new deposits. These rates will reduce the interest spread earned on new business and the Company will look to reduce deposit interest rates to more sustainable levels in the coming months. This may have a dampening effect on deposit growth and consequently constrain growth of mortgage originations. During the second quarter, the Company had a very low level of new loan originations and sold residential and commercial mortgage assets as well as consumer lending assets. The accompanying reduction in interest income is only partly reflected in the current quarter, as most of the asset sales took place near the quarter end. The Company closed significant commercial mortgage asset sales during July, 2017.  The proceeds from asset sales have been used to repay the Berkshire credit facility in full. Consequently, the Company will experience lower interest costs partly offset by lower interest income in the third quarter. The Company can also expect elevated non-interest expenses as it will continue to be subject to scrutiny from a wide range of stakeholders.

Guideline B-20
In July, OSFI introduced for comment and consultation a revised draft of Guideline B-20 (B-20) Residential Mortgage Underwriting Practices and Procedures. The draft revisions include a qualifying stress test for uninsured mortgages, a prohibition on certain co-lending arrangements and additional guidance on income verification and expectation to account for property price inflation when determining appropriate loan to value. Based on the Company's preliminary analysis and interpretation, the revisions to B-20, if implemented as proposed, would reduce, possibly materially, the size of the uninsured mortgage market available to the Company and its federally regulated competitors. The Company also believes that the revisions, if implemented as proposed, would increase the rate of renewals of mortgage loans with the existing lenders. The draft guideline is in the consultation stage and may be further revised before implementation, and it is unclear in any event what impact the revisions to B-20 would have on the real estate and mortgage markets as a whole. If implemented as proposed, the draft guideline would be expected to have a material impact on the Company's business strategy going forward. At this time, there can be no certainty as to the final revisions of the guideline.

(signed)	(signed)
BONITA THEN	BRENDA EPRILE
Interim President & Chief Executive Officer	Chair of the Board
August 2, 2017

The Company's 2017 Second Quarter Financial Report, including Management's Discussion and Analysis, for the three and six months ended June 30, 2017 is available at www.homecapital.com and on the Canadian Securities Administrators' website at www.sedar.com.

Second Quarter 2017 Results Conference Call and Webcast

The conference call will take place on Thursday, August 3, 2017, at 8:30 a.m. ET. Participants are asked to call approximately 10 minutes in advance at 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 on Home Capital's website at www.homecapital.com in the Investor Relations section of the website.

Conference Call Archive

A telephone replay of the call will be available between 11:30 a.m. ET Thursday, August 3, 2017 and 12:00 a.m. ET Thursday, August 10, 2017 by calling 416-849-0833 or 1-855-859-2056 (enter passcode 51553293). The archived audio webcast will be available for 90 days on CNW Group's website at www.newswire.ca and Home Capital's website at www.homecapital.com.

Special Meeting Notice

The Company has set the record and meeting date for the special meeting of its shareholders to consider an additional investment of 23,955,420 Common Shares of the Company by a wholly owned subsidiary of Berkshire Hathaway Inc. (Berkshire), on a private placement basis.

Shareholders of record as of the close of business on August 8, 2017 will be entitled to vote at the special meeting, which will be held on September 12, 2017 at a time and location to be announced. The additional investment by Berkshire must be approved by a majority of votes cast at the special meeting, excluding the Common Shares of the Company beneficially held by Berkshire, or over which it exercises control or direction. The Company expects to file the Management Information Circular and Form of Proxy for the special meeting no later than August 21, 2017.

Financial Highlights
(Unaudited)	For the three months ended						For the six months ended
(000s, except Percentage and Per Share Amounts)	June 30		March 31		June 30		June 30		June 30
		2017		2017		2016		2017		2016
OPERATING RESULTS
Net Income (Loss)	$	(111,116)	$	58,041	$	66,252	$	(53,075)	$	130,500
Net Interest Income (Loss)		(3,407)		125,857		122,103		122,450		244,620
Total Revenue^1		(61,293)		147,742		146,761		86,449		292,267
Diluted Earnings (Loss) per Share	$	(1.73)	$	0.90	$	0.99	$	(0.83)	$	1.91
Return on Shareholders' Equity		(26.1)%		14.1%		16.5%		(6.3)%		16.4%
Return on Average Assets		(2.2)%		1.1%		1.3%		(0.5)%		1.3%
Net Interest Margin (TEB)^2		(0.07)%		2.44%		2.38%		1.20%		2.38%
Provision as a Percentage of Gross Uninsured Loans (annualized)		0.07%		0.16%		0.08%		0.12%		0.06%
Provision as a Percentage of Gross Loans (annualized)		0.05%		0.13%		0.06%		0.09%		0.05%
Efficiency Ratio (TEB)^2		(138.9)%		43.4%		37.2%		171.0%		38.4%
								As at
	June 30			March 31		December 31		June 30
		2017		2017		2016		2016
BALANCE SHEET HIGHLIGHTS
Total Assets	$	20,077,150	$	20,993,385	$	20,528,777	$	20,763,147
Total Assets Under Administration^3		28,292,436		29,583,545		28,917,534		28,430,730
Total Loans^4		17,648,114		18,573,476		18,035,317		18,065,074
Total Loans Under Administration^3,4		25,863,400		27,163,636		26,424,074		25,732,657
Liquid Assets		1,737,417		2,098,192		2,067,981		2,391,225
Deposits		13,104,606		16,249,611		15,886,030		16,022,219
Line of Credit Facility		1,396,959		-		-		-
Shareholders' Equity		1,735,692		1,665,503		1,617,192		1,555,893
FINANCIAL STRENGTH
Capital Measures^5
Risk-Weighted Assets	$	8,328,024	$	9,086,886	$	8,643,267	$	8,310,406
Common Equity Tier 1 Capital Ratio		17.06%		16.34%		16.55%		16.38%
Tier 1 Capital Ratio		17.06%		16.34%		16.54%		16.38%
Total Capital Ratio		17.54%		16.77%		16.97%		16.82%
Leverage Ratio		7.19%		7.29%		7.20%		6.77%
Credit Quality
Net Non-Performing Loans as a Percentage of Gross Loans		0.23%		0.24%		0.30%		0.33%
Allowance as a Percentage of Gross Non-Performing Loans		100.5%		91.8%		73.4%		66.0%
Share Information
Book Value per Common Share	$	21.63	$	25.94	$	25.12	$	23.67
Common Share Price – Close	$	16.99	$	26.03	$	31.34	$	32.02
Dividend paid during the period ended	$	-	$	0.26	$	0.26	$	0.24
Dividend Payout Ratio		-		28.9%		32.9%		24.2%
Market Capitalization	$	1,363,380	$	1,671,230	$	2,017,920	$	2,105,027
Number of Common Shares Outstanding		80,246		64,204		64,388		65,741

¹ The Company has revised its definition of Total Revenue and restated amounts in prior periods accordingly.  Please see the revised definition under Non-GAAP Measures in the Company's 2017 Second Quarter Report.

² See definition of Taxable Equivalent Basis (TEB) under Non-GAAP Measures in the Company's 2017 Second Quarter Report.

³ Total assets and loans under administration include both on- and off-balance sheet amounts.

⁴ Total loans include loans held for sale.

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

Consolidated Statements of Income (Loss)
		For the three months ended						For the six months ended
thousands of Canadian dollars, except per share amounts		June 30		March 31		June 30		June 30		June 30
(Unaudited)			2017		2017		2016		2017		2016
Net Interest Income (Loss) Non-Securitized Assets
Interest from loans		$	192,394	$	192,435	$	191,704	$	384,829	$	385,250
Dividends from securities			300		2,286		2,447		2,586		5,139
Other interest			1,627		2,920		2,985		4,547		5,513
			194,321		197,641		197,136		391,962		395,902
Interest on deposits and other			71,673		77,252		78,312		148,925		157,775
Interest and fees on line of credit facility			130,630		-		-		130,630		-
Net interest income (loss) non-securitized assets			(7,982)		120,389		118,824		112,407		238,127
Net Interest Income Securitized Loans and Assets
Interest income from securitized loans and assets			22,678		21,558		20,732		44,236		40,825
Interest expense on securitization liabilities			18,103		16,090		17,453		34,193		34,332
Net interest income securitized loans and assets			4,575		5,468		3,279		10,043		6,493
Total Net Interest Income (Loss)			(3,407)		125,857		122,103		122,450		244,620
Provision for credit losses			2,420		5,919		2,760		8,339		4,154
			(5,827)		119,938		119,343		114,111		240,466
Non-Interest Income (Loss)
Fees and other income			17,168		16,331		17,328		33,499		36,493
Securitization income			1,877		6,432		9,452		8,309		17,134
Gain on acquisition of CFF Bank			-		-		-		-		651
Net realized and unrealized losses on securities and loans			(76,912)		(3)		-		(76,915)		(175)
Net realized and unrealized losses on derivatives			(19)		(875)		(2,122)		(894)		(6,456)
			(57,886)		21,885		24,658		(36,001)		47,647
			(63,713)		141,823		144,001		78,110		288,113
Non-Interest Expenses
Salaries and benefits			29,303		29,619		24,685		58,922		53,396
Premises			3,365		3,752		3,575		7,117		7,426
Other operating expenses			52,333		31,094		26,652		83,427		52,107
			85,001		64,465		54,912		149,466		112,929
Income (Loss) Before Income Taxes			(148,714)		77,358		89,089		(71,356)		175,184
Income taxes
	Current		(39,616)		23,142		24,911		(16,474)		44,997
	Deferred		2,018		(3,825)		(2,074)		(1,807)		(313)
			(37,598)		19,317		22,837		(18,281)		44,684
NET INCOME (LOSS)		$	(111,116)	$	58,041	$	66,252	$	(53,075)	$	130,500
NET INCOME (LOSS) PER COMMON SHARE
Basic		$	(1.73)	$	0.90	$	0.99	$	(0.83)	$	1.91
Diluted		$	(1.73)	$	0.90	$	0.99	$	(0.83)	$	1.91
AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
Basic			64,378		64,263		66,663		64,321		68,324
Diluted			64,378		64,294		66,798		64,321		68,420
Total number of outstanding common shares			80,246		64,204		65,741		80,246		65,741
Book value per common share		$	21.63	$	25.94	$	23.67	$	21.63	$	23.67

Consolidated Statements of Comprehensive Income (Loss)
	For the three months ended						For the six months ended
	June 30		March 31		June 30		June 30		June 30
thousands of Canadian dollars (Unaudited)		2017		2017		2016		2017		2016
NET INCOME (LOSS)	$	(111,116)	$	58,041	$	66,252	$	(53,075)	$	130,500
OTHER COMPREHENSIVE INCOME (LOSS)
Available for Sale Securities and Retained Interests
Net unrealized gains (losses)		550		16,414		4,272		16,964		(8,742)
Net losses reclassified to net income		46,647		3		-		46,650		204
		47,197		16,417		4,272		63,614		(8,538)
Income tax expense (recovery)		12,514		4,358		1,134		16,872		(2,287)
		34,683		12,059		3,138		46,742		(6,251)
Cash Flow Hedges
Net unrealized gains (losses)		(525)		(85)		(1,312)		(610)		1,909
Net losses reclassified to net income		572		329		341		901		705
		47		244		(971)		291		2,614
Income tax expense (recovery)		12		72		(257)		84		694
		35		172		(714)		207		1,920
Total other comprehensive income (loss)		34,718		12,231		2,424		46,949		(4,331)
COMPREHENSIVE INCOME (LOSS)	$	(76,398)	$	70,272	$	68,676	$	(6,126)	$	126,169

  

Consolidated Balance Sheets
							As at
		June 30		March 31		December 31
thousands of Canadian dollars (Unaudited)			2017		2017		2016
ASSETS
Cash and Cash Equivalents		$	1,682,982	$	1,251,190	$	1,205,394
Available for Sale Securities			31,495		549,456		534,924
Loans Held for Sale			-		40,721		77,918
Loans
Securitized mortgages			3,257,104		2,647,014		2,526,804
Non-securitized mortgages and loans			14,391,010		15,885,741		15,430,595
			17,648,114		18,532,755		17,957,399
Collective allowance for credit losses			(40,063)		(39,063)		(37,063)
			17,608,051		18,493,692		17,920,336
Other
Restricted assets			216,596		140,325		265,374
Derivative assets			21,804		33,480		37,524
Other assets			384,676		347,477		348,638
Deferred tax assets			19,510		18,048		16,914
Goodwill and intangible assets			112,036		118,996		121,755
			754,622		658,326		790,205
		$	20,077,150	$	20,993,385	$	20,528,777
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits
Deposits payable on demand		$	372,912	$	2,377,400	$	2,531,803
Deposits payable on a fixed date			12,731,694		13,872,211		13,354,227
			13,104,606		16,249,611		15,886,030
Line of Credit Facility			1,396,959		-		-
Securitization Liabilities
CMHC-sponsored mortgage-backed security liabilities			1,649,637		922,377		898,386
CMHC-sponsored Canada Mortgage Bond liabilities			1,474,001		1,474,539		1,637,117
Bank-sponsored securitization conduit liabilities			203,991		250,129		114,146
			3,327,629		2,647,045		2,649,649
Other
Derivative liabilities			11,322		2,871		3,490
Other liabilities			466,320		394,762		336,132
Deferred tax liabilities			34,622		33,593		36,284
			512,264		431,226		375,906
			18,341,458		19,327,882		18,911,585
Shareholders' Equity
Capital stock			231,618		85,194		84,910
Contributed surplus			4,922		4,725		4,562
Retained earnings			1,507,268		1,618,418		1,582,785
Accumulated other comprehensive loss			(8,116)		(42,834)		(55,065)
			1,735,692		1,665,503		1,617,192
		$	20,077,150	$	20,993,385	$	20,528,777

Consolidated Statements of Changes in Shareholders' Equity
								Net Unrealized
								Losses		Net Unrealized		Total
								on Securities and		Losses on		Accumulated
								Retained Interests		Cash Flow		Other		Total
thousands of Canadian dollars,		Capital		Contributed		Retained		Available		Hedges,		Comprehensive		Shareholders'
except per share amounts (Unaudited)		Stock		Surplus		Earnings		for Sale, after Tax		after Tax		Loss		Equity
Balance at December 31, 2016		$	84,910	$	4,562	$	1,582,785	$	(53,589)	$	(1,476)	$	(55,065)	$	1,617,192
Comprehensive income (loss)			-		-		(53,075)		46,742		207		46,949		(6,126)
Stock options settled			548		(141)		-		-		-		-		407
Amortization of fair value of
	employee stock options		-		501		-		-		-		-		501
Repurchase of shares			(267)		-		(5,732)		-		-		-		(5,999)
Issuance of shares			146,427		-		-		-		-		-		146,427
Dividends
($0.26 per share)			-		-		(16,710)		-		-		-		(16,710)
Balance at June 30, 2017		$	231,618	$	4,922	$	1,507,268	$	(6,847)	$	(1,269)	$	(8,116)	$	1,735,692
Balance at December 31, 2015		$	90,247	$	3,965	$	1,592,438	$	(62,466)	$	(3,078)	$	(65,544)	$	1,621,106
Comprehensive income			-		-		130,500		(6,251)		1,920		(4,331)		126,169
Stock options settled			780		(182)		-		-		-		-		598
Amortization of fair value of
	employee stock options		-		472		-		-		-		-		472
Repurchase of shares			(5,514)		-		(154,309)		-		-		-		(159,823)
Dividends
($0.48 per share)			-		-		(32,629)		-		-		-		(32,629)
Balance at June 30, 2016		$	85,513	$	4,255	$	1,536,000	$	(68,717)	$	(1,158)	$	(69,875)	$	1,555,893

Consolidated Statements of Cash Flows
			For the three months ended				For the six months ended
			June 30		June 30		June 30		June 30
thousands of Canadian dollars (Unaudited)				2017		2016		2017		2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) for the period			$	(111,116)	$	66,252	$	(53,075)	$	130,500
Adjustments to determine cash flows relating to operating activities:
	Amortization of net discount on securities			(137)		(182)		(223)		(317)
	Provision for credit losses			2,420		2,760		8,339		4,154
	Loss on sale of loan portfolios			5,005		-		5,005		-
	Gain on sale of mortgages or residual interest			(360)		(7,976)		(5,098)		(13,911)
	Net realized and unrealized losses on securities			71,907		-		71,910		175
	Amortization and impairment losses¹			10,526		3,827		16,745		7,473
	Amortization of fair value of employee stock options			197		195		501		472
	Deferred income taxes			2,018		(2,074)		(1,807)		(313)
Changes in operating assets and liabilities
	Loans, net of gains or losses on securitization and sales			919,162		(108,969)		381,893		214,525
	Restricted assets			(76,271)		61,637		48,778		(36,079)
	Derivative assets and liabilities			20,174		6,979		23,843		7,022
	Accrued interest receivable			2,263		1,225		1,751		2,718
	Accrued interest payable			(28,204)		(12,119)		(8,556)		5,660
	Deposits			(3,145,005)		197,320		(2,781,424)		356,261
	Line of credit facility			1,396,959		-		1,396,959		-
	Securitization liabilities			680,584		103,647		677,980		56,923
	Taxes receivable or payable and other			45,256		39,384		79,063		(7,841)
Cash flows (used in) provided by operating activities				(204,622)		351,906		(137,416)		727,422
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of shares				146,427		-		146,427		-
Repurchase of shares				(37)		(159,460)		(5,999)		(159,823)
Exercise of employee stock options				-		557		407		598
Repayment of senior debt				-		(150,000)		-		(150,000)
Dividends paid to shareholders				-		(15,834)		(16,710)		(32,629)
Cash flows provided by (used in) financing activities				146,390		(324,737)		124,125		(341,854)
CASH FLOWS FROM INVESTING ACTIVITIES
Activity in securities
	Purchases			-		(103,942)		(5,803)		(189,361)
	Proceeds from sales			491,883		-		491,883		-
	Proceeds from maturities			1,220		76,933		10,271		114,104
Purchases of capital assets				(530)		(1,095)		(586)		(1,319)
Capitalized intangible development costs				(2,549)		(5,269)		(4,886)		(10,293)
Cash flows provided by (used in) investing activities				490,024		(33,373)		490,879		(86,869)
Net increase (decrease) in cash and cash equivalents during the period				431,792		(6,204)		477,588		298,699
Cash and cash equivalents at beginning of the period				1,251,190		1,454,752		1,205,394		1,149,849
Cash and Cash Equivalents at End of the Period			$	1,682,982	$	1,448,548	$	1,682,982	$	1,448,548
Supplementary Disclosure of Cash Flow Information
Dividends received on investments			$	1,008	$	2,772	$	4,036	$	5,551
Interest received				216,122		216,513		431,766		433,897
Interest paid				248,610		111,196		322,304		187,815
Income taxes paid				6,646		16,647		26,868		44,126
¹Amortization and impairment losses include amortization on capital and intangible assets and impairment losses on intangible assets and goodwill.

Caution Regarding Forward-looking Statements

From time to time Home Capital Group Inc. makes written and verbal forward-looking statements. These are included in the Annual Report, periodic reports to shareholders, regulatory filings, press releases, Company presentations and other Company communications. Forward-looking statements are made in connection with business objectives and targets, Company strategies, operations, anticipated financial results and the outlook for the Company, its industry, and the Canadian economy. These statements regarding expected future performance are "financial outlooks" within the meaning of National Instrument 51-102. Please see the risk factors, which are set forth in detail in the Risk Management section of the 2017 Second Quarter Report, as well as the Company's other publicly filed information, which is 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 risk, reputational risk, compliance risk and capital adequacy risk along with additional risk factors that may affect future results.  Forward-looking statements can be found in the Report to the Shareholders and the Overview of the Second Quarter and Outlook section in the 2017 Second Quarter Report. Forward-looking statements are typically identified by words such as "will,"  "believe," "expect," "anticipate," "intend," "should," "estimate," "plan," "forecast," "may," and "could" or other similar expressions. 

By their very nature, these statements require the Company to make assumptions and are subject to inherent risks and uncertainty, 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.  Please also refer to the Overview of the Second Quarter and Outlook section of the 2017 Second Quarter Report for risks and uncertainties related to the Company's going concern assessment. 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 presents forward-looking statements to assist shareholders in understanding the Company's assumptions and expectations about the future that are relevant in management's setting of performance goals, strategic priorities and outlook. The Company presents its outlook to assist shareholders in understanding management's expectations on how the future will impact the financial performance of the Company. These forward-looking statements may not be appropriate for other purposes. 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 2017 and its effect on Home Capital's business are material factors the Company considers when setting its performance goals, strategic priorities and outlook. In determining expectations for economic growth, both broadly and in the financial services sector, the Company primarily considers historical and forecasted economic data provided by the Canadian government and its agencies. In determining the outlook for the remainder of 2017, management's expectations continue to assume:

• The Canadian economy is expected to be relatively stable in 2017, supported by expanded Federal Government spending.
  
  
• Generally the Company expects stable employment conditions in its established regions. Also, the Company expects inflation will generally be within the Bank of Canada's target of 1% to 3%, leading to stable credit losses and demand for the Company's lending products in its established regions.
  
  
• The Canadian economy will continue to be influenced by the economic conditions in the United States and global markets and further adjustments in commodity prices; as such, the Company is prepared for the variability that may result.
  
  
• The Company is assuming that interest rates will generally remain at the current very low rates for 2017. This is expected to continue to support relatively low mortgage interest rates for the foreseeable future.
  
  
• The Company believes that the current and expected levels of housing activity indicate a relatively stable real estate market overall. Please see Market Conditions under the Overview of the Second Quarter and Outlook section of the 2017 Second Quarter Report for more discussion on the Company's expectations for the housing market.
  
  
• The Company expects that consumer debt levels, while elevated, will remain serviceable by Canadian households.
  
  
• The Company will have access to the mortgage and deposit markets through broker networks.
   
  

Non-GAAP Measures

The Company has adopted IFRS as its accounting framework. IFRS are the generally accepted accounting principles (GAAP) for Canadian publicly accountable enterprises for years beginning on or after January 1, 2011. 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 2017 Second Quarter Report.

Regulatory Filings

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

About Home Capital

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

SOURCE Home Capital Group Inc.

Investors: Laura Lepore, Assistant Vice President, Investor Relations, [phone], [email protected]; Media: Boyd Erman, Longview Communications Inc., [phone], [email protected]; or Peter Block, Longview Communications Inc., [phone], [email protected]

Related Links

http://www.homecapital.com