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Home Capital Reports Annual and Q4 Earnings, Share Buyback and Dividend Increase
PR Newswire
  • Diluted Q4 2015 earnings per share of $1.00; adjusted diluted earnings per share of $1.02
  • Planned share buyback of up to $150 million
  • Quarterly dividend increased 9.1% or $0.02 per share, to $0.24 per common share, which would be $0.96 on an annualized basis

TORONTO, Feb. 10, 2016 /CNW/ - Home Capital Group Inc. (TSX: HCG) today reported financial results for the fourth quarter and for 2015, a year in which the company made significant progress strengthening its business in a prudent, profitable and sustainable manner, and announced a dividend increase of 9.1% and a planned $150 million share buyback.

In Q4 2015, Home Capital delivered an increased net interest margin of 2.46%, from a healthy loan portfolio with low non-performing loans and credit losses, continued progress on improving the pace of loan originations, and a strong capital position. In addition, the Company continued to execute on growth initiatives, including closing the acquisition of CFF Bank, a Schedule I bank under the Bank Act (Canada), fulfilling a strategic priority, and the expansion of its credit card business with the launch of another co-branded Visa product.

For 2015, Home Capital reported adjusted diluted earnings per share in line with 2014's record level and near-record annual adjusted net income and adjusted revenue. Total loans under administration rose to $25.06 billion, the highest in the Company's history, driven by its solid core residential business, increases in its Accelerator portfolio, the acquisition of the CFF loans portfolio and increases in commercial mortgages and other lending. In addition, the Company continued to strengthen its balance sheet, invest in technology and diversify deposit funding, important steps in creating a stronger business.

Home Capital continues to expect that it will meet its three- to five-year mid-term targets, reflecting the strength of the overall business and its diverse sources of growth.

Q4 Financial Highlights:

  • Adjusted Q4 2015 net income of $71.8 million and $288.9 million for 2015, down 0.1% compared to $71.9 million in Q4 2014 and down 0.1% compared to $289.2 million for 2015, respectively.  Adjusted Q4 2015 net income was 0.9% lower than Q3 2015.
  • Adjusted Q4 2015 diluted earnings per share (EPS) of $1.02 and $4.11 for 2015, compared to $1.02 and $4.11 earned in Q4 2014 and full year 2014, respectively.  Adjusted Q4 2015 diluted EPS was down 1.0% compared to Q3 2015.
  • Adjusted Return on common shareholders' equity was 18.0% for Q4 2015 and 18.8% for 2015.
  • Net non-performing loans as a percentage of gross loans (NPL ratio) was 0.28% at the end of Q4 2015, compared to 0.30% at the end of Q4 2014 and 0.30% at the end of Q3 2015. 
  • Net write-offs as a percentage of gross loans were 0.05% for Q4 2015, compared to 0.07% for Q4 2014 and 0.04% for Q3 2015.  Net write-offs for 2015 were 0.04% compared to 0.06% for 2014.   
  • Q4 2015 Common Equity Tier 1 ratio of 18.31% and Tier 1 and Total capital ratios of 18.30% and 20.70%, respectively.

 

Growing Our Core Business

Home Capital, through its principal subsidiary Home Trust Company, continued throughout 2015 to build on its presence as Canada's leading alternative financial institution serving an established, but underserved and growing, market niche. The Company continued to make progress on its efforts to increase originations of single-family residential mortgages, and throughout the year has experienced strong growth in its other lines of business.

Total mortgage advances in Q4 2015 were $2.15 billion, a decrease of 6.0% from $2.29 billion in Q4 2014. Home Capital reported traditional (uninsured single-family) residential mortgage originations of $1.30 billion, as compared to $1.48 billion in Q4 2014, a decrease of 12.1%.  Accelerator originations increased 46.1% in Q4 2015 to $515.9 million from $353.0 million in Q4 2014.  Originations from all other sources decreased 26.3% to $334.0 million.

Total mortgage advances were down 13.8% over Q3 2015, reflecting expected seasonality trends.

On a full-year basis, total mortgage originations from all sources in 2015 were $8.06 billion, down 8.9% from 2014, as increased commercial mortgage originations helped to offset declines in traditional and Accelerator residential mortgages.

For 2015, traditional residential originations decreased 13.5% to $5.07 billion from $5.86 billion in 2014, while Accelerator originations declined 22.0% to $1.39 billion in 2015 from $1.79 billion in 2014.

In Q2 2015, the Company disclosed that its mortgage origination volumes were impacted directly by, among other things, the Company suspending, during the period of September 2014 to March 2015, its relationship with 18 independent mortgage brokers and 2 brokerages, for a total of approximately 45 individual mortgage brokers. 

The total value of outstanding loans at December 31, 2015 that were referred by the suspended brokers was $1.55 billion.  This compares to $1.72 billion as at September 30, 2015.  The Company expects this balance to decline further as customers pay down loans.  The Company continues to actively monitor the subject mortgages and notes that there have been no unusual credit issues. 

The Company is reviewing and re-validating, where appropriate, the income documentation related to the identified group of mortgages and taking corrective action accordingly.  As of the date of this report, the Company is over 40% of the way through its review process, with plans to complete these efforts by the end of 2016.  Of the accounts reviewed, the Company has determined that approximately 90% of the mortgages reviewed to date could be eligible for renewal.

Home Capital has taken several steps to improve origination volumes in 2015 and in the initial part of 2016, including sales measures to strengthen the Company's pipeline for residential mortgage originations and to take advantage of the solid demand for its traditional mortgages within its established regions.  The Company has taken additional steps to improve origination volumes in the beginning of 2016 by enhancing the broker experience through its broker portal technology, and launching a new broker partnership program.  In addition, the Company has renewed focus on expanding its commercial lending products, seeking to expand its footprint, as appropriate opportunities arise.  The Company expects to see further progress from these efforts to improve origination volumes through 2016.

Other lending, comprising credit cards and other consumer retail loans, continues to be an important source of loan assets with attractive returns.  These assets now represent 3.7% of the total on-balance sheet loan portfolio, and generated 7.0% of the interest income from loans for the quarter.  The other lending business demonstrated strong growth in 2015, despite the payout of the waterheater loan portfolio of $234.9 million in 2014, which resulted in the absence of net interest income of approximately $12.6 million ($9.3 million, after tax or $0.13 earnings per share) that would have been otherwise generated through this portfolio in 2014.

The Company continued its expansion of its credit card co-branding initiatives in Q4 2015, with the launch of a new Visa credit card program co-branded with Giant Tiger. That is in addition to two new programs announced in the third quarter of 2015 with Union Plus Canada and Optimax.  The Visa cards are issued and managed by Home Trust.  These credit card programs leverage the brand, customer affinity and distribution channels of these corporate partners.

The balance of Oaken deposits at the end of the year exceeded $1 billion at $1.09 billion, reflecting an increase in the balance over last year of 42.2%. 

On October 1, 2015, the Company, through its subsidiary Home Trust Company, finalized the acquisition of all outstanding common shares of CFF Bank for a purchase price of $19.6 million, subject to final adjustments.  The acquisition of CFF Bank, a Schedule 1 bank under the Bank Act (Canada), supports the Company's long-term strategy to continue to develop its deposit diversification initiatives and potentially its product suite.  In addition, the Company has a mortgage and lending distribution agreement in place with certain owner-managed Canadian First Financial Centres that had a prior relationship with CFF Bank. These centres are located across Canada, helping the Company to expand its distribution networks.

Building on Operational Excellence

Home Capital continues to experience strong credit performance, with net non-performing loans as a percentage of gross loans (NPL ratio) at 0.28% at the end of Q4 2015, down from 0.30% at the end of both Q3 2015 and Q4 2014. These results reflect the high credit quality of the Company's loan portfolio and are supported by the Company's continued investments in its risk oversight functions.

Home Capital also continued through the end of 2015 to make disciplined and measured investments in other areas related to the longer-term growth of the business. These investments include, among other things, ongoing investments in IT related to moving toward operating as a digital enterprise, as well as continuing to update the Company's loans-origination platform, which is designed for more efficient processing of loan applications. 

The integration of CFF Bank with the Company's own operations is proceeding as expected. All retained former employees of CFF Bank have been transitioned to Home Trust. The Company is beginning the initial stages of decommissioning redundant systems to realize planned cost savings and to facilitate the efficient growth of the CFF business. The Company incurred acquisition and integration expenses in the quarter related to CFF Bank in the amount of $4.2 million.  These amounts have been excluded in the calculation of adjusted metrics.

While most of the increase in expenses incurred by the Company in 2015 were associated with ongoing efforts to build on Home Capital's operational excellence and dedication to providing service to clients and business partners, the Company has incurred additional expenses of approximately $2.9 million in 2015 related to its efforts to realign some of its business partnerships following the suspension of the small number of brokers.

Strong and Conservative Financial Position

Home Capital continued to focus on maintaining its strong and conservative financial position while delivering value to shareholders in Q4 2015 and the full year 2015. Home Capital delivered an adjusted return on average shareholders' equity of 18.0% and 18.8%, respectively.

Subsequent to the end of the quarter, and in light of the Company's performance, profitability and strong financial position, the Board of Directors approved a quarterly dividend of $0.24 per common share, payable on March 1, 2016 to shareholders of record at the close of business on February 23, 2016.  The dividend increase marks Home Capital's 18th increase to its common share dividend in the last 10 years. 

In addition, Home Capital Group's Board of Directors has authorized a share repurchase of up to $150 million, which is anticipated to take place through a Substantial Issuer Bid by way of an issuer bid circular that would be provided to the shareholders of Home Capital.  Home Capital has engaged RBC Capital Markets as its financial advisor in connection with the proposed Substantial Issuer Bid.  The terms and conditions of the bid remain to be determined, and are subject to approval by the Board of Directors.  The Company will provide additional details regarding the share repurchase in due course.

In summary, the Company has maintained its solid fundamentals, and has seen improvements in originations through the end of 2015. Home Capital's focus remains on providing the best service and support to our customers and valued business partners, generating future growth that is sustainable and prudent, and making the investments in our business that help us to achieve those goals.

Looking ahead, the Board of Directors and management expect that Home Capital will continue generating solid shareholder returns for 2016 and beyond.

(signed)






(signed)       








GERALD M. SOLOWAY






KEVIN P.D. SMITH

Chief Executive Officer






Chair of the Board

February 10, 2016







 

The Company's 2015 Annual and Fourth Quarter Consolidated Financial Report, including Management's Discussion and Analysis, for each of the three- and twelve-month periods ended December 31, 2015 is available at www.homecapital.com and on the Canadian Securities Administrators' website at www.sedar.com.

Conference Call and Webcast

Fourth Quarter Results Conference Call

The conference call will take place on Thursday, February 11, 2016, 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, February 11, 2016 and midnight Thursday, February 18, 2016 by calling 416-849-0833 or 1-855-859-2056 (enter passcode 30647595). 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.

Annual Meeting Notice

The Annual Meeting of Shareholders of Home Capital Group Inc. will be held at One King West, Grand Banking Hall, Toronto, Ontario, M5H 1A1, on Wednesday, May 11, 2016 at 11:00 a.m. local time. Shareholders and guests are invited to join Directors and Management for lunch and refreshments following the Annual Meeting. All shareholders are encouraged to attend.

Financial Highlights












For the three months ended

For the year ended


December 31

September 30

December 31

December 31

December 31

(000s, except Percentage, Multiples, and Per Share Amounts)


2015


2015


2014


2015


2014

OPERATING RESULTS











Net Income

$

70,239

$

72,443

$

95,936

$

287,285

$

313,172

Adjusted Net Income1


71,811


72,443


71,917


288,857


289,153

Net Interest Income


126,658


121,698


116,416


481,090


459,529

Total Adjusted Revenue1


246,406


247,194


251,917


993,711


1,010,311

Diluted Earnings per Share

$

1.00

$

1.03

$

1.36

$

4.09

$

4.45

Adjusted Diluted Earnings per Share1

$

1.02

$

1.03

$

1.02

$

4.11

$

4.11

Return on Shareholders' Equity


17.6%


18.7%


27.2%


18.7%


23.8%

Adjusted Return on Shareholders' Equity1


18.0%


18.7%


20.4%


18.8%


22.0%

Return on Average Assets


1.4%


1.4%


1.9%


1.4%


1.6%

Net Interest Margin (TEB)2


2.46%


2.38%


2.27%


2.36%


2.25%

Provision as a Percentage of Gross Uninsured Loans (annualized)


0.04%


0.08%


0.09%


0.06%


0.10%

Provision as a Percentage of Gross Loans (annualized)


0.03%


0.06%


0.07%


0.05%


0.07%

Efficiency Ratio (TEB)2


36.0%


30.8%


22.9%


32.4%


27.2%

Adjusted Efficiency Ratio (TEB)1,2


33.7%


30.8%


28.2%


31.8%


28.8%


















As at






December 31

September 30

December 31







2015


2015


2014





BALANCE SHEET HIGHLIGHTS











Total Assets

$

20,512,019

$

20,314,220

$

20,082,744





Total Assets Under Administration3


27,301,433


25,404,219


24,281,366





Total Loans4


18,268,708


18,336,736


18,364,910





Total Loans Under Administration3,4


25,058,122


23,426,735


22,563,532





Liquid Assets


2,095,145


1,477,493


1,058,297





Deposits


15,665,958


14,949,842


13,939,971





Shareholders' Equity


1,621,106


1,569,230


1,448,633





FINANCIAL STRENGTH











Capital Measures5











Risk-Weighted Assets

$

7,985,498

$

7,797,987

$

7,186,132





Common Equity Tier 1 Capital Ratio


18.31%


18.06%


18.30%





Tier 1 Capital Ratio


18.30%


18.06%


18.30%





Total Capital Ratio


20.70%


20.51%


20.94%





Leverage Ratio6


7.36%


7.17%


N/A





Credit Quality











Net Non-Performing Loans as a Percentage of Gross Loans


0.28%


0.30%


0.30%





Allowance as a Percentage of Gross Non-Performing Loans


74.0%


69.4%


64.4%





Share Information











Book Value per Common Share

$

23.17

$

22.37

$

20.67





Common Share Price – Close

$

26.92

$

32.03

$

47.99





Dividend paid during the period ended

$

0.22

$

0.22

$

0.20





Market Capitalization

$

1,883,808

$

2,247,225

$

3,363,907





Number of Common Shares Outstanding


69,978


70,160


70,096





1 See definition of Adjusted Net Income, Total Adjusted Revenue, Adjusted Diluted Earnings per Share, Adjusted Return on Shareholders' Equity and Adjusted Efficiency Ratio under Non-GAAP Measures in the Company's 2015 Annual and Fourth Quarter consolidated financial report and the Reconciliation of Net Income to Adjusted Net Income in the following table.

2 See definition of Taxable Equivalent Basis (TEB) under Non-GAAP Measures in the Company's 2015 Annual and Fourth Quarter consolidated financial report.

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

4 Total loans include loans held for sale.

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

6 Effective Q1 2015, the Assets to Regulatory Capital Multiple has been replaced with the Basel III Leverage ratio.  See definition of the leverage ratio under Non-GAAP Measures in the Company's 2015 Annual and Fourth Quarter consolidated financial report.

 

Reconciliation of Net Income to Adjusted Net Income














Quarter

Year

(000s, except % and per share amounts)

Q4

Q3

%

Q4

%



%



2015

2015

Change

2014

Change

2015

2014

Change

Net income under GAAP

$

70,239

$

72,443

(3.0)%

$

95,936

(26.8)%

$

287,285

$

313,172

(8.3)%

Adjustment for acquisition  and integration costs, net of gain recognized on acquisition of CFF Bank (net of tax)


1,572


-

-


-

-


1,572


-

-

Adjustment for prepayment income on portfolio sale (net of tax)


-


-

-


(24,019)

(100.0)%


-


(24,019)

(100.0)%

Adjusted Net Income1

$

71,811

$

72,443

(0.9)%

$

71,917

(0.1)%

$

288,857

$

289,153

(0.1)%

Adjusted Basic Earnings per Share1

$

1.02

$

1.03

(1.0)%

$

1.03

(1.0)%

$

4.12

$

4.14

(0.5)%

Adjusted Diluted Earnings per Share1

$

1.02

$

1.03

(1.0)%

$

1.02

-

$

4.11

$

4.11

-

1 Adjusted Net Income and Adjusted Earnings per share are defined in the Non-GAAP section of the Company's 2015 Annual and Fourth Quarter Consolidated Financial Report.

 

The Company's results were affected by the following items of note that aggregated to a negative impact of $1.6 million and $0.02 diluted earnings per share in both Q4 2015 and 2015:

  • $0.7 million in acquisition costs, $3.5 million in integration costs, and $2.1 million in relation to a bargain purchase gain for a total of $2.1 million related to the acquisition of CFF Bank in 2015 ($1.6 million, after tax and $0.02 diluted earnings per share).

The Company's results were affected by the following items of note in Q4 2014 and the year ended 2014:

  • $32.7 million prepayment income in Q4 2014 ($24.0 million, after tax and $0.34 diluted earnings per share) related to the prepayment of $234.9 million of water heater loans.

2015 Performance Summary

Below is a summary of the Company's performance for 2015 against the mid-term targets.  The Company will continue to focus on its medium-term objectives to guide the Company's decision-making and describe its accomplishments.

  • Diluted earnings per share (adjusted) were $4.11 for 2015.  The Company's goal is to achieve, average annualized growth in diluted earnings (adjusted) per share of 8% to 13% in the three- to five-year medium term.
  • Return on shareholders' equity (adjusted) was 18.8% for 2015, with the goal to achieve on average annualized return on equity of greater than 16% in the three- to five-year medium term.  This objective was revised during the fourth quarter of 2015.
  • Common Equity Tier 1 and Tier 1 capital ratios of 18.31% and 18.30%, respectively, and Total capital ratio of 20.70% continue to be well in excess of regulatory minimums.
  • Dividend payout ratio of 22.0%, with a targeted payout on average of 19% to 26% of earnings to shareholders in the three- to five-year medium term.

On annual basis, the Company will update its three year financial plan and evaluate targets as part of its year-end process or as required.

Consolidated Balance Sheets












As at




 December 31


September 30


December 31

thousands of Canadian dollars


2015


2015


2014

ASSETS







Cash and Cash Equivalents

$

1,149,849

$

612,218

$

360,746

Available for Sale Securities


453,230


413,381


582,819

Loans Held for Sale


135,043


162,432


102,094

Loans







Securitized mortgages


2,674,475


2,900,586


3,945,654

Non-securitized mortgages and loans


15,459,190


15,273,718


14,317,162



18,133,665


18,174,304


18,262,816

Collective allowance for credit losses


(36,249)


(35,900)


(34,100)



18,097,416


18,138,404


18,228,716

Other







Restricted assets


195,921


494,133


421,083

Derivative assets


64,796


77,875


38,534

Other assets


287,417


292,331


235,616

Goodwill and intangible assets


128,347


123,446


113,136




676,481


987,785


808,369


$

20,512,019

$

20,314,220

$

20,082,744

LIABILITIES AND SHAREHOLDERS' EQUITY







Liabilities







Deposits







Deposits payable on demand

$

1,986,136

$

1,562,081

$

1,064,152

Deposits payable on a fixed date


13,679,822


13,387,761


12,875,819



15,665,958


14,949,842


13,939,971

Senior Debt


151,480


153,652


152,026

Securitization Liabilities







Mortgage-backed security liabilities


531,326


327,837


471,551

Canada Mortgage Bond liabilities


2,249,230


2,990,281


3,831,912



2,780,556


3,318,118


4,303,463

Other







Derivative liabilities


5,447


2,992


2,266

Other liabilities


264,941


283,421


199,831

Deferred tax liabilities


22,531


37,035


36,554



292,919


323,378


238,651




18,890,913


18,744,990


18,634,111

Shareholders' Equity







Capital stock


90,247


89,683


84,687

Contributed surplus


3,965


3,775


3,989

Retained earnings


1,592,438


1,544,620


1,378,562

Accumulated other comprehensive loss


(65,544)


(68,848)


(18,605)



1,621,106


1,569,230


1,448,633


$

20,512,019

$

20,314,220

$

20,082,744




























Consolidated Statements of Income













For the three months ended


For the year ended



 December 31


September 30


 December 31


 December 31


 December 31

thousands of Canadian dollars, except per share amounts


2015


2015


2014


2015


2014

Net Interest Income Non-Securitized Assets











Interest from loans

$

197,052

$

195,051

$

187,272

$

769,562

$

717,798

Dividends from securities


2,608


2,597


2,842


10,620


11,426

Other interest


1,694


1,846


2,482


7,951


13,912



201,354


199,494


192,596


788,133


743,136

Interest on deposits and other


77,762


80,771


81,326


318,597


311,494

Interest on senior debt


1,824


1,512


1,660


6,396


6,392

Net interest income non-securitized assets


121,768


117,211


109,610


463,140


425,250












Net Interest Income Securitized Loans and Assets











Interest income from securitized loans and assets


22,853


24,315


35,559


103,841


166,491

Interest expense on securitization liabilities


17,963


19,828


28,753


85,891


132,212

Net interest income securitized loans and assets


4,890


4,487


6,806


17,950


34,279












Total Net Interest Income


126,658


121,698


116,416


481,090


459,529

Provision for credit losses


1,415


2,849


3,186


8,933


13,134



125,243


118,849


113,230


472,157


446,395

Non-Interest Income











Fees and other income


19,927


20,096


18,272


82,632


71,241

Securitization income


5,760


5,788


4,956


26,208


26,845

Prepayment income on portfolio sale


-


-


32,675


-


32,675

Gain on acquisition of CFF Bank


2,056


-


-


2,056


-

Net realized and unrealized (losses) gains on securities


(66)


(542)


965


836


3,425

Net realized and unrealized loss on derivatives


(3,422)


(1,957)


(431)


(7,939)


(827)



24,255


23,385


56,437


103,793


133,359



149,498


142,234


169,667


575,950


579,754












Non-Interest Expenses











Salaries and benefits


25,874


19,382


20,156


88,873


80,769

Premises


2,731


3,149


3,213


12,274


11,866

Other operating expenses


26,076


22,424


16,520


89,526


69,617



54,681


44,955


39,889


190,673


162,252












Income Before Income Taxes


94,817


97,279


129,778


385,277


417,502

Income taxes












Current


25,548


23,189


32,539


98,481


102,201


Deferred


(970)


1,647


1,303


(489)


2,129



24,578


24,836


33,842


97,992


104,330

NET INCOME

$

70,239

$

72,443

$

95,936

$

287,285

$

313,172












NET INCOME PER COMMON SHARE











Basic

$

1.00

$

1.03

$

1.37

$

4.09

$

4.48

Diluted

$

1.00

$

1.03

$

1.36

$

4.09

$

4.45

AVERAGE NUMBER OF COMMON SHARES OUTSTANDING











Basic


70,157


70,218


70,101


70,170


69,857

Diluted


70,237


70,380


70,462


70,323


70,432












Total number of outstanding common shares


69,978


70,160


70,096


69,978


70,096

Book value per common share

$

23.17

$

22.37

$

20.67

$

23.17

$

20.67










Consolidated Statements of Comprehensive Income







For the three months ended


For the year ended


 December 31

September 30

 December 31

 December 31

 December 31

thousands of Canadian dollars

2015

2015

2014

2015

2014












NET INCOME

$

70,239

$

72,443

$

95,936

$

287,285

$

313,172












OTHER COMPREHENSIVE INCOME (LOSS)






















Available for Sale Securities and Retained Interests











Net unrealized gains (losses)


6,171


(29,730)


(3,862)


(61,991)


2,854

Net losses (gains) reclassified to net income


66


460


(965)


(917)


(3,425)



6,237


(29,270)


(4,827)


(62,908)


(571)

Income tax expense (recovery)


1,654


(7,760)


(1,279)


(16,684)


(152)



4,583


(21,510)


(3,548)


(46,224)


(419)












Cash Flow Hedges











Net unrealized (losses) gains


(2,110)


130


(608)


(2,449)


(1,061)

Net losses reclassified to net income


369


369


365


1,474


1,461



(1,741)


499


(243)


(975)


400

Income tax (recovery) expense


(462)


133


(64)


(260)


107



(1,279)


366


(179)


(715)


293












Total other comprehensive income (loss)


3,304


(21,144)


(3,727)


(46,939)


(126)












COMPREHENSIVE INCOME

$

73,543

$

51,299

$

92,209

$

240,346

$

313,046




Consolidated Statements of Changes in Shareholders' Equity




















Net Unrealized








Losses

Net Unrealized

Total






on Securities and

Losses on

Accumulated






Retained

Cash Flow

Other

Total

thousands of Canadian dollars,

Capital

Contributed

Retained

Interests Available

Hedges,

Comprehensive

Shareholders'

except per share amounts

Stock

Surplus

Earnings

for Sale, After Tax

After Tax

Loss

Equity
















Balance at December 31, 2014

$

84,687

$

3,989

$

1,378,562

$

(16,242)

$

(2,363)

$

(18,605)

$

1,448,633

Comprehensive income


-


-


287,285


(46,224)


(715)


(46,939)


240,346

Stock options settled


6,002


(1,605)


-


-


-


-


4,397

Amortization of fair value of















employee stock options


-


1,581


-


-


-


-


1,581

Repurchase of shares


(442)


-


(10,270)


-


-


-


(10,712)

Dividends















($0.88 per share)


-


-


(63,139)


-


-


-


(63,139)

Balance at December 31, 2015

$

90,247

$

3,965

$

1,592,438

$

(62,466)

$

(3,078)

$

(65,544)

$

1,621,106































Balance at December 31, 2013

$

70,233

$

5,984

$

1,119,959

$

(15,823)

$

(2,656)

$

(18,479)

$

1,177,697

Comprehensive income


-


-


313,172


(419)


293


(126)


313,046

Stock options settled


14,488


(3,895)


-


-


-


-


10,593

Amortization of fair value of















employee stock options


-


1,900


-


-


-


-


1,900

Repurchase of shares


(34)


-


(1,356)


-


-


-


(1,390)

Dividends















($0.70 per share)


-


-


(53,213)


-


-


-


(53,213)

Balance at December 31, 2014

$

84,687

$

3,989

$

1,378,562

$

(16,242)

$

(2,363)

$

(18,605)

$

1,448,633




Consolidated Statements of Cash Flows


For the three months ended

For the year ended



December 31


December 31


December 31


 December 31

thousands of Canadian dollars


2015


2014


2015


2014

CASH FLOWS FROM OPERATING ACTIVITIES









Net income for the year

$

70,239

$

95,936

$

287,285

$

313,172

Adjustments to determine cash flows relating to operating activities:










Amortization of net (discount) premium on securities


(221)


(514)


(169)


1,001


Provision for credit losses


1,415


3,186


8,933


13,134


Prepayment income on portfolio sale


-


(32,675)


-


(32,675)


Gain on acquisition of CFF Bank


(2,056)


-


(2,056)


-


Gain on sale of mortgages or residual interest


(4,728)


(4,362)


(21,412)


(23,712)


Net realized and unrealized gains on securities


66


(965)


(836)


(3,425)


Amortization of capital and intangible assets


2,918


868


12,922


10,387


Amortization of fair value of employee stock options


418


376


1,581


1,900


Deferred income taxes


(970)


1,303


(489)


2,129

Changes in operating assets and liabilities










Loans, net of securitization and sales


165,761


158,268


205,412


(299,376)


Restricted assets


302,883


245,557


229,833


227,200


Derivative assets and liabilities


13,844


(5,275)


(24,075)


(9,791)


Accrued interest receivable


495


(505)


1,319


(1,951)


Accrued interest payable


(10,146)


(23,535)


4,399


60


Deposits


514,361


(82,161)


1,524,232


1,174,017


Securitization liabilities


(557,308)


(422,698)


(1,542,653)


(1,469,601)


Taxes receivable or payable and other


(11,072)


(43,069)


20,358


(41,867)

Cash flows provided by (used in) operating activities


485,899


(110,265)


704,584


(139,398)

CASH FLOWS FROM FINANCING ACTIVITIES









Repurchase of shares


(7,334)


(618)


(10,712)


(1,390)

Exercise of employee stock options


638


101


4,397


10,593

Dividends paid to shareholders


(15,429)


(14,020)


(61,763)


(48,922)

Cash flows used in financing activities


(22,125)


(14,537)


(68,078)


(39,719)

CASH FLOWS FROM INVESTING ACTIVITIES









Activity in securities










Purchases


(35,020)


(42,482)


(35,020)


(542,558)


Proceeds from sales


-


32,617


76,924


206,020


Proceeds from maturities


1,618


20,135


25,350


178,772

Acquisition of CFF Bank, net of cash acquired


115,892


-


115,892


-

Purchases of capital assets


(1,628)


(1,063)


(5,302)


(3,080)

Capitalized intangible development costs


(7,006)


(11,760)


(25,247)


(32,463)

Cash flows provided by (used in) investing activities


73,856


(2,553)


152,597


(193,309)

Net increase (decrease) in cash and cash equivalents during the year


537,630


(127,355)


789,103


(372,426)

Cash and cash equivalents at beginning of the period


612,219


488,101


360,746


733,172

Cash and Cash Equivalents at End of the Period

$

1,149,849

$

360,746

$

1,149,849

$

360,746

Supplementary Disclosure of Cash Flow Information









Dividends received on investments

$

4,342

$

2,607

$

11,656

$

9,750

Interest received


220,787


224,528


881,749


895,851

Interest paid


109,628


137,208


406,485


450,038

Income taxes paid


26,374


20,821


128,763


81,320



















Net Interest Margin


For the three months ended

For the year ended


December 31

September 30

December 31

December 31

December 31


2015

2015

2014

2015

2014

Net interest margin non-securitized interest earning assets (non-TEB)

2.87%

2.80%

2.77%

2.80%

2.80%

Net interest margin non-securitized interest earning assets (TEB)

2.89%

2.83%

2.79%

2.83%

2.83%

Net interest margin securitized assets

0.60%

0.52%

0.60%

0.49%

0.67%

Total net interest margin (non-TEB)

2.45%

2.36%

2.25%

2.34%

2.23%

Total net interest margin (TEB)

2.46%

2.38%

2.27%

2.36%

2.25%

Spread of non-securitized loans over deposits and other

2.97%

2.93%

2.83%

2.91%

2.93%

 

Net Interest Income by Product and Average Rate












For the three months ended


December 31, 2015

September 30, 2015

December 31, 2014

(000s, except %)


Income/

Average


Income/

Average


Income/

Average



Expense

Rate 1


Expense

Rate 1


Expense

Rate 1

Interest-bearing assets










Cash resources and securities

$

4,302

1.39%

$

4,443

1.33%

$

5,324

1.80%

Traditional single-family residential mortgages


145,867

4.95%


148,945

5.02%


144,496

4.98%

Accelerator single-family residential mortgages


8,651

2.63%


6,879

2.47%


7,518

2.90%

Residential commercial mortgages 2


5,036

3.97%


4,121

3.85%


3,959

4.79%

Non-residential commercial mortgages


22,205

5.95%


21,067

6.09%


16,566

6.16%

Credit card loans and lines of credit


8,388

9.05%


7,823

9.14%


7,552

9.21%

Other consumer retail loans


6,905

9.81%


6,216

9.96%


7,181

10.07%

Total non-securitized loans


197,052

5.00%


195,051

5.07%


187,272

5.11%

Taxable equivalent adjustment


941

-


937

-


1,024

-

Total on non-securitized interest earning assets


202,295

4.76%


200,431

4.79%


193,620

4.89%

Securitized single-family residential mortgages


13,549

2.74%


14,524

2.85%


22,875

3.12%

Securitized multi-unit residential mortgages


8,580

4.28%


8,879

4.29%


10,969

4.09%

Assets pledged as collateral for securitization


724

0.63%


912

0.62%


1,715

1.22%

Total securitized residential mortgages


22,853

2.82%


24,315

2.81%


35,559

3.11%

Total interest-bearing assets

$

225,148

4.35%

$

224,746

4.36%

$

229,179

4.42%

Interest-bearing liabilities










Deposits and other

$

77,762

2.03%

$

80,771

2.14%

$

81,326

2.28%

Senior debt


1,824

4.78%


1,512

3.96%


1,660

4.55%

Securitization liabilities


17,963

2.20%


19,828

2.26%


28,753

2.48%

Total interest-bearing liabilities

$

97,549

1.89%

$

102,111

1.98%

$

111,739

2.15%

Net Interest Income (TEB)

$

127,599


$

122,635


$

117,440


Tax Equivalent Adjustment


(941)



(937)



(1,024)


Net Interest Income per Financial Statements

$

126,658


$

121,698


$

116,416








2015



2014

(000s, except %)





Income/

Average


Income/

Average






Expense

Rate 1


Expense

Rate 1

Interest-bearing assets










Cash resources and securities




$

18,571

1.44%

$

25,338

1.81%

Traditional single-family residential mortgages





588,854

4.99%


552,112

5.10%

Accelerator single-family residential mortgages





28,777

2.58%


26,746

2.80%

Residential commercial mortgages 2





17,053

4.16%


14,355

4.68%

Non-residential commercial mortgages





80,032

6.06%


64,852

6.27%

Credit card loans and lines of credit





31,427

9.06%


28,529

9.18%

Other consumer retail loans





23,419

9.88%


31,204

9.21%

Total non-securitized loans





769,562

5.05%


717,798

5.21%

Taxable equivalent adjustment





3,830

-


4,117

-

Total on non-securitized interest earning assets





791,963

4.79%


747,253

4.93%

Securitized single-family residential mortgages





62,891

2.79%


105,393

3.21%

Securitized multi-unit residential mortgages





36,625

4.23%


54,634

4.23%

Assets pledged as collateral for securitization





4,325

0.84%


6,464

1.18%

Total securitized residential mortgages





103,841

2.86%


166,491

3.25%

Total interest-bearing assets




$

895,804

4.35%

$

913,744

4.43%

Interest-bearing liabilities










Deposits and other




$

318,597

2.14%

$

311,494

2.28%

Senior debt





6,396

4.18%


6,392

4.35%

Securitization liabilities





85,891

2.32%


132,212

2.55%

Total interest-bearing liabilities




$

410,884

1.99%

$

450,098

2.18%

Net Interest Income (TEB)




$

484,920


$

463,646


Tax Equivalent Adjustment





(3,830)



(4,117)


Net Interest Income per Financial Statements




$

481,090


$

459,529


1 The average is calculated with reference to opening and closing monthly asset and liability balances.

Residential commercial mortgages include non-securitized multi-unit residential mortgages and commercial mortgages secured by residential property types.

 

Mortgage Advances
















For the three months ended


For the year ended




December 31


September 30


December 31


December 31


December 31

(000s)


2015


2015


2014


2015


2014

Single-family residential mortgages












Traditional

$

1,304,268

$

1,514,429

$

1,484,475

$

5,074,723

$

5,864,562


Accelerator


515,891


416,273


353,002


1,391,740


1,785,032

Residential commercial mortgages












Multi-unit uninsured residential mortgages


23,503


31,031


38,519


105,098


93,476


Multi-unit insured residential mortgages


101,683


298,438


261,016


688,743


624,879


Other1


8,535


18,460


14,296


43,957


45,615

Non-residential commercial mortgages












Stores and apartments


26,462


32,728


24,144


109,115


118,272


Commercial


173,825


186,598


114,999


646,033


319,459

Total mortgage advances

$

2,154,167

$

2,497,957

$

2,290,451

$

8,059,409

$

8,851,295

1 Other residential commercial mortgages include mortgages such as builders' inventory.

 











Provision for Credit Losses  and Net Write-offs as a Percentage of Gross Loans on an Annualized Basis






For the three months ended

(000s, except %)

 December 31, 2015

 September 30, 2015

 December 31, 2014




% of Gross



% of Gross



% of Gross


Amount

Loans 1

Amount

Loans1

Amount

Loans1

Provision2










Single-family residential mortgages

$

986

0.03%

$

1,805

0.06%

$

2,203

0.07%

Residential commercial mortgages


-

-


-

-


24

0.04%

Non-residential commercial mortgages


(40)

(0.01)%


237

0.06%


81

0.03%

Credit card loans and lines of credit


343

0.37%


163

0.19%


128

0.15%

Other consumer retail loans


101

0.14%


44

0.07%


90

0.19%

Securitized single-family residential mortgages


-

-


-

-


-

-

Securitized multi-unit residential mortgages


-

-


-

-


-

-

Total individual provision


1,390

0.03%


2,249

0.05%


2,586

0.06%

Total collective provision


25

0.00%


600

0.01%


600

0.01%

Total provision

$

1,415

0.03%

$

2,849

0.06%

$

3,186

0.07%

Net Write-Offs2










Single-family residential mortgages

$

1,415

0.04%

$

1,128

0.03%

$

3,054

0.10%

Residential commercial mortgages


-

-


-

-


24

0.04%

Non-residential commercial mortgages


127

0.03%


303

0.08%


56

0.02%

Credit card loans and lines of credit


502

0.54%


163

0.19%


114

0.14%

Other consumer retail loans


94

0.13%


29

0.04%


48

0.10%

Securitized single-family residential mortgages


-

-


-

-


-

-

Securitized multi-unit residential mortgages


-

-


-

-


-

-

Net write-offs

$

2,138

0.05%

$

1,623

0.04%

$

3,296

0.07%











(000s, except %)


2015

2014







% of Gross



% of Gross





Amount

Loans1

Amount

Loans1

Provision2










Single-family residential mortgages




$

5,415

0.04%

$

9,507

0.08%

Residential commercial mortgages





4

0.00%


(1)

(0.00)%

Non-residential commercial mortgages





720

0.05%


270

0.02%

Credit card loans and lines of credit





798

0.22%


571

0.17%

Other consumer retail loans





171

0.06%


187

0.10%

Securitized single-family residential mortgages





-

-


-

-

Securitized multi-unit residential mortgages





-

-


-

-

Total individual provision





7,108

0.04%


10,534

0.06%

Total collective provision





1,825

0.01%


2,600

0.01%

Total provision




$

8,933

0.05%

$

13,134

0.07%

Net Write-Offs2










Single-family residential mortgages




$

5,292

0.04%

$

9,099

0.07%

Residential commercial mortgages





4

0.00%


24

0.01%

Non-residential commercial mortgages





435

0.03%


202

0.02%

Credit card loans and lines of credit





969

0.26%


692

0.21%

Other consumer retail loans





168

0.06%


272

0.15%

Securitized single-family residential mortgages





-

-


-

-

Securitized multi-unit residential mortgages





-

-


-

-

Net write-offs




$

6,868

0.04%

$

10,289

0.06%

1 Gross loans used in the calculation of total Company ratio includes securitized on-balance sheet loans.

2 There were no specific provisions, allowances or net write-offs on securitized mortgages.

 

Loans by Geographic Region and Type (net of individual allowances for credit losses)














(000s, except %)




As at December 31, 2015


British








Columbia

Alberta

Ontario

Quebec


Other


Total

Securitized single-family residential mortgages

$

125,239

$

114,807

$

1,559,536

$

81,262

$

67,266

$

1,948,110

Securitized multi-unit residential mortgages


94,676


46,848


372,141


51,309


161,391


726,365

Total securitized mortgages


219,915


161,655


1,931,677


132,571


228,657


2,674,475

Single-family residential mortgages


706,555


525,984


11,060,894


419,075


266,910


12,979,418

Residential commercial mortgages1


21,128


14,215


216,407


27,265


42,427


321,442

Non-residential commercial mortgages


25,157


59,861


1,358,295


14,505


32,830


1,490,648

Credit card loans and lines of credit


9,598


22,709


330,188


1,489


6,841


370,825

Other consumer retail loans


783


11,090


284,231


-


753


296,857

Total non-securitized mortgages and loans2


763,221


633,859


13,250,015


462,334


349,761


15,459,190


$

983,136

$

795,514

$

15,181,692

$

594,905

$

578,418

$

18,133,665

As a % of portfolio


5.4%


4.4%


83.7%


3.3%


3.2%


100.0%














(000s, except %)










As at September 30, 2015



British













Columbia


Alberta


Ontario


Quebec


Other


Total

Securitized single-family residential mortgages

$

136,396

$

108,656

$

1,676,375

$

90,839

$

60,867

$

2,073,133

Securitized multi-unit residential mortgages


103,608


61,846


396,139


71,204


194,656


827,453

Total securitized mortgages


240,004


170,502


2,072,514


162,043


255,523


2,900,586

Single-family residential mortgages


694,241


485,077


11,052,127


415,887


254,769


12,902,101

Residential commercial mortgages1


24,530


24,242


198,956


23,989


24,174


295,891

Non-residential commercial mortgages


26,060


62,397


1,327,687


12,860


36,194


1,465,198

Credit card loans and lines of credit


5,280


15,020


316,965


1,532


3,988


342,785

Other consumer retail loans


754


6,716


259,570


-


703


267,743

Total non-securitized mortgages and loans2


750,865


593,452


13,155,305


454,268


319,828


15,273,718


$

990,869

$

763,954

$

15,227,819

$

616,311

$

575,351

$

18,174,304

As a % of portfolio


5.4%


4.2%


83.8%


3.4%


3.2%


100.0%














(000s, except %)










As at December 31, 2014



British













Columbia


Alberta


Ontario


Quebec


Other


Total

Securitized single-family residential mortgages

$

218,927

$

182,797

$

2,376,966

$

127,999

$

83,430

$

2,990,119

Securitized multi-unit residential mortgages


133,838


72,615


480,693


79,128


189,261


955,535

Total securitized mortgages


352,765


255,412


2,857,659


207,127


272,691


3,945,654

Single-family residential mortgages


661,661


445,390


10,737,812


392,998


212,667


12,450,528

Residential commercial mortgages1


7,972


36,869


147,697


22,645


28,135


243,318

Non-residential commercial mortgages


9,956


45,263


1,001,141


10,422


40,096


1,106,878

Credit card loans and lines of credit


5,829


16,505


302,699


1,477


3,817


330,327

Other consumer retail loans


826


2,204


182,576


-


505


186,111

Total non-securitized mortgages and loans2


686,244


546,231


12,371,925


427,542


285,220


14,317,162


$

1,039,009

$

801,643

$

15,229,584

$

634,669

$

557,911

$

18,262,816

As a % of portfolio


5.7%


4.4%


83.4%


3.5%


3.0%


100.0%

1 Residential commercial mortgages include non-securitized multi-unit residential mortgages and commercial mortgages secured by residential property types.

2 Loans exclude mortgages held for sale.

 


Impaired Loans and Individual Allowances for Credit Losses




















(000s)









As at December 31, 2015



Single-Family


Residential


Non-Residential


Credit Card


Other





Residential


Commercial


Commercial


Loans and


Consumer





 Mortgages


 Mortgages


 Mortgages


 Lines of Credit


Retail Loans


Total

Gross amount of impaired loans

$

49,285

$

-

$

2,558

$

1,518

$

161

$

53,522

Individual allowances on principal


(1,652)


-


(340)


(329)


(161)


(2,482)

Net amount of impaired loans

$

47,633

$

-

$

2,218

$

1,189

$

-

$

51,040

Net impaired loans as a % of gross loans


0.37%


-


0.15%


0.32%


-


0.28%














(000s)









As at September 30, 2015



Single-Family


Residential


Non-Residential


Credit Card


Other





Residential


Commercial


Commercial


Loans and


Consumer





 Mortgages


 Mortgages


 Mortgages


Lines of Credit


Retail Loans


Total

Gross amount of impaired loans

$

50,873

$

-

$

4,594

$

1,450

$

155

$

57,072

Individual allowances on principal


(1,952)


-


(405)


(68)


(155)


(2,580)

Net amount of impaired loans

$

48,921

$

-

$

4,189

$

1,382

$

-

$

54,492

Net impaired loans as a % of gross loans


0.38%


-


0.29%


0.40%


-


0.30%














(000s)









As at December 31, 2014



Single-Family


Residential


Non-Residential


Credit Card


Other





Residential


Commercial


Commercial


Loans and


Consumer





 Mortgages


 Mortgages


 Mortgages


Lines of Credit


Retail Loans


Total

Gross amount of impaired loans

$

52,551

$

54

$

2,516

$

1,938

$

160

$

57,219

Individual allowances on principal


(1,808)


-


(55)


(80)


(160)


(2,103)

Net amount of impaired loans

$

50,743

$

54

$

2,461

$

1,858

$

-

$

55,116

Net impaired loans as a % of gross loans     


0.41%


0.02%


0.22%


0.56%


-


0.30%



Allowance for Credit Losses





(000s)

For the three months ended December 31, 2015



Single-family


Residential


Non-residential


Credit Card 


Other





Residential


Commercial


Commercial


Loans and


Consumer





Mortgages


Mortgages


Mortgages


Lines of Credit


Retail Loans


Total

Individual allowances













Allowance on loan principal













Balance at the beginning of the period

$

1,952

$

-

$

405

$

68

$

155

$

2,580

Allowance assumed on purchase of CFF Bank


-


-


-


420


-


420

Provision for credit losses


1,115


-


62


343


100


1,620

Write-offs


(1,531)


-


(167)


(519)


(123)


(2,340)

Recoveries


116


-


40


17


29


202



1,652


-


340


329


161


2,482

Allowance on accrued interest receivable













Balance at the beginning of the period


968


-


159


-


4


1,131

Provision for credit losses


(129)


-


(102)


-


1


(230)



839


-


57


-


5


901

Total individual allowance


2,491


-


397


329


166


3,383

Collective allowance













Balance at the beginning of the period


22,232


327


9,500


3,541


300


35,900

Allowance assumed on purchase of CFF Bank


-


-


-


324


-


324

Provision for credit losses


-


-


-


25


-


25



22,232


327


9,500


3,890


300


36,249

Total allowance

$

24,723

$

327

$

9,897

$

4,219

$

466

$

39,632

Total provision

$

986

$

-

$

(40)

$

368

$

101

$

1,415



(000s)

For the three months ended September 30, 2015



Single-family


Residential


Non-residential


Credit Card


Other





Residential


Commercial


Commercial


Loans and


Consumer





Mortgages


Mortgages


Mortgages


Lines of Credit


Retail Loans


Total

Individual allowances













Allowance on loan principal













Balance at the beginning of the period

$

1,463

$

-

$

480

$

68

$

142

$

2,153

Provision for credit losses


1,617


-


228


163


42


2,050

Write-offs


(1,417)


-


(309)


(166)


(78)


(1,970)

Recoveries


289


-


6


3


49


347



1,952


-


405


68


155


2,580

Allowance on accrued interest receivable













Balance at the beginning of the period


780


-


150


-


2


932

Provision for credit losses


188


-


9


-


2


199



968


-


159


-


4


1,131

Total individual allowance


2,920


-


564


68


159


3,711

Collective allowance













Balance at the beginning of the period


21,632


327


9,500


3,541


300


35,300

Provision for credit losses


600


-


-


-


-


600



22,232


327


9,500


3,541


300


35,900

Total allowance

$

25,152

$

327

$

10,064

$

3,609

$

459

$

39,611

Total provision

$

2,405

$

-

$

237

$

163

$

44

$

2,849









(000s)







For the three months ended December 31, 2014



Single-family


Residential


Non-residential


Credit Card


Other





Residential


Commercial


Commercial


Loans and


Consumer





Mortgages


Mortgages


Mortgages


Lines of Credit


Retail Loans


Total

Individual allowances













Allowance on loan principal













Balance at the beginning of the period

$

2,399

$

-

$

55

$

66

$

118

$

2,638

Provision for credit losses


2,463


24


56


128


90


2,761

Write-offs


(3,125)


(24)


(56)


(134)


(123)


(3,462)

Recoveries


71


-


-


20


75


166



1,808


-


55


80


160


2,103

Allowance on accrued interest receivable       













Balance at the beginning of the period


760


-


32


-


3


795

Provision for credit losses


(200)


-


25


-


-


(175)



560


-


57


-


3


620

Total individual allowance


2,368


-


112


80


163


2,723

Collective allowance













Balance at the beginning of the period


20,032


327


9,300


3,541


300


33,500

Provision for credit losses


600


-


-


-


-


600



20,632


327


9,300


3,541


300


34,100

Total allowance

$

23,000

$

327

$

9,412

$

3,621

$

463

$

36,823

Total provision

$

2,863

$

24

$

81

$

128

$

90

$

3,186






(000s)







For the year ended December 31, 2015



Single-family


Residential


Non-residential


Credit Card


Other





Residential


Commercial


Commercial


Loans and


Consumer





Mortgages


Mortgages


Mortgages


Lines of Credit


Retail Loans


Total

Individual allowances













Allowance on loan principal













Balance at the beginning of the year

$

1,808

$

-

$

55

$

80

$

160

$

2,103

Allowance assumed on purchase of CFF Bank


-


-


-


420


-


420

Provision for credit losses


5,136


4


720


798


169


6,827

Write-offs


(6,357)


(9)


(486)


(1,005)


(442)


(8,299)

Recoveries


1,065


5


51


36


274


1,431



1,652


-


340


329


161


2,482

Allowance on accrued interest receivable













Balance at the beginning of the year


560


-


57


-


3


620

Provision for credit losses


279


-


-


-


2


281



839


-


57


-


5


901

Total individual allowance


2,491


-


397


329


166


3,383

Collective allowance













Balance at the beginning of the year


20,632


327


9,300


3,541


300


34,100

Allowance assumed on purchase of CFF Bank


-


-


-


324


-


324

Provision for credit losses


1,600


-


200


25


-


1,825



22,232


327


9,500


3,890


300


36,249

Total allowance

$

24,723

$

327

$

9,897

$

4,219

$

466

$

39,632

Total provision

$

7,015

$

4

$

920

$

823

$

171

$

8,933























(000s)





For the year ended December 31, 2014



Single-family


Residential


Non-residential


Credit Card


Other





Residential


Commercial


Commercial


Loans and


Consumer





Mortgages


Mortgages


Mortgages


Lines of Credit


Retail Loans


Total

Individual allowances













Allowance on loan principal













Balance at the beginning of the year

$

1,201

$

-

$

-

$

201

$

236

$

1,638

Provision for credit losses


9,706


24


257


571


196


10,754

Write-offs


(9,645)


(24)


(294)


(752)


(488)


(11,203)

Recoveries


546


-


92


60


216


914



1,808


-


55


80


160


2,103

Allowance on accrued interest receivable













Balance at the beginning of the year


759


25


44


-


12


840

Provision for credit losses


(199)


(25)


13


-


(9)


(220)



560


-


57


-


3


620

Total individual allowance


2,368


-


112


80


163


2,723

Collective allowance













Balance at the beginning of the year


18,032


327


9,300


3,541


300


31,500

Provision for credit losses


2,600


-


-


-


-


2,600



20,632


327


9,300


3,541


300


34,100

Total allowance

$

23,000

$

327

$

9,412

$

3,621

$

463

$

36,823

Total provision

$

12,107

$

(1)

$

270

$

571

$

187

$

13,134

There were no specific provisions, allowances, or net write-offs on securitized residential mortgages.

 

Securitization Activity


























(000s)










For the three months ended





December 31



September 30







2015






2015


Single-Family

Multi-Unit



Single-Family

Multi-Unit




Residential MBS

Residential MBS

Total MBS

Residential MBS

Residential MBS

Total MBS

Carrying value of underlying mortgages derecognized

$

371,473

$

161,757

$

533,230

$

210,881

$

154,986

$

365,867

Net gains on sale of mortgages or residual interest 1


3,362


1,366


4,728


3,183


1,270


4,453

Retained interests recorded


-


5,933


5,933


-


8,910


8,910

Servicing liability recorded


-


1,278


1,278


-


1,686


1,686














(000s)








For the three months ended








December 31













2014






Single-Family

Multi-Unit








Residential MBS

Residential MBS

Total MBS

Carrying value of underlying mortgages derecognized







$

371,782

$

241,023

$

612,805

Net gains on sale of mortgages or residual interest 1








2,549


1,813


4,362

Retained interests recorded








-


9,289


9,289

Servicing liability recorded








-


2,257


2,257














(000s)


2015


2014


Single-Family

Multi-Unit



Single Family

Multi-Unit




Residential MBS

Residential MBS

Total MBS

Residential MBS

Residential MBS

Total MBS

Carrying value of underlying mortgages derecognized

$

1,184,253

$

713,635

$

1,897,888

$

1,745,454

$

783,972

$

2,529,426

Net gains on sale of mortgages or residual interest 1


15,499


5,913


21,412


18,685


5,027


23,712

Retained interests recorded


-


33,228


33,228


-


32,090


32,090

Servicing liability recorded


-


6,229


6,229


-


6,781


6,781

 Gains on sale of mortgages or residual interest are net of hedging impact.

 

Securitization Income





(000s)




For the three months ended




December 31, 2015


September 30, 2015


December 31, 2014

Net gain on sale of mortgages or residual interest1


$

4,728

$

4,453

$

4,362

Net change in unrealized gain or loss on hedging activities



(232)


(39)


(591)

Servicing income



1,264


1,374


1,185

Total securitization income


$

5,760

$

5,788

$

4,956

 











(000s)






2015



2014

Net gain on sale of mortgages and residual interest1





$

21,412


$

23,712

Net change in unrealized gain or loss on hedging activities






(313)



(177)

Servicing income






5,109



3,310

Total securitization income





$

26,208


$

26,845

1 Gains on sale of mortgages or residual interest are net of hedging impact.

 

Management's Responsibility for Financial Information

The Company's Audit Committee reviewed this document along with the Company's 2015 Annual and Fourth Quarter Consolidated Financial Report.  The Company's Board of Directors approved both documents prior to their release.   A full description of management's responsibility for financial information is included in the Company's 2015 Annual and Fourth Quarter Consolidated Financial Report.

Caution Regarding Forward-looking Statements

From time to time 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 in the Risk Management section of the Company's 2015 Annual and Fourth Quarter Consolidated Financial Report, as well as its other publicly filed information, which are available on the System for Electronic Document Analysis and Retrieval (SEDAR) at www.sedar.com, for the material factors that could cause the Company's actual results to differ materially from these statements.  These risk factors are material risk factors a reader should consider, and include credit risk, funding and liquidity risk, structural interest rate risk, operational risk, investment risk, strategic and business risk, reputational risk, compliance risk, and capital adequacy risk along with additional risk factors that may affect future results. Forward-looking statements can be found in the Report to the Shareholders and the Outlook sections in the Annual Report.   Forward-looking statements are typically identified by words such as "will,"  "believe," "expect," "anticipate," "estimate," "plan," "forecast," "may," and "could" or other similar expressions. 

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

These and other factors should be considered carefully and readers are cautioned not to place undue reliance on these 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 2016 and its effect on Home Capital's business are material factors the Company considers when setting its objectives, targets and outlook.  In determining expectations for economic growth, both broadly and in the financial services sector, the Company primarily considers historical and forecasted economic data provided by the Canadian government and its agencies.  In setting and reviewing its targets, objectives and outlook for 2016, management's expectations assume:

  • The Canadian economy is expected to be relatively stable in 2016; however, it will continue to be impacted by adverse effects related to the drop and fluctuations in oil prices and other commodities.  The Company has limited exposure in energy producing regions. 
  • Generally the Company expects stable employment conditions in its established regions; however, unemployment rates in energy producing regions are expected to continue to increase in 2016.  Also, the Company expects inflation will generally be within the Bank of Canada's target of 1% to 3%, leading to stable credit losses and consistent demand for the Company's lending products in its established regions. Credit losses and delinquencies in the energy producing regions may increase, but given the Company's limited exposure, this is not expected to be significant.
  • The Canadian economy will continue to be influenced by the economic conditions in the United States and global markets and further adjustments in commodity prices; as such, the Company is prepared for the variability to plan that may result.
  • The Company is assuming that overnight interest rates will remain at the current very low rate for 2016. This is expected to continue to support relatively low mortgage interest rates for the foreseeable future.
  • In the Company's established regions, the Company expects that the housing market will remain stable with reduced, but balanced supply supported by continued low interest rates, and relatively stable employment, depending on location and immigration.  There will be moderately easing housing starts and resale activity with relatively stable prices throughout most of Canada, with continued regional disparities. This supports continued stable credit losses and stable demand for the Company's lending products in its established regions.
  • The Company expects that consumer debt levels, while elevated, will remain serviceable by Canadian households.
  • The Company will have access to the mortgage and deposit markets through broker networks.

Non-GAAP Measures

The Company 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 used in this report can be found under Non-GAAP Measures in the Management's Discussion and Analysis included in the Company's 2015 Annual and Fourth Quarter Consolidated Financial 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.  Home Trust also conducts business through its wholly owned subsidiary, CFF Bank.  In addition, Home Trust offers deposits via brokers and financial planners, and through its direct to consumer brand, Oaken Financial.  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.

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