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Home Capital Reports Fourth Quarter and Full Year 2021 Results

February 17, 2022

Annual growth of 44% in diluted earnings per share, declaration of a quarterly dividend of $0.15 per common share and mortgage origination growth of 27%

TORONTO--(BUSINESS WIRE)-- Home Capital Group Inc. (“Home Capital” or “the Company”) (TSX: HCG) today reported financial results for the three and twelve months ended December 31, 2021. This press release should be read in conjunction with the Company’s 2021 Annual and Fourth Quarter Consolidated Financial Report including Financial Statements and Management’s Discussion and Analysis which are available on Home Capital’s website at www.homecapital.com and on SEDAR at www.sedar.com.

“Home Capital has now delivered better than 40% growth in earnings per share for two consecutive years and achieved 15.1% return on equity this year,” said Yousry Bissada, President and Chief Executive Officer. “2021 was a year in which we executed across all our strategic objectives by growing originations, implementing new technology and diversifying our funding sources. We also returned over $365 million to shareholders through share repurchases, making significant progress toward achieving our target capital ratio. Today’s announcement of a dividend demonstrates the confidence that the board and management have in the resilience of our business model and in our ability to generate increasing value for shareholders.

Net Income: Diluted earnings per share of $4.78 in 2021 compared with $3.33 in 2020

  • Net income of $244.7 million or $4.78 diluted earnings per share in 2021, compared with $175.7 million or $3.33 per share in 2020. Fourth quarter net income of $52.7 million or $1.04 per share compared with $54.8 million or $1.08 per share in Q3 2021 and $55.3 million or $1.06 per share in Q4 2020.
  • Adjusted net income of $249.3 million or $4.87 diluted earnings per share in 2021, up 37.6% from $3.54 per share in 2020. Fourth quarter adjusted net income of $53.7 million or $1.06 per share compared with $1.10 per share in Q3 2021 and $1.11 per share in Q4 2020. Results are adjusted for items of note related to implementing our Ignite Program. Adjusted results, measures and ratios are non-GAAP financial measures. Please see the Adjusted Results section below.
  • Net interest margin of 2.56% in 2021, compared with 2.46% in 2020. Net interest margin of 2.46% in Q4 2021 compared with 2.58% in Q3 2021 and 2.55% in Q4 2020.
  • Non-interest expenses of $248.8 million in 2021, compared with $262.6 million in 2020. Fourth quarter non-interest expenses of $61.7 million, compared with $64.6 million in Q3 2021 and $71.8 million in Q4 2020.

Asset Growth: Mortgage originations increased 27.5% over 2020

  • Mortgage originations of $8.86 billion in 2021, compared with $6.95 billion in 2020. Mortgage originations of $2.72 billion in Q4 2021, compared with $2.41 billion in Q3 2021 and $1.88 billion in Q4 2020.
  • Single-family mortgage originations of $7.45 billion in 2021, compared with $5.18 billion in 2020. Single-family mortgage originations of $2.27 billion in Q4 2021, compared with $2.01 billion in Q3 2021 and compared with $1.50 billion in Q4 2020.
  • Total loan portfolio of $18.43 billion at the end of 2021, an increase of 5.5% from the end of 2020 and 5.0% from the end of Q3 2021.
  • Loans under administration of $24.15 billion at the end of 2021, up 5.2% from the end of 2020 and up 3.4% from the end of Q3 2021.

Funding: Deposits through our Oaken channel of $4.39 billion make up 31.3% of total deposits

  • Total deposits of $14.01 billion at the end of 2021, compared with $13.93 billion at the end of 2020 and $13.71 billion at the end of Q3 2021.
  • Total Oaken deposits of $4.39 billion at the end of 2021, an increase of 10.6% from the end of 2020 and 3.2% from the end of Q3 2021.
  • Oaken’s share of total deposits was 31.3% at the end of 2021, compared with 28.5% at the end of 2020 and 31.0% at the end of Q3 2021.

Credit Quality: Reversal of credit provisions of 0.18% of gross loans in 2021 compared with a provision expense of 0.20% in 2020

  • Reversal of provision for credit losses (“PCL”) of $33.7 million in 2021, compared with a provision expense of $34.1 million in 2020. Provision expense of $1.0 million in Q4 2021, compared with a reversal of $3.8 million in Q3 2021 and a reversal of $7.7 million in Q4 2020.
  • Allowance for credit losses of 0.20% of gross loans at the end of 2021, consistent with 0.20% at the end of Q3 2021 and 0.41% at the end of Q4 2020.
  • Net write-offs as a percentage of gross loans were less than one basis point in 2021, compared to 0.15% in 2020. Net write-offs as a percentage of gross loans were less than one basis point in Q4 2021, compared to 0.01% in Q3 2021 and net recoveries of 0.01% in Q4 2020.
  • Net non-performing loans (represented by Stage 3 loans under IFRS 9) as a percentage of gross loans at 0.13% at the end of 2021, compared with 0.57% at the end of 2020 and 0.15% at the end of Q3 2021.

Dividend Declaration

The Board has declared a dividend of $0.15 per common share, payable on March 31, 2022 to shareholders of record at the close of business on March 15, 2022. The dividend is designated as an “eligible” dividend for the purposes of the Income Tax Act (Canada) and any similar provincial legislation.

Outlook

“We are beginning this year with a lot of momentum in all our business areas,” stated Mr. Bissada. “We expect to continue growing our business while returning capital to shareholders through a combination of share repurchases and common share dividends. We will continue to target a range of CET1 capital between 14% and 15%, and will regularly review this target. Regular increases to the dividend rate in future years are anticipated as part of our capital planning with a goal to supporting mid-teen returns on equity.

Fourth Quarter and Full Year 2021 Results Conference Call and Webcast

The conference call will take place by webcast on Thursday, February 17, 2022, at 8:00 a.m. EST. Participants may register in advance for the webcast by visiting this link 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. The archived audio webcast will be available for 90 days on Home Capital’s website at www.homecapital.com.

Financial Highlights

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the three months ended

For the year ended

(000s, except Percentage and Per Share Amounts)

December 31

September 30

December 31

December 31

December 31

 

 

2021

 

2021

 

2020

 

2021

 

2020

INCOME STATEMENT HIGHLIGHTS 1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Interest Income

$

120,996

$

123,078

$

123,483

$

493,752

$

474,835

Net Interest Margin

 

2.46%

 

2.58%

 

2.55%

 

2.56%

 

2.46%

Efficiency Ratio

 

45.9%

 

47.3%

 

51.3%

 

45.3%

 

49.0%

Adjusted Efficiency Ratio2

 

44.8%

 

46.1%

 

48.2%

 

44.2%

 

46.2%

 

 

 

 

 

 

 

 

 

 

 

Provision as a Percentage of Gross Loans (annualized)

 

0.02%

 

(0.09)%

 

(0.18)%

 

(0.18)%

 

0.20%

Net Write-Offs (Recoveries) as a Percentage of Gross Loans (annualized)

 

0.00%

 

0.01%

 

(0.01)%

 

0.00%

 

0.15%

 

 

 

 

 

 

 

 

 

 

 

Net Income

$

52,664

$

54,811

$

55,343

$

244,734

$

175,690

Adjusted Net Income2

 

53,748

 

56,002

 

58,476

 

249,330

 

186,574

Diluted Earnings per Share

$

1.04

$

1.08

$

1.06

$

4.78

$

3.33

Adjusted Diluted Earnings per Share2

 

1.06

 

1.10

 

1.11

 

4.87

 

3.54

Return on Shareholders' Equity (annualized)

 

12.4%

 

12.2%

 

13.4%

 

15.1%

 

10.5%

Adjusted Return on Shareholders’ Equity (annualized)2

 

12.7%

 

12.5%

 

14.2%

 

15.3%

 

11.1%

ORIGINATIONS 1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Mortgage Originations

$

2,722,079

$

2,407,892

$

1,882,094

$

8,860,495

$

6,950,601

Single-Family Residential Mortgage Originations

 

2,273,322

 

2,011,408

 

1,495,006

 

7,453,315

 

5,175,364

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As at

 

 

 

 

 

December 31

September 30

December 31

 

 

 

 

 

 

2021

 

2021

 

2020

 

 

 

 

BALANCE SHEET HIGHLIGHTS 1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Assets

$

20,146,954

$

18,899,321

$

19,356,227

 

 

 

 

Total Assets Under Administration3

 

25,802,433

 

24,695,395

 

24,834,794

 

 

 

 

Total Loan Portfolio4

 

18,428,802

 

17,548,678

 

17,467,453

 

 

 

 

Total Loans Under Administration3

 

24,154,206

 

23,350,913

 

22,951,192

 

 

 

 

Deposits

 

14,013,372

 

13,713,894

 

13,932,812

 

 

 

 

FINANCIAL STRENGTH 1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital Measures 5

 

 

 

 

 

 

 

 

 

 

Common Equity Tier 1 Capital Ratio

 

18.43%

 

22.57%

 

19.82%

 

 

 

 

Leverage Ratio

 

7.19%

 

8.97%

 

7.79%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Credit Quality

 

 

 

 

 

 

 

 

 

 

Net Non-Performing Loans as a Percentage of Gross Loans

 

0.13%

 

0.15%

 

0.57%

 

 

 

 

NPL Allowance as a Percentage of Gross NPL6

 

22.8%

 

22.1%

 

15.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share Information

 

 

 

 

 

 

 

 

 

 

Book Value per Common Share

$

36.55

$

36.40

$

32.42

 

 

 

 

Number of Common Shares Outstanding

 

42,986

 

49,862

 

51,841

 

 

 

 

1 Please see the Glossary in the Company’s 2021 Annual and Fourth Quarter Consolidated Financial Report for additional information on various measures presented in this table.

2 Adjusted results, measures and ratios are non-GAAP financial measures. Please see the Adjusted Results section below.

3 Total assets and loans under administration include both on- and off-balance sheet amounts. Total on-balance sheet loans include loans held for sale and are presented gross of allowance for credit losses.

4 Total loan portfolio is presented gross of allowance for credit losses and excludes loans held for sale.

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

6 NPL indicates non-performing loans, defined as Stage 3 loans under IFRS 9 Financial Instruments. See definition of impaired or non-performing loans under Glossary in the Company’s 2021 Annual and Fourth Quarter Consolidated Financial Report.

Adjusted Results

The Company has adopted IFRS as its accounting framework. IFRS are the generally accepted accounting principles (GAAP) for Canadian publicly accountable enterprises. In addition to reported results, management also uses adjusted results to assess its underlying business performance. Adjusted results, measures, and ratios are non-GAAP financial measures. They are not calculated in accordance with GAAP, are not defined by GAAP, and do not have standardized meanings and as a result may not be comparable to similar financial measures disclosed by other companies.

To arrive at adjusted results, items of note are removed from reported results. The items of note for 2021 and 2020 are adjustments in connection with the Company’s Ignite Program for items which management does not believe are indicative of underlying business performance. Management believes that adjusted measures provide investors with a better understanding of how management assesses underlying business performance and facilitates a more informed analysis of trends.

Please see Adjusted Results in the Financial Highlights section on page 9 in the Company's 2021 Annual and Fourth Quarter Consolidated Financial Report for further information.

Adjusted Net Income

Adjusted net income is a non-GAAP financial measure. Items of note are removed from reported net income in determining adjusted net income. The following table provides a reconciliation of net income calculated in accordance with GAAP to adjusted net income.

For the three months ended

For the year ended

(000s)

December 31

September 30

December 31

December 31

December 31

 

 

 

2021

 

2021

 

2020

 

2021

 

2020

Net income

$

52,664

$

54,811

$

55,343

$

244,734

$

175,690

Adjustments for items of note in connection with the Company's Ignite Program, net of tax

 

 

 

 

 

 

 

 

 

 

 

Amortization of intangible assets1

 

819

 

820

 

1,915

 

3,279

 

7,396

 

Operating expenses2

 

265

 

371

 

1,218

 

1,317

 

3,488

Total adjustments for items of note in connection with the Company's Ignite Program, net of tax

 

1,084

 

1,191

 

3,133

 

4,596

 

10,884

Adjusted net income

$

53,748

$

56,002

$

58,476

$

249,330

$

186,574

1 Amortization of intangible assets relates to incremental amortization resulting from previous changes to the useful lives, recognized in other operating expenses in the consolidated statements of income.

2 Operating expenses relates to elevated operating expenses for the reimplementation of the Company’s core banking system, recognized primarily in other operating expenses in the consolidated statements of income.

Adjusted Efficiency Ratio

Adjusted efficiency ratio is a non-GAAP ratio and is calculated in the same manner as the efficiency ratio, using adjusted pre-tax non-interest expenses instead of pre-tax non-interest expenses calculated in accordance with GAAP. The following table provides a reconciliation of non-interest expenses calculated in accordance with GAAP to adjusted non-interest expenses.

For the three months ended

For the year ended

(000s)

December 31

September 30

December 31

December 31

December 31

 

 

 

2021

 

2021

 

2020

 

2021

 

2020

Non-interest expenses

$

61,701

$

64,556

$

71,774

$

248,832

$

262,571

Adjustments for items of note in connection with the Company's Ignite Program, pre-tax

 

 

 

 

 

 

 

 

 

 

 

Amortization of intangible assets1

 

1,114

 

1,114

 

2,604

 

4,457

 

10,063

 

Operating expenses2

 

361

 

504

 

1,656

 

1,791

 

4,745

Total adjustments for items of note in connection with the Company's Ignite Program, pre-tax

 

1,475

 

1,618

 

4,260

 

6,248

 

14,808

Adjusted non-interest expenses

$

60,226

$

62,938

$

67,514

$

242,584

$

247,763

1 Amortization of intangible assets relates to incremental amortization resulting from previous changes to the useful lives, recognized in other operating expenses in the consolidated statements of income.

2 Operating expenses relates to elevated operating expenses for the reimplementation of the Company’s core banking system, recognized primarily in other operating expenses in the consolidated statements of income.

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 2021 Annual and Fourth Quarter Consolidated Financial 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 Outlook section of the 2021 Annual and Fourth Quarter Consolidated Financial 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, the impacts of the novel coronavirus disease (COVID-19) pandemic and government responses to it, 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, climate change, 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 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 2021 and its effect on Home Capital’s business are material factors the Company considers when setting 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 and other third-party providers. In setting and reviewing its strategic priorities and outlook for 2021, management makes certain assumptions about the Canadian economy, employment conditions, interest rates, levels of housing activity, household debt service levels and the Company’s continued access to broker mortgage and deposit markets. These assumptions are discussed in greater detail in the 2021 Annual and Fourth Quarter Consolidated Financial Report.

The global pandemic related to the outbreak of COVID-19 significantly impacts these assumptions. Updated forward-looking macroeconomic assumptions have been incorporated into the models used in the Company’s expected credit loss estimation process. Please see Note 5(C) to the consolidated financial statements included in the Company’s 2021 Annual and Fourth Quarter Consolidated Financial Report for more information on these assumptions. The full extent of the impact that COVID-19, including government and/or regulatory responses to the outbreak, will have on the Canadian economy and the Company’s business remains uncertain and difficult to predict. Please see the Impact of COVID-19, the Outlook and the Risk Management sections in the Management’s Discussion and Analysis included in the 2021 Annual and Fourth Quarter Consolidated Financial Report for more information.

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 residential and non-residential mortgage lending, securitization of residential mortgage products, consumer lending and credit card services. In addition, Home Trust and its wholly owned subsidiary, Home Bank, offer deposits via brokers and financial planners, and through a direct-to-consumer brand, Oaken Financial. Licensed to conduct business across Canada, we have offices in Ontario, Alberta, British Columbia, Nova Scotia, and Quebec.

Jill MacRae
VP, Investor Relations and ESG
(416) 933-4991
investor.relations@hometrust.ca

Source: HOME CAPITAL GROUP INC.

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