Investor Update Fourth Quarter 2015 Caution re: Forward-looking - - PowerPoint PPT Presentation

Fourth Quarter 2015

Investor Update

Caution re: Forward-looking Statements

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This presentation provides management with the opportunity to discuss the financial performance and condition of Home Capital Group Inc. and Home Trust Company and, as such may contain forward-looking information about strategies and expected financial results. Various factors, many difficult to predict and to control, could cause actual results to differ materially from results projected in forward-looking statements. Accordingly, the audience is cautioned against undue reliance on these remarks.

Fourth Quarter 2015

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• Performance Against Mid‐Term Targets
• Financial Performance
• Capital Management
• Risk Management
• 2016 Outlook

Agenda

Performance Against Mid-Term Targets

Fourth Quarter 2015

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Mid-term Objectives (3-5 Years)

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• Average pay out 19% - 26% of

earnings as dividends

• Average annual growth in

diluted earnings per share (adjusted) of 8% - 13%

• Maintain strong capital ratios
• Average annualized return on

equity in excess of 16%

Q4 2015 Results

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Q4 2015 Results Increase (Decrease)

• vs. Q4 2014

2015 Results Increase (Decrease)

• vs. 2014

Adjusted Net Income* $71.8M

• $288.9M

(0.1)% Adjusted Diluted EPS* $1.02

• $4.11
• Adjusted Return on Equity*

18.0% 18.8% Total Loans Under Administration $25.1B 11.1% $25.1B 11.1% Payout Ratio 22.0% 21.5% Total Capital Ratio 20.70% 20.70% CET 1 Ratio 18.31% 18.31%

* Adjusted metrics for 2015 exclude the impact of acquisition and integration costs, offset by the gain on bargain purchase in relation to CFF Bank. Adjusted metrics for 2014 exclude the impact of the prepayment income received on the sale of the water heater loan portfolio.

Financial Performance

Fourth Quarter 2015

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Q4 2015 Financial Results

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Q4 2015 Q3 2015 Q4 2014 2015 2014 Adjusted Net Income* $71.8M $72.4M $71.9M $288.9M $289.2M Adjusted Revenue* $246.4M $247.2M $251.9M $993.7M $1.01B NIM (TEB) 2.46% 2.38% 2.27% 2.36% 2.25% Loans Under Administration $25.1B $23.4B $22.6B $25.1B $22.6B Adjusted Efficiency Ratio* 33.7% 30.8% 28.2% 31.8% 28.8% Provision as a % of Gross Uninsured Loans 0.04% 0.08% 0.09% 0.06% 0.10% NPL Ratio 0.28% 0.30% 0.30% 0.28% 0.30% CET1 Ratio 18.31% 18.06% 18.30% 18.31% 18.30% * Adjusted metrics for 2015 exclude the impact of acquisition and integration costs, offset by the gain on bargain purchase in relation to CFF Bank. Adjusted metrics for 2014 exclude the impact of the prepayment income received on the sale of the water heater loan portfolio.

• Delivered a 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

• Total loans under

administration rose to $25.1B, driven by its solid core residential business, increases in its Accelerator portfolio and the acquisition of the CFF loans portfolio, along with increases in commercial mortgages and other lending.

YTD 2015 Items of Note

9 2015 2014 After Tax Diluted EPS After Tax Diluted EPS Reported net income and EPS (diluted) $287.3M $4.09 $313.2M $4.45 Items of Note Adjustment for acquisition and integration costs, net of gain recognized on acquisition of CFF Bank (net of tax) $1.6M $0.02

• Adjustment for prepayment income on portfolio

sale (net of tax)

• $(24.0M)

$(0.34) Adjusted net income and EPS $288.9M $4.11 $289.2M $4.11

Mortgage Originations

10 ‐ 200.0 400.0 600.0 800.0 1,000.0 1,200.0 1,400.0 1,600.0 Traditional Single‐family Residential Mortgages Accelerator Single‐family Residential Mortgages Residential Commercial Mortgages Non‐Residential Commercial Mortgages Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015

Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Traditional Single-family Residential Mortgages $1,484.5M $961.3M $1,294.7M $1,514.4M $1,304.3M Accelerator Single-family Residential Mortgages $353.0M $180.0M $279.5M $416.3M $515.9M Residential Commercial Mortgages $313.8M $112.3M $243.9M $347.9M $133.7M Non-Residential Commercial Mortgages $139.1M $130.3M $205.2M $219.3M $200.3M Total Mortgage Originations $2,290.5M $1,384.0M $2,023.3M $2,498.0M $2,154.2M

Net Interest Margin

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NIM (TEB) NIM Non Securitized Assets (TEB) NIM Securitized Assets (TEB) Spread of Non-Securitized Loans over Deposits (TEB)

2.27% 2.28% 2.29% 2.38% 2.46% Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 2.79% 2.81% 2.77% 2.83% 2.89% Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 0.60% 0.46% 0.42% 0.52% 0.60% Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 2.83% 2.87% 2.89% 2.93% 2.97% Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015

CFF Acquisition

12 Assets Acquired $251.8M Loans under Administration $1.45B Capital injected on October 1, 2015 $35M Purchase Price $19.6M cash consideration, subject to final adjustments

Financial Highlights

Description of Transaction

On October 1, 2015, Home Capital Group through its subsidiary Home Trust Company completed the acquisition of all outstanding common shares of CFF Bank, a Schedule I bank under the Bank Act (Canada). CFF Bank is a Canadian retail bank offering deposit, mortgage and personal banking products through a number of channels.

Expected Synergies

• Supports the Company’s long-term strategy to

develop its deposit diversification and expand the broker network to build relationships and drive mortgage and loan origination volumes

Integration Update

• All retained former CFF Bank employees have been

transitioned to Home Trust and relocated from their former locations in Calgary and Oakville

• Beginning the initial stages of decommissioning

redundant systems to realize planned cost savings and to facilitate the efficient growth of the CFF business.

Historical Share Price Performance

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Q4 2015 dividend of $0.24 per share or 23.53% of net income

Share price and dividend yield has been adjusted for the stock dividend of one common share for each issued and outstanding common share that was paid on March 10, 2014.

$26.92 $- $0.05 $0.10 $0.15 $0.20 $0.25 $0.30

$0.00 $10.00 $20.00 $30.00 $40.00 $50.00 $60.00 Q4 2005 Q1 2006 Q2 2006 Q3 2006 Q4 2006 Q1 2007 Q2 2007 Q3 2007 Q4 2007 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015

HCG Shar HCG Share e Pr Price ice

Share Price Dividend $0.24

Capital Management

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Capital & Liquidity

15 18.30% 17.95% 18.03% 18.06% 18.31% Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 20.94% 20.50% 20.53% 20.51% 20.70% Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015

Basel III Common Equity Tier 1 Basel III Total Capital Leverage Ratio

6.75 6.94 7.17 7.36 Q1 2015 Q2 2015 Q3 2015 Q4 2015

• Continued to maintain strong CET 1 and Tier 1

capital ratios of 18.31% and 18.30%, along with total capital ratios of 20.70%

• Conservative leverage ratio at 7.36%
• The Company’s Board of Directors has

authorized a share repurchase of up to $150 million.

• The Company declared a quarterly dividend
• f $0.22 per common share, subsequent to

the end of the year.

• Payout ratio of 22.0% in Q4 2015

Risk Management

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Mortgage Lending

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• Total mortgage portfolio balance of $17.5B, of which 91.5% of the portfolio is residential mortgages
• 23.0% of the residential mortgage portfolio is insured
• Weighted average current loan-to-value (LTV) of the uninsured portfolio was 66.4%
• 98.2% of the mortgage portfolio is current, with 0.3% over 90 days past due
• No unusual credit issued have been identified related to the mortgages associated with the

suspended mortgage brokers

• Condominiums represent 9.1% of the residential mortgage portfolio, with 22.3% insured
• 3.0% of the uninsured mortgage portfolio was in energy producing regions

Single-Family Residential Loans by Province Insured Uninsured Equity Line Visa Total % British Columbia $294.1M $537.7M $3.4M $835.2M 5.5% Alberta $270.2M $370.6M $11.8M $652.6M 4.3% Ontario $2,467.8M $10,152.7M $301.9M $12,922.3M 84.7% Quebec $149.5M $350.8M $1.5M $501.8M 3.3% Other $174.1M $160.1M $2.4M $336.6M 2.2% Total $3,355.7M $11,571.9M $321.0M $15,248.5M 100.0%

Non-Performing vs. Net Write Offs as a % of Gross Loans

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• Prudent strategies to maintain a high credit quality
• Close monitoring of non performing loans and proactive measures to minimize losses

0.28% 0.28% 0.05% 0.05%

0.00% 0.20% 0.40% 0.60% 0.80% 1.00% 1.20% 1.40% Q4 2007 Q4 2008 Q4 2009 Q4 2010 Q4 2011 Q4 2012 Q4 2013 Q4 2014 Q4 2015 Non Performing Loans as a Percentage of Gross Loans Net Writeoff's as a Percentage of Gross Loans

2016 Outlook

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Outlook for 2016

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• Supply and demand in the Company’s key established real estate market is expected to remain balanced in 2016, with

relatively stable prices and sales volumes with regional disparities, as demand for new homes and resale activity eases

• moderately. The Company believes that the current and expected levels of housing activity indicate a healthy real estate

market overall.

• The Company expects to see the impact of certain positive forces on its established markets through 2016, including a

generally positive outlook for the US economy, the comparatively weaker Canadian dollar, the continued low interest rate environment and the beneficial impact of lower oil prices on economic growth in Central Canada. Adverse effects related to the drop in oil prices and other commodity prices continue to negatively impact the economies of energy producing regions.

• The Company remains committed to offering a range of mortgage products to support its “one-stop” initiative.
• The Company expects to see continued strengthening of its origination volumes through 2016, when compared to 2015
• riginations. The Company will look to rebuild its market share lost during 2015 through the Company’s proved business

model and service levels.

• The Company will continue to originate and securitize prime insured single-family and multi-unit residential mortgages and

will generally sell these off-balance sheet, generating gains on sale. The market for both of these products remains very competitive.

• The Company expects 2016 net interest margin to remain relatively stable to margins experienced on new loans originated in

Q4 2015, but is prepared for modest volatility.

• The Company will continue to source deposits from the public through investment dealers and deposit brokers and will

continue to emphasize growth of its direct-to-consumer business, Oaken Financial. The Company will continue to strengthen its funding capability through agreements with additional deposit brokers and the enhancement of its direct-to-consumer sales and service capabilities. The relative cost of deposits is expected to remain stable to slightly lower when compared to 2015.

• The acquisition of CFF Bank supports the Company’s long-term strategy to diversify its funding sources. Through 2016, the

Company will integrate the technology platform of CFF Bank into the Company’s infrastructure, to facilitate growth in deposit funding generated through CFF Bank, which issues deposits that would be eligible for deposit insurance, in an efficient, and effective manner.

Appendices

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Home Capital Group Inc.

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• Home Trust Company - Federally regulated deposit taking institution;

includes, its subsidiary, CFF Bank, a federally regulated bank

• Member of Canada Deposit Insurance Corporation offering:
• Term deposit products
• High Interest Savings Account (HISA)
• Direct to consumer savings via Oaken Financial
• Canada’s one-stop mortgage lender offering
• “Classic” non-prime mortgages
• “Accelerator” Prime insured mortgages
• “Equityline” Visa
• Secured Visa
• Preferred Visa
• Merchant acquirer solutions (via PSiGate)
• Retail Credit
• Commercial lending
• Investment grade ratings:
• HCG – BBB-/A3 (Standard & Poor’s), BBB/R-2 (middle) (DBRS)
• HTC – BBB/A2 (Standard & Poor’s), BBB(high)/R-2 (high) (DBRS)
• Listed on the Toronto Stock Exchange (Symbol: HCG)

Business Profile

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• Home Capital Group Inc., together with its operating subsidiary Home Trust Company, has

developed a track record of success as Canada's leading alternative lender. Building on the demonstrated strength of its core residential mortgage lending business, the Company also offers complementary lending services, as well as highly competitive deposit investment products.

MORTGAGE LENDING Home Trust is one of Canada's leading mortgage lenders, focusing on homeowners who typically do not meet all the lending criteria of traditional financial institutions. In addition, Home Trust offers a full range of insured mortgage products through the Accelerator program to individuals customarily served by larger financial

• institutions. With a proprietary lending

approach, comprehensive borrower profiling and flexible alternative solutions, Home Trust is a one‐stop shop for borrowers and mortgage brokers. Home Trust is also a provider of commercial first mortgages to high‐quality borrowers in selected markets across Canada. CONSUMER LENDING Home Trust's Equityline Visa program brings the advantages to cardholders of accessing the equity they have built in their homes together with the features and convenience of a Gold Visa card. The Company also offers deposit‐ secured credit cards for individuals who wish to build or re‐establish a positive credit history as well as unsecured cards under Home Trust’s brand name as well as recently launched Union Plus, Optimax and Giant Tiger co‐branded

• programs. PSiGate, a wholly owned

subsidiary, offers electronic card‐based payment services to merchants who conduct business primarily on the

• Internet. Home Trust's Retail Credit

Services provides installment financing for customers making purchases from established businesses. DEPOSIT INVESTMENTS Home Trust provides a broad range of Guaranteed Investment Certificates and a high interest savings account. These are offered via Registered Retirement Savings Plans, Registered Retirement Income Funds, Tax‐free Savings Accounts and on a non‐ registered basis. The Company has developed an extensive network nationally of intermediaries, including investment dealers, mutual fund dealers, deposit brokers and other wealth management professionals through which these are offered. DIRECT TO CONSUMER SAVINGS Oaken Financial offers a suite of consumer deposit products, including Guaranteed Investment Certificates (GICs) and the Oaken Savings Account. Oaken provides consumers with a secure alternative to managing their savings independently.

Home Trust Branches

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• 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

• ffering 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 deposit brand, Oaken Financial. Home Trust also conducts business through its wholly owned subsidiary, CFF Bank. Licensed to conduct business across Canada, Home Trust has branch offices in Ontario, Alberta, British Columbia, Nova Scotia, Quebec and Manitoba.

www.hometrust.ca www.oaken.com www.homecapital.com

Across Canada:

• 6 branches and stores
• 2 stores
• 877 employees (as of December 31, 2015)

HALIFAX VANCOUVER MONTREAL TORONTO CALGARY WINNIPEG

Media/Investor Relations Contacts

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Investor Relations Media Relations

Home Capital Group Inc. Attention: Investor Relations 145 King St. West, Suite 2300 Toronto, ON, M5H 1J8 Canada Phone: (416) 360‐4663 Toll Free Phone: (800) 990‐7881 Inquiries: inquiry.homecapitalgroup@hometrust.ca Gerald M. Soloway, Chief Executive Officer

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Martin Reid, President To arrange an interview: Margaret Kingerski Phone: (416) 775‐5089 Toll Free Phone: (800) 990‐7881 Email: margaret.kingerski@hometrust.ca

Upcoming Events

February 10, 2016 Q4 2015 Earnings Release February 11, 2016, 10:30 a.m. Q4 2015 Conference Call May 4, 2016 Q1 2016 Earnings Release May 11, 2016 Annual General Meeting