Investor Update Fourth Quarter 2015
Caution re: Forward-looking Statements 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. 2
Agenda • Performance Against Mid ‐ Term Targets • Financial Performance • Capital Management • Risk Management • 2016 Outlook Fourth Quarter 2015 3
Performance Against Mid-Term Targets Fourth Quarter 2015 4
Mid-term Objectives (3-5 Years) Average pay out 19% - 26% of Maintain strong capital ratios earnings as dividends Average annualized return on Average annual growth in equity in excess of 16% diluted earnings per share (adjusted) of 8% - 13% 5
Q4 2015 Results Increase Increase Q4 2015 2015 Results (Decrease) (Decrease) Results vs. Q4 2014 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 $25.1B 11.1% $25.1B 11.1% Administration 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. 6
Financial Performance Fourth Quarter 2015 7
Q4 2015 Financial Results • Delivered a net interest Q4 2015 Q3 2015 Q4 2014 2015 2014 margin of 2.46%, from a healthy loan portfolio with low Adjusted Net Income* $71.8M $72.4M $71.9M $288.9M $289.2M non-performing loans and credit losses, continued Adjusted Revenue* $246.4M $247.2M $251.9M $993.7M $1.01B progress on improving the pace of loan originations and NIM (TEB) 2.46% 2.38% 2.27% 2.36% 2.25% a strong capital position • Total loans under Loans Under $25.1B $23.4B $22.6B $25.1B $22.6B administration rose to $25.1B, Administration driven by its solid core residential business, Adjusted Efficiency 33.7% 30.8% 28.2% 31.8% 28.8% Ratio* increases in its Accelerator portfolio and the acquisition of the CFF loans portfolio, along Provision as a % of 0.04% 0.08% 0.09% 0.06% 0.10% with increases in commercial Gross Uninsured Loans mortgages and other lending. 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. 8
YTD 2015 Items of Note 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, $1.6M $0.02 - - net of gain recognized on acquisition of CFF Bank (net of tax) Adjustment for prepayment income on portfolio - - $(24.0M) $(0.34) sale (net of tax) Adjusted net income and EPS $288.9M $4.11 $289.2M $4.11 9
Mortgage Originations 1,600.0 1,400.0 1,200.0 Q4 2014 1,000.0 Q1 2015 800.0 Q2 2015 600.0 Q3 2015 400.0 Q4 2015 200.0 ‐ Traditional Single ‐ family Accelerator Single ‐ family Residential Commercial Non ‐ Residential Residential Mortgages Residential Mortgages Mortgages Commercial Mortgages 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 $353.0M $180.0M $279.5M $416.3M $515.9M Mortgages 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 10
Net Interest Margin NIM (TEB) Spread of Non-Securitized Loans over Deposits (TEB) 2.46% 2.97% 2.93% 2.38% 2.89% 2.87% 2.28% 2.29% 2.27% 2.83% Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 NIM Securitized Assets (TEB) NIM Non Securitized Assets (TEB) 2.89% 0.52% 0.60% 0.60% 0.42% 2.81% 2.83% 0.46% 2.79% 2.77% Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 11
CFF Acquisition 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). Assets Acquired $251.8M CFF Bank is a Canadian retail bank offering deposit, mortgage and personal banking products through a number of channels. Loans under Administration $1.45B Expected Synergies • Supports the Company’s long-term strategy to Capital injected on October 1, 2015 $35M develop its deposit diversification and expand the broker network to build relationships and drive mortgage and loan origination volumes Purchase Price $19.6M cash Integration Update consideration, subject to • All retained former CFF Bank employees have been final adjustments 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. 12
Historical Share Price Performance $0.30 $60.00 HCG Share HCG Shar e Pr Price ice Share Price Dividend $0.24 $50.00 $0.25 $40.00 $0.20 $0.15 $30.00 $26.92 $20.00 $0.10 $10.00 $0.05 $- $0.00 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 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. 13
Capital Management 14
Capital & Liquidity Basel III Common Equity Tier 1 • Continued to maintain strong CET 1 and Tier 1 capital ratios of 18.31% and 18.30%, along 18.31% 18.30% with total capital ratios of 20.70% 18.06% 18.03% • Conservative leverage ratio at 7.36% 17.95% • The Company’s Board of Directors has authorized a share repurchase of up to $150 million. Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 • The Company declared a quarterly dividend of $0.22 per common share, subsequent to the end of the year. • Payout ratio of 22.0% in Q4 2015 Leverage Ratio Basel III Total Capital 7.36 20.94% 7.17 20.70% 6.94 20.53% 6.75 20.51% 20.50% Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2015 Q2 2015 Q3 2015 Q4 2015 15
Risk Management 16
Mortgage Lending • 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 Equity Insured Uninsured Total % Line Visa 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% 17
Non-Performing vs. Net Write Offs as a % of Gross Loans Non Performing Loans as a Percentage of Gross Loans 1.40% Net Writeoff's as a Percentage of Gross Loans 1.20% 1.00% 0.80% 0.60% 0.40% 0.28% 0.28% 0.20% 0.05% 0.05% 0.00% Q4 2007 Q4 2008 Q4 2009 Q4 2010 Q4 2011 Q4 2012 Q4 2013 Q4 2014 Q4 2015 Prudent strategies to maintain a high credit quality • Close monitoring of non performing loans and proactive measures to minimize losses • 18
2016 Outlook 19
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