Home Capital Reports fourth quarter and full year 2017 Results

TORONTO, Feb. 14, 2018 /CNW/ - Home Capital Group ("Home Capital" or "the Company") (TSX: HCG) today reported financial results for the three and twelve months ended December 31, 2017. This press release should be read in conjunction with the Company's 2017 Annual and Fourth Quarter Consolidated Financial Report including Financial Statements and Management's Discussion and Analysis (MD&A), which are available on Home Capital's website at www.homecapital.com and on SEDAR at www.sedar.com.

"Our improved fourth quarter performance capped an important year for Home Capital employees, customers, brokers and shareholders," said Yousry Bissada, President and Chief Executive Officer, Home Capital Group. "We have demonstrated progress towards growing our residential and commercial business lines to more normal and sustainable levels and our employees delivered improved service. The steps we have taken to ensure we provide efficient and effective service to brokers and customers will help us to drive profitable growth going forward."

"We are entering 2018 with positive momentum in our business. We have turned the corner and expect to grow from here, responsibly, with sustainable risk management practices embedded in our culture," Mr. Bissada continued. "We have a strong capital position and balance sheet. We will use our position of strength to seize opportunities to invest in, and grow, our business to create value."

Fourth Quarter 2017, compared with the Third Quarter 2017:

Net income of $30.6 million, an increase of 2.1% or $0.6 million from $30.0 million.
Diluted earnings per share of $0.38, an increase of 2.7% from $0.37.
Non-interest expense of $65.5 million, an increase of 9.3% or $5.6 million from $59.9 million.
Non-securitized single-family residential mortgages of $10.04 billion, a decrease of 3.5% or $0.36 billion from
$10.40 billion.
Total mortgage originations of $872.1 million, an increase of 126% or $487.0 million from $385.1 million.
Provision for credit losses as a percentage of gross uninsured loans of 0.12%, compared to (0.14)% where Q3 2017 included a reduction of $6.5 million in the collective allowance (0.07% in the absence of this reduction).

Fourth Quarter 2017, compared with the Fourth Quarter 2016:

Net income of $30.6 million, a decrease of 39.6% or $20.1 million from $50.7 million.
Net income in Q4 2017 includes the impact of reduced loan balances and lower securitization income, partially offset by lower non-interest expenses.
Diluted earnings per share of $0.38, a decrease of 51.9% from $0.79.
Non-interest expenses were $65.5 million, a $5.5 million decline and 7.8% improvement from $71.0 million.
Total mortgage originations of $872.1 million, a decrease of 64.1% or $1.56 billion from $2.43 billion.
Provision for credit losses as a percentage of gross uninsured loans was 0.12% compared to 0.07%.

Year Ended December 31, 2017, compared with the Year Ended December 31, 2016:

Net income of $7.5 million, compared with $247.4 million.
Net income includes $223.6 million of expenses directly associated with the Q2 2017 liquidity event.
Diluted earnings per share of $0.10 compared to diluted earnings per share of $3.71.
Total loans under administration of $22.51 billion, a decrease of 14.8% or $3.91 billion from $26.42 billion.
Provision for credit losses as a percentage of gross uninsured loans was 0.07%, compared to 0.05%.

Corporate Update

Home Capital ended 2017 with a strong capital position, poised for sustainable growth and with a clear goal of regaining its leading market share position in Canada's Alt-A mortgage market.

Management and the Board of Directors are focused on completing a strategy that will take advantage of the Company's capital position and balance sheet to invest in the business, drive profitable growth and create long-term shareholder value.

In the near term, management's key areas of focus are:

1.	Profitably growing residential and commercial business lines to more sustainable levels and increasing market share.
2.	Improving service levels through training initiatives that will empower employees to deliver best-in-class service.
3.	Increasing renewal and retention rates.
4.	Increasing broker outreach to advance higher-quality applications.
5.	Maintaining competitive product offerings.
6.	Innovating and applying technology in the mortgage business to enhance customer and broker experiences.

In addition, the Company is operating in the context of an evolving regulatory landscape that will affect its primary residential mortgage market, although the extent of any impact is not yet clear. Management and the Board of Directors will continue to assess opportunities for the business as it relates to the current environment during the first and second quarters of 2018.

Fourth Quarter 2017 Financial Position

Total loans under administration of $22.51 billion, which includes securitized mortgages that qualify for off-balance sheet accounting, decreased by 14.8% or $3.91 billion from $26.42 billion at the end of 2016, and 3.1% or $719.2 million from $23.23 billion at the end of Q3 2017.
Total loans of $15.06 billion declined 16.5% from $18.04 billion at the end of 2016, and 2.4% from $15.43 billion at the end of Q3 2017.
- Total mortgages originated of $872.1 million, compared to $2.43 billion in Q4 2016 and $385.1 million in Q3 2017.
- Single-family residential mortgage originations of $566.0 million in Q4 2017, compared with $1.78 billion in Q4 2016 and $224.0 million in Q3 2017.
- Multi-unit residential mortgage originations of $194.8 million, compared to $371.5 million in Q4 2016 and $99.1 million in Q3 2017. Multi-unit residential mortgage originations are mostly insured and subsequently securitized through programs that qualify for off-balance sheet accounting.
- Non-residential commercial mortgage originations, which include store and apartment mortgages, of $111.2 million, compared to $277.3 million in Q4 2016 and $62.0 million in Q3 2017.
Liquid assets were $1.65 billion, compared to $2.07 billion at the end of 2016 and $2.66 billion at September 30, 2017. The Company maintains a prudent level of liquidity, given the current level of operations, loan balances and the Company's obligations.
Total deposits were $12.17 billion, compared to $15.89 billion at the end of 2016 and $13.36 billion at the end of Q3 2017.
- The decrease in deposits from the end of last year reflects the elevated level of redemptions of the Company's High-Interest Savings Accounts during the Q2 2017 liquidity event and lower funding requirements due to lower loan balances.
- The decrease in deposits from the end of last quarter reflects the Company's intentional actions to slow the inflow of deposits to match expected mortgage originations. During the third quarter, the Company decided to offer premium rates on deposits to increase inflows following the Q2 2017 liquidity event. The growth of deposits outpaced loan growth and created a drag on earnings. Consequently, by the end of the third quarter, the Company reduced interest rates on new deposits to intentionally lower deposits until mortgage balances began to grow.
- The Company created net deposits inflows mid-way through the fourth quarter by increasing interest rates paid on new and renewed deposits to meet expected mortgage funding requirements. It is expected that the Company may be required to offer higher interest rates on new deposits in future periods. It is assumed that any such increases could be offset by increased interest rates charged on mortgages originated or renewed in future periods. Any inability to pass on any increased funding costs would negatively impact net interest margins.

Credit Quality

The loan portfolio remained strong with the level of credit losses and non-performing loans remaining low. Provision for credit losses (PCL) for the quarter was $3.4 million, compared to $2.4 million in Q4 2016 and a $4.3 million release in Q3 2017.

The annualized credit provision as a percentage of gross uninsured loans was 0.12%, compared to 0.07% in Q4 2016 and (0.14)% in Q3 2017.
- The increase in the PCL ratio over last year resulted from a specific provision of $2.2 million against one non-residential commercial mortgage. The negative PCL ratio in the third quarter resulted from the reduction of $6.5 million in the collective allowance for the non-residential commercial portfolio related to asset sales (see Note 5(H) of the consolidated financial statements for more information). In the absence of this reduction, the PCL ratio in Q3 2017 would have been 0.07%.
Net non-performing loans as a percentage of gross loans ended 2017 at 0.30%, compared to 0.28% at the end of Q3 2017 and unchanged from the end of 2016.
- Although the percentage of net non-performing loans over gross loans was consistent year over year and sequentially, there was a significant change in the mix of net non-performing residential and commercial mortgages.
- The net amount of non-performing non-residential commercial mortgages increased to $13.7 million at Q4 2017 from $4.5 million at Q4 2016 and $6.2 million at Q3 2017, and the net amount of non-performing single-family residential mortgages decreased to $30.1 million from $47.9 million at Q4 2016 and $36.1 million at Q3 2017.
- Total net non-performing loan balances decreased to $45.4 million at Q4 2017 from $53.7 million at Q4 2016 and increased from $43.6 million at Q3 2017.
The Company adopted IFRS 9 beginning January 1, 2018. The impact of the adoption of IFRS 9 is not expected to be significant. Additional information on the impacts of IFRS 9 will be made available in the Company's Report to Shareholders for the first quarter of 2018.

Capital Position

The Company maintained strong capital ratios well above Company targets and regulatory minimums at the end of 2017. Management continues to review opportunities to deploy capital in the most efficient manner to maximize shareholder value.

Home Trust's Common Equity Tier 1 and Total capital ratios remained very strong at 23.17% and 23.68%, respectively, at December 31, 2017. The comparative balances were 16.55% and 16.97%, respectively, at December 31, 2016.
Home Trust's Leverage ratio was 8.70% at December 31, 2017 and 7.20% at December 31, 2016.

Looking Forward

Looking to 2018, the Company's strong capital position and balance sheet, stable deposit funding base and ample liquidity provide a solid foundation for future investment in the business and to be competitive in the Canadian market.

Management is confident it is well-positioned to deliver sustainable loan growth as well as improved execution and service levels to increase market share. As the business grows, management and the Board are committed to the ongoing enhancement of risk management and corporate governance practices to grow the business responsibly. Creating long-term shareholder value and resuming Home Capital's nearly 30-year track record of profitable growth are priorities for the Company.

(signed)	(signed)
YOUSRY BISSADA	BRENDA EPRILE
President & Chief Executive Officer	Chair of the Board
February 14, 2018

The Company's 2017 Annual and Fourth Quarter Consolidated Financial Report, including Management's Discussion and Analysis, for the three and twelve months ended December 31, 2017 is available at www.homecapital.com and on the Canadian Securities Administrators' website at www.sedar.com.

Fourth Quarter and Year-End 2017 Results Conference Call and Webcast

The conference call will take place on Thursday, February 15, 2018, at 8:00 a.m. ET. Participants are asked to call approximately 10 minutes in advance at 647-427-7450 in Toronto or toll-free 1-888-231-8191 throughout North America. A webcast slide presentation will also be accessible in listen-only mode on Home Capital's website at www.homecapital.com in the Investor Relations section of the website.

Conference Call Archive

A telephone replay of the call will be available between 11:00 a.m. ET Thursday, February 15, 2018 and 12:00 a.m. ET Thursday, February 22, 2018 by calling 416-849-0833 or 1-855-859-2056 (enter passcode 8574149). The archived audio webcast will be available for 90 days on CNW Group's website at www.newswire.ca and Home Capital's website at www.homecapital.com.

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
		2017		2017		2016		2017		2016
OPERATING RESULTS
Net Income	$	30,619	$	29,983	$	50,706	$	7,527	$	247,396
Net Interest Income		91,718		88,762		120,620		302,930		485,164
Total Revenue¹		109,455		95,407		144,597		291,311		581,959
Diluted Earnings per Share	$	0.38	$	0.37	$	0.79	$	0.10	$	3.71
Return on Shareholders' Equity		6.8%		6.8%		12.6%		0.4%		15.1%
Return on Average Assets		0.7%		0.6%		1.0%		0.0%		1.2%
Net Interest Margin (TEB)²		2.02%		1.85%		2.38%		1.55%		2.37%
Provision as a Percentage of Gross Uninsured Loans (annualized)³		0.12%		(0.14)%		0.07%		0.07%		0.05%
Provision as a Percentage of Gross Loans (annualized)³		0.09%		(0.11)%		0.05%		0.05%		0.04%
Efficiency Ratio (TEB)²		59.8%		62.7%		48.8%		94.0%		40.8%
						As at
	December 31		September 30		December 31
		2017		2017		2016
BALANCE SHEET HIGHLIGHTS
Total Assets	$	17,591,143	$	18,856,294	$	20,528,777
Total Assets Under Administration⁴		25,040,182		26,659,330		28,917,534
Total Loans⁵		15,064,424		15,429,650		18,035,317
Total Loans Under Administration^4,5		22,513,463		23,232,686		26,424,074
Liquid Assets		1,654,718		2,657,055		2,067,981
Deposits		12,170,454		13,358,618		15,886,030
Shareholders' Equity		1,813,505		1,781,741		1,632,587
FINANCIAL STRENGTH
Capital Measures⁶
Risk-Weighted Assets	$	6,532,130	$	6,890,938	$	8,643,267
Common Equity Tier 1 Capital Ratio		23.17%		21.25%		16.55%
Tier 1 Capital Ratio		23.17%		21.25%		16.54%
Total Capital Ratio		23.68%		21.74%		16.97%
Leverage Ratio		8.70%		7.89%		7.20%
Credit Quality
Net Non-Performing Loans as a Percentage of Gross Loans		0.30%		0.28%		0.30%
Allowance as a Percentage of Gross Non-Performing Loans		79.5%		82.6%		73.4%
Share Information
Book Value per Common Share	$	22.60	$	22.20	$	25.36
Common Share Price – Close	$	17.31	$	13.89	$	31.34
Dividend paid during the period ended	$	-	$	-	$	0.26
Dividend Payout Ratio		-		-		32.9%
Market Capitalization	$	1,389,058	$	1,114,617	$	2,017,920
Number of Common Shares Outstanding		80,246		80,246		64,388

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

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

³Provision as a percentage of both gross uninsured loans and gross loans for the three months ended September 30, 2017 include a release of $6.5 million in the collective allowance (please see Note 5(H) to the audited consolidated financial statements included in the Company's 2017 Annual and Fourth Quarter Consolidated Financial Report). In the absence of this release, annualized provision for credit losses was 0.07% of gross uninsured loans and 0.06% of gross loans for the three months ended September 30, 2017.

⁴Total assets and loans under administration include both on- and off-balance sheet amounts.

⁵Total loans include loans held for sale.

⁶These figures relate to the Company's operating subsidiary, Home Trust Company.

Consolidated Balance Sheets
						As at
		December 31		September 30		December 31
thousands of Canadian dollars		2017		2017		2016
ASSETS
Cash and Cash Equivalents	$	1,336,138	$	1,058,940	$	1,205,394
Available for Sale Securities		332,468		523,482		534,924
Loans Held for Sale		165,947		74,207		77,918
Loans
Securitized mortgages		2,993,250		2,549,205		2,526,804
Non-securitized mortgages and loans		11,905,227		15,378,826		15,430,595
		14,898,477		17,928,031		17,957,399
Collective allowance for credit losses		(33,563)		(37,063)		(37,063)
		14,864,914		17,890,968		17,920,336
Other
Restricted assets		437,011		231,235		265,374
Derivative assets		7,325		52,178		37,524
Other assets		336,770		336,077		348,638
Deferred tax assets		9,577		16,362		16,914
Goodwill and intangible assets		100,993		133,581		121,755
		891,676		769,433		790,205
	$	17,591,143	$	20,317,030	$	20,528,777
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits
Deposits payable on demand	$	539,364	$	2,432,283	$	2,531,803
Deposits payable on a fixed date		11,631,090		13,261,819		13,354,227
		12,170,454		15,694,102		15,886,030
Securitization Liabilities
CMHC-sponsored mortgage-backed security liabilities		1,562,152		930,614		898,386
CMHC-sponsored Canada Mortgage Bond liabilities		1,473,318		1,610,482		1,637,117
Bank-sponsored securitization conduit liabilities		142,279		139,115		114,146
		3,177,749		2,680,211		2,649,649
Other
Derivative liabilities		38,728		959		3,490
Other liabilities		360,477		324,070		320,737
Deferred tax liabilities		30,230		38,210		36,284
		429,435		363,239		360,511
		15,777,638		18,737,552		18,896,190
Shareholders' Equity
Capital stock		231,156		83,975		84,910
Contributed surplus		4,978		4,588		4,562
Retained earnings		1,583,265		1,554,258		1,598,180
Accumulated other comprehensive loss		(5,894)		(63,343)		(55,065)
		1,813,505		1,579,478		1,632,587
	$	17,591,143	$	20,317,030	$	20,528,777

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			2017		2017		2016		2017		2016
Net Interest Income Non-Securitized Assets
Interest from loans		$	158,938	$	167,159	$	190,389	$	710,926	$	768,034
Dividends from securities			278		253		2,614		3,117		10,112
Other interest			6,417		4,303		2,514		15,267		11,073
			165,633		171,715		195,517		729,310		789,219
Interest on deposits and other			70,330		75,430		78,868		294,685		318,162
Interest and fees on line of credit facility			6,215		11,368		-		148,213		-
Net interest income non-securitized assets			89,088		84,917		116,649		286,412		471,057

Net Interest Income Securitized Loans and Assets
Interest income from securitized loans and assets			22,563		23,130		19,923		89,929		81,705
Interest expense on securitization liabilities			19,933		19,285		15,952		73,411		67,598
Net interest income securitized loans and assets			2,630		3,845		3,971		16,518		14,107

Total Net Interest Income			91,718		88,762		120,620		302,930		485,164
Provision for credit losses			3,434		(4,257)		2,400		7,516		7,890
			88,284		93,019		118,220		295,414		477,274
Non-Interest Income (Loss)
Fees and other income			16,346		18,087		17,613		67,932		71,329
Securitization income			1,695		2,525		9,064		12,529		33,797
Gain on acquisition of CFF Bank			-		-		-		-		651
Net realized and unrealized losses on securities			-		(13,155)		-		(90,070)		(175)
Net realized and unrealized losses on derivatives			(304)		(812)		(2,700)		(2,010)		(8,807)
			17,737		6,645		23,977		(11,619)		96,795
			106,021		99,664		142,197		283,795		574,069

Non-Interest Expenses
Salaries and benefits			17,063		22,610		24,134		98,595		101,880
Premises			3,478		3,283		3,607		13,878		14,505
Other operating expenses			44,949		34,031		43,287		162,407		122,554
			65,490		59,924		71,028		274,880		238,939

Income Before Income Taxes			40,531		39,740		71,169		8,915		335,130
Income taxes
	Current		8,160		5,839		22,941		(2,475)		90,895
	Deferred		1,752		3,918		(2,478)		3,863		(3,161)
			9,912		9,757		20,463		1,388	-	87,734
NET INCOME		$	30,619	$	29,983	$	50,706	$	7,527	$	247,396

NET INCOME PER COMMON SHARE
Basic		$	0.38	$	0.37	$	0.79	$	0.10	$	3.71
Diluted		$	0.38	$	0.37	$	0.79	$	0.10	$	3.71
AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
Basic			80,246		80,246		64,479		72,349		66,601
Diluted			80,286		80,246		64,519		72,358		66,668

Total number of outstanding common shares			80,246		80,246		64,388		80,246		64,388
Book value per common share		$	22.60	$	22.20	$	25.36	$	22.60	$	25.36

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	2017		2017		2016		2017		2016

NET INCOME	$	30,619	$	29,983	$	50,706	$	7,527	$	247,396

OTHER COMPREHENSIVE INCOME

Available for Sale Securities and Retained Interests
Net unrealized gains		1,431		1,483		12,774		19,878		11,852
Net losses reclassified to net income		-		-		-		46,650		204
		1,431		1,483		12,774		66,528		12,056
Income tax expense		378		394		3,391		17,644		3,179
		1,053		1,089		9,383		48,884		8,877

Cash Flow Hedges
Net unrealized gains (losses)		356		(467)		(1,677)		(721)		1,035
Net (gains) losses reclassified to net income		(68)		287		174		1,120		1,147
		288		(180)		(1,503)		399		2,182
Income tax expense (recovery)		78		(50)		(398)		112		580
		210		(130)		(1,105)		287		1,602

Total other comprehensive income		1,263		959		8,278		49,171		10,479

COMPREHENSIVE INCOME	$	31,882	$	30,942	$	58,984	$	56,698	$	257,875

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, 2016		$	84,910	$	4,562	$	1,598,180	$	(53,589)	$	(1,476)	$	(55,065)	$	1,632,587
Comprehensive income			-		-		7,527		48,884		287		49,171		56,698
Stock options settled			548		(141)		-		-		-		-		407
Amortization of fair value of
	employee stock options		-		557		-		-		-		-		557
Repurchase of shares			(267)		-		(5,732)		-		-		-		(5,999)
Issuance of shares			145,965		-		-		-		-		-		145,965
Dividends
($0.26 per share)			-		-		(16,710)		-		-		-		(16,710)
Balance at December 31, 2017		$	231,156	$	4,978	$	1,583,265	$	(4,705)	$	(1,189)	$	(5,894)	$	1,813,505

Balance at December 31, 2015		$	90,247	$	3,965	$	1,607,833	$	(62,466)	$	(3,078)	$	(65,544)	$	1,636,501
Comprehensive income			-		-		247,396		8,877		1,602		10,479		257,875
Stock options settled			1,984		(530)		-		-		-		-		1,454
Amortization of fair value of
	employee stock options		-		1,127		-		-		-		-		1,127
Repurchase of shares			(7,321)		-		(191,875)		-		-		-		(199,196)
Dividends
($0.98 per share)			-		-		(65,174)		-		-		-		(65,174)
Balance at December 31, 2016		$	84,910	$	4,562	$	1,598,180	$	(53,589)	$	(1,476)	$	(55,065)	$	1,632,587

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			2017		2016		2017		2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income for the year		$	30,619	$	50,706	$	7,527	$	247,396
Adjustments to determine cash flows relating to operating activities:
	Amortization of net discount on securities		-		(79)		(330)		(458)
	Provision for credit losses		3,434		2,400		7,516		7,890
	Loss on sale of loan portfolio		-		-		18,160		-
	Gain on sale of mortgages or residual interest		(163)		(7,006)		(5,695)		(26,972)
	Net realized and unrealized losses on securities		-		-		71,910		175
	Amortization and impairment losses¹		12,035		18,104		34,345		29,686
	Amortization of fair value of employee stock options		(118)		322		557		1,127
	Deferred income taxes		1,752		(2,478)		3,863		(3,161)
Changes in operating assets and liabilities
	Loans, net of gains or losses on securitization and sales		361,955		(28,184)		2,947,462		253,837
	Restricted assets		(147,141)		(34,139)		(171,637)		(69,453)
	Derivative assets and liabilities		10,676		15,682		65,836		27,497
	Accrued interest receivable		1,385		(506)		10,613		2,668
	Accrued interest payable		5,435		(1,855)		3,666		(1,312)
	Deposits		(1,188,164)		191,928		(3,715,576)		220,072
	Securitization liabilities		(76,930)		(30,562)		528,100		(130,907)
	Taxes receivable or payable and other		(13,922)		(1,489)		13,086		2,757
Cash flows (used in) provided by operating activities			(999,147)		172,844		(180,597)		560,842
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of shares			-		-		145,965		-
Repurchase of shares			-		(5,678)		(5,999)		(199,196)
Exercise of employee stock options			-		856		407		1,454
Repayment of senior debt			-		-		-		(150,000)
Dividends paid to shareholders			-		(16,770)		(16,710)		(65,174)
Cash flows (used in) provided by financing activities			-		(21,592)		123,663		(412,916)
CASH FLOWS FROM INVESTING ACTIVITIES
Activity in securities
	Purchases		(73,168)		(2,978)		(378,123)		(203,674)
	Proceeds from sales		-		-		491,883		-
	Proceeds from maturities		73,701		3,992		84,919		132,932
Purchases of capital assets			(314)		(460)		(1,715)		(2,550)
Capitalized intangible development costs and acquisition of intangible assets			(2,693)		(5,352)		(9,286)		(19,089)
Cash flows (used in) provided by investing activities			(2,474)		(4,798)		187,678		(92,381)
Net increase in cash and cash equivalents during the year			(1,001,621)		146,454		130,744		55,545
Cash and cash equivalents at beginning of the year			-		612,218		1,205,394		1,149,849
Cash and Cash Equivalents at End of the Year		$	(1,001,621)	$	758,672	$	1,336,138	$	1,205,394
Supplementary Disclosure of Cash Flow Information
Dividends received on investments		$	274	$	1,898	$	4,542	$	10,037
Interest received			189,307		212,920		825,030		863,321
Interest paid			95,413		96,675		512,643		388,440
Income taxes paid			6,988		16,314		3,002		84,559
¹ Amortization and impairment losses include amortization on capital and intangible assets and impairment losses on intangible assets and goodwill.


Net Interest Margin

	For the three months ended			For the year ended
	December 31	September 30	December 31	December 31	December 31
	2017	2017	2016	2017	2016
Net interest margin non-securitized interest-earning assets (non-TEB)	2.46%	2.21%	2.71%	1.79%	2.71%
Net interest margin non-securitized interest-earning assets (TEB)	2.46%	2.21%	2.73%	1.80%	2.73%
Net interest margin CMHC-sponsored securitized assets	0.30%	0.43%	0.53%	0.48%	0.47%
Net interest margin bank-sponsored securitization conduit assets	0.99%	1.17%	1.90%	1.37%	1.90%
Total net interest margin (non-TEB)	2.02%	1.85%	2.36%	1.54%	2.35%
Total net interest margin (TEB)	2.02%	1.85%	2.38%	1.55%	2.37%
Spread of non-securitized loans over deposits and credit facilities	2.84%	2.62%	2.86%	1.96%	2.91%

Net Interest Income
							For the three months ended
	December 31, 2017			September 30, 2017			December 31, 2016
(000s, except %)		Income/	Average		Income/	Average		Income/	Average
		Expense	Rate¹		Expense	Rate¹		Expense	Rate¹
Assets
Cash resources and securities	$	6,695	1.12%	$	4,556	0.75%	$	5,128	1.31%
Traditional single-family residential mortgages		115,118	4.88%		122,489	4.82%		131,029	4.75%
ACE Plus single-family residential mortgages		3,732	3.94%		3,612	3.62%		3,344	3.38%
Accelerator single-family residential mortgages²		3,442	3.72%		2,763	3.98%		6,505	2.24%
Residential commercial mortgages		1,881	4.98%		2,063	5.98%		4,291	3.99%
Non-residential commercial mortgages		16,257	6.25%		18,777	6.12%		28,233	5.93%
Credit card loans and lines of credit		8,021	9.03%		8,327	8.99%		8,389	9.02%
Other consumer retail loans		10,487	11.39%		9,128	10.11%		8,598	9.32%
Total non-securitized loans		158,938	5.25%		167,159	5.16%		190,389	4.86%
Taxable equivalent adjustment		100	-		91	-		944	-
Total non-securitized assets		165,733	4.57%		171,806	4.47%		196,461	4.56%
CMHC-sponsored securitized single-family residential mortgages		13,891	2.40%		13,718	2.27%		11,115	2.50%
CMHC-sponsored securitized multi-unit residential mortgages		7,115	5.04%		7,718	5.31%		7,197	4.63%
Assets pledged as collateral for CMHC-sponsored securitization		343	1.20%		122	0.68%		495	1.35%
Total CMHC-sponsored securitized residential mortgages		21,349	2.85%		21,558	2.81%		18,807	2.96%
Bank-sponsored securitization conduit assets		1,214	2.98%	$	1,572	3.26%	$	1,116	3.53%
Total assets	$	188,296	4.15%		194,936	4.06%		216,384	4.24%
Liabilities and shareholders' equity
Deposits and credit facilities	$	76,545	2.41%	$	86,798	2.54%	$	78,868	2.00%
CMHC-sponsored securitization liabilities		19,121	2.51%		18,277	2.37%		15,438	2.41%
Bank-sponsored securitization conduit liabilities		812	2.04%		1,008	2.16%		514	1.61%
Other liabilities and shareholders' equity		-	-		-	-		-	-
Total liabilities and shareholders' equity	$	96,478	2.13%	$	106,083	2.21%	$	94,820	1.86%
Net Interest Income (TEB)	$	91,818		$	88,853		$	121,564
Taxable Equivalent Adjustment		(100)			(91)			(944)
Net Interest Income per Financial Statements	$	91,718		$	88,762		$	120,620

			2017			2016
(000s, except %)		Income/	Average		Income/	Average
		Expense	Rate¹		Expense	Rate¹
Assets
Cash resources and securities	$	18,384	0.94%	$	21,185	1.25%
Traditional single-family residential mortgages		500,278	4.75%		540,522	4.84%
ACE Plus single-family residential mortgages		14,284	3.61%		11,490	3.31%
Accelerator single-family residential mortgages²		13,974	2.81%		30,935	2.38%
Residential commercial mortgages		13,173	4.84%		17,614	4.12%
Non-residential commercial mortgages		97,421	6.03%		102,465	6.01%
Credit card loans and lines of credit		33,328	8.93%		33,536	8.99%
Other consumer retail loans		38,468	10.11%		31,472	9.22%
Total non-securitized loans		710,926	5.05%		768,034	4.90%
Taxable equivalent adjustment		1,125	-		3,654	-
Total non-securitized assets		730,435	4.56%		792,873	4.56%
CMHC-sponsored securitized single-family residential mortgages		52,053	2.35%		46,642	2.60%
CMHC-sponsored securitized multi-unit residential mortgages		30,782	5.25%		29,866	4.58%
Assets pledged as collateral for CMHC-sponsored securitization		943	1.17%		2,246	0.96%
Total CMHC-sponsored securitized residential mortgages		83,778	2.91%		78,754	2.94%
Bank-sponsored securitization conduit assets		6,151	3.22%		2,951	3.43%
Total assets	$	820,364	4.19%	$	874,578	4.24%
Liabilities and shareholders' equity
Deposits and credit facilities	$	442,898	3.09%	$	315,919	1.99%
Senior debt		-	-		2,243	3.91%
CMHC-sponsored securitization liabilities		69,872	2.41%		66,278	2.44%
Bank-sponsored securitization conduit liabilities		3,539	1.88%		1,320	1.58%
Other liabilities and shareholders' equity		-	-		-	-
Total liabilities and shareholders' equity	$	516,309	2.64%	$	385,760	1.87%
Net Interest Income (TEB)	$	304,055		$	488,818
Taxable Equivalent Adjustment		(1,125)			(3,654)
Net Interest Income per Financial Statements	$	302,930		$	485,164

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

² 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)			2017		2017		2016		2017		2016
Single-family residential mortgages
	Traditional	$	515,699	$	201,131	$	1,325,896	$	2,875,535	$	4,991,051
	ACE Plus		21,713		1,541		106,477		185,283		407,767
	Accelerator		28,635		21,292		346,690		281,773		1,622,003
Residential commercial mortgages
	Multi-unit uninsured residential mortgages		17,568		-		53,999		71,854		142,026
	Multi-unit insured residential mortgages		177,224		99,054		293,306		599,843		956,406
	Other¹		-		-		24,179		6,815		50,772
Non-residential commercial mortgages
	Stores and apartments		1,870		-		14,878		45,499		80,888
	Commercial		109,343		62,047		262,423		654,247		974,864
Total mortgage advances		$	872,052	$	385,065	$	2,427,848	$	4,720,849	$	9,225,777

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, 2017			September 30, 2017			December 31, 2016
		% of Gross			% of Gross			% of Gross
	Amount		Loans ¹	Amount		Loans¹	Amount		Loans¹
Provision²
Single-family residential mortgages	$	266	0.01%	$	1,165	0.04%	$	1,029	0.03%
Residential commercial mortgages		(9)	(0.03)%		6	0.02%		2	0.00%
Non-residential commercial mortgages³		2,584	0.99%		202	0.08%		45	0.01%
Credit card loans and lines of credit		485	0.55%		756	0.83%		1,164	1.26%
Other consumer retail loans		108	0.12%		114	0.12%		160	0.17%
Securitized single-family residential mortgages		-	-		-	-		-	-
Securitized multi-unit residential mortgages		-	-		-	-		-	-
Total individual provision		3,434	0.09%		2,243	0.06%		2,400	0.05%
Total collective provision		-	-		(6,500)	(0.17)%		-	-
Total provision	$	3,434	0.09%	$	(4,257)	(0.11)%	$	2,400	0.05%
Net Write-Offs²
Single-family residential mortgages	$	489	0.02%	$	506	0.02%	$	440	0.01%
Residential commercial mortgages		17	0.06%		4	0.02%		2	0.00%
Non-residential commercial mortgages		14	0.01%		33	0.01%		(5)	(0.00)%
Credit card loans and lines of credit⁴		3,288	3.74%		637	0.70%		469	0.51%
Other consumer retail loans		138	0.15%		73	0.08%		48	0.05%
Securitized single-family residential mortgages		-	-		-	-		-	-
Securitized multi-unit residential mortgages		-	-		-	-		-	-
Net write-offs	$	3,946	0.11%	$	1,253	0.03%	$	954	0.02%


(000s, except %)	2017			2016
		% of Gross			% of Gross
	Amount		Loans¹	Amount		Loans¹
Provision²
Single-family residential mortgages	$	1,891	0.02%	$	3,917	0.03%
Residential commercial mortgages		16	0.01%		2	0.00%
Non-residential commercial mortgages³		3,196	0.31%		246	0.01%
Credit card loans and lines of credit		5,387	1.53%		2,379	0.64%
Other consumer retail loans		526	0.15%		532	0.14%
Securitized single-family residential mortgages		-	-		-	-
Securitized multi-unit residential mortgages		-	-		-	-
Total individual provision		11,016	0.07%		7,076	0.04%
Total collective provision		(3,500)	(0.02)%		814	0.00%
Total provision	$	7,516	0.05%	$	7,890	0.04%
Net Write-Offs²
Single-family residential mortgages	$	2,467	0.02%	$	3,087	0.02%
Residential commercial mortgages		16	0.01%		2	0.00%
Non-residential commercial mortgages		96	0.01%		515	0.03%
Credit card loans and lines of credit⁴		5,710	1.62%		1,928	0.52%
Other consumer retail loans		666	0.18%		275	0.07%
Securitized single-family residential mortgages		-	-		-	-
Securitized multi-unit residential mortgages		-	-		-	-
Net write-offs	$	8,955	0.06%	$	5,807	0.03%

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

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

³ Provision for credit losses includes an individual provision of $2.2 million in Q4 2017 and $2.5 million for the year resulting from a non-residential commercial property that is not considered to be indicative of increased credit exposure in the remainder of the portfolio.

⁴ Write-offs for credit card loans for the three months ended December 31, 2017 includes $2.3 million related to the non-core prepaid card business which was recognized in provision for credit losses in the first quarter of 2017.

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

(000s, except %)								As at December 31, 2017
	British
	Columbia		Alberta		Ontario		Quebec			Other		Total
Securitized single-family residential mortgages¹	$	228,024	$	278,110	$	1,666,337	$	84,977	$	177,760	$	2,435,208
Securitized multi-unit residential mortgages		84,860		44,728		227,686		45,664		155,104		558,042
Total securitized mortgages		312,884		322,838		1,894,023		130,641		332,864		2,993,250
Single-family residential mortgages		525,998		366,537		8,687,274		251,240		204,473		10,035,522
Residential commercial mortgages²		9,819		1,924		96,817		3,037		2,760		114,357
Non-residential commercial mortgages		18,853		10,638		986,723		24,190		2,449		1,042,853
Credit card loans and lines of credit		6,193		17,183		321,114		1,473		5,642		351,605
Other consumer retail loans		1,948		11,476		330,119		195		17,152		360,890
Total non-securitized mortgages and loans³		562,811		407,758		10,422,047		280,135		232,476		11,905,227
	$	875,695	$	730,596	$	12,316,070	$	410,776	$	565,340	$	14,898,477
As a % of portfolio		5.9%		4.9%		82.6%		2.8%		3.8%		100.0%

(000s, except %)										As at September 30, 2017
		British
		Columbia		Alberta		Ontario		Quebec		Other		Total
Securitized single-family residential mortgages¹	$	243,686	$	278,181	$	1,776,505	$	89,518	$	175,379	$	2,563,269
Securitized multi-unit residential mortgages		85,277		45,009		238,250		46,168		155,933		570,637
Total securitized mortgages		328,963		323,190		2,014,755		135,686		331,312		3,133,906
Single-family residential mortgages		554,951		359,120		9,044,266		261,728		179,204		10,399,269
Residential commercial mortgages²		9,751		3,789		83,033		3,039		75		99,687
Non-residential commercial mortgages		3,783		13,631		997,287		15,738		2,510		1,032,949
Credit card loans and lines of credit		6,515		17,674		330,256		1,549		5,793		361,787
Other consumer retail loans		2,088		16,963		330,142		218		12,321		361,732
Total non-securitized mortgages and loans³		577,088		411,177		10,784,984		282,272		199,903		12,255,424
	$	906,051	$	734,367	$	12,799,739	$	417,958	$	531,215	$	15,389,330
As a % of portfolio		5.9%		4.8%		83.2%		2.7%		3.5%		100.0%

(000s, except %)										As at December 31, 2016
		British
		Columbia		Alberta		Ontario		Quebec		Other		Total
Securitized single-family residential mortgages¹	$	200,882	$	211,131	$	1,298,919	$	68,229	$	127,450	$	1,906,611
Securitized multi-unit residential mortgages		86,479		45,819		281,923		47,638		158,334		620,193
Total securitized mortgages		287,361		256,950		1,580,842		115,867		285,784		2,526,804
Single-family residential mortgages		688,939		401,820		10,796,570		326,253		208,426		12,422,008
Residential commercial mortgages²		15,387		21,271		232,819		24,058		11,653		305,188
Non-residential commercial mortgages		48,335		58,688		1,795,461		35,820		16,516		1,954,820
Credit card loans and lines of credit		7,548		20,265		333,903		1,253		6,709		369,678
Other consumer retail loans		950		20,492		354,356		-		3,103		378,901
Total non-securitized mortgages and loans³		761,159		522,536		13,513,109		387,384		246,407		15,430,595
	$	1,048,520	$	779,486	$	15,093,951	$	503,251	$	532,191	$	17,957,399
As a % of portfolio		5.8%		4.3%		84.1%		2.8%		3.0%		100.0%

¹ Securitized single-family residential mortgages include both CMHC-sponsored securitized insured mortgages and bank-sponsored securitization conduit uninsured mortgages.

² Residential commercial mortgages include non-securitized multi-unit residential mortgages and commercial mortgages secured by residential property types.

³ Loans exclude mortgages held for sale.

Impaired Loans and Individual Allowances for Credit Losses

(000s, except %)						As at December 31, 2017
	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	$	31,836	$	-	$	16,489	$	2,038	$	276	$	50,639
Individual allowances on principal		(1,729)		-		(2,750)		(457)		(276)		(5,212)
Net amount of impaired loans	$	30,107	$	-	$	13,739	$	1,581	$	-	$	45,427
Net impaired loans as a % of gross loans		0.30%		-		1.31%		0.45%		-		0.30%

(000s, except %)									As at September 30, 2017
		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	$	37,978	$	337	$	6,521	$	4,230	$	304	$	49,370
Individual allowances on principal		(1,860)		-		(300)		(3,260)		(304)		(5,724)
Net amount of impaired loans	$	36,118	$	337	$	6,221	$	970	$	-	$	43,646
Net impaired loans as a % of gross loans		0.35%		-		0.60%		0.27%		-		0.28%

(000s, except %)									As at December 31, 2016
		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	$	49,834	$	-	$	4,577	$	2,049	$	411	$	56,871
Individual allowances on principal		(1,980)		-		(30)		(780)		(411)		(3,201)
Net amount of impaired loans	$	47,854	$	-	$	4,547	$	1,269	$	-	$	53,670
Net impaired loans as a % of gross loans		0.39%		0.00%		0.23%		0.34%		-		0.30%

Allowance for Credit Losses

(000s)						For the three months ended December 31, 2017
	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	$	1,860	$	-	$	300	$	3,260	$	304	$	5,724
Provision for credit losses		358		17		2,464		485		110		3,434
Write-offs¹		(760)		(17)		(21)		(3,366)		(186)		(4,350)
Recoveries		271		-		7		78		48		404
		1,729		-		2,750		457		276		5,212
Allowance on accrued interest receivable
Balance at the beginning of the period		1,108		26		358		-		9		1,501
Provision for credit losses		(92)		(26)		120		-		(2)		-
		1,016		-		478		-		7		1,501
Total individual allowance		2,745		-		3,228		457		283		6,713
Collective allowance
Balance at the beginning of the period		23,032		327		6,000		3,904		300		33,563
Provision for credit losses²		(2,692)		-		-		(808)		3,500		-
		20,340		327		6,000		3,096		3,800		33,563
Total allowance	$	23,085	$	327	$	9,228	$	3,553	$	4,083	$	40,276
Total provision	$	(2,426)	$	(9)	$	2,584	$	(323)	$	3,608	$	3,434

(000s)						For the three months ended September 30, 2017
	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	$	1,302	$	-	$	141	$	3,141	$	264	$	4,848
Provision for credit losses		1,064		4		192		756		113		2,129
Write-offs		(651)		(4)		(33)		(705)		(136)		(1,529)
Recoveries		145		-		-		68		63		276
		1,860		-		300		3,260		304		5,724
Allowance on accrued interest receivable
Balance at the beginning of the period		1,007		24		348		-		8		1,387
Provision for credit losses		101		2		10		-		1		114
		1,108		26		358		-		9		1,501
Total individual allowance		2,968		26		658		3,260		313		7,225
Collective allowance
Balance at the beginning of the period		23,032		327		12,500		3,904		300		40,063
Provision for credit losses²		-		-		(6,500)		-		-		(6,500)
		23,032		327		6,000		3,904		300		33,563
Total allowance	$	26,000	$	353	$	6,658	$	7,164	$	613	$	40,788
Total provision	$	1,165	$	6	$	(6,298)	$	756	$	114	$	(4,257)

(000s)						For the three months ended December 31, 2016
	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	$	1,637	$	-	$	20	$	85	$	302	$	2,044
Provision for credit losses		783		2		5		1,164		157		2,111
Write-offs		(619)		(2)		(5)		(493)		(126)		(1,245)
Recoveries		179		-		10		24		78		291
		1,980		-		30		780		411		3,201
Allowance on accrued interest receivable
Balance at the beginning of the period		1,095		-		58		-		9		1,162
Provision for credit losses		246		-		40		-		3		289
		1,341		-		98		-		12		1,451
Total individual allowance		3,321		-		128		780		423		4,652
Collective allowance
Balance at the beginning of the period		23,032		327		9,500		3,904		300		37,063
Provision for credit losses		-		-		-		-		-		-
		23,032		327		9,500		3,904		300		37,063
Total allowance	$	26,353	$	327	$	9,628	$	4,684	$	723	$	41,715
Total provision	$	1,029	$	2	$	45	$	1,164	$	160	$	2,400

(000s)						2017
	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	$	1,980	$	-	$	30	$	780	$	411	$	3,201
Provision for credit losses		2,216		16		2,816		5,387		531		10,966
Write-offs		(3,120)		(21)		(103)		(5,968)		(847)		(10,059)
Recoveries		653		5		7		258		181		1,104
		1,729		-		2,750		457		276		5,212
Allowance on accrued interest receivable
Balance at the beginning of the year		1,341		-		98		-		12		1,451
Provision for credit losses		(325)		-		380		-		(5)		50
		1,016		-		478		-		7		1,501
Total individual allowance		2,745		-		3,228		457		283		6,713
Collective allowance
Balance at the beginning of the year		23,032		327		9,500		3,904		300		37,063
Provision for credit losses²		(2,692)		-		(3,500)		(808)		3,500		(3,500)
		20,340		327		6,000		3,096		3,800		33,563
Total allowance	$	23,085	$	327	$	9,228	$	3,553	$	4,083	$	40,276
Total provision	$	(801)	$	16	$	(304)	$	4,579	$	4,026	$	7,516

(000s)						2016
	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	$	1,652	$	-	$	340	$	329	$	161	$	2,482
Provision for credit losses		3,415		2		205		2,379		525		6,526
Write-offs		(3,608)		(2)		(537)		(2,117)		(519)		(6,783)
Recoveries		521		-		22		189		244		976
		1,980		-		30		780		411		3,201
Allowance on accrued interest receivable
Balance at the beginning of the year		839		-		57		-		5		901
Provision for credit losses		502		-		41		-		7		550
		1,341		-		98		-		12		1,451
Total individual allowance		3,321		-		128		780		423		4,652
Collective allowance
Balance at the beginning of the year		22,232		327		9,500		3,890		300		36,249
Provision for credit losses		800		-		-		14		-		814
		23,032		327		9,500		3,904		300		37,063
Total allowance	$	26,353	$	327	$	9,628	$	4,684	$	723	$	41,715
Total provision	$	4,717	$	2	$	246	$	2,393	$	532	$	7,890


¹ Write-offs in the credit card and line of credit portfolio include $2.3 million related to the non-core prepaid card business that was recognized as provision for credit losses in Q1 2017.
² The following changes were recognized in the collective allowance:
•	Single-family residential mortgage portfolio – reduction of $2.7 million reflecting the decrease in the portfolio size, decreased loss rates and continued low levels of loans in arrears.
•	Non-residential commercial mortgages portfolio – net reduction of $3.5 million comprises a reduction of $6.5 million reflecting the sale of mortgages from this portfolio (please see Note 5(H) to the audited consolidated financial statements included in the Company's 2017 Annual and Fourth Quarter Consolidated Financial Report) offset partially by an increase of $3.0 million reflecting an increase in the construction and land segment of that portfolio.
•	Credit card loans and lines of credit portfolio – reduction of $0.8 million reflecting the decrease in the portfolio size, decreased loss rates and continued low levels of loans in arrears.
•	Other consumer retail loans portfolio – increase of $3.5 million reflects recent settlement experience related to cash reserves on certain programs within this portfolio.

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

Securitization Activities

(000s)										For the three months ended
				December 31					September 30
						2017						2017
	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	$	-	$	51,869	$	51,869	$	-	$	58,905	$	58,905
Net gains on sale of mortgages or residual interest¹		-		163		163		-		434		434
Retained interests recorded		-		2,730		2,730		-		2,349		2,349
Servicing liability recorded		-		444		444		-		480		480

(000s)								For the three months ended
									December 31
												2016
							Single-family		Multi-unit
							Residential MBS		Residential MBS		Total MBS
Carrying value of underlying mortgages derecognized							$	392,298	$	314,985	$	707,283
Net gains on sale of mortgages or residual interest¹								4,284		2,722		7,006
Retained interests recorded								-		10,004		10,004
Servicing liability recorded								-		2,408		2,408

(000s)		2017						2016
	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	$	288,458	$	510,813	$	799,271	$	1,490,850	$	1,046,457	$	2,537,307
Net gains on sale of mortgages or residual interest¹		2,084		3,611		5,695		17,368		9,604		26,972
Retained interests recorded		-		20,815		20,815		-		41,900		41,900
Servicing liability recorded		-		4,943		4,943		-		8,955		8,955

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


(000s)				For the three months ended
	December 31, 2017			September 30, 2017		December 31, 2016
Net gain on sale of mortgages and residual interest¹		$	163	$	434	$	7,006
Net change in unrealized gain or loss on hedging activities			(137)		349		276
Servicing income			1,669		1,742		1,782
Total securitization income		$	1,695	$	2,525	$	9,064

(000s)					2017		2016
Net gain on sale of mortgages and residual interest ¹				$	5,695	$	26,972
Net change in unrealized gain or loss on hedging activities					(247)		399
Servicing income					7,081		6,426
Total securitization income				$	12,529	$	33,797

¹ Gains on sale of mortgages and 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 2017 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 2017 Annual and Fourth Quarter Consolidated Financial Report.

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 Company's 2017 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 in the Annual Report. Forward-looking statements are typically identified by words such as "will," "believe," "expect," "anticipate," "intend," "should," "estimate," "plan," "forecast," "may," and "could" or other similar expressions.

By their very nature, these statements require the Company to make assumptions and are subject to inherent risks and uncertainty, general and specific, which may cause actual results to differ materially from the expectations expressed in the forward-looking statements. These risks and uncertainties include, but are not limited to, global capital market activity, changes in government monetary and economic policies, changes in interest rates, inflation levels and general economic conditions, legislative and regulatory developments, competition and technological change. 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 2018 and its effect on Home Capital's business are material factors the Company considers when setting its performance goals, strategic priorities and outlook. In determining expectations for economic growth, both broadly and in the financial services sector, the Company primarily considers historical and forecasted economic data provided by the Canadian government and its agencies. In setting and reviewing its strategic priorities and outlook for 2018, management's expectations continue to assume:

The Canadian economy is expected to be relatively stable in 2018, supported by expanded Federal Government spending.
Generally, the Company expects stable employment conditions in its established regions. Also, the Company expects inflation will generally be within the Bank of Canada's target of 1% to 3%, leading to stable credit losses and demand for the Company's lending products in its established regions.
The Canadian economy will continue to be influenced by the economic conditions in the United States and global markets and further adjustments in commodity prices; as such, the Company is prepared for the variability that may result.
While the Company is assuming that interest rates will experience modest increases in 2018, the impact of such increases is not expected to be material. The level of interest rates is expected to continue to support relatively low mortgage interest rates for the foreseeable future.
The Company believes that the current and expected levels of housing activity indicate a relatively stable real estate market overall. Please see Market Conditions under the 2018 Overall Outlook section of the Company's 2017 Annual and Fourth Quarter Consolidated Financial Report for more discussion on the Company's expectations for the housing market.
The Company expects that consumer debt levels, while elevated, will remain serviceable by Canadian households.
The Company will have access to the mortgage and deposit markets through broker networks.

Non-GAAP Measures

The Company has adopted IFRS as its accounting framework. IFRS are the generally accepted accounting principles (GAAP) for Canadian publicly accountable enterprises for years beginning on or after January 1, 2011. The Company uses a number of financial measures to assess its performance. Some of these measures are not calculated in accordance with GAAP, are not defined by GAAP, and do not have standardized meanings that would ensure consistency and comparability between companies using these measures. Definitions of non-GAAP measures can be found under Non-GAAP Measures in the Management's Discussion and Analysis included in of the Company's 2017 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.

About Home Capital

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

SOURCE Home Capital Group Inc.

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