Home Capital Group Inc.

Thank you for standing by. Welcome to the Home Capital Group first quarter financial results conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Jill McCrae, with Investor Relations. Thank you. Please go ahead.

Thank you, Chelsea. Good morning, everyone, and thank you for joining us today. Our agenda for today's investor presentation is as follows. We'll begin the call with remarks from Yusri Basada, Homes President and CEO. Our CFO, Brad Kodesh, will then review our financial performance, which will be followed by a question and answer period for all participants. We have members of our senior management team with us on the call to help answer your questions. On behalf of those speaking today, I note that this call may contain forward-looking statements and that actual results could differ materially from forecasts, projections, or conclusions in these statements. Please refer to our advisory and forward-looking statements on slide two of the presentation. I would also remind listeners that HOME uses non-GAAP financial measures to arrive at adjusted results, and that management will be referring to both reported and adjusted results in their remarks. And now, I'd like to turn the call over to Yusri Basada.

YUSRI BASADA Good morning, and thank you for joining us for our first quarter conference call. Today, I'll discuss the results for the quarter and some of our strategic objectives for the remainder of 2021 relating to underwriting, funding, update on our Ignite program, and capital optimization. We had a good start to the year. We continue to see the effects of strong housing demand in our major markets. Sales figures and transaction prices are significantly higher than in 2020. We expect this trend to continue in the near term as early indications of a healthy spring housing market will be compared to April and May of 2020, when the economy first went into lockdown. At that time, there was early evidence of uncertainty around the progress of COVID-19 and the direction of the economy. Home responded with a number of strategic decisions to prepare the company for this uncertain future. The first decision was to move to a work from home model. This was accomplished quickly and seamlessly with our primary concerns being for employee health, health and safety, and for customer service and data security. The second was a shift to what we call pandemic underwriting conditions. This meant a change in our risk appetite for both residential and commercial loans. On the residential side, we reduced our maximum loan to value criteria in certain geographic areas. In other geographic areas, we stopped underwriting altogether. We used extra due diligence in the income verification efforts for our small business customers that were working in a location-based people-gathering industries. In our commercial underwriting, we pulled back significantly from properties in areas like hotel, restaurant, and retail. We did this consistent with our sustainable risk culture and to ensure homes resilience in the face of the pandemic. The third decision was to build our reserves for future credit losses. This led to significant additions to our loan loss allowances in the first and second quarter of last year. Now let me update you on where we stand with each of these decisions today and our outlook for the rest of 2021. First, with the exception of a few essential workers, we're still working from home. We have learned a lot about our employees, their capabilities and concerns, and how they are all balancing work with family obligations. In spite of this, our employee organization health surveys continue to go up. Our team wants to know when we will be back in the office and whether we will require everyone to come back full time. Right now, we don't have all the answers to these important questions. except to say that we will follow public health guidelines and also consider our experiences from the past year, input from our business leaders and ongoing support for mental health. We believe that some form of new hybrid model of a mix of work from home and the office will be the way back and that it will likely take some time to settle into the new normal. Second, Our pandemic underwriting guidelines are still in place, but are currently under review. We will determine as to when to relax these standards in stages to get back to our normal guidelines over time commencing this year. The economy has posted an impressive recovery in the last 12 months. While there's still uncertainty about the presence of the variants of concern, we have reason to be optimistic about the progress of vaccinations and the effectiveness of public health measures. In addition, we continue to manage the fast rise of home values with prudent guidelines around maximum loan to value. Even under pandemic underwriting conditions, home was still the leader in alternative mortgage lending originations due to our commitment to excellent service and the engagement of our broker partners. We believe we have a compelling opportunity for even more growth in this market through the rest of 2021. Looking beyond this year, there is a growing pool of consumer saving and higher employment and immigration targets for the next three years are the highest in history. We believe this will lead to a healthy market in mortgages and specifically strong growth in the Alt-A segment of mortgages. Finally, we're reversing some of the earlier provisions we took against future credit losses as the expectations arising from our third-party economic models continue to improve. Brad will discuss this in more detail in his presentation. I will point out we continue to see our loan book as well secured and well provisioned. We continue to be conservative in our provisioning. Our loan loss allowance after this recovery still offers a cushion of $19.4 million compared to what it would be under the model-driven base case scenario. Looking at the results of this quarter, we have a lot to be pleased about. Home reported net earnings of $64.5 million, or $1.24 per share, compared with $27.7 million last year. This came as our single family loan book grew by 27% compared with last year, even under restrictive pandemic underwriting conditions. Our focus on excellent service and relationship with our brokers is one of our key strategic priorities, and we expect the easing of our pandemic underwriting restrictions will contribute to opportunities for growth for the rest of 2021. Another of our strategic priorities is diversifying our funding sources. This quarter, deposits through our open financial business surpassed $4 billion, or 29.5% of our total deposits. Even with the temporary closure of our Toronto store and limiting our other locations to visit by appointment, we continue to draw customers with our value proposition of attractive rates, flexible range of saving options, and top-level customer service. Later this year, we'll be delivering an enhanced digital experience to our Okin depositors with the launch of our new apps for iOS and Android. This will both improve the Okin offering for existing customers and widen the appeal of Okin platform to younger customers. This is one example of how our Ignite program is continuing to enhance our service offerings. We look forward to sharing more details with you in future calls. In addition, later this quarter, we expect we will be coming to market with the next offering of our residential mortgage-backed securities. Investors were pleased with the market performance and credit performance of our inaugural RMBS offering, and we believe conditions are favorable to continue with our strategy of being a programmatic issuer in this market. We also sold mortgages under our whole loan sales program initiated in Q4 of 2020. We expect this program to develop throughout 2021, providing with another attractive option for funding diversifications. We continue to move forward on our Ignite project. The re-platforming of our banking system earlier in the year is stabilizing well and no disruption to our customers, brokers, and financial reporting functions. This involved a long process of data migration and training for hundreds of employees. While this was happening, other Ignite projects were able to go live concurrently, including an update of our document storage platform the rollout of more robotic process automation bots, and the development of our data analytics capability. Another operational benefit from our work on Ignite is a change to our way of doing things. For every Ignite project that finishes, we leave behind an agile development team that continues to operate. This process ensures we will go on sustaining innovation once the heavy lifting is over. Another of home priorities is optimizing our capital base. While we delivered a return on equity in the mid-teens for the third quarter in a row, we recognized that we would do even better on this measure with a more efficient capital level. As you know, in March of 2020, OSFI announced its expectation that all federally regulated financial institutions halt dividend increases and share buybacks. The company continues to be focused on its capital base, and for so long as OSFI's expectations remain unchanged, we expect our capital levels to remain higher than we would otherwise target. Once OSFI modifies or removes its expectations with respect to dividends and share buybacks, we intend to consider appropriate mechanisms to optimize our capital levels, including share repurchases and dividends. Balancing business opportunities against returns of capital and subject to prevailing market conditions, we intend to sustainably manage towards a target CET1 range of 14% to 15%. Finally, one of our key strategic objectives is to attract, develop, and retain top talent. We are focused on building a culture that prioritizes inclusion and engagement in line with our home values. Our efforts were recognized this year when home was named a great place to work and a best mortgage employer in 2021. Our cultures and values are critically important to the success of our operations and the achievement of our strategic objectives. It is one of the material issues we identified in our inaugural ESG report, which we published earlier this year. I encourage you to read the report, which is available on the governance section of our website. This represents the first step in our sustainability reporting journey, and we look forward to feedback from the investment community as we develop and expand our communication in this area. I'll now turn the call over to Brad, who will provide greater detail on our financial results.