Home Capital Group Inc.

Good morning. My name is Chris and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Home Capital Group Q1 2022 results conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star and the number one on your telephone keypad. To withdraw your question, please press star one again. Thank you. Jill McRae, Vice President of Investor Relations. You may begin. Jill McRae, Vice President of Investor Relations. You may begin.

Jill McRae, Vice President of Investor Relations. You may begin. Jill McRae, Vice President of Investor Relations. You may begin. Jill McRae, Vice President of Investor Relations. You may begin. Jill McRae, Vice President of Investor Relations. You may begin. Jill McRae, Vice President of Investor Relations. You may begin. Jill McRae, Vice President of Investor Relations. You may begin. Jill McRae, Vice President of Investor Relations. You may begin. Jill McRae, Vice President of Investor Relations. You may begin. Jill McRae, Vice President of Investor Relations. You may begin. Jill McRae, Vice President of Investor Relations. You may begin. Jill McRae, Vice President of Investor Relations. You may begin. Jill McRae, Vice President of Investor Relations. You We have a few members of our senior management team with us on the call to help answer your questions. On behalf of those speaking today, I know 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 on forward-looking statements on page 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 adjusted and reported results in their remarks. And now I'd like to welcome you, Srivastava.

Thank you, Jill, and good morning, everyone. I'll start with some comments about our first quarter results, followed by a discussion of the current market conditions, and conclude with a brief look ahead. Then I'll turn the call over to Brad, who will discuss our results in more detail. This was a strong quarter. We reported origination growth across all our lending business with $2.8 billion, including $2.3 billion in single-family residential mortgages. Of that, our alternative mortgage loans, which we refer to as our classic business, we beat last quarter's record originations with a new record of $2.1 billion in T1. Our funded volume of alternative mortgages in the quarter increased by 90% year-over-year. We reported strong growth in our commercial originations as well of $463 million. This represents a year-over-year increase of 70%. Strong origination activity contributed to growth in our balance sheet. We added over $1 billion to our loans on balance sheet in the quarter and reported 11% year-over-year growth in our loans under administration. Let me pause for my results to discuss the market. We delivered this growth in a market that is starting to show signs of slowing after the rapid growth of prices and volumes last year. Reports from the Canadian Real Estate Association indicate that sales volumes for the first three months of the year have moderated from the record levels of 2021. We believe this is healthy for the long-term sustainability of the housing market. We are also seeing upward pressure on interest rates for the first time since the start of the pandemic. the Bank of Canada began to increase the benchmark overnight rate with a move of 25 basis points in March and a further increase of 50 basis points in April. The bank has made it clear they will take necessary actions to keep inflation in check and maintain price stability. The bond market reacts to these signals and has priced an expectation of an additional move up to 100 basis points by year-end. This has a direct impact on our cost of funds. Let me explain. The market for deposits and the market for mortgages are both competitive. In a rising rate environment, deposits tend to reprice faster than mortgages. Typically, price on term deposits will follow closely to price moves of the equivalent term government account of the bond. Bond prices have moved rapidly this quarter, not just in response to central bank moves, but in anticipation of future increases. On the mortgage side, it takes some time for the spread between mortgage rates and deposit rates to revert to the mean. In the broker distribution channel, the first lender to raise rates may risk losing volumes until those rates are matched by other lenders. Eventually, rates will move up to bring margins back closer to historical mean levels. We've taken the lead in setting rates for our alternative mortgage loans at levels that began the move back to historical mean. We will always balance considerations of growth, sustainability, and long-term value in our pricing strategy. However, as our rates on our assets increase more slowly than our cost of funds, the result is an income pressure. We expect spreads to normalize if, as, and when the pace of rate increases stabilizes. Importantly, we were able to grow our loan book and gather assets that will continue to produce income into the future through refinance and renewal activity. We have found that retention improves in periods of rising rates because borrowers are less likely to switch due to having to qualify at higher rates than other institutions. Now, returning to our results and some of the other achievements this quarter. We were very pleased with the results from our token channel. We had a good quarter in terms of deposits and relationship growth. As rates have moved up, we have been thoughtfully and proactively moving consumer rates to maximize long-term value to both customers and investors. We closed our first RMBS offering for 2022 during the quarter and added additional funding to a number of channels as part of our funding diversification initiatives. Brad will share more details in his presentation. Additionally, we received an upgrade to our credit rating from DBRS. This is a validation of the strength of our company and our sustainable risk culture. We believe this upgrade will open up more opportunities for additional funding options in the future. On the credit side, our metrics are healthy. The biggest predictor of credit defaults is unemployment, and the outlook for employment in Canada is still quite robust. You will hear more about this from Brad a little later. On our internal Ignite technology transformation project, we made lots of progress. This includes we continued to develop best-in-class reporting to our mortgage broker partners to help them in their business. We added data analytics internally to better understand our customers. And we automated more internal processes using robotic processing automation, RPA tables. We were also named Great Place to Work Hybrid. This is particularly meaningful as our back at home team has put a lot of energy into developing a successful hybrid work model. We have continued to make progress towards our goal of reaching our target capital range. For a combination of growth in our risk-weighted assets and share repurchases in the quarter, we have brought down our CET1 ratio by 85 basis points. Our normal course issuer bid was approved on February 17, and we commenced purchases in the market. Now for a brief look ahead. We are continuing to see demand for both our residential and commercial loans. While rates are higher than they had been in the last few years, they're still low in a historical context. With our years of experience operating in all type of rate conditions, we are comfortable in our ability to manage profitability through this environment as well. Margins will be impacted by changes in rate expectations. but we expect they will revert to historical average levels in time. We will continue to diversify our funding sources and make progress towards our target capital range. We are committed to achieving an efficient capital structure to drive ROE and deliver shareholder value. Finally, I want to recognize the people of Home Capital Group for their work this quarter. It's great to see so many back in person. Thank you for your dedication to supporting our customers, our partners, and ultimately our shareholders through a very busy quarter in all our business areas. I'll now invite Brad to discuss our financial results.