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Q3 Lender Earnings: The Unexpected Recovery

The country’s key mortgage lenders recently released their third-quarter earnings, and it’s safe to say results were better-than-expected all around.

Equitable Bank had its best-ever third quarter, while First National had its own record quarter.

“For customers and partners, we originated a record volume of mortgages,” First National Chairman and CEO Stephen Smith announced, adding that the lender picked up broker channel market share in the quarter.

Meanwhile, mortgage insurer Sagen MI Canada (formerly Genworth Canada) announced its own market share gain, “as lenders allocated more business to the private sector in response to the underwriting changes implemented by CMHC,” Sagen president and CEO Stuart Levings said.

More highlights from the conference call transcripts from Home Capital, Equitable Bank, First National and Sagen MI Canada follow below.

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First National NEW

  • Net income: $72.5 million (+19.6% YoY)
  • New originations: $7.6 billion (+36%)
  • Single-family originations: Up 34% YoY
  • Mortgage Renewals: $2.4 billion (+14%)
  • Loans under administration: $117.1 billion (+6%)

First National’s Mortgage Deferrals

  • As of May 11: First National approved 33,800 single-family borrowers, or 13.9% of eligible clients, for its deferral program.
  • As of Oct. 23: That had fallen to 0.7% of First National’s portfolio.
    • “While the majority of these borrowers have resumed making payments, the company estimates that 1% of the borrowers that took part in the deferral payment program will have some form of delinquency issues going forward,” said Rob Inglis, Chief Financial Officer.

Notables from its call:

  •  “With COVID-19 uncertainties still prevalent, it is difficult to look too far ahead. However, management is very positive about the fourth quarter and the start of 2021,” the company noted, adding it expects “substantially higher seasonal residential origination” in the fourth quarter.
  • “Unlike in Q2, we saw growth both in insured and conventional mortgage production,” said Chairman and CEO Stephen Smith. “As you may recall, we saw some investors in conventional mortgages pause their activities early this year to assess risk, which caused us to focus more heavily on CMHC-insured programs. Now some of these investors are returning.”
  • “All our regional offices achieved double-digit year-over-year production growth,” Smith added. “The growth leaders were Quebec and British Columbia with increases of 69% and 61%, respectively, over last year.
  • Asked to comment on First National’s market share in the broker channel, Smith said, “our share has been strong,” adding that First National was number two in broker channel market share as of Q2.

First National Q3 conference call


  • Net income: $58.5 million (+67.2% YoY)
  • Total originations: $1.96 billion (+26.5%)
  • Loans under administration: $23.06 billion (+0.4%)
  • Net interest margin: 2.51%
  • Provisions as % of gross loans: 0.16% (down from a peak of 0.7% in Q1)
  • Net write-offs as % of gross loans: 0.55% (vs. 0.06% in Q3 2019)

Home Capital’s Mortgage Deferrals

  • Total deferrals (as of Oct. 31): 335
    • vs. 9,903 as of April 30, a 97% decrease.
  • Loan deferral value: $146.1 million (less than 1% of loans outstanding)
    • vs. $3.9 billion as of April 30
  • Home noted that 99% of loans coming off deferral have either been discharged or returned to regular payments.

Home Capital Q3 conference call

 Notables from its call:

  • “Our performance this quarter is directly linked to the continuing resilience of the housing market,” said CEO Yousry Bissada, referring to the higher sales volumes and home prices in all markets.
  • Commenting on the quick pace at which those with mortgages under deferral were returned to regular payments, in most cases, Bissada added, “When someone buys a home, they generally do whatever they can to keep it. Our experience with deferrals during this year makes that clear…”
  • Asked about the sustainability of Home’s high net-interest margin of 2.51%, Brad Kotush, Chief Financial Officer, said, “…for now, we continue to see higher rate deposits will often be replaced with lower rate deposits. And to the extent our underwriting teams are able to price their products, the current spreads, we may see some slight declines in them. But we’re also able to, or have been able to, maintain it over the past couple of months.”

Home Capital Q3 earnings call

  • Net income: $70.9 million (+30% YoY)
  • Loans under administration (retail): $32.6 billion (+6%)
  • Net interest margin: 1.69% (-6 bps)

Equitable Bank’s Mortgage Deferrals

  • Equitable Bank saw its peak mortgage deferrals in May at 20% of its total mortgage portfolio (representing $5.6 billion of total loan balances).
    • As of October 23, that had fallen to just 0.3% of its portfolio (280 accounts)
  • Net losses and write-offs in Q3 amounted to $2 million, or 3 bps of total loan assets annualized.

Notables from its call:

  • Equitable has lowered its allowances for credit losses based on positive changes to the outlook as forecast by Moody’s. “If the economic picture unfolds in line with our base case, we will lower reserve by $6.5 million,” CEO Andrew Moor said.
  • Equitable’s prime single-family loans grew $1.1 billion or 17% year-over-year and 2% in the quarter. “We combined internally generated prime originations with both acquired and third-parties. I am very pleased to note that our internal business has generated record monthly levels of prime single-family originations since May as we continue to expand our market presence with mortgage broker partners,” Moor said. “We expect growth to continue in Q4 using this blended approach to origination.”
  • Due to “tighter risk tolerances,” Moor added that balances within the bank’s alternative single-family portfolio were down 3% year-over-year.
  • Moor acknowledged the bank deliberately ceded market share on that front. “Essentially what we did was cut back our loan-to-values at the end of March, beginning of April in the phase of the pandemic, trying to protect the balance with a view that home prices could be dropping. I think with the benefit of hindsight, we were probably overly cautious, frankly.”

Equitable Bank Q3 conference call

Sagen MI Canada logo

  • Net income: $124 million (+12% YoY)
  • Premiums written: $297 million (+36%)
  • Premiums earned: $173 million (+1%)
  • Loss ratio: 13% (-5 pts)
  • Avg. credit score: 752 (vs. 748 in Q3 2019)
  • Home price: $371k (vs. $349k in Q3 2019)
  • Delinquency rate: 0.20% (vs. 0.20% in Q3 2019)

Sagen MI Canada’s Mortgage Deferrals

  • Sagen said mortgage payment deferrals fell to 5.9% of outstanding mortgages as of Sept. 30, down from 13.7% in Q2.
    • By province, the highest deferral rate was in Alberta at 9.9%, while the lowest was 4.5% in Ontario.
  • 66% have an estimated effective loan-to-value of less than 80%, “representing an equity buffer in the event of ongoing income challenges,” said CEO Stuart Levings.

Notables from its call:

  • “While the economic environment continues to evolve in line with our expectations, there remains a high degree of uncertainty as the country enters a second wave of the COVID-19 pandemic,” said Levings. “That said, the pace of economic recovery, strength of the housing market and downward trend in mortgage payment deferrals should help us manage through this period, even as the mortgage payment deferral and government wage subsidy programs wind down over the coming months.”
  • Sagen also saw an increase in market share during the quarter “as lenders allocated more business to the private sector in response to the underwriting changes implemented by CMHC,” Levings said. When asked for specifics, Levings added, “It’s hard to put the absolute totals together until we see the results from the other two mortgage insurers, but I would estimate we’re probably in the high 30s percent market share at this point.”
  • “We were pleased with the quality of mortgage insurance applications we sold during the quarter, with a modestly higher average credit score of 752.”
  • Sagen lowered its full-year estimated loss ratio range from 25% to 35% to 15% to 25% for 2020. “As is typically the case during an economic downturn, we do expect to see a lag effect on new delinquencies, potentially exacerbated by the slower economic recovery and softer housing market, with the result that losses and claims will likely be higher next year,” said Levings.

Sagen Canada Q3 conference call

Note: Transcripts are provided as-is from the companies and/or third-party sources, and their accuracy cannot be 100% assured.