Third Quarter Lender Earnings: The Unexpected Recovery

The nation’s major mortgage lenders recently released their third quarter results, and it’s safe to say that results were better than expected overall.

Equitable Bank had its best third quarter yet, while First National posted its own record quarter.

“For customers and partners, we created record mortgage volume,” said Stephen Smith, President and CEO of First National, adding that the lender has gained market share in the broker channel at course of the quarter.

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

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

Quick links:

  • Net revenue: 72.5 million dollars (+19.6% over one year)
  • New origins: $7.6 billion (+36%)
  • Single-family origins: Up to 34% year over year
  • Mortgage renewals: $2.4 billion (+14%)
  • Loans under administration: $117.1 billion (+6%)

First National Mortgage Deferrals

  • As of May 11: First National has approved 33,800 single-family borrowers, or 13.9% of eligible customers, for its deferral program.
  • As of October 23: This 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 borrowers who participated in the payment deferral program will have some form of delinquency issues in the future,” said Rob Inglis, Chief Financial Officer.

Notables of his calling:

  • “With the uncertainties related to COVID-19 still prevailing, it is difficult to look too far ahead. However, management is very positive for the fourth quarter and the start of 2021,” the company noted, adding that it is expects “significantly higher seasonal residential production” in the fourth quarter.
  • “Unlike the second quarter, we saw growth in both insured and conventional mortgage production,” said chairman and chief executive Stephen Smith. “As you may recall, we saw some investors in conventional mortgages pause early this year to assess risk, which led us to focus more on CMHC-insured programs. Now some of those investors are coming back.
  • “All of our regional offices saw double-digit year-over-year production growth,” Smith added. “The growth leaders were Quebec and British Columbia with respective increases of 69% and 61% 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 in the second quarter.

First Quarterly National Conference Call


  • Net revenue: 58.5 million dollars (+67.2% over one year)
  • Total number of origins: $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% (versus a peak of 0.7% in Q1)
  • Net waivers as % of gross loans: 0.55% (vs. 0.06% in Q3 2019)

Home Capital Mortgage Deferral

  • Total deferrals (as of October 31): 335
    • against 9,903 on April 30, a decrease of 97%.
  • Loan deferral value: $146.1 million (less than 1% of outstanding loans)
    • vs. $3.9 billion as of April 30
  • Home noted that 99% of loans that were deferred were either canceled or returned to regular payments.

Home Capital Q3 conference call

Notables of his calling:

  • “Our performance this quarter is directly linked to the continued resilience of the housing market,” CEO Yousry Bissada said, referring to rising sales volumes and home prices across all markets.
  • Commenting on the rapid rate at which those with deferred mortgages have returned to regular payments, in most cases, Bissada added: “When someone buys a house, they usually do everything they can to keep it. Our experience with deferrals over the course of this year makes this 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 that higher rate deposits will often be replaced by deposits at lower rates. And to the extent that our underwriting teams are able to price their products, the current spreads, we could see slight declines. But we are also able, or have been able, to maintain it over the past two months. »

Home Capital Third Quarter Earnings Call

  • Net revenue: 70.9 million dollars (+30% over one year)
  • Loans under administration (detail): $32.6 billion (+6%)
  • Net interest margin: 1.69% (-6 basis points)

Equitable Bank Mortgage Deferrals

  • Equitable Bank experienced its peak mortgage deferral in May, at 20% of its total mortgage portfolio (representing $5.6 billion of total loan balance).
    • As of October 23, this had fallen to just 0.3% of its portfolio (280 accounts)
  • Net losses and write-offs in the third quarter were $2 million, or 3 basis points of total annualized loan assets.

Notables of his calling:

  • Equitable reduced its provisions for credit losses due to positive changes in the outlook, as expected by Moody’s. “If the economic situation unfolds in line with our base scenario, we will reduce reserves by $6.5 million,” CEO Andrew Moor said.
  • Equitable’s prime single-family loans were up $1.1 billion or 17% year over year and 2% in the quarter. “We have combined internally generated premium origins with acquisitions 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,” said Moor. “We expect growth to continue in the fourth quarter using this blended approach to origination.”
  • Due to “tighter risk tolerances,” Moor added that balances in the bank’s alternative single-family portfolio were down 3% year-over-year.
  • Moor acknowledged that the bank deliberately lost market share on this front. “Essentially what we did was reduce our loan-to-value ratio at the end of March, beginning of April in the pandemic phase, trying to protect the balance in view that house prices could come down. I think that in hindsight, we were probably overly cautious, frankly.

Equitable Bank T3 Conference Call

Sagen MI Canada logo

  • Net revenue: 124 million dollars (+12% over one year)
  • Premiums written: $297 million (+36%)
  • Premiums earned: $173 million (+1%)
  • Loss rate: 13% (-5 points)
  • Avg. credit score: 752 (compared to 748 in Q3 2019)
  • House price: $371,000 (compared to $349,000 in Q3 2019)
  • Delinquency rate: 0.20% (vs. 0.20% in Q3 2019)

Sagen MI CanadaMortgage deferrals

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

Notables of his calling:

  • “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,” Levings said. “That said, the pace of economic recovery, the strength of the housing market and the downward trend in mortgage payment deferrals should help us through this period, even if the mortgage payment deferral and wage subsidy programs of the government come to an end in the coming months.
  • Sagen also saw market share increase in the quarter “as lenders allocated more business to the private sector in response to underwriting changes implemented by CMHC,” Levings said. When asked for details, 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 market share. raised by 30% at this stage.”
  • “We were pleased with the quality of mortgage insurance applications we sold during the quarter, with a slightly higher average credit score of 752.”
  • Sagen lowered its estimated loss ratio range for the full year from 25% to 35% to 15% to 25% for 2020. by the slower economic recovery and weaker housing market, with the result that losses and claims will likely be higher next year,” Levings said.

Sagen Canada Q3 Conference Call

To note: Transcripts are provided as is by the companies and/or third-party sources, and their accuracy cannot be guaranteed to be 100%.

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