Home Capital swings to $111M loss in first quarter since Buffett buy-in

Home Capital Group, the alternative mortgage lender that was on the brink of collapse earlier this year, has reported a loss of $111.1 million in its latest quarter compared with a profit of $66.3 million a year ago.

In its first earnings report since famed investor Warren Buffett came to its aid, the Toronto-based company says the loss amounted to $1.73 per share for the quarter that ended June 30 compared to earnings per share of 99 cents a year ago.

Home Capital says its bottom line was weighed down by elevated expenses, including $213.6 million pre-tax from its liquidity crisis earlier this year.

• Home Capital sells $1.2 billion in mortgages

In April, Ontario's securities regulator alleged the company had not satisfied its disclosure obligations in a scandal about falsified loan applications, sending its shares on a nosedive that became worse as customers pulled their deposits.

The liquidity crisis at Home Capital, which uses its deposits to fund its mortgage lending for borrowers who can't qualify for loans from the big banks, gave rise to questions about whether it represented bigger problems in Canada's real estate market.

But those concerns diminished as the company took steps to rebuild investor confidence.

It secured an emergency loan from the Healthcare of Ontario Pension Plan and then an investment and line of credit from Buffett's Berkshire Hathaway. The company also appointed a new CEO and settled its case with the Ontario Securities Commission.

• Home Capital settles class action suit and dispute with OSC

Its shares have also recovered somewhat, closing at $13.77 on Wednesday on the Toronto Stock Exchange, up from its low this year of $5.85 on May 5.

"The company's business plan and cash flow forecast suggest that the current liquidity and credit facilities are sufficient to support ongoing business for the foreseeable future," Home Capital said in a news release late Wednesday. "Management has concluded that there is no longer material uncertainty that casts significant doubt as to the ability of the company to continue as a going concern."