Toronto, Ontario – November 8, 2019. MCAN Mortgage Corporation (“MCAN”, the “Company” or “we”) (TSX: “MKP”) reported net income of $14.6 million ($0.60 per share) for the third quarter ended September 30, 2019, an increase of 32% from $11.0 million ($0.47 per share) in the third quarter of 2018. In the third quarter of 2019, we recorded a $5.0 million net gain on securities compared to a $0.4 million net gain in the third quarter of 2018. Year to date, we reported net income of $37.7 million ($1.57 per share), an increase of 15% from $32.7 million ($1.39 per share) for the same period in 2018.
Year to Date 2019
“The third quarter was strong for growth in all our business activities, driven by increases in our construction portfolio and securitization volumes,” said Karen Weaver, President and Chief Executive Officer. “This is largely a reflection of our continued focus on sales and marketing, internal infrastructure effectiveness and leveraging on our strategic partnerships”.
The Board of Directors (the “Board”) declared a fourth quarter dividend of $0.32 per share on November 8, 2019 to be paid January 2, 2020 to shareholders of record as of December 13, 2019.
1 Considered to be a “Non-IFRS Measure”. For further details, refer to the “Non-IFRS Measures” section of this press release.
2 Effective January 1, 2019, we revised the impaired mortgage ratios to include insured mortgages in the numerator such that the ratios are equal to impaired mortgages divided by portfolio balance. Prior period ratios have been restated.
While Canada’s economy gained some traction in mid-2019, trade conflicts and the associated uncertainty are expected to keep Gross Domestic Product growth close to 1.5% for the year due to Canada’s relatively large exposure to the involved economies. The outlook for 2020 and 2021 in terms of growth was revised downwards as a result of a weaker business investment profile offset by the expectation of lower mortgage rates and larger working age population. Growth in housing starts is expected to remain modest into 2020, supported by immigration household formation resulting in a balanced overall housing market. We expect to continue to see challenges in affordable housing in major urban markets in the near future driven by supply and demand fundamentals. The Canadian housing market has shown signs of stabilization in both housing starts and price in most provinces; however, market conditions continue to be mixed across regions. We expect these regional disparities to continue into 2020.
Canadian household indebtedness remains high. If an interruption is experienced in relation to current population growth trends, employment or actual economic conditions outside of current expectations, we would expect market conditions to deteriorate.
We are a diversified lender primarily focused on residential Canadian real estate and believe that our systematic approach to lending, as defined by our risk appetite and expertise in balance sheet management, will allow us to effectively grow our business and optimize opportunities.
Our portfolio composition continues to provide a balanced risk profile as we position ourselves for potential economic uncertainty. Increased competition from other lenders in the market is placing downward pressure on yields in our single family, construction and commercial portfolios. We continue to focus on our desired markets with our chosen borrowers and strategic partnerships as well as internal efficiencies to earn appropriate risk adjusted returns. Our targeted annual growth in corporate assets over the long term is 10%, within our risk appetite. We have had a strong third quarter in terms of corporate asset growth on an annualized basis of 16%, which is partially due to the seasonality of our construction and commercial portfolio. Our current 2019 outlook continues to be in the range of 5-8%.
This Outlook contains forward-looking statements. For further information, please refer to the “A Caution About Forward-Looking Information and Statements” section of this MD&A.
Dividend Reinvestment Plan
The Dividend Reinvestment Plan (“DRIP”) is a program that has historically provided MCAN with a reliable source of new capital and existing shareholders an opportunity to acquire additional shares at a discount to market value. Under the DRIP, dividends paid to shareholders are automatically reinvested in common shares issued out of treasury at the weighted average trading price for the five days preceding such issue less a discount of 2% until further notice from MCAN. For further information on how to enrol in the DRIP, please refer to the Management Information Circular dated March 15, 2019 or visit our website at www.mcanmortgage.com/investors/regulatory-filings/.
The following metrics are considered to be Non-IFRS measures and are defined in the “Non-IFRS Measures” section of the 2019 third quarter MD&A: Return on Average Shareholders’ Equity, Taxable Income, Taxable Income Per Share, Average Interest Rate, Net Corporate Mortgage Spread Income and Net Securitized Mortgage Spread Income, Impaired Mortgage Ratios, Mortgage Arrears, Common Equity Tier 1, Tier 1 and Total Capital Ratios, Total Exposures, Regulatory Assets, Leverage Ratio, Risk Weighted Assets Ratios, Income Tax Assets, Income Tax Liabilities, Income Tax Capital, Income Tax Assets to Capital Ratio, Income Tax Liabilities to Capital Ratio, Market Capitalization, Book Value per Common Share and Limited Partner’s At-Risk Amount.
Effective January 1, 2019, we revised the impaired mortgage ratios to include insured mortgages in the numerator such that the ratios are equal to impaired mortgages divided by portfolio balance. Prior period ratios have been restated.
Complete copies of the Company’s Q3 2019 Report will be filed on the System for Electronic Document Analysis and Retrieval (“SEDAR”) at www.sedar.com and on the Company’s website at www.mcanmortgage.com.
MCAN is a public company listed on the Toronto Stock Exchange under the symbol MKP and is a reporting issuer in all provinces and territories in Canada. MCAN also qualifies as a mortgage investment corporation (“MIC”) under the Tax Act.
The Company’s primary objective is to generate a reliable stream of income by investing in a diversified portfolio of Canadian mortgages, including single family residential, residential construction, non-residential construction and commercial loans, as well as other types of securities, loans and real estate investments. MCAN employs leverage by issuing term deposits that are eligible for Canada Deposit Insurance Corporation deposit insurance and are sourced through a network of independent financial agents. We manage our capital and asset balances based on the regulations and limits of both the Income Tax Act (Canada) and the Office of the Superintendent of Financial Institutions.
As a MIC, we are entitled to deduct the dividends that we pay to shareholders from our taxable income. Regular dividends are taxed as interest income to shareholders. We are able to pay capital gains dividends, which would be taxed as capital gains to shareholders. Dividends paid to foreign investors may be subject to withholding taxes. Additionally, to continue to meet the MIC criteria, 67% of our non-consolidated assets measured on a tax basis are required to be held in cash or cash equivalents and residential mortgages.
MCAN’s wholly-owned subsidiary, XMC Mortgage Corporation, is an originator of single family residential mortgage products across Canada.
For further information, please contact:
MCAN Mortgage Corporation
President and Chief Executive Officer
Vice President and Chief Financial Officer
A CAUTION ABOUT FORWARD-LOOKING INFORMATION AND STATEMENTS
This press release contains forward-looking information within the meaning of applicable Canadian securities laws. All information contained in this press release, other than statements of current and historical fact, is forward-looking information. All of the forward-looking information in this press release is qualified by this cautionary note. Often, but not always, forward-looking information can be identified by the use of words such as “may,” “believe,” “will,” “anticipate,” “expect,” “planned,” “estimate,” “project,” “future,” and variations of these or similar words or other expressions that are predictions of or indicate future events and trends and that do not relate to historical matters. Forward-looking information in this press release includes, among others, statements and assumptions with respect to:
Forward-looking information is not, and cannot be, a guarantee of future results or events. Forward-looking information reflects management’s current beliefs and is based on information currently available to management. Forward-looking information is based on, among other things, opinions, assumptions, estimates and analyses that, while considered reasonable by us at the date the forward-looking information is provided, inherently are subject to significant risks, uncertainties, contingencies and other factors that may cause actual results and events to be materially different from those expressed or implied by the forward-looking information.
The material factors or assumptions that we identified and were applied by us in drawing conclusions or making forecasts or projections set out in the forward-looking information include, but are not limited to:
Reliance should not be placed on forward-looking information because it involves known and unknown risks, uncertainties and other factors, which may cause actual results to differ materially from anticipated future results expressed or implied by such forward-looking information. Factors that could cause actual results to differ materially from those set forth in the forward-looking information include, but are not limited to:
Subject to applicable securities law requirements, we undertake no obligation to publicly update or revise any forward-looking information after the date of this MD&A whether as a result of new information, future events or otherwise or to explain any material difference between subsequent actual events and any forward-looking information. However, any further disclosures made on related subjects in subsequent reports should be consulted.