Toronto, Ontario – November 5, 2021. MCAN Mortgage Corporation (“MCAN”, the “Company” or “we”) (TSX: “MKP”) reported strong net income of $13.0 million ($0.47 earnings per share) for the third quarter of 2021, a decrease from net income of $22.7 million ($0.92 earnings per share) in the third quarter of 2020 primarily due to an expected decrease in equity income from MCAP related to lower mortgage origination and processing fees, including non-recurring new contracts in the prior year. Third quarter 2021 return on average shareholders’ equity was 13.22% compared to 28.04% in the prior year. Results for the third quarter of 2021 were positively impacted by growth in our core business compared to the third quarter of 2020.
Year to date, we reported net income of $48.3 million ($1.84 earnings per share), an increase of 132% from a net income of $20.8 million ($0.85 earnings per share) for the same period in 2020. Year to date return on average shareholders’ equity was 17.40% compared to 8.61% in the prior year. Year to date 2021 results were mainly impacted by fair value gains on our marketable securities compared to fair value losses at the onset of the pandemic and growth in our core business, partly offset by an expected decrease in equity income from MCAP. The Company typically sees swings in its earnings per share due to fluctuations in marketable and non-marketable securities investment income, realized gains and unrealized gains and losses.
The Board of Directors (the “Board”) declared a quarterly cash dividend of $0.34 per share to be paid January 4, 2022 to shareholders of record as of December 15, 2021.
“We are very pleased with our strong year to date results. Our mortgage originations continue to be strong and our portfolio continues to grow in response to very low interest rates and our exceptional client service. We have been enhancing our sales and marketing capabilities, services to our mortgage brokers and our underwriting efficiency and our efforts are paying off. We recently won Canadian Mortgage Professional’s 5-star Mortgage Products Award in the Alternative Lending Category,” said Karen Weaver, President and Chief Executive Officer. “We are also looking to expand our sources of capital, both debt and equity, and to that end have recently filed a Base Shelf prospectus and launched an at-the-market equity program to be executed over a maximum 24 month period that will supplement other capital raising initiatives.”
1 Considered to be a “Non-IFRS Measure”. For further details, refer to the “Non-IFRS Measures” section of this news release.
2 Effective March 31, 2020, the total capital ratio reflects the inclusion of stage 1 and stage 2 allowances on the Company’s mortgage portfolio in Tier 2 capital. In accordance with OSFI’s transitional arrangements for capital treatment of ECL issued March 27, 2020, a portion of stage 1 and stage 2 allowances that would otherwise be included in Tier 2 capital are included in CET 1 capital. The adjustment to CET 1 capital will be measured each quarter as the increase, if any, in stage 1 and stage 2 allowances compared to the corresponding allowances at December 31, 2019. The increase, if any, is subject to a scaling factor that will decrease over time and is set at 70% in fiscal 2020, 50% in fiscal 2021 and 25% in fiscal 2022.
The following metrics are considered to be Non-IFRS measures and are defined in the “Non-IFRS Measures” section of the 2021 Third Quarter Report: Return on Average Shareholders’ Equity, Net Corporate Mortgage Spread Income, Spread of Corporate Mortgages over Term Deposit Interest, Average Corporate Mortgage Portfolio Balance, Net Securitized Mortgage Spread Income, Average Securitized Mortgage Portfolio Balance, Spread of Securitized Mortgages Over Liabilities, Impaired Corporate Mortgage Ratio, Arrears Total Mortgage Ratio, Impaired Total Mortgage Ratio, Total Mortgage Arrears, Common Equity Tier 1 (“CET 1”) and Tier 1 Capital to Risk-Weighted Assets Ratios, Total Capital to Risk-Weighted Assets Ratio, Leverage Ratio and Income Tax Assets to Capital Ratio.
Complete copies of the Company’s 2021 Third Quarter 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.
For our Outlook, refer to the “Outlook” section of the 2021 Third Quarter Report.
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 Income Tax Act (Canada) (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 Tax Act and OSFI.
As a MIC, we are entitled to deduct the dividends that we pay to shareholders from our taxable income. Regular dividends are treated as interest income to shareholders for income tax purposes. We are also able to pay capital gains dividends, which would be treated as capital gains to shareholders for income tax purposes. Dividends paid to foreign investors may be subject to withholding taxes. 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 how to enroll in the DRIP, please refer to the Management Information Circular dated March 12, 2021 or visit our website at www.mcanmortgage.com/investors/regulatory-filings. 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, 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 news release contains forward-looking information within the meaning of applicable Canadian securities laws. All information contained in this news release, other than statements of current and historical fact, is forward-looking information. All of the forward-looking information in this news 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 news 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:
The COVID-19 pandemic has cast particular uncertainty on the Company’s internal expectations, estimates, projections, assumptions and beliefs, including with respect to the Canadian economy, employment conditions, interest rates, levels of housing activity and household debt service levels. There can be no assurance that they will continue to be valid. Given the rapid pace of change with respect to the impact of the COVID-19 pandemic, it is premature to make further assumptions about these matters. The duration, extent and severity of the impact the COVID-19 pandemic or any further outbreaks, including measures to prevent its spread and related government actions adopted in response, will have on our business continues to be highly uncertain and difficult to predict at this time.
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, the risks and uncertainties referred to in our Annual Information Form for the year ended December 31, 2020.
Subject to applicable securities law requirements, we undertake no obligation to publicly update or revise any forward-looking information after the date of this news release 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.