Stock market symbol
TSX: MKP
TORONTO, May 6, 2015 /CNW/ - MCAN Mortgage Corporation's
("MCAN", the "Company" or "we") net income for the first quarter of
2015 was $4.3 million, compared to
$7.4 million in 2014. Earnings
per share were $0.21, down from
$0.36 in the prior year. Return
on average shareholders' equity was 7.49% for the quarter, down
from 13.52% in the prior year.
The decrease in net income from the first quarter of 2014 was
primarily due to certain items not related to net interest income.
We had a $1.5 million realized
and unrealized loss on financial instruments and lower equity
income from MCAP Commercial LP ("MCAP") in the current quarter,
partially offset by higher securitization income in the current
quarter from a significant increase in our participation in the
market mortgage-backed securities ("MBS") program. In the
prior year, we had a gain from the partial sale of our equity
investment in MCAP and a significant recovery of a
provision.
We incurred a $1.5 million loss in
the current quarter on the hedge associated with mortgages
securitized through the market MBS program as a result of the
decline in 5-year Government of Canada bond rates during the quarter following
the Bank of Canada overnight rate
cut in January. The offsetting economic gain will be recorded
over the 5-year term of the related MBS through higher spread
income, as this hedging activity did not qualify for hedge
accounting which would have provided an accounting offset.
Income from the market MBS program increased in the current quarter
as a result of the growth in our securitized portfolio from the
prior year, including the issuance of $146
million of new MBS in the current quarter.
Corporate assets totalled $1.06
billion as at March 31, 2015,
up from $1.04 billion as at
December 31, 2014. Activity for
the quarter included increases of $27
million in cash and cash equivalents and $4 million in financial investments and a
decrease of $13 million in
mortgages. Our corporate mortgage portfolio decreased from
$895 million at December 31, 2014 to $882
million at March 31, 2015,
which included a decrease of $26
million in construction loans and increases of $5 million in uninsured single family mortgages
and $9 million in commercial
loans. Given the current economic uncertainty in Alberta, we have taken a measured approach to
new loan originations and have experienced a steady volume of loan
repayments.
The Board of Directors (the "Board") declared a second quarter
regular dividend of $0.28 per share
to be paid June 30, 2015 to
shareholders of record as of June 15,
2015.
Net Investment Income - Corporate Assets:
Net investment income from corporate assets was $7.4 million in the current quarter, down from
$10.3 million in the prior year.
Mortgage interest income
Mortgage interest income increased to $12.5 million in the current quarter from
$12.4 million in the prior year.
The average mortgage portfolio balance increased from
$848 million in the prior year to
$921 million in the current quarter,
while the average mortgage portfolio yield decreased from 6.02% in
the prior year to 5.48% in the current quarter.
Excluding the mortgages acquired as part of the acquisition of
Xceed, the average yield decreased from 5.79% to 5.48%. The
balance of the decrease in the corporate yield from the prior year
was due to a shift in the average mortgage balance by line of
business in the current quarter such that our residential
construction portfolio has been relatively flat while our single
family portfolio has increased significantly. The
proportionately higher balance of these lower-yielding mortgages
caused the average corporate mortgage yield to decrease, however
this was more than offset by an increase in market MBS program
income in the current quarter.
The growth in the average mortgage portfolio since the prior
year has related primarily to our single family mortgage
portfolio. Due to significantly higher securitization
activity through the market MBS program in the current quarter, our
average corporate insured single family mortgage balance increased
substantially over the prior year. We generally hold these
mortgages on our corporate balance sheet on a short-term basis
prior to securitization. The average corporate mortgage
portfolio also increased as a result of an increase in our
uninsured single family mortgage portfolio, partially offset by a
decrease in the average commercial loan portfolio
balance.
Equity income from MCAP
Equity income from our ownership in MCAP decreased from
$2.1 million in the prior year to
$1.1 million in the current
quarter. During the quarter, MCAP incurred hedge losses on
its mortgage commitments as a result of the decrease in 5-year
Government of Canada bond rates
further discussed below in "realized and unrealized losses on
financial instruments". MCAP expects to recover these losses
through gains on sale or higher spread income once the committed
mortgages fund. In addition, mortgage origination expenses
increased over the prior year. These items were
partially offset by increased servicing income from higher assets
under administration and an increase in mortgage origination
fees. MCAP's origination volumes were $2.7 billion in the first quarter of 2015.
MCAP had $47.6 billion of assets
under administration as at February 28,
2015.
Realized and unrealized losses on financial
instruments
The realized and unrealized loss on financial instruments
increased significantly to $1.5
million in the current quarter from $319,000 in the prior year. These losses relate
to the hedging of mortgage funding commitments to mitigate interest
rate risk. We enter into forward starting interest rate swaps
with a financial institution as part of this hedge. If the
hedged mortgage is securitized through the market MBS program, the
offsetting economic gain (loss) is realized over the term of the
mortgage through higher (lower) spread income. If the hedged
mortgages are sold to third parties on a whole loan basis,
offsetting gains or losses are recognized in the period that the
mortgages are sold.
During the current quarter, 5-year Government of Canada bond rates decreased significantly from
1.34% to 0.79%, which was the primary reason for the $1.5 million loss that was incurred.
However, this decrease will be offset by a significant future
economic benefit through substantially higher than usual spread
income from the $146 million of
mortgages securitized through the market MBS program in the current
quarter. The prior year loss was due to a decrease of 0.14%
in the 5-year Government of Canada
bond rate.
Other net investment income
Fees consisting primarily of extension, renewal and letter of
credit fees earned on our corporate mortgage portfolio, decreased
slightly to $530,000 in the current
quarter from $615,000 in the prior
year.
Marketable securities income increased to $387,000 in the current quarter from $310,000 in the prior year as a result of a
higher average portfolio balance in the current quarter.
Whole loan gains on sale were $205,000 in the current quarter, down from
$331,000 in the prior year. We
regularly sell mortgages to third-party aggregators on a whole-loan
basis with mortgage premiums received at the time of sale. In
the current quarter, we used the majority of our insured single
family originations for the market MBS program and therefore whole
loan sales volumes were relatively low.
Term deposit interest and expenses increased to $5.1 million in the quarter from $5.0 million in the prior year as a result of a
$54 million increase in the average
term deposit balance from $788
million in the prior year to $842
million in the current quarter. The average term
deposit rate decreased from 2.49% in the prior year to 2.40% in the
current quarter.
Mortgage expenses, consisting primarily of mortgage servicing
fees, decreased to $894,000 in the
current quarter from $954,000 in the
prior year.
We recorded $63,000 of recoveries
of credit losses during the quarter compared to $608,000 of recoveries in the prior year.
The change is primarily due to a recovery of a $550,000 individual mortgage allowance in the
prior year.
Net write-offs increased to $223,000
(9.7 basis points) during the current quarter from $57,000 (2.7 basis points) in the prior year.
Other Income - Corporate Assets: The prior
year included a $711,000 gain from
the partial sale of our investment in MCAP.
Net Investment Income - Securitization
Assets: Net investment income from securitization
assets was $694,000 in the current
quarter compared to a loss of $277,000 in the prior year. Net investment
income from securitization assets relates to MCAN's participation
in the market MBS program and the Canada Mortgage Bonds ("CMB")
program. For further details on these programs, refer to the
"Securitization Programs" section of the Management's Discussion
and Analysis ("MD&A"). Net investment income from the market
MBS program has increased in recent quarters as we have continued
to securitize insured single family mortgages through this
program. The CMB program will cease after the maturity of the
last issuance in the second quarter of 2015.
Market MBS Program
Net investment income from the market MBS program was
$728,000 in the current quarter, up
from $421,000 in the prior
year. Mortgage interest income was $4.9 million, up from $1.6
million in the prior year. The average portfolio
balance increased from $208 million
to $709 million, while the average
yield decreased from 3.00% to 2.84%. Interest on financial
liabilities from securitization was $3.9
million in the current quarter, up from $1.1 million in the prior year. The market
MBS liability average balance increased from $205 million to $710
million while the average interest rate decreased from 2.25%
to 2.23%.
CMB Program
We incurred a net loss of $33,000
from the CMB program in the current quarter compared to a loss of
$699,000 in the prior year. CMB
mortgage interest was $57,000 in the
current quarter, down from $939,000
in the prior year. Interest on financial liabilities from
securitization was $122,000, down
from $2.1 million in the prior
year. Both decreases were a result of a significant decline
in the average principal balance from the maturity of issuances
over 2014. Interest on financial investments and interest on
short-term investments both decreased from the prior year by
$204,000 and $264,000, respectively, as a result of a
significant decrease in the average portfolios due to the continued
maturity of CMB-related assets during the current year.
Operating Expenses: Operating expenses were
$3.6 million in the current quarter,
up from $3.4 million in the prior
year. Salaries and benefits increased by $323,000, while general and administrative
expenses decreased by $117,000.
The increase in salaries and benefits was due to an increase in the
number of employees in the current quarter. As we have grown
our internal origination platform through Xceed, we have continued
to increase the size of our staff.
Income Taxes: In the current quarter we
incurred a deferred tax expense of $225,000 compared to a recovery of $13,000 in the prior year. We incurred
deferred taxes in the current year from the partial application of
loss carry forwards as a result of taxable income earned in
subsidiaries.
Taxable income was $924,000
($0.04 per share) in the current
quarter compared to $4.1 million
($0.20 per share) in the prior year.
In the current quarter, we incurred $5.8 million of up-front origination costs on
mortgages securitized through the market MBS program, which are
expensed for tax purposes and amortized for accounting purposes,
compared to $2.1 million in the prior
year.
Credit Quality: Impaired mortgages were
$8.0 million as at March 31, 2015, down from $8.4 million as at December 31, 2014. The total impaired
mortgage ratio was 0.45% at March 31,
2015, down from 0.50% at December 31,
2014 while the corporate impaired mortgage ratio also
decreased to 0.90% at March 31, 2015
from 0.92% as at December 31,
2014.
Corporate mortgage arrears and impaired mortgages were
$32 million at March 31, 2015, up from $30 million at December
31, 2014. Securitized mortgage arrears were
$10 million at March 31, 2015, up from $9
million as at December 31,
2014. Despite the economic volatility and uncertainty
relating to oil prices and any potential impact across Canada, our mortgage arrears did not increase
significantly during the first quarter of 2015.
Financial Position: Total assets were
$1.96 billion as at March 31, 2015, consisting of $1.06 billion of corporate assets and
$901 million of securitization
assets. Corporate assets increased by $19 million in the current quarter, which
included increases of $27 million in
cash and cash equivalents and $4
million in financial investments and a decrease of
$13 million in mortgages. Our
corporate mortgage portfolio decreased from $895 million at December
31, 2014 to $882 million at
March 31, 2015, which included a
decrease of $26 million in our
residential construction loan portfolio.
Securitization assets increased by $140
million during the quarter, primarily due to the
$146 million of new mortgages
securitized through the market MBS program in the current
quarter. CMB-related asset activity was minimal as there were
no CMB issuance maturities in the quarter.
As we securitize mortgages into the market MBS program, assets
are effectively transferred from corporate mortgages to securitized
mortgages on the balance sheet. The change contributes to
changes in asset levels when mortgages purchased are securitized in
the following quarter.
Term deposit liabilities were $847
million at March 31, 2015, up
from $822 million at December 31, 2014.
Financial liabilities from securitization were $881 million at March 31,
2015, up from $746 million as
at December 31, 2014. The
increase was due to $146 million of
new liabilities from our current quarter issuance through the
market MBS program and an $11 million
repayment of existing market MBS liabilities.
Total shareholders' equity was $231
million as at March 31, 2015,
up from $225 million as at
December 31, 2014. Activity for the
quarter included net income of $4.3
million, the issuance of $3.9
million of new common shares through the dividend
reinvestment plan, the payment of the first quarter dividend of
$5.9 million and an increase to
accumulated other comprehensive income of $3.7 million.
Asset Capacity: As at March 31, 2015, our remaining income tax asset
capacity, based on our target income tax assets to capital ratio of
5.75, was $105 million.
Outlook: While the majority of Canadian real estate
markets have remained balanced throughout the first quarter of
2015, we continued to observe weakness in the housing markets in
Alberta as the province adjusts to
instability in oil prices and weakness in employment. We expect
housing markets to remain in a balanced state given inventory
levels remain at record lows while consumers and developers adjust
current sales activity due to regional economic conditions. The
housing market in Alberta is
expected to encounter some instability over the next few quarters
as the market adjusts to lower employment, net provincial migration
and home sales.
The overnight rate cut by the Bank of Canada in January appears to have softened the
impact of the energy sector on the housing market. The
integration of lower rates into markets has facilitated increased
consumer spending and stabilized economic growth. In 2015, the
housing market should continue to benefit from the low interest
rate environment and stable unemployment rates. We expect continued
volatility in the stock market and the global price of oil could
have a temporary negative influence on market sentiment in the
first half of 2015. We expect mortgage rates to remain low as a
result of increased competition between mortgage providers and
compression in the long term bond market which has improved
mortgage spreads. Balanced housing markets and low mortgage rates
should support price appreciation to support demand for housing in
Ontario and British Colombia. We
expect interest rates to remain at historic lows throughout
2015.
We participated in the MBS securitization market with a
$146 million issuance in the first
quarter of 2015. We expect to continue these issuances in the near
term. We experienced significant volatility in the Canadian MBS
bond market in the first quarter following the Bank of Canada's unexpected overnight rate cut as MBS
bond spreads widened due to market uncertainty and reduced appetite
given significantly lower all-in rates. These market conditions
impacted the timing of MCAN's securitization and hedging activities
in the first quarter. We expect less volatile market conditions in
the coming quarters.
To date, we have retained the residual economics of the MBS (the
"interest-only strip"). We regularly review the economics of this
retention strategy and will assess the impact of future sales of a
portion of the MBS interest-only strips going forward to facilitate
portfolio growth.
Our growth strategy remains focused on our single family
mortgage portfolio both sourced by MCAP and through our direct
origination platform of Xceed. We continue to experience growth in
origination in this asset class and expect originations to
strengthen over 2015 which will allow us to grow corporate assets,
further diversify and re-balance our mortgage portfolio while
optimizing returns and lowering our risk profile.
We expect construction activity to moderate nationally, with
British Columbia and Ontario experiencing increased activity while
Alberta sees reduced activity as a
result of the decline in oil prices and decreased exploration
activity effecting employment. Our construction portfolio remains
well balanced containing seasoned projects underwritten with strong
pre-sales and experienced builders and developers.
Non-IFRS Measures: The following metrics are
considered to be Non-IFRS measures and are defined in the "Non-IFRS
Measures" section of the MD&A: Return on Average Shareholders'
Equity, Taxable Income, Taxable Income Per Share, Average Interest
Rate, Net Interest Income, Impaired Mortgage Ratios, Common Equity
Tier 1, Tier 1 and Total Capital Ratios, Total Exposures,
Regulatory Assets, Leverage Ratio, Assets to Capital Multiple; Risk
Weighted Asset Ratios, Tier 1, Tier 2, Tier 3 and Total Liquid
Assets and Liquidity Ratios, Income Tax Assets, Income Tax
Liabilities, Income Tax Capital, Income Tax Assets to Capital
Ratio, Income Tax Asset Capacity, Market Capitalization, Book Value
per Common Share and Limited Partner's At-Risk Amount.
Further Information: Complete copies of the
Company's 2015 First 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.
|
|
CONSOLIDATED
BALANCE SHEETS
|
(Unaudited) (in
thousands of Canadian dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March
31
|
|
December
31
|
As
at
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate
Assets
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
78,438
|
|
$
|
51,090
|
|
Marketable
securities
|
|
|
26,445
|
|
|
24,900
|
|
Mortgages
|
|
|
882,181
|
|
|
895,467
|
|
Foreclosed real
estate
|
|
|
686
|
|
|
686
|
|
Financial
investments
|
|
|
32,859
|
|
|
28,469
|
|
Other
loans
|
|
|
1,517
|
|
|
2,108
|
|
Equity investment in
MCAP Commercial LP
|
|
|
39,888
|
|
|
38,792
|
|
Other
assets
|
|
|
1,798
|
|
|
3,067
|
|
|
|
|
1,063,812
|
|
|
1,044,579
|
|
|
|
|
|
|
|
|
Securitization
Assets
|
|
|
|
|
|
|
|
Short-term
investments
|
|
|
24,939
|
|
|
16,763
|
|
Mortgages
|
|
|
874,075
|
|
|
741,184
|
|
Financial
investments
|
|
|
109
|
|
|
907
|
|
Derivative financial
instruments
|
|
|
47
|
|
|
71
|
|
Other
assets
|
|
|
1,678
|
|
|
1,441
|
|
|
|
|
900,848
|
|
|
760,366
|
|
|
|
$
|
1,964,660
|
|
$
|
1,804,945
|
|
|
|
|
|
|
|
|
Liabilities and
Shareholders' Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate
Liabilities
|
|
|
|
|
|
|
|
Term
deposits
|
|
$
|
847,434
|
|
$
|
821,742
|
|
Current taxes
payable
|
|
|
120
|
|
|
120
|
|
Deferred tax
liabilities
|
|
|
1,053
|
|
|
473
|
|
Other
liabilities
|
|
|
3,957
|
|
|
11,202
|
|
|
|
|
852,564
|
|
|
833,537
|
|
|
|
|
|
|
|
|
Securitization
Liabilities
|
|
|
|
|
|
|
|
Financial liabilities
from securitization
|
|
|
880,574
|
|
|
746,063
|
|
Other
liabilities
|
|
|
180
|
|
|
42
|
|
|
|
|
880,754
|
|
|
746,105
|
|
|
|
|
1,733,318
|
|
|
1,579,642
|
|
|
|
|
|
|
|
|
Shareholders'
Equity
|
|
|
|
|
|
|
|
Share
capital
|
|
|
187,799
|
|
|
183,939
|
|
Contributed
surplus
|
|
|
510
|
|
|
510
|
|
Retained
earnings
|
|
|
32,913
|
|
|
34,481
|
|
Accumulated other
comprehensive income
|
|
|
10,120
|
|
|
6,373
|
|
|
|
|
231,342
|
|
|
225,303
|
|
|
|
$
|
1,964,660
|
|
$
|
1,804,945
|
|
|
|
|
|
|
|
|
|
|
|
CONSOLIDATED
STATEMENTS OF INCOME
|
(Unaudited) (in
thousands of Canadian dollars except for per share
amounts)
|
|
|
|
|
|
|
|
|
|
For the Quarters
Ended March 31
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
Net Investment
Income - Corporate Assets
|
|
|
|
|
|
|
|
Mortgage
interest
|
|
$
|
12,541
|
|
$
|
12,407
|
|
Equity income from
MCAP Commercial LP
|
|
|
1,096
|
|
|
2,095
|
|
Fees
|
|
|
530
|
|
|
615
|
|
Marketable
securities
|
|
|
387
|
|
|
310
|
|
Whole loan gain on
sale income
|
|
|
205
|
|
|
331
|
|
Realized and
unrealized gain (loss) on financial instruments
|
|
|
(1,481)
|
|
|
(319)
|
|
Interest on financial
investments and other loans
|
|
|
144
|
|
|
44
|
|
Interest on cash and
cash equivalents
|
|
|
128
|
|
|
218
|
|
|
|
|
13,550
|
|
|
15,701
|
|
|
|
|
|
|
|
|
|
Term deposit interest
and expenses
|
|
|
5,141
|
|
|
5,029
|
|
Mortgage
expenses
|
|
|
894
|
|
|
954
|
|
Interest on loans
payable
|
|
|
180
|
|
|
34
|
|
Provision for
(recovery of) credit losses
|
|
|
(63)
|
|
|
(608)
|
|
|
|
|
6,152
|
|
|
5,409
|
|
|
|
|
|
|
|
|
|
|
|
|
7,398
|
|
|
10,292
|
|
|
|
|
|
|
|
|
Other Income -
Corporate Assets
|
|
|
|
|
|
|
|
Gain on sale of
investment in MCAP Commercial LP
|
|
|
-
|
|
|
711
|
|
|
|
|
-
|
|
|
711
|
|
|
|
|
|
|
|
|
Net Investment
Income - Securitization Assets
|
|
|
|
|
|
|
|
Mortgage
interest
|
|
|
4,951
|
|
|
2,573
|
|
Interest on financial
investments
|
|
|
1
|
|
|
205
|
|
Interest on
short-term investments
|
|
|
25
|
|
|
289
|
|
Other securitization
income
|
|
|
33
|
|
|
447
|
|
|
|
|
5,010
|
|
|
3,514
|
|
|
|
|
|
|
|
|
|
Interest on financial
liabilities from securitization
|
|
|
4,022
|
|
|
3,226
|
|
Mortgage
expenses
|
|
|
270
|
|
|
101
|
|
|
|
|
4,292
|
|
|
3,327
|
|
|
|
|
|
|
|
|
|
Net investment income
before fair market value adjustment
|
|
|
718
|
|
|
187
|
|
Fair market value
adjustment - derivative financial instruments
|
|
|
(24)
|
|
|
(464)
|
|
|
|
|
694
|
|
|
(277)
|
|
|
|
|
|
|
|
|
Operating
Expenses
|
|
|
|
|
|
|
|
Salaries and
benefits
|
|
|
2,060
|
|
|
1,737
|
|
General and
administrative
|
|
|
1,511
|
|
|
1,628
|
|
|
|
|
3,571
|
|
|
3,365
|
|
|
|
|
|
|
|
|
Net Income Before
Income Taxes
|
|
|
4,521
|
|
|
7,361
|
Provision for
(recovery of) income taxes
|
|
|
|
|
|
|
|
Deferred
|
|
|
225
|
|
|
(13)
|
|
|
|
|
225
|
|
|
(13)
|
Net
Income
|
|
$
|
4,296
|
|
$
|
7,374
|
|
|
|
|
|
|
|
|
Basic and diluted
earnings per share
|
|
$
|
0.21
|
|
$
|
0.36
|
Dividends per
share
|
|
$
|
0.28
|
|
$
|
0.28
|
Weighted average
number of basic and diluted shares (000's)
|
|
|
20,941
|
|
|
20,507
|
|
|
|
|
|
|
|
|
CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME
|
(Unaudited) (in
thousands of Canadian dollars)
|
|
|
|
|
|
|
|
For the Quarters
Ended March 31
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
Net
income
|
$
|
4,296
|
|
$
|
7,374
|
|
|
|
|
|
|
|
Other
comprehensive income
|
|
|
|
|
|
|
Change
in unrealized gain on available for sale marketable
securities
|
|
1,424
|
|
|
590
|
|
Transfer
of losses (gains) on sale of marketable securities to net
income
|
|
-
|
|
|
41
|
|
Change
in unrealized gain on available for sale financial
investments
|
|
2,678
|
|
|
-
|
|
Less:
deferred taxes
|
|
(355)
|
|
|
-
|
|
|
|
3,747
|
|
|
631
|
|
|
|
|
|
|
|
Comprehensive
income
|
$
|
8,043
|
|
$
|
8,005
|
|
|
CONSOLIDATED
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
|
(Unaudited) (in
thousands of Canadian dollars)
|
|
|
|
|
|
|
|
|
|
For the Quarters
Ended March 31
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
Share
capital
|
|
|
|
|
|
|
Balance, beginning of
period
|
|
$
|
183,939
|
|
$
|
179,215
|
Common shares
issued
|
|
|
3,860
|
|
|
1,246
|
Balance, end of
period
|
|
|
187,799
|
|
|
180,461
|
|
|
|
|
|
|
|
|
Contributed
surplus
|
|
|
|
|
|
|
Balance, beginning of
period
|
|
|
510
|
|
|
510
|
Changes to
contributed surplus
|
|
|
-
|
|
|
-
|
Balance, end of
period
|
|
|
510
|
|
|
510
|
|
|
|
|
|
|
|
|
Retained
earnings
|
|
|
|
|
|
|
Balance, beginning of
period
|
|
|
34,481
|
|
|
32,145
|
Net income
|
|
|
4,296
|
|
|
7,374
|
Dividends
declared
|
|
|
(5,864)
|
|
|
(5,742)
|
Balance, end of
period
|
|
|
32,913
|
|
|
33,777
|
|
|
|
|
|
|
|
|
Accumulated other
comprehensive income
|
|
|
|
|
|
|
Balance, beginning of
period
|
|
|
6,373
|
|
|
3,030
|
Other comprehensive
income
|
|
|
3,747
|
|
|
631
|
Balance, end of
period
|
|
|
10,120
|
|
|
3,661
|
|
|
|
|
|
|
|
|
Total
shareholders' equity
|
|
$
|
231,342
|
|
$
|
218,409
|
|
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
(Unaudited) (in
thousands of Canadian dollars)
|
|
|
|
|
|
|
|
|
|
For the Quarters
Ended March 31
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
Cash provided by
(used for):
|
|
|
|
|
|
Operating
Activities
|
|
|
|
|
|
|
Net income
|
$
|
4,296
|
|
$
|
7,374
|
|
Adjusted for non-cash
items:
|
|
|
|
|
|
|
|
Deferred
taxes
|
|
225
|
|
|
(13)
|
|
|
Equity
income
|
|
(1,096)
|
|
|
(2,095)
|
|
|
Gain on sale of
investment in MCAP Commercial LP
|
|
-
|
|
|
(711)
|
|
|
Provision for
(recovery of) credit losses
|
|
(63)
|
|
|
(608)
|
|
|
Fair market value
adjustment - derivative financial instruments
|
|
24
|
|
|
464
|
|
|
Amortization of
securitized mortgage and liability transaction costs
|
|
644
|
|
|
227
|
|
|
Amortization of other
assets
|
|
98
|
|
|
17
|
|
|
Amortization of
mortgage discounts (premiums)
|
|
11
|
|
|
(610)
|
|
|
Amortization of
premium on marketable securities
|
|
(11)
|
|
|
-
|
|
Mortgage
advances
|
|
(333,442)
|
|
|
(284,248)
|
|
Mortgage
reductions
|
|
187,252
|
|
|
104,991
|
|
Proceeds on sale of
mortgages
|
|
26,112
|
|
|
322,419
|
|
Issuance of term
deposits
|
|
111,187
|
|
|
77,080
|
|
Repayment of term
deposits
|
|
(85,495)
|
|
|
(69,279)
|
|
Issuance of financial
liabilities from securitization
|
|
146,060
|
|
|
45,998
|
|
Repayment of
financial liabilities from securitization
|
|
(11,549)
|
|
|
(372,472)
|
|
Decrease in other
assets
|
|
710
|
|
|
866
|
|
Decrease in other
liabilities
|
|
(1,176)
|
|
|
(5,203)
|
Cash flows from
(for) operating activities
|
|
43,787
|
|
|
(175,803)
|
Investing
Activities
|
|
|
|
|
|
|
Increase in
marketable securities
|
|
(111)
|
|
|
(2,983)
|
|
(Increase) Decrease
in short-term investments
|
|
(8,177)
|
|
|
207,229
|
|
(Increase) Decrease
in financial investments
|
|
(914)
|
|
|
1,964
|
|
Increase in
foreclosed real estate
|
|
-
|
|
|
(40)
|
|
Proceeds on sale of
investment in MCAP Commercial LP
|
|
-
|
|
|
2,930
|
|
Decrease in other
loans
|
|
593
|
|
|
346
|
Cash flows (for)
from investing activities
|
|
(8,609)
|
|
|
209,446
|
Financing
Activities
|
|
|
|
|
|
|
Issue of common
shares
|
|
3,860
|
|
|
1,246
|
|
Decrease in loans
payable
|
|
-
|
|
|
(17,991)
|
|
Dividends
paid
|
|
(11,690)
|
|
|
(11,471)
|
Cash flows for
financing activities
|
|
(7,830)
|
|
|
(28,216)
|
Increase in cash and
cash equivalents
|
|
27,348
|
|
|
5,427
|
Cash and cash
equivalents, beginning of period
|
|
51,090
|
|
|
64,945
|
Cash and cash
equivalents, end of period
|
$
|
78,438
|
|
$
|
70,372
|
|
|
|
|
|
|
|
|
Supplementary
Information
|
|
|
|
|
|
|
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
Interest
received
|
$
|
18,805
|
|
$
|
15,687
|
Interest
paid
|
|
7,254
|
|
|
4,302
|
|
|
|
|
|
|
|
|
MCAN is a public company listed on the Toronto Stock Exchange
("TSX") 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 its corporate funds in a portfolio of
mortgages (including single family residential, residential
construction, non-residential construction and commercial loans),
as well as other types of financial investments, loans and real
estate investments. MCAN employs leverage by issuing term deposits
eligible for Canada Deposit Insurance Corporation ("CDIC") deposit
insurance up to a maximum of five times capital (on a
non-consolidated tax basis in the MIC entity) as permitted by the
Tax Act. The term deposits are sourced through a network of
independent financial agents. As a MIC, MCAN is entitled to deduct
from income for tax purposes 100% of dividends, except for capital
gains dividends, which are deducted at 50%. Such dividends
are received by the shareholders as interest income and capital
gains dividends, respectively.
MCAN's wholly-owned subsidiary, Xceed, focuses on the
origination and sale to third party mortgage aggregators of
residential first-charge mortgage products across Canada. As
such, Xceed operates primarily in one industry segment through its
sales team and mortgage brokers.
MCAN also participates in the market MBS program and the CMB
program.
A CAUTION ABOUT FORWARD-LOOKING INFORMATION AND
STATEMENTS
This press release contains "forward-looking statements" within
the meaning of applicable Canadian securities laws. The words
"may," "believe," "will," "anticipate," "expect," "planned,"
"estimate," "project," "future," and other expressions that are
predictions of or indicate future events and trends and that do not
relate to historical matters identify forward-looking statements.
Such statements reflect management's current beliefs and are based
on information currently available to management. The
forward-looking statements in this press release include, among
others, statements and assumptions with respect to:
- the current business environment and outlook;
- possible or assumed future results;
- ability to create shareholder value;
- business goals and strategy;
- the stability of home prices;
- effect of challenging conditions on us;
- factors affecting our competitive position within the housing
markets;
- sufficiency of our access to capital resources; and
- the timing of the effect of interest rate changes on our cash
flows.
The material factors or assumptions that were identified and
applied by us in drawing conclusions or making forecasts or
projections set out in the forward-looking statements include, but
are not limited to:
- the Company's ability to successfully implement and realize on
its business goals and strategy;
- factors and assumptions regarding interest rates;
- housing sales and residential mortgage borrowing
activities;
- the effect of competition;
- government regulation of the Company's business;
- computer failure or security breaches;
- future capital and funding requirements;
- the value of mortgage originations;
- the expected margin between interest earned on mortgage
portfolios and interest paid on deposits;
- the relative continued health of real estate markets;
- acceptance of the Company's products in the marketplace;
- availability of key personnel;
- the Company's operating cost structure; and
- the current tax regime.
Reliance should not be placed on forward-looking statements
because they involve known and unknown risks, uncertainties and
other factors, which may cause the actual results to differ
materially from the anticipated future results expressed or implied
by such forward-looking statements. Factors that could cause actual
results to differ materially from those set forth in the
forward-looking statements include, but are not limited to:
- global market activity;
- worldwide demand for and related impact on commodity
prices;
- changes in government and economic policy;
- changes in general economic, real estate and other
conditions;
- changes in interest rates;
- changes in MBS spreads and swap rates;
- MBS and mortgage prepayment rates;
- mortgage rate and availability changes;
- adverse legislation or regulation;
- availability of CMB and MBS issuer allocation;
- technology changes;
- confidence levels of consumers;
- ability to raise capital and term deposits on favourable
terms;
- our debt and leverage;
- competitive conditions in the homebuilding industry, including
product and pricing pressures;
- ability to retain our executive officers and other
employees;
- litigation risk;
- relationships with our mortgage originators;
- ability to realize anticipated benefits from the acquisition of
Xceed; and
- additional risks and uncertainties, many of which are beyond
our control, referred to in this press release and our other public
filings with the applicable Canadian regulatory authorities.
Subject to applicable securities law requirements, we undertake
no obligation to publicly update any forward-looking statements
whether as a result of new information, future events or
otherwise. However, any further disclosures made on related
subjects in subsequent reports should be consulted.
SOURCE MCAN Mortgage Corporation