Stock market symbol
TSX: MKP
TORONTO, Feb. 26, 2016 /CNW/ - MCAN Mortgage
Corporation ("MCAN", the "Company" or "we") reported strong
earnings today for both the fourth quarter and fiscal year of
2015.
Highlights
Q4 Net Income
- Net income was $9.5 million in Q4
2015, up 33% from $7.1 million in Q4
2014 due to higher securitization income from an 83% increase in
our average market mortgage-backed securities ("MBS") program
mortgage portfolio and a $2.5 million
income distribution received on a commercial real estate
investment.
- Earnings per share increased by 24% to $0.42 in Q4 2015 from $0.34 in Q4 2014.
- Return on average shareholders' equity increased to 14.66% in
Q4 2015 from 12.76% in Q4 2014.
Fiscal 2015 Net Income
- We earned record net income of $32.9
million in fiscal 2015, a 29% increase from $25.4 million in 2014. In addition to the items
noted above for Q4 2015, equity income from our investment in MCAP
Commercial LP ("MCAP") increased significantly from 2014.
- Earnings per share were $1.51 in
fiscal 2015, up 23% from $1.23 per
share in 2014.
- Return on average shareholders' equity increased to 13.45% in
2015 from 11.50% in 2014.
Dividend
- Consistent with the prior quarter dividend increase, the Board
of Directors (the "Board") declared a first quarter dividend of
$0.29 per share to be paid
March 31, 2016 to shareholders of
record as of March 15, 2016.
Corporate Activity
- Corporate assets totalled $1.16
billion at December 31, 2015,
an increase of $63 million during Q4
2015.
- Q4 2015 corporate asset activity included increases of
$63 million in mortgages,
$5 million in marketable securities
and $5 million in financial
investments and a decrease of $16
million in cash and cash equivalents.
- Corporate mortgage portfolio increased to $944 million from $881
million during Q4 2015.
- Q4 2015 corporate mortgage activity included increases of
$49 million in construction,
$26 million in uninsured single
family and $22 million in completed
inventory loans and a decrease of $33
million in insured single family.
Securitization Activity
- We issued and sold $89 million of
new MBS to third parties through the market MBS program in Q4 2015
and $589 million for fiscal
2015.
- We sold the residual economics (the "interest-only strips")
associated with $147 million of
mortgages that had previously been securitized through the market
MBS program, which allowed us to derecognize the associated
mortgages from our balance sheet and reduce the related capital
utilization for regulatory purposes.
Credit Quality
- Impaired mortgages decreased to $2.7
million from $3.7 million
during Q4 2015.
- Total impaired mortgage ratio decreased to 0.11% from 0.15%
during Q4 2015.
- Corporate impaired mortgage ratio decreased to 0.23% from 0.34%
during Q4 2015.
Capital
- Common Equity Tier 1, Tier 1 and Total Capital to risk-weighted
assets ratios were 23.64% at December 31,
2015 on the transitional basis and 23.08% on the "all-in"
basis compared to 25.77% and 25.21%, respectively, at September 30, 2015.
- Leverage ratio was 9.96% at December 31,
2015, up from 9.64% at September 30,
2015.
- Income tax asset capacity was $141
million at December 31, 2015,
down from $191 million at
September 30, 2015.
Outlook
Canadian real estate markets are experiencing mixed performances
as some regional economies adjust to reduced oil prices and the
negative impact on employment, while other regional economies
benefit from the lower Canadian dollar and employment strength in
the manufacturing sector. As a result, housing markets in the
Prairie Provinces are experiencing declines in home sales volumes
as the markets adjust to reduced oil prices, slow growth and
increasing unemployment. Meanwhile, home sales remain steady in
Canada's largest cities,
Toronto and Vancouver, as sales volumes continue to grow
and housing inventory levels remain at historical lows due to
building lot supply shortages. The rest of the country continues to
see stable housing markets as a result of historically low mortgage
rates.
We expect financial markets to remain volatile for the first
half of 2016 with significant fluctuations in stock markets as
slowing global growth and volatility in international currencies
impact reported earnings and earnings multiples. In Canada the impact of oil and commodity prices
continues to impact a significant portion of the market, raising
concerns over low or negative economic growth, increases in
unemployment rates and the spillover effect to consumer confidence.
Volatility in stock markets and the continued weakness in global
oil prices could have a negative influence on consumer confidence
and the economy in 2016.
Consensus forecasted GDP growth rates for Canada are 1.4% in 2016. With low levels of
economic growth, the risk of increased interest and mortgage rates
is seen as low. We expect housing markets to continue to benefit
from low mortgage rates and relatively stable employment in most of
the country, with the exception of the Prairie Provinces. Although
mortgage rates are expected to remain low, volatility within the
bond market could marginally impact mortgage spreads as it did in
the later part of 2015. Increased uncertainty in regional
employment markets is expected to impact housing markets and could
temper price appreciation in those markets. We expect housing
sales, both new housing and resale, to decline moderately in the
Prairie Provinces for 2016 due to weakness in demand.
The key risks to the housing market are the prospects for slow,
and possibly negative, economic growth and increases in regional
unemployment rates. These factors could have a direct impact on the
stability of the regional housing markets, particularly in
Alberta. The current level of
relatively low mortgage rates should help to support home
affordability and keep price appreciation in line with inflation.
The impact of oversupply in local housing markets could lead to
significant price volatility. We will continue to be diligent in
monitoring local housing markets in which we lend and will closely
monitor our mortgage portfolio for early indicators of potential
performance concerns.
We expect construction activity to moderate nationally, with
British Columbia and Ontario benefiting from the recent decline in
the Canadian dollar and increased exports. Given economic
uncertainty and slow growth projections for the Canadian economy,
we are closely monitoring our construction portfolio and do not
expect to materially grow the construction portfolio in 2016. Our
portfolio remains well diversified with projects supported by
presales in balanced markets and experienced developers.
Our strategy remains focused on growth in our insured and
uninsured single family mortgage portfolio sourced through our
direct Xceed origination platform. Our current view is that 2016
originations and portfolio growth in single family mortgages will
allow us to continue to achieve our annual corporate asset growth
target of 10%, which will further diversify and re-balance our
portfolio to optimize return and lower our risk profile.
We participated in the MBS securitization market with regular
issuances throughout 2015 totaling $589
million. We expect our MBS volumes to moderate in the first
half of 2016 as we have reduced our volume expectations in the
first quarter to allow for a system upgrade that includes new
underwriting software. With origination volumes surpassing
$500 million in 2015, the adoption of
the new system will facilitate the future growth of the Xceed
platform. We believe that this upgrade will enhance its
capabilities and productivity as well as enhance our risk
management processes.
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, Mortgage Arrears, Common Equity
Tier 1, Tier 1 and Total Capital Ratios, Total Exposures,
Regulatory Assets, Leverage Ratio, Assets to Capital Multiple; Risk
Weighted Assets 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 Annual 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
("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 NHA MBS 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;
- the price of oil and its impact on housing markets in
Western Canada;
- 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 oil and other
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 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; 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