Stock market symbol
TSX: MKP
TORONTO, Aug. 11, 2016 /CNW/ - MCAN Mortgage
Corporation ("MCAN", the "Company" or "we") reported earnings today
for the second quarter of 2016. Net income of $13.6 million increased by 14% from Q2 2015 and
earnings per share of $0.59 increased
by 5% from Q2 2015.
Highlights
Net Income
Q2 2016
- Net income was $13.6 million in
Q2 2016, an increase of $1.7 million
from $11.9 million in Q2 2015 due to
the recognition of $3.8 million of
income upon the receipt of a distribution from our investment in
Crown Realty II Limited Partnership and higher securitization
income, offset by higher operating expenses.
- Earnings per share increased by $0.03 to $0.59 in
Q2 2016 from $0.56 in Q2 2015.
- Return on average shareholders' equity of 20.10% in Q2 2016
compared to 20.16% in Q2 2015.
- Continued strong equity income from our investment in MCAP
Commercial LP ("MCAP") of $4.5
million in Q2 2016 compared to $4.9
million in Q2 2015.
Year to Date 2016
- For the year to date in 2016, net income was $21.4 million, an increase of $5.2 million (32%) from $16.2 million in 2015 due to the Q2 items noted
above and higher equity income from MCAP for the year to date.
- Earnings per share increased by $0.16 (21%) to $0.93 for the year to date in 2016 from
$0.77 in 2015.
- Increase of 15% in return on average shareholders' equity to
16.02% for the year to date in 2016 from 13.92% in 2015.
Dividend
- Consistent with the prior quarter dividend, the Board of
Directors declared a third quarter dividend of $0.29 per share to be paid September 30, 2016 to shareholders of record as
of September 15, 2016.
Corporate Activity
Q2 2016
- Corporate assets totalled $1.26
billion at June 30, 2016, an
increase of $27 million from
March 31, 2016, which included
increases of $21 million in mortgages
and $7 million in marketable
securities.
- The corporate mortgage portfolio increased by $21 million during Q2 2016 to $1.02 billion from $998
million, which included increases of $21 million in commercial, $14 million in construction, $4 million in completed inventory and
$3 million in insured single family,
offset by a decrease of $21 million
in uninsured single family.
- During Q2 2016, we originated $36
million of single family mortgages through our Xceed
origination platform, consisting of $30
million of insured single family and $6 million of uninsured single family.
Year to Date 2016
- Corporate assets have increased by $103
million for the year to date in 2016, including increases of
$75 million in corporate mortgages,
$15 million in marketable securities
and $8 million in financial
investments.
- The increase in the corporate mortgage portfolio for the year
to date in 2016 includes increases of $74
million in construction, $27
million in commercial and $26
million in insured single family, offset by decreases of
$37 million in uninsured single
family and $15 million in completed
inventory loans.
- For the year to date in 2016, we have originated $65 million of single family mortgages through
our Xceed origination platform, consisting of $53 million of insured single family and
$12 million of uninsured single
family.
Securitization Activity
- We recommenced our participation in the Canada Mortgage Bonds
("CMB") program in Q2 2016 by securitizing $28 million of insured single family mortgages
and $37 million of multi family
loans.
- We issued and sold $17 million of
new mortgage backed securities ("MBS") to third parties through the
market MBS program.
Credit Quality
- Impaired mortgages decreased to $3.9
million from $4.9 million
during Q2 2016.
- The impaired total mortgage ratio decreased to 0.14% from 0.20%
during Q2 2016.
- The impaired corporate mortgage ratio decreased to 0.29% from
0.41% during Q2 2016.
- Total mortgage arrears decreased to $39
million from $43 million
during Q2 2016.
Capital
- Our Common Equity Tier 1, Tier 1 and Total Capital to
risk-weighted assets ratios were 21.65% at June 30, 2016 on the transitional basis and
21.27% on the "all-in" basis compared to 22.38% and 22.03%,
respectively, at March 31, 2016.
- Our leverage ratio was 10.01% at June
30, 2016 compared to 10.00% at March
31, 2016.
- Income tax asset capacity was $90
million at June 30, 2016
compared to $135 million at
March 31, 2016.
Outlook
Canadian real estate markets continue to experience mixed
conditions, as some regional economies adjust to the negative
impact of weak oil prices on employment while other regional
economies benefit from the lower Canadian dollar and employment
strength in the manufacturing sector. The Canadian dollar has
continued to weaken after oil futures decreased with the prospect
of further drilling in the United
States.
We expect financial markets to remain volatile for the second
half of 2016, with fluctuations in stock markets as slowing global
growth and volatility in international currencies impact corporate
earnings and valuations. In Canada, the impact of a weak oil sector and
soft commodity prices continues to impact a significant portion of
the market. The manufacturing sector has been weak as sales
declined 1.0% in May, which was the third decrease in five
months. Manufacturing shipment volumes were down 2.1%,
highlighting a lower level of activity during the month.
Concerns over low or negative economic growth and increases in
unemployment rates are expected to have a spillover effect on
consumer confidence. The Canadian government's Child Benefit
program will see spending growth in families eligible for
payments.
Home sales remain strong in Toronto and Vancouver, where volumes continue to grow,
prices are increasing and housing inventory levels remain
low. Meanwhile, housing markets in the Prairie Provinces
continue to experience declines in home sale volumes and weak
prices as markets adjust to reduced demand caused by lower oil
prices. The Fort McMurray
fires have lengthened the duration of the forecasted negative
economic outlook and have led to increased
unemployment. Nearly one third of the recent rise in
the Alberta unemployment rate
occurred in the regional municipality of Wood Buffalo, which
includes Fort McMurray. On a year-over-year basis, the
overall number of employment insurance beneficiaries in
Alberta has increased by 59%.
The Bank of Canada's forecasted
GDP growth rates for Canada have
been reduced to 1.7% for 2016 with expected moderation in the
second half of the year. With relatively low levels of
economic growth, the probability of increased interest and mortgage
rates is 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. We
expect housing sales, both new and resale, to decline moderately in
the Prairie Provinces in 2016 due to weakness in demand and slow
job growth.
We expect construction activity to moderate nationally, although
British Columbia and Ontario are expected to benefit from strong
net job growth caused by a weaker Canadian dollar and increased
exports. Vancouver has become one
of the most attractive places to invest in real estate globally,
which helped to increase prices by 30% (approximately $200,000 per home) in just one year. The newly
legislated 15% tax on non-resident real estate purchases is
intended to help restore housing affordability for residents in the
Metro Vancouver Area by raising non-residents' cost of purchasing
and, on the margin, discouraging foreign speculation. The
government intends to use some of these new tax revenues to help
boost housing supply.
The key risks to the housing market are the prolonged slow, and
possibly negative, economic growth and increases in regional
unemployment rates. Global economic problems have proved to have a
significant impact on Canada given
its exposure to commodities. These factors could have a direct
impact on the stability of the regional housing markets,
particularly in Alberta and
Saskatchewan. The impact of
oversupply in local housing markets could lead to significant price
volatility. We will continue to be diligent in monitoring the
local housing markets in which we lend and will closely monitor our
mortgage portfolio for early indicators of potential performance
concerns.
We will continue to diversify and re-balance our portfolio to
optimize return and lower our risk profile. For the year to
date, our corporate asset portfolio has grown by 9% compared to our
target growth rate of 10% per annum. We expect the moderation in
our single family origination volumes to continue into the second
half of 2016, as we tighten our underwriting criteria to address
concerns of high levels of price inflation in Vancouver and Toronto.
Dividend Reinvestment Plan
The Dividend Reinvestment Plan ("DRIP") is a program that
provides 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 5
days preceding such issue less a discount of 2%. For further
information on how to enrol in the DRIP, please refer to the
Management Information Circular dated March
11, 2016 or visit our website at www.mcanmortgage.com.
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 2016 Second 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.
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 is also an NHA MBS issuer.
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