MCAN FINANCIAL GROUP ANNOUNCES Q3 2024 RESULTS AND DECLARES $0.39 REGULAR CASH DIVIDEND
Return on average shareholders' equity1 reaches 18.16% for the quarter
TORONTO, Nov. 11, 2024 /CNW/ - MCAN Mortgage Corporation d/b/a MCAN Financial Group ("MCAN", the "Company" or "we") (TSX: MKP) reported net income of $26.9 million ($0.70 earnings per share) for the third quarter of 2024, an increase from net income of $18.5 million ($0.53 earnings per share) in the third quarter of 2023.
Third quarter 2024 return on average shareholders' equity1 was 18.16% compared to 14.20% for the same period in the prior year.
Our Q3 results were mainly impacted by higher unrealized fair value gains on our REIT portfolio and higher income from our investment in MCAP compared to the same prior year period.
For year to date 2024, we reported net income of $69.9 million ($1.87 earnings per share), an increase from net income of $57.6 million ($1.66 earnings per share) for the same prior year period.
Return on average shareholders' equity1 was 16.29% for year to date 2024 compared to 15.06% for the same prior year period.
We reported higher total net income for the year to date mainly as a result of higher unrealized fair value gains on our REIT portfolio, higher income from MCAP and higher net securitized mortgage spread income partially offset by slightly lower net corporate mortgage spread income compared to the same prior year period. We continued to manage our portfolio in a declining interest rate environment.
We are committed to a strategy of managing controllable factors to protect our bottom line and taking advantage of opportunities that arise in the current market environment.
The Board of Directors declared a fourth quarter regular cash dividend of $0.39 per share to be paid on January 2, 2025 to shareholders of record as of December 13, 2024. As a mortgage investment corporation, we pay out all of our taxable income to shareholders through dividends.
"We had a strong quarter, with total assets surpassing $5.2 billion and net income exceeding last year's figures, thanks to the various levers we have in our business during a declining interest rate environment as well as better performance from our investment in MCAP. We also successfully raised additional capital in the quarter through our at-the-market program to help us grow," said CEO Don Coulter. "In this environment, we are continuing to see solid origination and renewal volumes across the entire loan book as well as good credit quality. Looking ahead, we are focused on MCAN's strategic growth and positioning in the Canadian mortgage market."
HIGHLIGHTS
Total assets reached $5.21 billion at September 30, 2024, a net increase of $474 million (10.0%) from December 31, 2023.
Corporate assets totalled $2.88 billion at September 30, 2024, a net increase of $124 million (4.5%) from December 31, 2023.
Construction and commercial mortgages totalled $1.02 billion at September 30, 2024, a net decrease of $93 million (8%) from December 31, 2023. Year to date 2024, the movement in the construction and commercial portfolios is attributed to net originations of $420 million in new construction and commercial mortgages, offset by repayments from completing projects. Originations in the third quarter were lower compared to the same period in 2023; however, we have seen some extensions of projects due to normal construction delays or normal delays relating to the permitting and zoning process. To date, projects continue to progress toward completion.
Uninsured residential mortgages totalled $1.11 billion at September 30, 2024, a net increase of $139 million (14%) from December 31, 2023. Uninsured residential mortgage originations totalled $311 million year to date 2024, an increase of $27 million (9%) from the same period in 2023. The economic and interest rate environment and its impact on the housing market and borrowers has improved somewhat due to expectations about further interest rate cuts. We have also seen solid uninsured residential mortgage renewal rates with renewals of $350 million year to date 2024 compared to $380 million for the same period in 2023 as borrowers find it more convenient to stay with their existing lender in the current market environment.
Non-marketable securities totalled $114 million at September 30, 2024, an increase of $4 million (4%) from December 31, 2023 with $69 million of remaining commitments expected to fund over the next five years.
Marketable securities totalled $59 million at September 30, 2024, a net increase of $9 million (17%) from December 31, 2023 due to net unrealized fair value gains. In 2024, we saw REIT prices increase due to a declining interest rate environment.
Securitized mortgages totalled $2.29 billion at September 30, 2024, a net increase of $360 million (19%) from December 31, 2023, due to higher securitization volumes.
Overall, total insured residential mortgage origination volumes are higher due to declining mortgage rates compared to the higher interest rate environment in the prior year. Insured residential mortgage originations totalled $528 million year to date 2024, an increase of $153 million (41%) from the same period in 2023. Insured residential mortgage securitizations totalled $591 million year to date 2024, an increase of $360 million (155%) from the same period in 2023. Insured residential mortgages being held for upcoming securitizations totalled $251 million at September 30, 2024, a net decrease of $26 million (9%) from December 31, 2023. We use various channels in funding the insured residential mortgage portfolio, in the context of market conditions and net contributions over the life of the mortgages, in order to support our overall business. As we have seen more favourable securitization spreads, we opted to securitize our insured residential mortgages as opposed to selling them at the commitment stage.
FINANCIAL UPDATE
Net corporate mortgage spread income1 is derived from both our residential lending portfolio and our construction and commercial portfolio. It decreased by $3.0 million for Q3 2024 from Q3 2023 and decreased $1.9 million for year to date 2024 from year to date 2023 mainly due to a reduction in the spread of corporate mortgages over term deposit interest and expenses partially offset by a higher average corporate mortgage portfolio balance. The decrease in the spread is mainly due to higher effective interest rates on our term deposits and fair value hedge costs. Year to date, this was partially offset by higher average mortgage rates primarily due to the impact of the higher rate environment on our floating rate residential construction loans.
Net securitized mortgage spread income1 increased by $1.1 million for Q3 2024 from Q3 2023 and increased $2.0 million year to date 2024 from year to date 2023 due to a higher average securitized mortgage portfolio balance and an increase in the spread of securitized mortgages over liabilities. We have seen better economics on securitizations as the spread of Government of Canada bond yields versus our mortgage rates has widened on the expectation of a declining interest rate environment.
For Q3 2024, we had a provision for credit losses on our corporate mortgage portfolio of $1.3 million compared to a provision for credit losses of $0.4 million in Q3 2023. For year to date 2024, we had a provision for credit losses on our corporate mortgage portfolio of $2.1 million compared to a provision for credit losses of $2.4 million for year to date 2023. For year to date ...
