TORONTO, Feb. 26, 2024 /CNW/ – MCAN Mortgage Corporation d/b/a MCAN Financial Group (“MCAN”, the “Company” or “we”) (TSX:MKP) reported our highest annual net income in our history of $77.5 million ($2.22 earnings per share) for 2023, an increase from net income of $55.4 million ($1.77 earnings per share) for the prior fiscal year. Return on average shareholders’ equity1 was 15.05% for 2023 compared to 12.47% for the prior fiscal year. We reported higher total net income for the year mainly as a result of higher net corporate mortgage spread income as we continued to adjust our portfolio to take advantage of the higher interest rate environment. Our net corporate mortgage spread income1 increased by $30.7 million for the current fiscal year compared to the prior fiscal year. For the fourth quarter of 2023, we reported net income of $19.9 million ($0.56 earnings per share), a decrease from net income of $24.1 million ($0.75 earnings per share) in the fourth quarter of 2022. Fourth quarter 2023 return on average shareholders’ equity1 was 15.01% compared to 21.17% for the same period in the prior year. While net corporate mortgage spread income was strong and ahead of the prior year, a number of factors impacted our Q4 results, including recording a higher provision for credit losses in the current year. 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 first quarter regular cash dividend of $0.39 per share (a 5.4% increase on an annualized basis from 2023) to be paid on March 28, 2024 to shareholders of record as of March 15, 2024. As a mortgage investment corporation, we pay out all of our taxable income to shareholders through dividends. Largely as a result of tax timing differences on various investing strategies that we undertook in the second half of 2023, we will not need to distribute a special dividend in the first quarter of 2024.
“I am thrilled to announce that we have achieved exceptional year end results with our highest net income in our history. We grew our diversified assets by 16% during the year reaching almost $5 billion at year end. Our strong performance is a testament to the dedication and hard work of our talented team, coupled with strategic decision-making during this uncertain market to achieve profitable growth,” said Don Coulter, Chief Executive Officer. “As we celebrate this remarkable achievement, we remain committed to driving sustainable growth and maximizing shareholder value in the long term.”
Highlights
Corporate assets totalled $2.76 billion at December 31, 2023, a net increase of $473 million (21%) from December 31, 2022.
Construction and commercial mortgages totalled $1.12 billion at December 31, 2023, a net increase of $187 million (20%) from December 31, 2022. Year to date 2023, the positive movement in the construction and commercial portfolios is attributed to originations of $666 million in new construction and commercial mortgages, partially offset by maturities and repayments. Originations have been strong this year and some extensions of projects due to normal construction delays or normal delays relating to the permitting and zoning process has meant that we have not experienced as much run-off in the portfolio as expected. To date, projects continue to progress toward completion.
Uninsured residential mortgages totalled $967 million at December 31, 2023, a net increase of $138 million (17%) from December 31, 2022. Uninsured residential mortgage originations totalled $352 million year to date 2023, a decrease of $17 million (4%) from the same period in 2022. The economic and interest rate environment and its impact on the housing market and borrowers has caused a slowdown in origination volumes in 2023. However, we have seen an increase in our uninsured residential mortgage renewal rates with renewals of $495 million year to date 2023 compared to $435 million year to date 2022 as borrowers find it more convenient to stay with their existing lender in the current market environment.
Non-marketable securities totalled $110 million at December 31, 2023, an increase of $13 million (13%) from December 31, 2022 with $76 million of remaining capital advances expected to fund over the next five years.
Marketable securities totalled $50 million at December 31, 2023, a net decrease of $3 million (6%) from December 31, 2022 due to net unrealized fair value losses. In 2023, we saw REIT prices decrease due to Bank of Canada interest rate increases and uncertainty around future rate increases and recessionary pressures.
Securitized mortgages totalled $1.93 billion at December 31, 2023, a net increase of $179 million (10%) from December 31, 2022, due to continued originations being ahead of maturities in the securitized portfolio.
Overall, for the year to date, total insured residential origination volumes (including commitments sold) were lower in 2023 as a result of the higher interest rate environment, particularly for first time home buyers, who would be a significant portion of the borrowers of insured residential mortgages. Insured residential mortgage originations totalled $523 million year to date 2023, a decrease of $65 million (11%) from the same period in 2022. This includes $25 million of insured residential mortgage commitments originated and sold in 2023 compared to $228 million in 2022. Insured residential mortgage securitizations totalled $359 million year to date 2023, a decrease of $67 million (16%) from the same period in 2022. Insured residential mortgages being held for upcoming securitizations totalled $277 million at December 31, 2023, a net increase of $132 million (91%) from December 31, 2022. 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.
Financial Update
Net corporate mortgage spread income1 is derived from both our residential lending portfolio and our construction and commercial portfolio. It increased by $5.5 million for Q4 2023 from Q4 2022 and increased $30.7 million for year to date 2023 from year to date 2022 mainly due to a higher average corporate mortgage portfolio balance from continued mortgage originations and renewals, and an increase in the spread of corporate mortgages over term deposit interest and expenses. The increase in the spread was mainly attributable to the rising interest rate environment’s impact on floating rates on residential construction loans that are now well above their floor rates.
Net securitized mortgage spread income1 increased marginally by $0.1 million for Q4 2023 from Q4 2022 due to a higher average securitized mortgage portfolio balance from insured residential mortgage originations as we continued to increase our mortgage lending in the Alberta and British Columbia urban markets. For year to date 2023, net securitized mortgage spread income1 decreased $0.7 million from year to date 2022 mainly due to a decrease in the spread of securitized mortgages over liabilities partially offset by a higher average securitized mortgage portfolio balance from originations and renewals of insured residential mortgages. We have seen the spread of securitized mortgages over liabilities decline on securitizations mainly as a result of higher securitization liability interest expense from higher Government of Canada bond yields in a higher interest rate environment.
For Q4 2023, we had a provision for credit losses on our corporate mortgage portfolio of $2.1 million compared to a recovery of credit losses of …