MCAN Mortgage Corporation Provides Update on Second Quarter
TSX: MKP
TORONTO, June 16, 2015 /CNW/ - MCAN Mortgage Corporation ("MCAN", the "Company" or "we") announced today that it anticipates net income for the second quarter of 2015 to increase substantively from the first quarter of 2015. With the recently announced rights offering scheduled to close on July 10, 2015, MCAN believed that a general update on MCAN's results for the second quarter was in order.
As detailed in the press release reporting results from the first quarter of 2015, MCAN's first quarter net income was negatively impacted directly by realized and unrealized losses on financial instruments (relating primarily to the cost of the hedging of mortgage funding commitments) and indirectly through lower equity income from our investment in MCAP Commercial LP ("MCAP") (primarily as a result of hedge losses incurred by MCAP related to a significant drop in bond rates in January 2015).
During the first two months of its second quarter, MCAP has earned significant income from funding mortgages at spreads higher than historical norms. MCAN's equity income from MCAP for the first two months of the second quarter of 2015 was $4.5 million compared to $1.1 million for the entire first quarter of 2015. Equity income from MCAP for the first two months of the second quarter of 2015 may not be indicative of future results. Realized and unrealized gains/losses on financial instruments incurred in MCAN for the first two months of the second quarter of 2015 have not been material.
The bond market continues to be volatile, so net income for the second quarter could be impacted by further market volatility in June.
MCAN's second quarter net income will also be impacted positively by a one-time discount income recognition of between $1.0 million and $1.2 million on the sale of a residential construction loan purchased at a discount.
In addition, MCAN's corporate mortgage portfolio has decreased since the first quarter of 2015. Mortgage growth remains under our growth target of 10 percent growth per annum. 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. We expect the corporate mortgage portfolio to grow in the second half of the year from the funding of mortgage commitments.
As a result of the impact of the items detailed above, MCAN anticipates net income for the second quarter of 2015 to be substantively higher than the first quarter of 2015, with second quarter earnings per share anticipated to be between $0.40 and $0.55, compared to first quarter earnings per share of $0.21.
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, including with respect to MCAP;
- 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
MCAN Mortgage Corporation, Website: www.mcanmortgage.com, e-mail: [email protected]; William Jandrisits, President and Chief Executive Officer, (416) 591-2726; Jeffrey Bouganim, Vice President and Chief Financial Officer, (416) 203-5935
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