Mcan Mortgage Corporation · TSX:MKP
Mcan Mortgage — Q3 2019 Earnings Presentation
30 slides from Mcan Mortgage's earnings presentation, November 2019
Slide 1: Investor Presentation 2019 Third Quarter
INVESTOR PRESENTATION 2019 THIRD QUARTER November 2019 Karen Weaver Dipti Patel President & Chief Vice President & Executive officer Chief Financial Officer
Slide 2: Forward Looking Information
FORWARD LOOKING INFORMATION This presentation may contain forward-looking statements and statements regarding the business and anticipated financial performance of MCAN Mortgage Corporation and its subsidiaries. These statements are based on current expectations, and are subject to a number of risks
Slide 3: Index
INDEX 1. Business Overview 2. Investment Strategy 3. Q3 2019 Highlights 4. Mission and Objectives 3
Slide 4: Business Overview
BUSINESS OVERVIEW 4
Slide 5: MCAN Business
MCAN BUSINESS Our focus since founding in 1991 5
Slide 6: Diversified Quality Real Estate Investments
DIVERSIFIED QUALITY REAL ESTATE INVESTMENTS MCAN'S Real Estate Investments Single Family Residential $1.37 Billion Total Corporate Assets Equity investment in MCAP Non-marketable securities Marketable securities $2.20 Billion Commercial Total Assets Residential & Non- Residential Construction • 11.3
Slide 7: Deposit Funding
DEPOSIT FUNDING MCAN's Term Deposits: • Since 1993 • Non-redeemable prior to maturity • Eligible for CDIC insurance coverage • $1,065 million at September 30, 2019 • 19.1 months average term to maturity 7
Slide 8: 10 Year History of Net Income and Earnings per Share
10 YEAR HISTORY OF NET INCOME AND EARNINGS PER SHARE 40.2 39.9 36.3 32.9 30.2 26.7 27.1 24.7 25.4 1.85 21.5 1.73 1.68 1.75 1.72 1.54 1.51 1.54 1.22 1.23 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Earnings per Share ($) Net Income ($ Millions) 8
Slide 9: MCAN's Capital History
MCAN'S CAPITAL HISTORY 10 Year History - Capital Growth and Book Value per Share Q3 2019 book value $13.53 per share 350 $14 $12.70 $12.89 $12.21 300 $11.36 $12 $10.83 $10.50 250 $9.40 $9.49 $10 $8.58 $8.66 ($ millions) 200 $8 150 $6 100 $4 50 $2 0 $0 2009 2010 2011 2012 2013 2014 2015 2016 2017 201
Slide 10: 10 Year History Dividend Growth & Yield
10 YEAR HISTORY Avg yield DIVIDEND GROWTH & YIELD 8.34% 10yr 10% 8% $1.43 $1.31 $1.13 $1.17 $1.08 $1.09 $1.12 $1.12 6% $1.01 $1.04 4% 2% 0% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Dividend Yield ** 10 Yr Avg. Yield Regular Dividend ** MKP CN Equity - Dividend Indicated Yield – Gross; month
Slide 11: Investment Strategy
INVESTMENT STRATEGY 11
Slide 12: Investment Strategy
INVESTMENT STRATEGY MCAN is a strategic investor in the Canadian real estate market with a diversified portfolio of mortgages, real estate secured lending products and equity investments • MIC focus is investments in residential mortgages and residential construction loans • Focus on first time / fi
Slide 13: Investment Strategy: Diversification
INVESTMENT STRATEGY Diversification is a key component of MCAN's overall risk profile and strategy • MCAN's portfolio is diversified by: ◦ asset category ◦ product type ◦ origination source ◦ geographic and market segments ◦ borrowers • Portfolio composition is actively monitored and adjusted for: ◦
Slide 14: Investment Strategy: Residential Construction Approach
INVESTMENT STRATEGY Residential Construction Approach MCAN uses lending discipline to effectively mitigate and manage risks inherent in residential construction lending • Invest in markets where deep experience and knowledge exists • Leverage strategic relationships to provide added market and work-
Slide 15: Investment Strategy: Strategic Partner Model
INVESTMENT STRATEGY Strategic Partner Model • MCAN selects strategic partner relationships with a clear alignment of interests, market approach and risk perspective • MCAN leverages its in house expertise in loan origination and underwriting • Strategic partners provide servicing and work-out expert
Slide 16: 2019 Third Quarter Highlights
2019 THIRD QUARTER HIGHLIGHTS 16
Slide 17: Q3 2019 Performance: Highlights
Q3 2019 PERFORMANCE: HIGHLIGHTS Q3 2019 Q3 2018 • Q3 2019 $5.0 million net gain on securities (MTM on REIT portfolio) Net Income $14.6 million $11.0 million vs. Q3 2018 $0.4 million net gain on securities (MTM on REIT portfolio and investment in Crown LP) Net Investment Income • Average corporate mo
Slide 18: Q3 2019 Performance: Highlights
Q3 2019 PERFORMANCE: HIGHLIGHTS QoQ Q3 2019 Q2 2019 Q1 2019 Q4 2018 USF Balance $364 million $345 million $308 million $256 million USF Originations $46 million $56 million $63 million $51 million ISF Originations $77 million $57 million $38 million $28 million Corporate Assets $1.37 billion $1.26 b
Slide 19: Q3 2019 Performance: Capital, Leverage & Dividends
Q3 2019 PERFORMANCE: CAPITAL, LEVERAGE & DIVIDENDS QoQ Q3 2019 Q2 2019 Q4 2018 CET 1* 21.77% 22.40% 21.66% Leverage Ratio* 12.28% 12.16% 11.79% Income Tax Assets to 5.13 4.71 4.64 Capital Ratio* Dividends per Share $0.32 $0.32 $0.32 * Non IFRS measure as defined in MCAN’s Q3 2019 MD&A • MCAN is well
Slide 20: Corporate Mortgage Portfolio
CORPORATE MORTGAGE PORTFOLIO Total Corporate Mortgages - Single Family and Construction & Commercial ($ millions) 542 452 478 474 375 443 375 330 529 533 547 544 555 524 452 470 2014 2015 2016 2017 2018 Q1 - 2019 Q2 - 2019 Q3 - 2019 Construction & Commercial Single Family 20
Slide 21: Total Mortgage Portfolio
TOTAL MORTGAGE PORTFOLIO Mortgages - Corporate and Securitization ($millions) 1,076 1,072 1,017 771 887 741 1,097 895 944 904 922 863 2014 2015 2016 2017 2018 Q3 - 2019 Corporate Securitization ($ millions) Q3 2019 Q4 2018 Change Q3 2018 Change Single Family $ 542 $ 375 45 % $ 365 48 % Construction
Slide 22: Strong Capital Position
STRONG CAPITAL POSITION 22.09% 22.40% 21.66% 21.77% 20.58% 12.05% 12.16% 12.28% 11.35% 11.79% 4.9 4.7 4.7 5.1 4.6 Q3-18 Q4-18 Q1-19 Q2-19 Q3-19 CET 1, Tier 1 and Total Capital Ratio (%, all-in)* Leverage Ratio (%) (effective 2015)* Income Tax Assets to Capital Ratio* * Non IFRS measure as defined in
Slide 23: Key Metrics: Quarterly Trend Charts
KEY METRICS: QUARTERLY TREND CHARTS Net income Basic and diluted EPS $14.3 $14.6 $0.60 $0.60 $11.0 $0.47 $8.9 $0.37 $3.5 $0.15 Q3-18 Q4-18 Q1-19 Q2-19 Q3-19 Q3-18 Q4-18 Q1-19 Q2-19 Q3-19 Return on average shareholders' equity* Book Value per common share* 18.36% 18.05% 14.29% $13.53 $13.18 $13.23 $1
Slide 24: Credit Quality & Risk Management
CREDIT QUALITY & RISK MANAGEMENT 0.50% 0.40% 0.30% 0.27% 0.20% 0.10% 0.00% Dec 2017 Mar 2018 Jun 2018 Sep 2018 Dec 2018 Mar 2019 Jun 2019 Sep 2019 Impaired Mortgages as % of Total Corporate Mortgages* * Non IFRS measure as defined in MCAN’s Q3 2019 MD&A 24
Slide 25: MCAN's Mission and Objectives
MCAN'S MISSION AND OBJECTIVES 25
Slide 26: MCAN's Mission
MCAN'S MISSION • Achieve superior, sustainable and stable growth performance • Employ expert balance sheet management • Leverage our investment expertise and relationships 26
Slide 27: Long Term Objectives
LONG TERM OBJECTIVES • Sustained annual growth of assets 8-10% • Sustained ROE 13-15% • Sustained and prudent dividend growth 27
Slide 28: Executive Management
EXECUTIVE MANAGEMENT Karen Weaver Mike Jensen President and CEO Vice President and Chief Compliance Officer (Chief Anti Money Laundering & Privacy Officer) Dipti Patel Vice President and Chief Financial Officer Sylvia Pinto Vice President, Corporate Secretary & Martin Beaudry Governance Officer Vice
Slide 29: Footnotes and References
Footnotes and References • [*] Non IFRS measure as defined in MCAN’s Q3 2019 MD&A • [**] MKP CN Equity - Dividend Indicated Yield – Gross; monthly data April 2009 up to Apr 26, 2019 • CET 1 = Common Equity Tier 1 • Data source of charts: MCAN’s Q3 2019 MD&A and historical quarterly and annual report
Slide 30: Contact Information
Contact Information MCAN MORTGAGE CORPORATION 200 King Street West, Suite 600 Toronto, ON M5H 3T4 Tel. (416) 572-4880 mcanexecutive@mcanmortgage.com www.mcanmortgage.com 30