Second quarter optimism for mortgage portfolio

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With high expectations of second quarter growth in net income, one mortgage company expects portfolio growth from the funding of mortgage commitments.

MCAN Mortgage Corporation announced that it anticipates net income for the second quarter of 2015 to increase substantively from the first quarter of 2015.  And with the recently announced rights offering scheduled to close on July 10, the company believed that a general update on its results for the second quarter was in order.

According to Jeffrey Bouganim, vice president and chief financial officer and William Jandrisits, president and chief executive officer, mortgage growth remains under MCAN’s 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,” stated Bouganim and Jandrisits. “We expect the corporate mortgage portfolio to grow in the second half of the year from the funding of mortgage commitments.”

The plunge in oil prices on the world market has had an effect on the Alberta housing and mortgage market, and MCAN's corporate mortgage portfolio has reflected that with a decrease since the first quarter of 2015.

Oil prices fell again this week over concerns of a global glut, with Brent crude down 22 cents at $63.12 a barrel.

The latest projections for industry jobs in Alberta predict that some 25,000 people could lose their jobs this year, according to the Canadian Association of Oilwell Drilling Contractors.

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 (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.

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