investors and continue to realize the benefits of solid cash flows and
distributions from these investments. Year to date, we received
distributions of $2.3 million (distribution yield1 of 6.02%) from our
REITs compared to $2.8 million (distribution yield1 of 6.22%) in 2023.
-- Net unrealized fair value loss on our non-marketable securities of $3.9
million in Q3 2024 mainly related to updated property valuations
partially offset by increased density approval on one underlying
property. In Q3 2023, we had a $2.1 million net unrealized fair value
gain on our non-marketable securities investments due to value-add
leasing activity on one underlying property investment. For year to date
2024, we had a net unrealized fair value loss on our non-marketable
securities of $3.6 million mainly related to the same factors as for Q3
2024 mentioned above. For 2023 year to date, we had a $2.1 million net
unrealized fair value gain on our non-marketable securities investments
due to the same factors as described for Q3 2023 mentioned above. Our
non-marketable securities are either held for long-term capital
appreciation or distribution income and they tend to improve the
diversification, and risk and reward characteristics of our overall
investment portfolio. Our real estate development fund investments tend
to have less predictable cash flows that are predicated on the completion
of the development projects within these funds.
Credit Quality
-- Arrears total mortgage ratio1 was 3.06% at September 30, 2024 compared to
3.04% at June 30, 2024 and 2.70% at December 31, 2023. The majority of
our residential mortgage arrears activity occurs in the 1-30 day category,
in which the bulk of arrears are resolved and do not migrate to arrears
categories over 30 days. While greater than 30 days arrears has increased
in our uninsured residential mortgages, we believe overall that we have a
quality uninsured residential mortgage loan portfolio with an average LTV
of 63.5% at September 30, 2024 compared to 64.5% at June 30, 2024 and
63.4% at December 31, 2023 based on an industry index of current real
estate values. We have also seen our arrears stabilize since Q1 2024.
With respect to our construction and commercial loan portfolio, we have a
strong track record with our default management processes and asset
recovery programs as the need arises.
-- Impaired corporate mortgage ratio1 was 2.26% at September 30, 2024
compared to 3.50% at June 30, 2024 and 3.26% at December 31, 2023. At
September 30, 2024, impaired mortgages mainly represent four impaired
construction mortgages where asset recovery programs have been initiated.
-- Impaired total mortgage ratio1 was 1.19% at September 30, 2024 compared
to 1.90% at June 30, 2024 and 1.82% at December 31, 2023. The decrease to
our impaired total mortgage ratio is mainly due to fewer impaired
construction mortgages as they were either brought current or we
recovered all past due interest and principal.
Capital
-- We have a Base Shelf prospectus allowing us to make certain public
offerings of debt or equity securities during the period that it is
effective, through Prospectus Supplements.
-- We have an ATM Program, established pursuant to a Prospectus
Supplement to our Base Shelf prospectus, allowing us to issue up
to $30 million common shares to the public from time to time at
the market prices prevailing at the time of sale. In Q3 2024, we
sold 182,600 common shares at a weighted average price of $17.75
for gross proceeds of $3.2 million and net proceeds of $3.0
million including $65 thousand of agent commission paid and $155
thousand of other share issuance costs under the ATM Program. At
September 30, 2024, we have $25.1 million remaining available to
be issued through our ATM Program. The volume and timing of
distributions under the ATM Program are determined at MCAN's sole
discretion.
-- We issued $2.2 million in new common shares in Q3 2024 (Q3 2023 - $4.0
million) and $14.8 million year to date 2024 (year to date 2023 - $14.5
million) through the Dividend Reinvestment Plan ("DRIP"). The DRIP
participation rate for the 2024 third quarter dividend was 15% (2024
second quarter - 30%; 2023 third quarter - 30%). The DRIP is a program
that has historically provided MCAN with a reliable source of new capital
and existing shareholders an opportunity to acquire additional shares at
a discount to market value.
-- Income tax assets to capital ratio3 was 5.38 at September 30, 2024
compared to 5.34 at June 30, 2024 and 5.52 at December 31, 2023.
-- Common Equity Tier 1 ("CET 1") and Tier 1 Capital to risk-weighted assets
ratios2 were 19.94% at September 30, 2024 compared to 19.10% at June 30,
2024 and 17.61% at December 31, 2023. Total Capital to risk-weighted
assets ratio2 was 20.19% at September 30, 2024 compared to 19.35% at June
30, 2024 and 17.91% at December 31, 2023. Leverage ratio2 was 9.99% at
September 30, 2024 compared to 9.85% at June 30, 2024 and 9.49% at
December 31, 2023. Improvement to our capital and leverage ratios in 2024
was due to the timing of our overnight marketed offering in Q1 2024.
(1) Considered to be a non-GAAP and other financial
measure. For further details, refer to the "Non-GAAP
and Other Financial Measures" section of this new
release. Non-GAAP and other financial measures and
ratios used in this document are not defined terms
under IFRS and, therefore, may not be comparable to
similar terms used by other issuers.
(2) These measures have been calculated in accordance
with OSFI's Leverage Requirements and Capital Adequacy
Requirements guidelines.
(3) Tax balances are calculated in accordance with
the Tax Act.
FURTHER INFORMATION
Complete copies of the Company's 2024 Third Quarter Report will be filed on the System for Electronic Document Analysis and Retrieval ("SEDAR+") at www.sedarplus.ca and on the Company's website at www.mcanfinancial.com.
For our Outlook, refer to the "Outlook" section of the 2024 Third Quarter Report.
MCAN is a public company listed on the Toronto Stock Exchange under the symbol MKP and is a reporting issuer in all provinces and territories in Canada. MCAN also qualifies as a mortgage investment corporation ("MIC") under the Tax Act. MCAN is the largest MIC in Canada and the only federally regulated MIC.
The Company's primary objective is to generate a reliable stream of income by investing in a diversified portfolio of Canadian mortgages, including residential mortgages, residential construction, non-residential construction and commercial loans, as well as other types of securities, loans and real estate investments. MCAN employs leverage by issuing term deposits that are eligible for Canada Deposit Insurance Corporation deposit insurance. MCAN is Investing in Communities and Homes for Canadians.
For how to enroll in the DRIP, please refer to the Management Information Circular dated March 15, 2024 or visit our website at www.mcanfinancial.com/investors/regulatory filings/dividends - historical. Under the DRIP, dividends paid to shareholders are automatically reinvested in common shares issued out of treasury at the weighted average trading price for the five days preceding such issue less a discount of 2% until further notice from MCAN.
NON-GAAP AND OTHER FINANCIAL MEASURES
This news release references a number of non-generally accepted accounting principles ("non-GAAP") and other financial measures and ratios to assess our performance such as return on average shareholders' equity, net corporate mortgage spread income, net securitized mortgage spread income, impaired corporate mortgage ratio, impaired total mortgage ratio, and arrears total mortgage ratio. These measures are not calculated in accordance with International Financial Reporting Standards ("IFRS"), are not defined by IFRS and do not have standardized meanings that would ensure consistency and comparability between companies using these measures. These metrics are considered to be non-GAAP and other financial measures and are incorporated by reference and defined in the "Non-GAAP and Other Financial Measures" section of our 2024 Third Quarter Management's Discussion and Analysis of Operations ("MD&A") available on SEDAR+ at www.sedarplus.ca. Below are reconciliations for our non-GAAP financial measures included in this news release using the most directly comparable IFRS financial measures.
Net Corporate Mortgage Spread Income
Non-GAAP financial measure that is an indicator of net interest profitability of income-earning assets less cost of funding for our corporate mortgage portfolio. It is calculated as the difference between corporate mortgage interest and term deposit interest and expenses.
(in thousands) Q3 Q3 Change YTD YTD Change For the Periods 2024 2023 ($) 2024 2023 ($) Ended September 30 Mortgage interest - corporate assets $ 48,067 $ 44,144 $ 144,497 $ 118,591 Term deposit interest and expenses 28,021 21,083 81,617 53,858 Net Corporate Mortgage Spread Income $ 20,046 $ 23,061 $ (3,015) $ 62,880 $ 64,733 $ (1,853)
Net Securitized Mortgage Spread Income
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