MCAN Mortgage Corporation (MKP) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. Welcome to the Annual General Meeting of Shareholders of MCAN Mortgage Corporation, doing businesses as MCAN Financial Group. My name is Derek Sutherland, and I am Chair of the Board of Directors of MCAN. Similar to last year, this year's meeting is being held in person and is also accessible online by a live video webcast for those of you who cannot be here in person. I'm happy to welcome all of our team members, shareholders and directors joining us in person and virtually from around the country. Joining me at the meeting in person today are Donald Coulter, our President and Chief Executive Officer; Peter Ryan, our Interim Chief Financial Officer; Avish Buck, Senior Vice President and Chief Operating Officer; Carl Brown, Senior Vice President, Investments and Corporate Development; Michelle Liotta, Vice President, Human Resources; and Sylvia Pinto, our Corporate Secretary. As in past years, we expect that the vast majority of votes have been cast in advance of the meeting by proxy through the various available channels. That said, the right to vote and participate in the meeting is very important, and we are fully supportive of such participation. Registered shareholders and duly appointed proxy holders who have not voted or wish to change their vote may vote in person by paper ballot or online by clicking on the voting icon on the virtual meeting platform. Once discussion on all business items has concluded, those participating will be provided further time to enter their votes before I declare voting closed on all resolutions. Registered shareholders, beneficial shareholders and guests can submit questions any time online by clicking on the question icon. For those attending in person, we will be opening the floor for questions at the end of the meeting. A recording of the meeting will be available on MCAN's website following the meeting. Prior to calling the meeting to order, I would like to acknowledge Gord Herridge, our Board member who will not be standing for reelection at this meeting. Gord has served on the Board since May of 2018, providing the benefits of experience with respect to accounting, assurance and advisory services. He was appointed Chair of the Audit Committee in October 2018 and has served in that capacity since. We wish to acknowledge and thank Gord for his exemplary contribution throughout his time with MCAN. Thanks, Gord. Before beginning the formal portion of the meeting, I would like to draw your attention to the advisory posted on the screen regarding forward-looking information that may be discussed at today's meeting. I now call the meeting to order. I will act as Chair of the meeting and Sylvia Pinto, our Corporate Secretary, will act as Secretary to the meeting. I hereby appoint Pina Pacifico of Computershare Trust Company of Canada, our transfer agent, to act as scrutineer for the meeting. The Secretary has advised me that a notice calling this meeting, together with the management information circular in the form of proxy have been mailed to each intermediary and registered holder of shares of the company on the record date for the meeting as well as to our directors and auditors. The annual report contains the financial statements of the company for the year ended December 31, 2023, and the auditor's report thereon was mailed to all registered shareholders, except those who asked not to receive it and to those beneficial shareholders who requested a copy. The secretary has provided proof of mailing of the notice of this meeting to me. I direct that a copy of the such notice with proof of mailing be attached to the minutes of this meeting as a schedule. The scrutineer has confirmed that a quorum is present. I direct that the scrutineer's final report be kept with the minutes to this meeting. As due notice has been given and a quorum is present, I declare that this meeting has been duly convened and constituted to transact the business for which it has been called. Please note that after the formal business is concluded and the meeting is terminated, our executive management team will address shareholders, after which there will be a question period. If participating online, your questions should be submitted through the phone, tablet or computer. There are 3 matters set out in the notice of this meeting to be voted on by shareholders. If you are a registered shareholder or duly appointed proxy holder, and if you've not already done so prior to today, you will be asked to cast your vote at the appropriate time. We are conducting voting in person and online at today's meeting. For those present in person, paper ballots will have been distributed to you by the scrutineer at the registration desk. If you did not receive any ballots and would like to vote today, please raise your hand and the scrutineer will distribute ballots to you. When completing each ballot, please indicate your vote by marking an X in the appropriate space and sign and printing your name clearly where indicated. If you've already voted by proxy and do not wish to change your vote, you do not need to complete a ballot. Remember, you are not entitled to vote by ballot if you have already completed and signed a proxy form, giving someone else the power to vote your shares unless you have properly revoked your proxy. If you own shares and your shares are registered in the name of a nominee, you are not entitled to vote by ballot unless your nominee has completed and signed a proxy expressly giving you the power to vote your shares. For those persons attending today's meeting online, you will be asked to cast your vote at the appropriate time by clicking on the voting icon on your phone, tablet or computer. A user guide with further details was distributed to shareholders with the meeting materials and is available online at MCAN's website. Each registered shareholder or duly appointed proxy holder may vote on all matters at this meeting. In particular, matter number one, the election of directors by selecting for or withhold for all director nominees, distributing your votes equally among them or by selecting the specific for and withhold votes you wish to allocate to each director nominee. Matter number two, the appointment of an auditor by selecting either for or withhold. And matter number three, the Board's approach to executive compensation by selecting for or against. If you have submitted your vote prior to this meeting, you should not vote on any matters of this meeting unless you wish to change your vote. Preliminary results will be announced later in the meeting after all matters have been voted on. The first step in today's meeting is the receipt of the audited consolidated financial statements for the financial year ended December 31, 2023, together with the auditor's report thereon as included in the 2023 annual report. A copy of the annual report has been made available to shareholders in either hard copy or electronically. A copy of the annual report is also found on our website. I now place before this meeting the consolidated financial statements and report of the auditor thereon for the year ended December 31, 2023. The next item of business is the election of directors. In accordance with MCAN's bylaws and as there were no further nominations received pursuant to MCAN's advanced notice provisions, for nomination of directors, the Board has determined that 9 directors are to be elected at this meeting. I would ask that the nominees as directors who are present please stand as their names are called. In addition to Donald Coulter and myself, the other nominees for election as directors of the company are Bonnie Agostinho, Brian Chu, John Coke, Glenn Dore; Phil Gillin; Karen Martin and Gaelen Morphet. If elected, the nominees will hold office until the close of the next Annual Meeting of Shareholders or until their successors are elected or appointed subject to the Trust and Loan Companies Act and the company's bylaws. Voting will occur by way of cumulative voting, which entitles each shareholder to cast votes equal to the number of shares held by a shareholder times 9. Each shareholder may cast all their votes in favor of one nominee or distribute them among the nominees in any manner. For example, a shareholder owning 100 shares could cast 900 votes in favor of one nominee or distribute 900 votes equally in favor of all nominees or distribute the votes in any other manner among the nominees as long as the total number of votes cast does not exceed 900. May I have a motion that the 9 persons nominated to be elected as directors of MCAN Mortgage Corporation under the close of the next Annual Meeting of Shareholders or until their successors are elected or appointed.

It's all moved.

Thank you, Aaron. May I have a seconder?

I second the motion.

Thank you, Paul. Thank you. We will now pause for 30 seconds to allow shareholders to vote on the matter. Please hold your paper ballots until the end of the meeting, at which time the scrutineer will come by to collect all ballots at once. Preliminary results will be announced later in the meeting after all matters have been voted on. [Voting]

The next item of business is the appointment of auditors for the current financial year. The Audit Committee and the Board of Directors proposed that Ernst & Young LLP chartered accountants be reappointed as auditors of the company until the close of the next Annual Meeting of Shareholders or until their successors are duly appointed. May I have a motion on this matter, please.

Has been moved.

Thank you, Justin. I have a seconder?

Mr. Chairman, I second the motion.

Thank you, Paul. We will now pause for 30 seconds to allow shareholders to vote on the matter. [Voting]

The next item of business is the adoption of the advisory resolution on the Board's approach to executive compensation. As described in the circular, the Board believes that shareholders should have the opportunity to fully understand the objectives and principles that the Board has used in its approach to executive compensation. Shareholders are asked to vote for or against the Board's approach to executive compensation in the form of this advisory resolution settled on Page 9 of the circular. The adoption of the advisory resolution will require that it be passed by a majority of the votes cast. As this is an advisory resolution, the results will not be binding upon the company. However, the Board will take the results of the vote into account as appropriate when considering future executive compensation policy and programs. May I have a motion that this resolution be approved.

[indiscernible]

Thank you, Paul. Do I have a seconder?

Mr. Chairman, I second the motion.

Thank you, Justin. We will now pause for 30 seconds to allow shareholders to vote. [Voting]

For those of you who have not voted on all of the resolutions, please do so now as I will shortly ask the scrutineers to collect the paper ballots and close the online polls. Can the scrutineers now collect the paper ballots and close the online polls. The online polls on all motions are now closed. The scrutineer has provided a preliminary report based on proxies received prior to the meeting. The preliminary results are as follows: each of the 9 nominees has been elected as a director of MCAN Mortgage Corporation with at least 99.29% of votes cast in favor of their election. Ernst & Young LLP has been reappointed auditor of MCAN Mortgage Corporation with 99.30% of the votes in favor. The advisory resolution on the Board's approach to executive compensation has passed with 98.9% of the votes in favor of the resolution. I note that the company will report the detailed final voting results once the tabulation is complete after the meeting, including those votes submitted in person by paper ballot as well as those submitted online. I adopt the preliminary report of the scrutineer and declare the 9 director nominees duly elected directors of MCAN Mortgage Corporation and each of the other matters of business passed. I direct that the scrutineers' report be included with the minutes of this meeting. Ladies and gentlemen, your duly elected directors of MCAN Mortgage Corporation are Bonnie Agostinho. Brian Chu, John Coke, Donald Coulter, Glenn Dore, Phil Gillin, Karen Martin, Gaelen Morphet and Derek Sutherland. As there's no other business that may properly be brought before the meeting, this concludes the formal business of the meeting. Thank you for all participating. May I please have a motion that this meeting be concluded.

I. I so moved.

Thank you, Aaron. May I have a seconder?

Mr. Chairman, I second the motion.

Thank you, Mike. I now declare the formal business of the 2024 Annual General Meeting of Shareholders of MCAN Mortgage Corporation at an end. I would now like to ask Don Coulter, MCAN's President and Chief Executive Officer; and Peter Ryan, MCAN's Interim Chief Financial Officer, to report on MCAN's 2023 year-end operating results and 2024 outlook. Avish Buck, Carl Brown and Peter Ryan will then report on the company's business operations; and Michelle Liotta, Vice President, Human Resources, will report on ESG, culture and our awards. If you're participating online and have any questions, you may submit them by clicking on the question icon at any time. Please include your e-mail address, so we can contact you should we not get to your question at the meeting. Peter will then read aloud any questions we receive. For those shareholders present in person, we will open the floor to questions following management's presentation. Now over to you, Don.

Thank you very much, Derek. Good afternoon, everybody. Delighted to welcome all of our shareholders, our partners, our Board members, team members and guests and everyone else to the AGM. Whether you are joining us here in person or online, we're delighted to have you here. Before I get into the management portion of the meeting, I wanted to express how delighted and honored I am to have recently joined MCAN Financial as CEO, and that was in December 1. I've had the pleasure in several months now to work with our team members and partners of the Board. I can tell you that the feedback I get in early days on this job is one of -- we have a tremendous team here with a tremendous culture. We have people who are committed to the organization. There's lots of pride in dedication. It's been very inspiring to me in my early days here. And I'm looking forward to continuing the great work that this team has done going forward on what will be, I believe, a successful and exciting journey. I want to talk to you about our identities -- our brand identities. So it was just 2 years ago that we identified our new brand identities, which you can see here. These identities correspond to the strategic components of our business being obviously MCAN Financial and then MCAN Home, MCAN Capital and MCAN Wealth. We've received positive feedback on these brands. They're really important to our businesses. They help us with our identity in the capital markets. They are a sense of pride for our employees and they give us awareness in the communities as well. Today, we're going to share with you more information about our business and how, with our collaborative culture and strong client and partner relationships, we execute on our strategy. So let's talk business. What exactly does MCAN do, we like to think of ourselves as investing in Canadians and also Canadian communities. And we do this through 5 different investing activities, and there's a sixth thing as well, which I'll mention at the end, which is very important, too. So first, we have a growing mortgage business in the residential single-family area. That's under the brand MCAN Home. Here, we have a great opportunity to help Canadians achieve and realize their dream of home ownership. And was there ever a more important time in our country's history than right now for that to happen. We provide funding for residential construction for experienced builders to provide new homes in Canada. And this is our MCAN Capital business. We also, in this business, have a REIT marketable securities portfolio, which provides enhanced long-term returns as well as a level of diversification. In this area as well, we also have nonmarketable securities. These comprised loan funds and real estate funds primarily focused on residential projects. And we have a truly important and differentiated ownership in MCAP, Canada's largest independent mortgage financing company. This really important investment provides -- in MCAP provides our shareholders with significant financial benefits through income contributions but also for our business, their strategic benefits as well as they're a great partner for us in many aspects of our business. So we get those 5 things when you invest in MCAN. You have the opportunity to participate in all of these channels in the Canadian and primarily residential real estate markets, which for most investors, otherwise would be difficult to achieve. I mentioned there's a sixth thing. And with MCAN, you also have the opportunity to invest in a series of term deposits that are competitively priced through our various deposit products that we offer through our MCAN Wealth division. And we'll talk more about this. We just launched a new product in 2024 that we'll talk about soon, a new deposit product. So today, with the leadership team, we'll talk about our business in 2023, where we are right now in 2024 and what you can expect going forward. Our vision. Our vision is to be the preferred mortgage lender and investor within our chosen real estate markets in Canada. The key is how we deliver achieving this vision. Our mission is to do -- is what we do every day to deliver sustainable growth and value for our stakeholders. First, we focus on relationship-driven lending, and investing, whether it's through our team in residential lending, our investment team working with our various partner originators. We're focused on relationships for the long run, and we approach this with a win-win approach and attitude. Secondly, we provide quality work, from an expert engaged and committed team. Importantly, we ensure that we have the following: a productive and healthy culture, strong supportive teams, training and development for every team member leadership, mentoring and coaching to help our people be successful. And lastly, and very importantly, we're dedicated to service to our clients, our colleagues and our communities. Each team member has clear accountability for the ownership of their roles, and we want them as a team to proudly own and execute on their duties. So every business has a value proposition. Ours is important. I believe ours is unique. It provides a unique value proposition to our company and also to our stakeholders and shareholders. MCAN structure as a Mortgage Investment Corporation or a MIC and also, at the same time, an OSFI regulated institution provides MCAN Financial with a unique advantage compared to our peers. Being a MIC means that we're essentially in the mortgage business. And relative to our MIC peers or competitors, we have a lower risk profile with the ability to access low-cost term deposit financing. And we differentiate ourselves from our OSFI regulated peers with our strategic focus on residential construction -- residential lending -- residential real estate funds. And our senior leadership team collectively has over 120 years of experience in these sectors. So the team takes the capital and the assets and the various strategic differentiators that we have and puts those all to work to provide an attractive financing profile and returns to our shareholders. Our portfolio is diversified amongst the various assets, and we ended 2023 well optimized in that mix. Attaining the right asset mix has been a multiyear initiative that we focused on. My colleagues will provide insights on each of these components shortly. Our strategy includes to continue optimizing our asset mix on the balance sheet in line with our risk appetite to achieve the highest possible sustainable returns for our shareholders. It's really about getting returns alongside prudent risk management. Before we talk about the business, the year and our strategic future, I want to take a moment to recap what the team at MCAN has achieved over the past 5 years. First and foremost, we achieved business growth with strategies that support long-term sustainability and high-quality earnings. And a continuously changing economic and interest rate environment with resulting disruptions to liquidity and funding markets that we've all experienced the last several years, all of which has had a profound impact on the housing markets and thus, the mortgage market and construction activity. We've been able still to successfully pivot and adapt our business to all of these changes and these challenges. This is a demonstration of the strength of MCAN's balance sheet and the resilience of the business model and the skill of the people and the depth and quality and importance of our strategic relationships. We have built an effective infrastructure of systems, team capabilities, risk frameworks and strategic risk management policies and procedures across all of our functions, all of our technology and all of our business processes. These all support operations and ensure an appropriate control environment and effective risk management. We have a focus on serving our customers exceptionally well and partnering very effectively with our strategic partners. In doing this, we can accelerate our business, differentiate ourselves in this very competitive market, so the team can be the best they can be. Lastly, as measured by multiple factors, including employee or team member engagement scores, low turnover, team spirits and other things, we have built a tremendous culture of teamwork, respect, diversity and inclusion. As one of the newer members of the team, I've been having coffee chats with a number of employees. Some of them are in the room today. And what I hear from them is they love working for MCAN. Why do they love working for MCAN? They love the people, they love the friendliness, they love the helpfulness. There's a lot of pride in this company. And I can say that in the months I've been here so far, I can give a testimony that, that is absolutely true. It's what I see every day. People at MCAN go the extra mile with pride. My throat's a little sore. We had board meetings the last 2 days. There's that sores, it's a little dry. So I apologize for that. With that, I'm going to pass it over to Peter, who will go through the financial results for you now.

Thank you, Don. Good afternoon. Today, I'll take you through some of our financial accomplishments in 2023 and over the last 5 years. Looking at our results over the last 5 years really tells the story of how we've managed through the uncertainty of a pandemic and the subsequent recovery, economic volatility, arising and higher interest rate environment and inflation. In that time, we have more than doubled our corporate mortgage portfolio, and we have more than doubled our total assets and net income. We have had a 16% increase in regular cash sustained dividends and paid $1.82 per share in special stock dividends. And we have improved our return on equity. Our average return on equity over the past 5 years is over 1% higher than in the previous 5-year period. Now let me take you through a snapshot of what we achieved in 2023. We ended the year with strong results. In fact, in 2023, we delivered our highest annual net income in our history at $77.5 million or $2.22 per share. We ended the year with over $4.7 billion in total assets and 21% in corporate asset growth. We have achieved 54% increase in our net corporate mortgage spread income, what we see as controllable components of our business. Not only did we benefit from the impact of the higher interest rate environment and that it had on our construction and commercial portfolio, which is mostly at floating rates. We also successfully managed our net interest margins in our residential lending portfolio. These achievements resulted in a return on average shareholders' equity of over 15%. This allowed us to pay $1.48 per share in dividends. And finally, we ended the year with over $0.5 billion in market cap. And so far, in 2024, we're off to a great start. We've continued with a solid first quarter, the result of our thoughtful business strategy and execution. Our corporate spreads have decreased slightly since the prior quarter, a sign of the current interest rate environment. However, our corporate spread income increased 4% since last year due to a higher balance of mortgages outstanding. Our net income was flat year-over-year at $23.2 million or $0.65 per share, resulting in a healthy return on equity of 17.9%. Although we continue to focus on protecting our bottom line, we still grew our asset base, ending the quarter at $4.9 billion in total assets. I have just talked about how well we have performed over the last 5 years and to the end of the first quarter of this year. One of the key areas of our business is our liquidity and how we fund the business. We have a clearly defined funding and liquidity strategy, and we have made significant strides over the last several years maturing and expanding to help grow our business. Our sources of short-term liquidity include our operating facility and a mortgage warehouse facility. Deposits, deposit funding forms an important part of our business. In 2023, we raised $1.3 billion of fixed rate deposits and continued to work to launch our direct-to-consumer deposit channel, which I'm happy to say was successfully launched in January of this year. This year, the work of our treasury function focused on the maturation of our derivative and hedging program, helping us to continue to manage our interest rate risk. And finally, our capital activities. In 2023, we raised over $2 million through an at-the-market program and expanded awareness of the MCAN brand in the investor community. Our efforts helped us successfully raise over $28 million through an overnight marketed offering in March of this year. We were able to upsize this offering due to strong investor demand, demonstrating the support our shareholders have for our business and for our strategy. It also allowed us to expand our investor base. This year, we will continue to expand our liquidity and funding sources to support the growth of our business. How will we do this? Well, we are looking at opportunities to execute on our hedging program to manage our interest rate risk. In terms of our funding strategies, we will not only continue to sell loans at the commitment stage, but we are also looking to do that with additional partners and with new mortgage products. We also want to mature our capital market strategies building off the recent capital raise. I'll now pass it over to Avish to provide us with an update on one of our top line businesses through our MCAN Home division.

Thanks, Peter. Having been here for 4 years, I'm very proud of everything that we've accomplished despite the challenging environment. When I started, we had a very nascent residential lending business, no real brand presence in the broker channel and a limited product line. Each year since then, we've continued to grow our market share, increase our product line and improve our service levels through digital enhancements and operational efficiency. So what is it that we do at MCAN Home. MCAN Home provides mortgage solutions to a variety of borrowers. We have a full suite of products from purchases to refinances, and we work closely with our broker partners to find the best solutions for their clients. The geographical focus of our portfolio is the major urban areas of Ontario, Alberta and BC. We're full service with in-house origination, boots on the ground in our core markets with deep relationship with third-party mortgage brokers. We also opportunistically pivot between securitizing or selling our insured mortgage commitments to different aggregators. And proudly, we're an award-winning business, consistently recognized by the mortgage community for our service, innovation and excellence. This reflects the hard work of our team member who embody growth and innovation through service, partnership and hard work. MCAN Home's performance in 2023 reflected rapidly changing market condition and sustained higher interest rates. Total new single-family mortgage originations were $940 million in 2023, while that number is down from 2022 levels due to higher interest rates. It's also down as a result of our own strategy of focusing on protecting our NIM, our net interest margins over growth. We also took advantage of available opportunities in the year to renew 14% more residential mortgages than we did a year ago. We successfully grew our mortgage portfolio and continued to build our mortgages pledged under securitization. MCAN Home will benefit from this growth in the future, earning income from the mortgages and improving our position to capture increased renewal opportunities. Last year, we made a deliberate effort to focus on Western Canada by adding more boots on the ground. And I'm pleased to say that we had a 25% year-over-year growth in total volume funded in that market. With all our enhancements to improve our service level and investment in technology, we've benefited from stronger relationship in our broker network. For this year, our risk management, credit monitoring and assessment activities continue to remain critical in operating our business. We expect to continue to have a portfolio with a strong credit profile at minimal level of arrears. In the short term, although we do not see weakness in the housing market, the acceleration of activity from expected Bank of Canada cuts have been delayed, leaving prospective buyers on the sideline. Despite that, we started the year strong, where our insured single-family were 250% higher than Q1 of 2023 and our uninsured originations were 36% higher than Q1 of last year. As well, we grew our uninsured residential mortgage portfolio to over $1 billion in the quarter, a record high with strong renewal volumes. We expect continued strong renewals in our portfolio given the higher interest rate environment and the fact that borrowers don't really have many options out there. Should they leave us, they would have to renew under the higher stress test rates. Accordingly, we foresee improving origination volume in the second half of this year, with the expectation of future interest rate cuts and improved economic forecast. Higher immigration is also expected to continue to support our business with a lack of supply in the market. Product preferences continue to shift, and we continue to pivot by adding new products and finding new funding sources. Looking ahead, we're confident that our strong relationship with our mortgage brokers, array of mortgage solutions and diverse funding sources will continue to fuel our growth. We plan to continue to enhance our technology and infrastructure to facilitate this. As part of our growth, we'll continue to expand our geographic footprint to gain further market share while building customer loyalty and retention. We are and will remain a prudent and disciplined lender. Through all of the growth that we've achieved, we remain dedicated to continuously improving our service level for our clients and broker partners. Next, I would like to highlight a special program that we offer to our broker partners and clients. Our Icon Partner program is unique in the space for the way it connects us to broker partners and clients through inclusive events such as our One Tree initiative, where we plant 4 trees for each deal funded across Canada and provide free mortgage payments to clients going through difficult life events. Last year, we gave away $57,000 mortgage payments, which helps our clients and broker partners increase referrals. In fact, we recently held an event with a part of a brokerage partner, where we gave away $25,000 to 10 families and an additional $2,500 to one of them in an on the spot draw, that family came all the way from Bracebridge, Ontario. They've had some credit struggles in the past and experienced unemployment gap during the pandemic. Just over a year ago, we refinanced a mortgage from another lender to consolidate some debt and free up more than $4,000 per month that was going to debt and interest payments. That's what our discover online is all about to help families going through a tough time and provide them with solutions that may not be readily available to them. It was an honor to meet that family and each of the clients who made the trip to be a part of that day. We like to say that every story begins at home. And moments like that reinforce our commitment to help Canadian achieve the home of -- the dream of homeownership. I would personally like to thank our broker partners, our partners at MCAP and our team for making MCAN Home a success in the past 5 years. I'm very excited for the next phase of our journey. I'll now pass it over to Carl to provide an update on our MCAN Capital division.

Okay. Thanks, Avish. I'm Carl Brown. I'm the Senior Vice President of Investments and Corporate Development. I lead the MCAN Capital Group. Starting with highlights. MCAN Capital had another record year. The commercial and construction portfolio reached an investment balance high and ended the year at $1.1 billion, with $666 million in construction and commercial originations. And as well with the benefits of growth and floating interest rates, the commercial construction operating margin after expenses was a record, increasing 66% from $30 million in 2022 to $50 million in 2023. The REIT portfolio began correcting in Q4. And over time, we have benefited from distributions and strong capital gains totaling $14 million in the last 5 years. Nonmarketable securities are held to generate long-term returns with 76 million remaining commitments. We achieved these strong results by continuing to focusing on 3 key lines of business. Firstly, the construction and commercial lending business. We are primarily focused on investing in residential construction, first mortgages, supported by long-term housing demand within the strong urban areas of Greater Vancouver, Calgary and [ Toronto ] markets. In the main, we stay within our historical pricing margins for residential construction lending, not reaching for yield. We maintain negligible loan exposure to commercial income-producing properties, particularly office and retail, which have been negatively impacted from work from home, online shopping trends and elevated interest rates and their impact on cap rates. Secondly, marketable securities. This portfolio comprises REITs with large market caps and diversification across the real estate sector. Our REIT portfolio is held for the long term with total returns targeting 9%. The portfolio provides other strategic benefits in terms of interest rate risk management due to the inverse correlation with rates and capital retained from realized gains. Thirdly, nonmarketable securities. This portfolio is invested in private mortgage debt and equity funds with experienced partners and developers investing in major urban real estate markets across Canada. Our Construction and Commercial business. This slide highlights just a few residential construction projects to get a sense of the type of first mortgages we invest in. This financing helps create communities and solve for increased housing needs across Canada. These few projects shown are located in strong urban areas in Vancouver and Calgary, which helped generate housing for over 320 families at more affordable pricing ranging from $330,000 to under $1 million. Our outlook and strategy. Given increased immigration and housing demand, we continue to see favorable long-term prospects in housing with supply years behind. We continue to source traditional deal structures through existing and growing strategic relationships to originate and provide loan servicing. In Q1, growth has been managed relative to capital, and pipelines are being built to offset loan runoff from project completions in order to achieve targets. The residential construction portfolio, net interest margin continues to benefit from the Bank of Canada, continued higher for longer interest rate position helped to control stubborn inflation. Credit quality. It continues to be sound, soundly managed given the challenged higher interest rates environment for our developers, our strategy to lend to experienced developers, particularly focused in strong urban locations in transit proximity has been key to credit performance and resilience. Our investment in MCAP. We continue to prosper from our equity interest in MCAP at approximately 14%. MCAP is Canada's largest independent mortgage finance company with assets under management of $155 billion and serving over 400,000 homeowners. MCAP is our largest originator of residential construction loans for over 2 decades and provide us with various servings capabilities and expertise. We expect MCAP continue to provide solid returns to MCAN over the long term. Finally, I would like to thank our strategic partners, originators and teams for a successful 2023 and success going forward. Now I'll pass it back to Peter.

Thanks, Carl. So I mentioned that liquidity and funding were important foundations of our business. At MCAN Wealth, we focus on one of our main funding sources, which is deposits. Our funding strategy since 1993 has been focused on leveraging term deposits eligible for CDIC insurance. Term deposits provide us with a source of low-cost liability funding and represent a significant source of funding for our business. We offer short- and long-term investment options for our customers. And a positive and lower risk element for our business is the fact that our GICs are nonredeemable. 2023 was an active year for our MCAN Wealth division. We raised a record number of deposits. We have typically had a go longer strategy for our deposit raising activities, and that has served us well over the years. That said, we pivot the strategy as markets change. And we raised this money through 3 large bank boards and over 40 brokers and agents. In 2023, we raised $1.3 billion in term deposits. We continue to implement ways to automate processes within our deposit operations, and we work to get our digital direct-to-customer deposit channel up and running, which, as I mentioned, we launched earlier this year. In 2024, our outlook is dynamic. We believe that there will continue to be an active market for deposits, but that there will be continued volatility in bond rates. Our treasury team is well prepared for this. In terms of strategy, we are focused in 2 main areas: first, continuing to increase brand awareness and the volume of deposits raised in our new direct-to-consumer deposit channel; and secondly, achieving further operating efficiencies in our operations. I'll now pass it back to Don for a discussion on our longer-term strategy and outlook.

Thank you very much, Peter. So as I was joining MCAN, you can imagine I did a lot of research and studying and tried to understand the organization better. That included speaking with directors and long-term employees. And so I benefited a lot from that. And what I learned is that this company's history is a story of entrepreneurial success. The founders worked hard. They identified market opportunities. They took prudent risks, they got it done. And this is both in the consumer sector and the commercial sector as well. Many of those founders are in the room today, I had a chance to meet some of them for the first time. What an honor. This company has gone through many full business cycles and challenges throughout the years, but it's always shown resiliency, strength and agility to be able to be successful. And we continue to do that, and we intend to keep on doing that in the future. We've been paying dividends for 32 years. This chart shows the last decade of dividends. And what I would say is we intend to continue distributing significant earnings to our shareholders. We intend to continue paying these dividends in the future. Nothing there is changing. If you look at our total shareholder returns, you can see these 3-, 5- and 10-year CAGRs or compounded annual growth rates. And you have to be -- I'm quite happy with those. I think they're very, very strong. And you have to also recognize the stock market, which is sometimes not controllable. I expect that both our dividends and returns will continue to reflect the growth of the company. As the company grows profitably, you should expect to see dividends grow as well. In terms of market outlook, my colleagues just talked to you about the market outlook, and it's summarized here. We all know the market has been very dynamic the last 4 years. Fortunately, at MCAN, we have strong fundamentals that back our business and its growth, both in terms of strong balance sheet and resiliency, but also the way we set ourselves up in the market. And we know what those are. We're in business for the long run. And we have to operate in every market that we are confronted with. We have to figure out how to operate to our best advantage in those markets, given the demands, the competition, funding costs and other parameters. That's the job of the leadership team, and it's also the job of the Board of Directors to provide oversight to us and advice as well. We've just reported to you on a great year and a strong first quarter, that comes off of an amazing 5 years. I'll let the past results of MCAN speak for the capability and also the future opportunity. Now with respect to strategic priorities, we're going to continue to focus on maturing and growing our businesses and our single-family and construction and commercial finance businesses, we're going to continue to maintain and grow the great strategic partnerships that we have, focusing on excellence in service, operations and fulfillment. So where do we see the business going in the next 3 to 5 years? Well, I see a deep and continued focus on a number of things: continuation of the quality work that we do, our people do; outstanding and excellent service; expanding those core franchise businesses that we have: streamlining, funding sources of efficiency as we grow; key investments and again, a continued focus on relationships and partnerships. We addressed the 5 areas of lending and investment that we do before as well as deposits. These franchise businesses are going to continue to be a really strong focus for MCAN Financial. Now I'm happy to pass it to Michelle. Michelle is going to give you some information on our culture, our team and also our ESG program.

Thank you, Don. Reporting on the work we do around ESG has been a recent focus of ours, and I'm happy to share with you today just a few of our initiatives we have a team -- as a team have worked on this last year to further our ESG goals. This year, we continued our tree planting initiative, planting over 8,000 trees in BC and Ontario regions impacted by fire and deforestation. And we have provided loans to our builders who are focused on sustainable building practices. Our team members have volunteered over 120 hours of their time, packing kits for community nonprofits and those in need to support the communities in which we live, serve and invest in. On February 29, members of our MCAN team made their extra day truly count by gathering an office to pack over 115 activity kits for Street Haven at The Crossroads, a charity here in downtown Toronto that supports women who are experiencing or at are at risk of homelessness. And as a company, our commitment continues donating to various charities in our communities on behalf of our team members, our brokers and our partners. All this to say that participating in initiatives like these ones highlighted here forms part of the core of how we do business. Since early 2019, we have been actively focused on enhancing our team member experience. Today, we are dedicated to supporting our team members through our culture, our benefits, our commitment to diversity, equity, inclusion and belonging and our development programs. With our growing group of talented and diverse team members, our investment starts here. We provide for each team member an opportunity to continue to develop their skills, which supports their own career advancements. We're a place for impact-driven individuals looking to stretch their skills with roles scoped for both breadth and depth. It's our steadfast belief that the talent we have here will help lead us to the exceptional future we have envisioned for each other. Thank you to our team members. These 2 statistics on this slide are from our 2023 engagement survey, and we believe they speak to our team culture and success. Further recognition for our team is from multiple external parties. Our culture, practices and engagement have been recognized through many workplace awards and further shows what a great place MCAN is to both work and grow. I will now turn the podium back to Derek for our Q&A session.

Thanks, everyone, for all the presentations. Now for the fun part. I would like to open the floor to questions. If you have a question, please stand, state your name and whether you are a shareholder of the company or a proxy holder of a shareholder of the company, raise your hand and Alicia will bring around a microphone. So those online can hear the question clearly. If you are participating online, you can use the question feature on the virtual meeting platform to ask a question. In this forum, we will answer questions that are in the interest of the broader shareholder base. If you have questions about current performance and guidance, I would ask that you refer to our Q1 report published yesterday evening. Any appropriate questions asked will be answered. However, we may not have time to answer all your questions as part of this Q&A period. If your question is not brought forward this afternoon, look for a response electronically from the office of the President and CEO or the interim CFO. There may be a bit of a lag between questions as they come into the online system. With that, I'd like to open up the floor to questions. Please raise your hands if you wish.

Thanks very much. Hello. My name is Daniel Engles. I'm a shareholder of MCAN. I just very much appreciate the full presentation you gave today. I know with MCAN Wealth, you're starting to offer GICs and the like directly to the public or anybody who's interested in buying GICs as opposed to going through a broker or like an agent. Do you anticipate in the mortgage business, like -- from what I understand, you do mortgages exclusively through mortgage brokers. Do you anticipate offering mortgages directly as well to potential homeowners?

Thank you for the question. Pass it to Don and/or Avish.

Yes. I'm happy to answer that. And Avish, if you have anything to add. Mr. Engles, thank you for the question. The answer is no. We don't. We have great channels of -- in the broker space. We have, I think, over 3,000 brokers that we deal with. That's the focus. And as Avish mentioned in his presentation, we're successfully growing that. We think we can take that to another level going forward.

Yes. Just to echo Don's comment, we've had a lot of success there. And like I said, we're just at the beginning. So -- and I would say that going direct to consumer, I haven't seen yet a successful model out there. Until there is, I don't foresee a lot of entrants there. Thank you.

Any other questions? Go figure.

Good afternoon. I'm Ian Sutherland, I'm a shareholder as the rest of my family. And we're very proud of the results over the past several years. And the latest quarter, in particular, is very, very vibrant. So congratulations to the team. As you all know, the federal budget, which hasn't been brought down for capital gains yet but is going to increase the inclusion 34% to 2/3. And I'm just wondering if MCAN is looking at its opportunities to realize gains before June 25, that will pass on lower taxes to your shareholders. I know you don't pay tax, but you pass them on to us.

Carl and/or Don?

Yes, Mr. Sutherland, thank you very much for that question. The budget was just passed recently. We've been analyzing it, mostly looking at third-party analysis of it. At this point, it's too early to -- for us to make conclusions on that, but it's prudent business activity for us to always consider prudent tax planning and what's the best interest of the organization. So we will be looking at that. There's still a bit of time left. I think the the data is in June sometime. But at this point, we haven't done a thorough analysis or concluded on that. If anyone? Peter has a tax perspective.

I would echo what you're saying as well. Yes, we're definitely looking into it. Just wait for the mic so the people online can here, please.

My name is Fred. I'm a portfolio manager, not a direct shareholder but indirect. 32 years you've been public?

Yes. [ You ] maybe one.

$10 IPO, right? Were you around at the time?

I wasn't officially, no.

Okay. So never mind just feeling old.

Thank you. Thank you for the acknowledgment. Yes, it has been a very long time. We'll just wait unless there's anything else in the room. We'll wait a minute or so. If anything is coming online, Peter, you can read aloud. No? Well, there do not appear to be any questions. I'd like all of you to join us down the hall out the door to the left for refreshments. You can address any directors or any of our executive management in person, if you didn't feel like asking questions into the general public. But we're happy to be -- we'll be around and happy to take any questions. So on that note, ladies and gentlemen, that concludes the question-and-answer session. On behalf of MCAN Mortgage Corporation, I would like to thank each of you for taking the time to join us today. And I want to thank our MCAN family for their ongoing commitment and dedication. We look forward to seeing you everyone next year. Thank you very much. Have a great.