MCAN Mortgage Corporation (MKP) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, and welcome to the Annual and Special Meeting of Shareholders of MCAN Mortgage Corporation, doing business as MCAN Financial Group. My name is Gaelen Morphet, and I am the Chair of the Board of Directors of MCAN. Similar to last year, this year's meeting is being held in person and is also online via video webcast, for those of you who cannot be here in person. I'm happy to welcome all our team members, shareholders and directors joining us in person and around the country, and a special welcome to some of our founders who are here today: Ian Sutherland, I saw Ian; and Judy, Hi. And Susan Dore, I understand Ray can't be here, but we're happy that you're here. And one of our past directors, Gord Herridge is here, too. So welcome. Joining me at the meeting in person today are Derek Sutherland, our President and Chief Executive Officer; Santokh Birk, Senior Vice President and Chief Financial Officer; 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 proxyholders who have not voted or wish to change their vote, may vote in person or by paper ballot or online by clicking on the voting icon on the virtual meeting platform. Once discussion on all business matters 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. 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 ask Chair of the Meeting -- sorry, I will act as Chair of the Meeting; and Sylvia Pinto, our Corporate Secretary, will act as Secretary of the meeting. I hereby appoint Pina Pacifico of Computershare Trust Company of Canada, our transfer agent, to act as scrutineer for the meeting. This year, the company used notice and access for both its registered and nonregistered shareholders, which allows the company to furnish proxy voting material electronically to shareholders instead of mailing paper copies of such materials. The secretary has advised me that a package containing the notice and access notice, together with the relevant voting document was mailed to each intermediary and registered shareholder of the company as of March 21, 2025, the record date for the meeting as well as to our directors and auditors advising that the notice of meeting and management information circular are available online. The secretary has provided proof of mailing of the notice and access package to me. I direct that a copy of such notice with proof of mailing be attached to the minutes of the 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 of the 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 President and CEO, will address shareholder after which there will be a question period. If participating online, your question will be submitted through -- or your questions should be submitted through your phone, tablet or computer. There are 5 matters set out in the notice of this meeting to be voted on by shareholders. If you are a registered shareholder or a duly appointed proxy holder, and if you have not already done so prior to the meeting, you'll 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 be distributed to you by the scrutineer at the scrutineers -- sorry, at the registration desk. So if you haven't received that, you can go and get one now. When completing each ballot, please indicate your vote by marking an X in the appropriate space and signing your name clearly where indicated. If you have already voted by proxy and do not wish to change your vote, you don't 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 also 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 notice and access package and is available online at MCAN's website. Each registered shareholder or duly appointed proxy holder may vote on all matters at this meeting. And the matters are such: Matter number one, a special resolution confirming an amendment to Section 3.01 of bylaw #11 by selecting for or against. Matter number two, the election of directors by selecting for or withhold. For all director nominees, distributing your ballots equally among them or by selecting specific for and withhold votes you wish to allocate to each nominee. Matter number 3 is the appointment of an auditor by selecting for or withhold. And number 4 is an ordinary resolution approving MCAN's second amended and restated executive share purchase plan by selecting for or against. And finally, an advisory resolution accepting 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 of these matters at the 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 auditor's consolidated financial statements for the financial year ended December 31, 2024, together with the auditor's report thereon as included in the 2024 annual report. A copy of the 2024 annual report has been made available to shareholders in either hard copy or electronically. A copy of the 2024 annual report is also found on our website. I now place before you the consolidated financial statements and report of the auditor therein for the year ended December 31, 2024. The next item of business is to consider and if deemed advisable approve a special resolution confirming an amendment to Section 3.01 of Bylaw #11 of the company, where cumulative voting applies under the Trust and Loan Companies Act or the laws -- or the bylaws of the company, the act also requires the number of directors to be fixed by bylaw. The company bylaw currently fix the number of directors at 9. On February 24, 2025, the Board approved an amendment to Section 3.01 of Bylaw #11 fixing the number of directors to 8. The full text of the amendment to Bylaw #11 is attached to Schedule A to the management's information circular. Shareholders are asked to pass a special resolution confirming this amendment. The full text of this special resolution is set out on Page 8 of the Management Information Circular. In order to become effective, the special resolution must be approved by 2/3 of the votes cast.

I move that the special resolution be approved.

Thank you very much, Aaron. May I have a seconder?

I so move.

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

Thank you. The next item of business is the election of directors. In accordance with MCAN's bylaws and as there are no further nominations received prior to MCAN's advanced notice provision for nomination of directors, the Board has determined that 8 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 being called. In addition to Derek Sutherland and myself, the other nominees for election as Directors of the company are: Bonnie Agostinho, Brian Chu, John Coke, Glenn Dore, Phil Gillin and Karen Martin. Thank you. 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 that shareholder times 8. 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 800 votes in favor of one nominee, say, Brian, or they could distribute their votes equally among the different directors or they could distribute their phones anyway they like as long as they do not cast more than 800 votes. May I have a nomination that the 8 persons nominated be elected Directors of MCAN Mortgage Corporation until the close of the next Annual Meeting of Shareholders or until their successors are elected or appointed?

[indiscernible].

Thank you, Paul. May I have a seconder?

I second the motion.

Thank you, Susan. 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 Board of Directors on the recommendation of the Audit Committee proposed that Ernst & Young LLP Chartered Accountants be reappointed as the 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?

I so move.

Thanks, Avish. May I have a seconder?

I second the motion.

Thanks, Paul. We will now pause for 30 seconds to allow shareholders to vote on this matter. [Voting]

The next item of business is to consider, and if deemed advisable, approve an ordinary resolution approving MCAN's second amended and restated executive share purchase plan. On December 17, 2024, the Board conditionally approved subject to receipt of shareholder approval and final TSX approval, a resolution to further amend and restate MCAN's amended and restated executive share purchase plan to, among other things, clarify that grants and loans under the plan may be made to purchase common shares pursuant to a public offering by MCAN of common shares or rights to subscribe for common shares at the applicable offering price or subscription price in such share or rights offering. Shareholders are asked to pass an ordinary resolution confirming these amendments. The full text of the ordinary resolution is set out in Schedule B of the Management Information Circular and the proposed second amended and restated executive share purchase plan is attached on Exhibit B there, too. In order to become effective, the resolution must be approved by at least a majority of the votes cast.

I move that this motion be approved.

Thanks, Susan. May I have a seconder?

I so move.

Thanks, Aaron. 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 to consider, and if deemed advisable, approve an advisory resolution on the Board's approach to executive compensation. As described in the Management Information 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 or at least -- sorry, or against the shareholders' approach to executive compensation and the full text of this advisory resolution is set out on Page 12 of the Management Information Circular. 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 on the company. However, the Board will take the results into account as appropriate when considering future executive compensation policies and programs. May I have a resolution motion for this resolution, please?

I so move.

Thanks, Justin. And may I have a seconder?

I second the motion.

Thanks, Michelle. So we will pause for 30 seconds to allow shareholders to vote on this matter. [Voting]

For those of you who have not voted on all the resolutions, please do so now as I will shortly ask the scrutineers to collect the paper bolts and close the online polls. Can the scrutineer now collect the paper ballots and close the online polls, please? Thank you. I'll just give it a minute or 2 for the -- or a few seconds more for the online polls. Okay. The scrutineer has provided a preliminary report based on proxies prior to this meeting and the preliminary results are as follows: the special resolution confirming the amendment to Section 3.01 of Bylaw #11 to decrease the size of the Board from 9 directors to 8 directors has passed with 97.06% of the votes in favor of the resolution. Each of the director -- each of the 8 directors have been elected as a Director of MCAN Mortgage Corporation with at least 98.9% of the votes in favor of their election. So congratulations. Ernst & Young has been reappointed auditor of MCAN's Mortgage Corporation with 99.3% of the vote in favor of the appointment. The ordinary resolution approving MCAN's second amended and restated executive share purchase plan has passed with 88.11% of the votes in favor of the resolution. And finally, the advisory resolution on the Board's approach to executive compensation has passed with 98.48% of the votes in favor of the resolution. I note that the company will report the detailed final results once the tabulation is complete after the meeting, including those votes submitted in person and those submitted online. I adopt the preliminary report of the scrutineer and declare the 8 director nominees duly elected directors of the MCAN Mortgage Corporation and each of the other matters of business passed. I direct that the scrutineer's report be included with the minutes of the meeting. So ladies and gentlemen, your duly elected directors of MCAN Mortgage Corporation are Bonnie Agostinho, Brian Chu, John Coke, Glenn Dore, Phil Gillin and Karen Martin, Gaelen Morphet and Derek Sutherland. As there is no other business that may be properly brought before the meeting, this concludes the formal business of the meeting. Thank you all for participating. May I please have a motion that this meeting be concluded?

I so move.

Thanks, Avish. May I have a seconder?

I second the motion.

Thanks, Justin. I now declare the formal business of the 2025 Annual and Special Meeting of Shareholders of MCAN Mortgage Corporation at an end. Now I would ask that Derek Sutherland, MCAN's President and Chief Executive Officer; and Santokh Birk, MCAN's Senior Vice President and Chief Financial Officer, report on MCAN's 2024 year-end operating results and 2025 outlook. Derek will then report on the company's business operations. If you are 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 that we can contact you should we not get to your questions during the meeting. Peter Ryan will then read aloud the questions. For those shareholders present in person, we will open the floor to questions following management presentation. Over to you, Derek.

Good afternoon, everyone. Thank you, Gaelen. I don't miss that part of the meeting. I'm pleased to welcome our shareholders, board members, team members, partners and guests to our AGM. Thank you for attending, whether you are with us in person or joining online. Before we begin the management portion of the presentation, I'd like to say that I'm pleased to have joined MCAN as President and CEO on a permanent basis and honored by the trust that the Board has placed in me. I'm committed to leading MCAN with resilience, vision, enthusiasm and drive sustainable growth and returns to our shareholders. I'm very fortunate to have a very talented and dedicated team to assist me to propel us on this journey. Let's talk business. What do we do? At MCAN, we'd like to think we are reimagining opportunity to drive growth for Canadian communities. That's a lot to digest. So how do we do it? We financed residential construction loans for experienced borrowers building homes for Canadians in our MCAN Capital business. We have a growing and award-winning mortgage lending business in a residential single-family MCAN Home business, helping Canadians realize their dreams of homeownership. And we have a truly important investment in MCAN, Canada's largest independent mortgage finance company. This investment in MCAN provides financial benefits to our shareholders through significant income contributions and also strategic benefits as they are a fantastic partner to us in several areas of our business. And I think half the room here is from MCAP, so thank you. All that to say that when you invest in MCAN, you have the opportunity to participate in various channels and forms of the Canadian real estate market, which may not be available to individuals. Our vision as Canada's leading alternative financial services company is to strive to redefine possibility through agile solutions that adapt to the diverse needs to our clients. We achieved this through our mission balancing risk and ingenuity through strong partnerships and principled stewardship delivering value through residential real estate that inspires confidence, drives returns and builds trust with our communities. We have a unique structure that provides a compelling value proposition to our company and shareholders. MCAN structure as a Mortgage Investment Corporation or MIC, and OSFI regulated institution, provides us with a unique advantage compared to our peers. Being at MIC means that we are fully in the mortgage business. And relative to our MIC peers, we have lower risk profile with the ability to access lower cost term deposit funding. We differentiate ourselves from our OSFI regulated peers with their strategic focus on residential construction and residential lending as well as our strategic partnership with an investment in MCAP. Together with our highly experienced management team, we are able to invest our capital using our proven expertise to provide consistent and attractive returns in the form of dividends and share price growth to our shareholders. Before we get into the details of our recent business performance, I want to take a moment to recap what we've done over the past 5 years. First and foremost, we have achieved record earnings, business growth and total returns for our shareholders. This was achieved by executing strategies that support long-term sustainability and high-quality earnings. In the past 5 years, we've increased our nonsecuritized mortgage portfolio by 97% to $2.5 billion. We increased our net income by 81%, up to $77.6 million. We increased our regular cash dividend by 15% to $1.56 per share and delivered average ROE of 14.45% over this period. During this time, our market cap increased by 71% to over $707 million at the end of 2024. We have continued to strengthen our key strategic partnerships and relationships, which are fundamental to our business. These strategic partnerships and relationships have contributed to our record earnings and growth over the past 5 years. We continue to build and enhance our internal infrastructure of systems, capabilities and policies across all our functions, all our technology and all our business processes. These all support efficient operations and ensure effective risk management. We have expanded our capital, liquidity and funding management programs over the past 5 years. This included successful capital raises through the overnight marketed offering and at the market program, raising close to $35 million in capital alone last year. We expanded our hedging program to better manage interest rate risk and launch direct-to-consumer digital term deposits. These programs have moved us forward in strengthening our treasury function. Lastly, as measured by multiple factors such as engagement scores, low turnover and team spirit, we have built a tremendous culture of teamwork, respect, diversity and inclusion. We have been recognized as a great place to work over the last 4 years. And most recently, we were recognized as one of Canada's most admired corporate cultures for 2024. Most importantly, our management team and many of our team members are aligned with you, our shareholders, as owners of this company. This buy-in from our team members truly helps us in strengthening our award-winning culture that we have established. I'll now provide you with a bit more information about our businesses, starting with MCAN Home. MCAN Home is an award-winning business consistently recognized by the mortgage community for our service, innovation and excellence. MCAN Home provides mortgage solutions to a variety of borrowers. We have a full suite of products from purchases to refinances for both insured and uninsured mortgages 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 are a full service with in-house origination, boots on the ground in our core markets and deep relationships with third-party mortgage brokers. MCAN Home posted strong results in 2024, partially fueled by improvements in housing affordability as interest rates began to decline. Total new mortgage originations were $1.1 billion in 2024, a 17% increase over 2023. Insured originations were totaled $638 million, uninsured originations totaled $430 million and uninsured renewals totaled $449 million. These together helped us achieve a record closing balance of our uninsured mortgage portfolio of $1.1 billion. For 2025, we anticipate further improvements in housing affordability on the expectation of further policy interest rate cuts by the Bank of Canada. However, we expect that borrowers will be cautious amidst the ongoing geopolitical tensions impacting meaningful improvements in the housing market. We do expect strong renewal activity again this year on the expectation that the trend for borrowers to stay with their existing lender continues. Our strategy for 2025 includes continuing to enhance our product offerings to better meet our clients' needs. We plan to continue to strengthen our partnerships with our brokers to improve our service levels. We also plan to further diversify our sources of income and maximize our CMHC allocation for securitization. We will continue to pivot between securitizing our mortgages and selling that commitment stage to achieve the best execution depending on the economics present at that time. Lastly, our MCAN Home business is on a journey of operational transformation. This year, we have undertaken a review and overhaul of our underwriting platform, the core of our lending business. This improved underwriting platform is expected to contribute significant efficiencies to our underwriting business and service to our broker partners. I'll now review our MCAN Capital business. MCAN Capital is focused primarily on construction and commercial lending to experienced borrowers. We focus on investing in residential construction first mortgages supported by long-term housing demand within strong urban areas of greater Vancouver, Calgary and Toronto. We maintain negligible loan exposure to commercial income properties, particularly office and retail, which are negatively impacted by hybrid work, online shopping trends and elevated interest rates impact on their cap rates. 2024 was another strong year for MCAN Capital. The portfolio maintained an invested balance of $1.1 billion to end 2024 as a result of $653 million of new fundings. MCAN Capital's construction and commercial business contributed $101 million of interest income to MCAN's bottom line, driven by an average yield on the residential construction portfolio of 9.45%. For 2025, we expect to see slower housing starts. The near-term continued economic and geopolitical uncertainty are significant contributors to this. However, we expect to continue to see quality deal flow as we source deals from our strategic partners who understand our risk-return appetite. This has not changed in our over 3 decades of lending to developers. This depth of experience is highlighted by negligible loan losses throughout our entire history. Our strategy for 2025 will focus on growing our construction lending portfolio with a focus on balancing risk and return. We are also managing our existing portfolio runoff from project completions to ensure our invested balance remains on track to reach our targets. We will leverage our strategic partnerships in doing so. These strategic partners originate and provide loan servicing on our behalf. We will also do so by continuing to manage residential construction risk through prudent underwriting and post-funding monitoring of our portfolio. Our MCAN Wealth division focuses on one of our main funding sources, deposits. Our funding strategy since 1992 has been focused on leveraging term deposits eligible for CDIC insurance. Term deposits provide us with a source of low-cost 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 lower risk element of this for our business is the fact that our term deposits are almost all nonredeemable. A recent highlight in our MCAN Wealth business was that we launched our MCAN Wealth direct-to-consumer channel in 2024, which provides an option for our clients to invest in our term deposits directly from our website. We expect that the direct-to-consumer channel will continue to provide a growing source of funding diversification going forward. 2024 was an active year for our MCAN Wealth division. We raised over $1.2 billion of deposits during the year. We have typically had a go longer strategy for our term deposit raising activities that has served us well over the years. That said, we pivot the strategy as the market changes. And we raised this funding through 3 large bank boards and a network of over 40 brokers and agents. For 2025, our outlook is dynamic. We believe there will continue to be an active market for deposits, but that there will be continued volatility in bond rates, which may impact market volumes. The market will also be impacted by depositors balancing their investment options in the current economic climate as they search for security and yield. Our MCAN Wealth team is well prepared for this. In terms of strategy, we focus on 2 main areas: first, continuing to increase brand awareness and the volume of deposits raised in our new direct-to-consumer deposit channel, both through our marketing efforts and through our product offerings; and second, by leveraging digital capabilities to grow our broker channels. Before we discuss our financial results, I want to highlight one of the key contributors to the history of our success, our strategic partnership with an investment in MCAP. MCAP is Canada's largest independent mortgage finance company with assets under management of $154 billion, serving over 400,000 homeowners. For over 3 decades, MCAP has been our largest originator construction loans and provides us various servicing capabilities. We have prospered from our partnership with an investment in MCAP, and we expect MCAP to continue to provide solid returns. Now I would like to ask Santokh to the podium where he will review with you our financial side of the business. Thank you.

Thank you, Derek. Good afternoon, everyone. I joined MCAN 7 months ago after a long career with a global financial institution. And I was recently with direct competitor of MCAN. I'm super happy to be working with Derek and the rest of the MCAN team. I'm fully invested not only as an employee or a team member, but also as a shareholder of MCAN. Now I will take you through some of the financial highlights of 2024 and the first quarter of 2025. We had solid results in 2024. We delivered another strong year for net income at $77.6 million. This was higher -- slightly higher than the previous year, which had the benefit of higher interest rates. Total assets for the year at over $5.3 billion represented an increase of 13% from 2023. This is higher than our long-term target of 10% growth per annum. Our nonsecuritized assets grew by 4%. Our uninsured residential mortgages grew by 15%, which was a record high. Construction and commercial balances grew by 5%, and we achieved a growth of 25% in our securitized asset portfolio, which was also a record high. This is a testament to the team members and the service and the great work they provide for our brokers and clients. These achievements earned a return on average equity of 13.4% and allowed us to pay a dividend of $1.56 per share. And finally, our market cap grew to over $700 million. So these results, coupled with strong liquidity and capital put us on solid footing to address the geopolitical and economic uncertainties in 2025. So for the first quarter of 2025, we achieved a good start to the year. We reported net income of $16.6 million, which translated into earnings per share of $0.43. We grew our total assets to $5.4 billion, a 2% increase from the previous year. Our assets under management, which include loans that we have derecognized but still managed grew at 3% to $6.1 billion. Our uninsured residential portfolio grew by 2%. Our construction and commercial portfolio also grew by 2%. However, our securitized mortgages decreased by 3% as a result of slower market sales activity. We also saw an improvement in our corporate spreads despite lower interest rates. This was driven by strategic hedging strategies implemented in 2024 as well as recent initiatives to improve pricing. All this contributed to a return on average shareholders' equity of 11% for the first quarter. This is below our long-term target of 13% to 15% as we recorded a $3 million provision for credit losses to reflect the current macroeconomic factors. The majority of this provision relates to performing loans. Lastly, our market capitalization increased by 2% to $718 million. MCAN has achieved a strong record of returns for our shareholders. We have been paying dividends for the past 32 years and we have achieved an annual compound growth rate of 4% over the last 5 years on our regular cash dividends. And then if you look at the chart on the right, our 5-year total shareholder return was 165%. This was significantly higher than the S&P TSX Composite Index. So if you -- if a $100 was invested in MCAN in 1992, it would have grown to $4,464 compared to $1,550 if invested in the index. This shows MCAN is a sound investment providing strong returns and sustainable returns for our shareholders. Management of capital liquidity and funding is a key focus area. We have clearly defined strategies which are aligned to our business growth objectives. We continue to be well capitalized and well above the regulatory capital ratios. In 2024, we raised capital from a number of different sources, including our dividend reinvestment program, our executive share purchase program, our regular at-the-market equity issuances, and we were also successful with an overnight marketed offering in April 2024. These programs, in aggregate, raised $50 million in additional capital. We continue to focus on the strategic allocation of this capital by optimizing our balance sheet mix to maximize returns. From a liquidity and funding perspective, deposits are an important part of our business. In 2024, as Derek mentioned, we raised over $1.2 billion in fixed rate deposits. We also launched our direct-to-consumer deposit channel, which achieved a compounded annual growth rate of 159% per quarter, albeit on relatively small balances currently. We continue to diversify our funding sources, which include operating and mortgage warehousing facilities as well as third-party funding programs, and we will continue to expand and diversify these programs going forward. I will now pass it back to Derek to discuss our near-term strategic priorities.

Thanks, Santokh. This year, our focus will be on growing and diversifying our product offering. While we are in a volatile and uncertain economy, we have been here before. MCAN is able to rely on our long embedded credit discipline where we grow our risk understanding ahead of growing our risk exposures. We will continue to engage our clients and partners to understand the demand for products to meet these demands in the market. As Santokh touched upon, we plan to further diversify and expand our sources of funding and capital as this is an important aspect to strengthening our business. We will continue to invest in technology and process efficiencies and continue to work to improve customer, partner and shareholder relations. These will help to drive us forward in achieving our business goals for the year. And lastly, we will work to enhance our people management capabilities and work to strengthen our culture and overall team member experience. I'll now pass it to Gaelen to open up the question-and-answer period.

Thank you, Derek, and thank you, Santokh. I now open the floor to questions. If you have a question, please stand and state your name and whether you are a shareholder of the company or a proxy holder of a company. 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 a question about current performance and guidance, I would ask that you refer to our Q1 report published yesterday afternoon. Any appropriate questions asked will be answered. However, we may not have time to answer all your questions in the Q&A period. If your question is not brought forward this afternoon, look for response electronically from the Office of the President and CEO or the CFO. There's a bit of a lag between questions as they come in online. And with that, I'd like to open up the floor to questions. And I see we have one waiting for us. Please go ahead, and remember, state your name.

Hello. My name is Daniel Engles, and I'm a shareholder of MCAN. I have one question, I think, for Derek. You mentioned about what MCAN finances and it's primarily residential construction. Is that a mix of single-family dwellings, apartment buildings and condos?

It is a mix. We go from the land development at the initial stage to the actual construction. Our niche, it would be low-rise development, medium-density townhouse, semi-detached. We avoid high-rise condominium a lot. We do not do that.

So if I can just ask a follow-up question? That was really what I was wondering about because I hear in Toronto, there's been a lot of condo developments canceled or suspended or they can't sell the units, and I was just wondering if that affects or has affected MCAN's financial position?

No. It has not. We're still actively doing new deals in our core markets of Greater Toronto, Greater Vancouver, Greater Calgary and focusing on the more affordable, lower-density markets.

Do we have any other questions? Do we have any questions online? No? Maybe we'll just give it a moment to see if there's any. Good. Great.

My name is [ Sean Stilman ]. I'm a shareholder but also a mortgage broker that deals with Avish's team a lot, and he does an amazing job. So thank you for everything. I would like to ask a question about risk versus reward as a shareholder. During a meeting with the alternative team, we were told that MCAN has only lost principle on one file while he was in charge. This tells me you have -- you're not taking enough risk on files and you're being too conservative and it's okay to lose more to win more. And this is as a shareholder, but also as a broker. No pressure. So I tell clients when they want to invest private funds, to buy your stock. Because I would tell my parents to buy your stock because generally, you're a very diligent lender, you're very thorough, you're very overly thorough. I've been asked questions, why someone left Venezuela and is no longer a citizen of Venezuela now. But there's deals that should be being done that are not being done.

I'll introduce you to Mike, our Compliance Officer. He's over there. He'll buy you a beer after the meeting, and I see a few more of our compliance people around. Do we take too much -- or not enough risk? We balance our risk by taking exposures on the residential side balanced with the exposures we take on the construction side. Not everyone is able to do that to the level that we are. So we have to constantly thread the needle -- thanks, John, for that line. And to get to balance out that risk and reward to serve our developer clients as well as our broker clients on the single-family side. Thanks, John. I appreciate your business.

Any other questions? This could be fun now, especially when they're so positive. Thank you very much. No other questions? All right. Then ladies and gentlemen, that concludes the question-and-answer period. 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 you for your ongoing commitment and dedication, both as shareholders. And also I'd like to thank our MCAN family for their hard work and dedication and commitment. We look forward to seeing you next year. Please join us for some light refreshments. Thank you very much.