Stock market symbol
TORONTO, Aug. 1 /CNW/ - MCAN Mortgage Corporation ("MCAN", the "Company"
or "we") reported net income of $4.2 million for the second quarter of 2007,
up from $3.5 million a year earlier. Earnings per share for the quarter were
$0.34 compared to $0.28 last year. Net income for the six months ended June
30, 2007 was $8.6 million, up from $6.5 million a year earlier, while earnings
per share in the same period were $0.69 compared to $0.53 in 2006.
Net Investment Income: Net investment income for the second quarter
increased from $4.4 million in 2006 to $5.1 million in 2007.
Mortgage interest income increased from $6.0 million to $6.5 million,
primarily due to a $34 million increase in the average portfolio.
Interest on loans and other investments for the quarter increased from
$991,000 to $1.5 million as a result of a substantial increase in the size of
Fees earned in the quarter increased from $666,000 to $791,000 as a
result of a larger portfolio of construction loans in 2007.
Marketable securities income decreased from $607,000 to $421,000 due to
lower distributions in 2007 from a lower average portfolio balance, partially
offset by higher gains from sales in the current quarter. Unrealized gains on
the portfolio at the end of June were $17,000 compared to $510,000 at March
Equity income from our ownership in MCAP Commercial LP was $460,000 in
the quarter compared to an equity loss of $169,000 last year.
We recognized securitization income of $497,000 during the quarter
relating to the securitization of insured residential mortgages through the
Canada Mortgage Bonds program.
Term deposit interest and expenses increased from $3.3 million in 2006 to
$4.3 million in 2007 due to a 0.64% increase in the average interest rate and
a $36 million increase in the average outstanding balance.
Allowances for loan losses were increased by $4,000 during the quarter,
compared to a reduction of $155,000 for the same period last year. This was
the result of an $8 million increase in outstanding mortgages during the
quarter, compared to a $16 million decrease for the same period last year. No
new specific allowances were required during the quarter and write-offs were
not material. Impaired loans net of specific allowances were 0.43%, compared
to 0.27% at March 31, 2007 and 0.15% at June 30, 2006.
Operating Expenses: Operating expenses of $955,000 were consistent with
Financial Position: As of June 30, 2007, total consolidated assets were
$468 million, unchanged from March 31, 2007. The activity in assets since
March 31, 2007 consists of increases of $8 million in mortgages and $6 million
in cash, offset by decreases of $11 million in loans and other investments and
$6 million in marketable securities. Term deposit liabilities were
$378 million at June 30, 2007, unchanged from March 31, 2007. Total
shareholders' equity of $87 million was unchanged from March 31, 2007.
Activity for the quarter consisted of net income of $4.2 million and the
issuance of $273,000 of common shares, offset by the second quarter dividend
of $2.9 million, a decrease to accumulated other comprehensive income of
$1.5 million and a charge to retained earnings of $478,000 relating to current
and future income taxes.
Rights Offering: The Company successfully completed a rights offering
(the "Offering") that expired on July 5, 2007. The Offering raised gross
proceeds of $16.4 million with 1,559,981 new common shares issued. The
additional capital from the Offering will increase asset capacity by
approximately $94 million.
Outlook: Our primary objective is to fully invest the balance sheet while
maintaining acceptable and sustainable returns. We are subject to maximum
asset levels under both the Income Tax Act (Canada) (the "Tax Act") and the
Trust and Loan Companies Act. The maximum asset level permitted under the Tax
Act, which is the most constraining for us, effectively limits assets to 6
times capital on a non-consolidated basis, measured at tax values. We manage
our assets to a level of 5.75 times capital to provide a prudent cushion
between the maximum and total actual assets. Despite a level of full
investment at December 31, 2006, our asset levels have decreased during the
first six months of 2007. After a significant decrease in mortgages during the
first quarter, we had a modest increase in the second quarter. However, due to
sales of marketable securities and repayments of loans and other investments
during the second quarter, our asset levels were unchanged from the first
quarter. As a result, we were underinvested by $36 million at quarter end
against our 5.75 internal limit. Given our mortgage funding opportunities, our
objective is to fully invest our new asset capacity from the rights offering
by the first quarter of 2008. Maintaining our balance sheet at full investment
will depend on our ability to find assets with satisfactory yields at
manageable levels of risk. Our operations and income are a function of the
interest rate environment and the availability of mortgage product at
reasonable yields. The availability of mortgage product for us and the yields
thereon is based on market competition.
Dividend: The Board of Directors declared a third quarter dividend of
$0.23 per share to be paid October 1, 2007 to shareholders of record as of
September 17, 2007.
Further Information: Complete copies of the Company's 2007 Second Quarter
Report will be filed on the System for Electronic Document Analysis and
Retrieval ("SEDAR") at www.sedar.com and on the Company's website at
www.mcanmortgage.com by August 14, 2007.
This report may contain forward-looking statements, including statements
regarding the business and anticipated financial performance of the
Company. These statements are subject to a number of risks and
uncertainties that may cause actual results to differ materially from
those contemplated by the forward-looking statements. Some of the factors
that could cause such differences include legislative or regulatory
developments, competition, technology change, global market activity,
interest rates, changes in government and economic policy and general
economic conditions in geographic areas where the Company operates.
Reference is made to the risk factors disclosed in the Company's 2007
Annual Information Form, which are incorporated herein by reference.
These and other factors should be considered carefully and undue reliance
should not be placed on the Company's forward-looking statements. Subject
to applicable securities law requirements, we do not undertake to update
any forward-looking statements.
For further information:
For further information: MCAN Mortgage Corporation, Website:
www.mcanmortgage.com, e-mail: firstname.lastname@example.org; Blaine Welch,
President and Chief Executive Officer, (416) 591-2726; Tammy Oldenburg, Vice
President and Chief Financial Officer, (416) 847-3542