Stock market symbol
TSX: MKP
TORONTO, May 5 /CNW/ - MCAP Inc. ("MCAP", the "Company", or "we")
reported net income of $3.1 million for the first quarter of 2006, up from
$3.0 million a year earlier. Earnings per share for the quarter were $0.25
compared to $0.26 last year.
Net Investment Income: Net investment income in the quarter was $4.0
million compared to $3.9 million in the same period of 2005.
Mortgage interest income was $5.4 million in the quarter compared to $4.8
million last year. The increase of $659,000 over last year was a result of an
increase in the average mortgage yield to 6.47% in 2006 from 5.98% last year
and a $6 million increase in the average portfolio. The increase in the
average mortgage yield is mostly due to an increase in the prime rate from
4.25% in the first quarter of 2005 to 5.50% at March 31, 2006, as
approximately 60% of our mortgages are floating rate.
Fees of $867,000 were earned in the quarter compared to $571,000 in the
same period last year. The increase is mostly due to higher commitment fee
income earned in 2006 as a result of a larger portfolio of residential
construction loans.
Marketable securities income was $406,000 in the quarter compared to $1.2
million last year. Gains from sales of marketable securities were $6,000 in
the quarter compared to $837,000 in the same period last year. Unrealized
gains on the portfolio at the end of March were $3.8 million compared to $2.5
million at December 31, 2005.
Equity income from our ownership interest in MCAP Commercial Limited
Partnership ("MCLP") was $135,000 in the quarter compared to $118,000 last
year. Current quarter equity income includes a $201,000 gain on the dilution
of our interest in MCLP. MCLP issued non-voting units to a partnership of
senior managers of MCLP such that our interest in MCLP was reduced from 25% to
22.8%. The equity loss of $66,000 is due to the seasonality of MCLP's
business.
Debenture interest and expenses were $3.0 million compared to $2.8
million in 2005. The increase over last year is primarily due to an increase
in the average debenture interest rate to 3.35% in the first quarter of 2006
from 3.12% in the same period last year.
Mortgage expenses were $718,000 in the quarter compared to $610,000 in
the same period last year. The increase is largely due to higher servicing
expenses resulting from larger construction and commercial mortgage
portfolios.
Provisions for losses were $179,000 in the quarter, down from $284,000 in
the same period of 2005. Impaired loans net of specific allowances (excluding
insured mortgages) were 0.25%, down from 0.67% at March 31, 2005 and 0.53% at
December 31, 2005.
Operating Expenses: Operating expenses during the quarter were $893,000
compared to $857,000 in 2005.
Income Taxes: The recovery of current and future taxes of $1.2 million
arising primarily from the payment of the 2006 first quarter dividend was
recorded directly to retained earnings. The provision for taxes of $13,000
recorded in the consolidated statement of income relates to large corporations
taxes that cannot be recovered from the payment of future dividends.
Financial Position: As of March 31, 2006, total consolidated assets were
$426 million, down $9 million from December 31, 2005 and up $28 million from
March 31, 2005. The decrease in assets since December 31, 2005 reflects a $25
million decrease in cash offset by a $5 million increase in marketable
securities, a $4 million increase in mortgages and a $6 million increase in
loans and other investments. Debenture liabilities decreased by $4 million in
the quarter. Total shareholders' equity of $80 million was down $1 million
from December 31, 2005. The decrease relates to the payment of the March 31,
2006 dividend of $6.7 million offset by the issuance of $1.6 million of shares
for cash, net income for the quarter of $3.1 million, and a recovery of
current and future taxes of $1.2 million.
Outlook: Our primary focus in 2006 is to fully invest the balance sheet
while maintaining historical spreads. 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. At March 31, 2006, we were underinvested by $58
million against our 5.75 internal limit. We are consciously targeting higher
yielding mortgage assets 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 will be dependent on market competition.
Dividend: The Board of Directors declared a fourth quarter dividend of
$0.21 per share to be paid June 30, 2006 to shareholders of record as of June
15, 2006.
Name Change: At the Annual and Special Meeting of Shareholders held on
May 4, 2006, the shareholders approved changing the name of the Company to
MCAN Mortgage Corporation subject to the receipt of all regulatory and legal
approvals. We expect to receive the necessary approvals within the next 90
days.
Change in Chairman of the Board: Effective May 4, 2006, Ian Sutherland
replaced Raymond DorDe as Chairman of the Board of Directors of MCAP. Mr. DorDe
will continue to serve on the Board of Directors of MCAP.
Further Information: Complete copies of the Company's 2006 First Quarter
Report will be filed on SEDAR at www.sedar.com and on the Company's website at
www.mcapinc.com by May 15th.
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. These and other factors should be considered
carefully and undue reliance should not be placed on the Company's forward-
looking statements. We do not undertake to update any forward-looking
statements.
