Stock market symbol
TSX: MKP
TORONTO, Aug. 4 /CNW/ - MCAP Inc. ("MCAP", the "Company" or "we")
reported net income of $3.5 million for the second quarter of 2006, up from
$2.9 million a year earlier. Earnings per share for the quarter were $0.28
compared to $0.25 last year. Net income for the six months ended June 30, 2006
was $6.5 million, up from $6.0 million a year earlier, while earnings per
share in the same period were $0.53 compared to $0.51 in 2005.
Net Investment Income: Net investment income for the quarter was $4.4
million compared to $3.7 million in 2005.
Mortgage interest income was $6.0 million in the quarter versus
$5.0 million last year. The increase of $1.0 million over last year was
primarily due to an increase in the average mortgage yield to 7.01% in 2006
from 5.94% last year. The increase in the average mortgage yield is mostly due
to an increase in the prime rate from 4.25% in the second quarter of 2005 to
6% at June 30, 2006, as approximately 55% of our mortgages at June 30, 2006
are floating rate.
Fees of $666,000 were earned in the quarter compared to $891,000 in the
same period of last year. The decrease is mostly due to a high volume of
construction loan repayments in the second quarter of 2005 versus the current
year.
Marketable securities income was $607,000 in the quarter compared to
$323,000 last year due to a larger average portfolio and higher gains from
sales. Unrealized gains on the portfolio at the end of June were $2.8 million
compared to $3.8 million at March 31, 2006.
The equity loss from our ownership interest in MCAP Commercial Limited
Partnership ("MCLP") was $169,000 in the quarter compared to equity income of
$374,000 last year as a result of lower production on commercial term loans
and lower commitment fees recognized in the quarter.
Other income, consisting of interest on loans and other investments, was
$991,000 in the quarter compared to $693,000 in 2005. The increase is due to a
larger average portfolio and an increase in prime over last year, as over half
of the portfolio is prime-based.
Debenture interest and expenses were $3.3 million in the quarter compared
to $2.8 million in 2005. The increase over last year is a result of an
increase in the average debenture interest rate to 3.65% in 2006 from 3.13%
last year and an $11 million increase in the average outstanding balance.
Reversals of provisions for losses were $155,000 in the quarter, compared
to provisions for losses of $152,000 in the same period of 2005. The current
quarter decrease in provisions over 2005 is due to a $16 million decrease in
mortgages over the second quarter of 2006 compared to an increase of
$6 million in the same period of 2005. Impaired loans net of specific
allowances (excluding insured mortgages) were 0.15%, down from 0.25% at March
31, 2006.
Operating Expenses: Operating expenses during the quarter were $960,000
compared to $850,000 in 2005.
Financial Position: As of June 30, 2006, total consolidated assets were
$426 million, substantially unchanged from March 31, 2006 and down $8 million
from December 31, 2005. The change in assets since March 31, 2006 consists of
an $11 million increase in cash, a $2 million increase in marketable
securities and a $3 million increase in loans and other investments, offset by
a $16 million decrease in mortgages. Debenture liabilities were $342 million
at June 30, 2006, a decrease of $917,000 in the quarter. Total shareholders'
equity of $82 million was up $1.6 million from March 31, 2006. The increase
relates to the issuance of $384,000 of shares for cash, net income for the
quarter of $3.5 million, and a recovery of current and future taxes of
$378,000, offset by the payment of the June 30, 2006 dividend of $2.6 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 June 30, 2006, we were underinvested by
$66 million against our 5.75 internal limit compared to $58 million at March
31, 2006. Our biggest challenge to date in 2006 has been finding 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 will be dependent on market competition.
Dividend: The Board of Directors declared a third quarter dividend of
$0.21 per share to be paid October 2, 2006 to shareholders of record as of
September 15, 2006. Due to current tax losses of $2.3 million allocated to the
Company relating to an internal restructuring of MCLP, it is unlikely that the
Company will pay a special dividend in addition to the regular dividend in the
first quarter of 2007.
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 30 to
60 days.
Change in Chief Financial Officer: Effective July 1, 2006, Tammy
Oldenburg replaced Robert Stuebing as Chief Financial Officer of MCAP upon Mr.
Stuebing's retirement. Mr. Stuebing will continue to serve on the Board of
Directors of MCAP.
Further Information: Complete copies of the Company's 2006 Second Quarter
Report will be filed on SEDAR at www.sedar.com and on the Company's website at
www.mcapinc.com by August 14th.
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.
