DJ Quest Capital FY Pretax Pft C$21.8M Vs C$36.0M

Mar 27, 2009 (Dow Jones Commodities News via Comtex) -- QCC | Quote | Chart | News | PowerRating -- Quest Capital Corp., a Canadian Mortgage Investment Corporation, Friday reported its financial results for the three and twelve months ended December 31, 2008.

FY Higllights

* Through a privately placed preferred share issue in December 2008, $40 million was raised thereby strengthening Quest's liquidity. A portion of this issue was used to reduce bank debt.

* Book value per share as at December 31, 2008 was $1.98, the same as at December 31, 2007.

* Quest's assets increased $58.5 million or 18% to $384.2 million at December 31, 2008 compared to $325.7 million a year earlier.

* Net income was $22.8 million compared to $23.7 million in 2007.

The 2008 results include a specific allowance for loan losses of $13.7 million compared to $nil in 2007.

* Diluted earnings per share were $0.16 in 2008, the same as in 2007

4Q Highlights

* Bank debt paid down $27.6 million.

 * Net income was $1.8 million compared to $3.6 million in the fourth quarter of 2007.

 * Diluted earnings per share were $0.01 compared to $0.02 in the fourth quarter of 2007.

 * Interest income was $11.6 million, an increase of 5% from $11.1 in the fourth quarter of 2007, while loans receivable at December 31, 2008 were $372.1 million, an increase of $94.4 million or 34% over the $277.7 million at December 31, 2007.

Edited Press Release

LONDON (Dow Jones)--Quest Capital Corp., a Canadian Mortgage Investment Corporation, said Friday for the year ended Dec. 31, 2008, it made a profit before taxation of 21.8 million Canadian dollars compared with a pretax profit of C$36.0 million a year earlier.

The President and Chief Executive Officer, Stephen Coffey, said: "To address deteriorating market conditions, we have shifted our focus from loan origination to problem loan remediation and capital preservation.

"This is an appropriate strategy that we believe positions us to better withstand the current economic crisis.

"Quest finished the year with equity of $291 million and a modest debt to equity ratio of 0.3 to 1.

"The Company's conservative financial structure allowed it to remain profitable in both the fourth quarter and the full year, notwithstanding the rapid economic deceleration in the second half of 2008.

"However, this is not business as usual. Loan loss provisions increased to $13.7 million of which $10.7 million were recorded in the fourth quarter compared to $nil recorded in 2007. These provisions relate to 10 loans totaling $56.5 million.

"We also had another four impaired loans totaling $47.2 million for which we have not provided specific provisions because the estimated net realizable value of the collateral exceeded their carrying value.

"In light of these circumstances, we have decided not to pay executive bonuses for 2008.

"Management has completed a full review of Quest's loan portfolio as at Dec. 31, 2008. This review enabled the Company to estimate the appropriate level of loan loss allowances and assisted management in developing an appropriate 2009 plan. This plan calls for management to concentrate on curing problem loans and monetizing the portfolio.

"In light of this focus, Quest has delayed indefinitely our application to become a deposit-taking institution.

"We believe shareholder value is best served currently by re-directing all of our efforts to collection and loan remediation rather than fractionalizing ourselves to complete this rigorous licensing process.

"In support of our current priority, we have increased staffing in our collection and problem loan remediation department and have undertaken measures to reduce overhead.

"Through these measures and by monetizing the portfolio and other means, we plan to accelerate bank debt repayments during 2009."

The co-Chairman, A. Murray Sinclair, said: "Reflecting our strategy to improve financial flexibility at this point in the cycle, we have decided not to pay our first quarter common share dividend.

"This will not affect our taxable position as a MIC, as we have sufficient tax losses ($9.1 million), and other deductions that we can utilize to offset taxable income.

"We intend to pay preferred share dividends in Quest common shares rather than in cash. These measures will allow us to accelerate debt repayment and reduce our leverage even more.

"We are committed to reinstating the common share dividend as soon as possible."

(END) Dow Jones Newswires

03-27-09 0835ET

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