NUMBERS OUTTORONTO, Feb. 12 /CNW/ - Northern Financial Corporation (TSX: NFC) ("Northern" or the "Company") today reported results for its third quarter and nine month period ended December 31, 2007 of its 2008 fiscal year. Net income for the second quarter was $1,384,561 or $0.14 per share compared with a restated net loss of $13,039 in the third quarter in the prior year. Core brokerage activities improved over the prior year and the Company also recorded a gain on the sale of its investment in Lakeside Steel Corporation ("Lakeside").
Consolidated revenue for the quarter ended December 31, 2007 was $8,661,971 compared to revenue of $5,108,421 in the third quarter of fiscal 2007.
Commission revenue was $2,766,768 for the quarter ended December 31, 2007 compared to $2,077,213 in the prior year. Underwriting and advisory revenue declined slightly to $3,816,204 compared to restated revenue of $3,928,695 in the third quarter of fiscal 2007. The decrease was primarily the result of a reduced valuation of the Company's broker warrant portfolio. Trading revenue was $126,509 in the current year compared to a loss $466,406 in the prior year. Interest revenue of $365,744 was up $107,294 based on higher client account balances.
Merchant banking activities generated revenue of $1,599,905 in the current quarter compared to a loss of $775,489 in the prior year. The Company sold its investment in Lakeside generating a gain of $1,566,616.
Total expenses for the period ended December 31, 2007 were $7,155,114 compared with $5,121,460 in the prior year. Brokerage operations costs increased to $6,581,056 from $4,556,265 as a result of an increase in variable compensation associated with the higher level of revenue. As well, the Company moved its offices in Calgary, Vancouver, and Toronto and wrote off the value of any remaining leasehold improvements in the amount of $132,582. Interest expense increased to $252,147 from $174,841. Merchant banking expenses were $113,614 compared to $2,293 in the prior year. General and administrative expenses were down considerably, from $335,657 to $16,635, as a result of lower professional fees and the closure of the Company's London office at the end of fiscal 2007.
The Company accounts for its investments in Jaguar Financial Inc. ("Jaguar") and Lakeside using the equity method, recording its share of earnings as income. During the third quarter, the Company recorded an equity loss in the amount of $122,296. There was no equivalent amount in the prior year.
As at December 31, 2007 the Company had cash, deposits, and securities of $9,783,209. During the third quarter the company retired its outstanding debenture of $750,000 and reduced its short term loans by $1,073,687.
Net income for the nine months ended December 31, 2007 was $3,039,248 or $0.31 per share compared with a restated net loss of $5,127,059 or $0.56 per share in the prior period. The improved results were attributable to stronger core brokerage activities, merchant banking gains, and equity income from Jaguar and Lakeside.
Revenue for the period ended December 31, 2007 was $20,133,680 compared to $9,376,605 in the prior period. Commission revenue was $7,520,210 compared to $6,295,086 last year. Underwriting and advisory revenue increased to $9,357,302 from $5,920,778 in the previous year, as restated. The increase was attributable to a greater number of financings undertaken as well as higher realized gains in the Company's broker warrant portfolio. Trading revenue was $580,942 compared to $14,168 in the prior year. Interest revenue was $1,137,550 compared to $941,412 in the prior year driven by higher client account balances. Merchant banking activities generated revenue of $1,661,237 compared to a loss of $3,877,212 in the prior period.
Total expenses for the period ended December 31, 2007 were $18,089,339 compared with $14,503,664 in the prior year. Brokerage operations costs increased to $16,908,701 from $13,849,995 resulting from increased variable compensation associated with the higher level of revenue. Interest expense of $704,694 remained relatively consistent with last year. Merchant banking expenses were $113,614 compared to a recovery of $1,725,128, representing a reduction in accrued variable compensation relating to the decline in value of the merchant banking investments. General and administrative expenses were $50,332 compared to $1,469,223 as a result of lower professional fees, the closure of the Company's London office at the end of fiscal 2007 and the recovery of costs previously incurred.
The Company recorded equity income in the amounts of $656,007 for Jaguar and $338,900 for Lakeside for the nine months ended December 31, 2007. There were no comparable amounts in the prior year.
Northern Financial Corporation wholly owns Northern Securities, a full service investment dealer that provides financial advisory services to retail and institutional clients and investment banking services to small capitalization companies.