Xceed Mortgage Corp. intends to apply to the Finance Ministry for approval to be continued as a federally regulated Schedule I bank, the company said Thursday.

Although no formal application has been made, the Toronto-based provider of insured mortgages, has had preliminary discussions with the Office of the Superintendent of Financial Institutions (OSFI) regarding its intentions to carry on business as a bank and is optimistic that it will receive the necessary approval to do so, although no assurances have been provided by OSFI.

The continuation of Xceed as bank is subject to receipt of a number of approvals, including the approval of OSFI, the Minister of Finance and shareholders of Xceed.

“Our decision to apply to form a Schedule I bank reflects the changes that have taken place in capital markets during the past two years,” said Ivan Wahl, chairman and CEO.

“We believe that forming a deposit-taking financial institution will provide Xceed with another important means of raising stable capital at a reasonable cost that we can deploy productively for Canadians, particularly for originating new mortgages and renewing existing ones,” Wahl said.

Separately, the company said it would have slipped into the red during its fiscal first quarter without a boost from one-time gains from accounting adjustments and valuation writedowns.

Xceed reported profits of $3.3 million, or 12¢ a share, more than doubling year-earlier net income of $1.5 million, or 5¢ a share. The company said it would have recorded a loss of $2 million without the one-time items.

Much of the boost came from a $4.8 million payment delivered under January’s asset-backed commercial paper restructuring agreement.

The one-time gains and mortgage sales contributed to a rise in quarterly revenue, which jumped to $8.5 million from $5.7 million reported during the corresponding quarter of the 2008 fiscal year.

Xceed said mortgages under administraion totalled $2.1 billion, remaining flat from levels recorded a year ago.

IE