TSX Symbol FC
TORONTO,
Nov. 7, 2012 /CNW/ - Firm Capital
Mortgage Investment Corporation (the "Corporation") (TSX FC), today
released its financial statements for the three and nine months
ended September 30, 2012.
PROFIT & RETURN ON EQUITY
Comprehensive income and profit ("Profit") for the third quarter
ended September 30, 2012 increased by
+9% to $4,135,328 or $0.241 per share as compared to $3,807,725 or $0.257 per share for the same period last year.
For the nine months ended September 30,
2012, profit increased by +17% to $12,683,967 or $0.765 per share as compared to $10,816,059 or $0.740 per share. Profit for the quarter ended
September 30, 2012 exceeded dividends
to Shareholders by $103,886.
The third quarter Profit represents an
annualized return on average Shareholders' equity of 9.45% per
annum. This return on Shareholders' equity equates to 837
basis points per annum over the average one year Government of
Canada Treasury bill yield for the quarter and is well in excess of
the Corporation's target yield objective of 400 basis points per
annum over the one year Treasury bill yield.
DIVIDEND OVERVIEW
For the third quarter ended September 30,
2012, the Corporation distributed $4,031,442 or $0.234 per share versus $3,489,032 or $0.234 per share for the third quarter ended
September 30, 2011. For the nine
months ended September 30, 2012, the
Corporation distributed $11,747,406
versus $10,300,321 for the nine
months ended September 30, 2011.
INVESTMENT PORTFOLIO HIGHLIGHTS
Details on the Corporation's investment portfolio as at
September 30, 2012 are as
follows:
- Total gross investment portfolio equals $287,415,599, which is a +5% increase over
December 31, 2011.
- Conventional first mortgages, being those mortgages with loan
to values less than 75%, comprise 67.1% of our total portfolio, and
total conventional mortgages with loan to values under 75% comprise
81.2% of our total portfolio.
- Non-conventional mortgages total 10.5% of the portfolio.
- Related investments total 8.3% of the portfolio.
- Approximately 67% of the portfolio matures by September 30, 2013. This results in a
continuously revolving portfolio, allowing management to assess
market conditions.
- The average face interest rate on the portfolio is 9.14% per
annum.
- Regionally, the portfolio is diversified approximately as
follows: Ontario (77.6%),
Alberta (15.8%), British Columbia (3.0%), with the balance
(3.6%) being in other provinces.
- Investment portfolio breakdown by loan size is as follows:
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Amount |
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Number
of
Investments |
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% |
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Total Amount |
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% |
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$0-$2,500,000 |
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101 |
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70% |
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$ |
80,970,823 |
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28% |
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$2,500,001-$5,000,000 |
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27 |
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19% |
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93,124,521 |
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32% |
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$5,000,001-$7,500,000 |
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10 |
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7% |
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59,831,073 |
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21% |
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$7,500,001 + |
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6 |
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4% |
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53,489,182 |
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19% |
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144 |
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100% |
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$ |
287,415,599 |
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100% |
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IMPAIRMENT PROVISION UPDATE
Management has always taken a proactive approach to allowance
provision reserves. This is a prudent approach to protecting our
Shareholders' equity. The impairment provision remains unchanged at
$3,180,000 which represents 1.1% of
the gross loan portfolio.
UNRECOGNIZED INCOME COLLECTED
As at September 30, 2012, the
Corporation has recorded as a receivable on its books, banked
non-refundable fee income of $512,925, which will be recognized as income over
the term of the corresponding investments.
DIVIDEND AND SHARE PURCHASE PLAN
The Corporation has in place a Dividend Reinvestment Plan (DRIP)
and Share Purchase Plan that is available to its Shareholders. The
plans allows participants to have their monthly cash dividends
reinvested in additional shares at a 2% discount to market and
grants participants the right to purchase, without commission,
additional shares, up to a maximum of $12,000 per annum.
ABOUT THE CORPORATION
The Corporation, through its Mortgage Banker, Firm Capital
Corporation, is a non-bank lender providing residential and
commercial short-term bridge and conventional real estate
financing, including construction, mezzanine and equity
investments. The Corporation's investment objective is the
preservation of Shareholders' equity, while providing Shareholders
with a stable stream of monthly dividends from investments. The
Corporation achieves its investment objectives by pursuing a
strategy of growth through investments in selected niche markets
that are under-serviced by large lending institutions. Lending
activities to date continue to develop a diversified mortgage
portfolio, producing a stable return to Shareholders. Full reports
of the financial results of the Corporation for the year are
outlined in the audited financial statements and the related
management discussion and analysis of Firm Capital, available on
the SEDAR website at www.sedar.com. In addition, supplemental
information is available on Firm Capital's website at
www.firmcapital.com.
Forward-Looking Statements
This news release contains forward-looking statements within the
meaning of applicable securities laws including, among others,
statements concerning our objectives, our strategies to achieve
those objectives, our performance, our mortgage portfolio and our
distributions, as well as statements with respect to management's
beliefs, estimates, and intentions, and similar statements
concerning anticipated future events, results, circumstances,
performance or expectations that are not historical facts.
Forward-looking statements generally can be identified by the use
of forward-looking terminology such as "outlook", "objective",
"may", "will", "expect", "intent", "estimate", "anticipate",
"believe", "should", "plans" or "continue" or similar expressions
suggesting future outcomes or events. Such forward-looking
statements reflect management's current beliefs and are based on
information currently available to management.
These statements are not guarantees of future
performance and are based on our estimates and assumptions that are
subject to risks and uncertainties, including those described in
our Annual Information Form under "Risk Factors" (a copy of which
can be obtained at www.sedar.com), which could cause our actual
results and performance to differ materially from the
forward-looking statements contained in this circular. Those
risks and uncertainties include, among others, risks associated
with mortgage lending, dependence on the Corporation's manager and
mortgage banker, competition for mortgage lending, real estate
values, interest rate fluctuations, environmental matters,
shareholder liability and the introduction of new tax rules.
Material factors or assumptions that were applied in drawing a
conclusion or making an estimate set out in the forward-looking
information include, among others, that the Corporation is able to
invest in mortgages at rates consistent with rates historically
achieved; adequate mortgage investment opportunities are presented
to the Corporation; and adequate bank indebtedness and bank loans
are available to the Corporation. Although the
forward-looking information continued in this new release is based
upon what management believes are reasonable assumptions, there can
be no assurance that actual results and performance will be
consistent with these forward-looking statements.
All forward-looking statements in this news
release are qualified by these cautionary statements. Except
as required by applicable law, the Corporation undertakes no
obligation to publicly update or revise any forward-looking
statement, whether as a result of new information, future events or
otherwise.
Unaudited Condensed Interim Financial Statements
of
FIRM CAPITAL MORTGAGE INVESTMENT
CORPORATION
For the Three and Nine Months Ended September 30, 2012 and 2011 (unaudited)
NOTICE UNDER NATIONAL INSTRUMENT 51-102
National Instrument 51-102: Continuous
Disclosure Requirements requires that these interim financial
statements be accompanied by this notice which indicates that these
financial statements have not been reviewed by the auditors of Firm
Capital Mortgage Investment Corporation.
FIRM CAPITAL MORTGAGE INVESTMENT
CORPORATION |
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Condensed Interim Balance Sheets |
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(in Canadian dollars) |
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September 30, 2012 |
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December 31, 2011 |
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(unaudited) |
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Assets |
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Amounts receivable and prepaid expenses |
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$ |
2,910,870 |
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$ |
3,478,338 |
Investment portfolio (note 4) |
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284,235,599 |
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271,048,591 |
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Total assets |
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$ |
287,146,469 |
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$ |
274,526,929 |
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Liabilities and Shareholders' Equity |
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Bank indebtedness |
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$ |
11,359,958 |
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$ |
37,763,021 |
Accounts payable and accrued liabilities |
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1,492,733 |
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1,354,639 |
Unearned income |
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512,925 |
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556,991 |
Shareholder dividend payable |
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1,347,423 |
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2,008,118 |
Loans payable |
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13,113,871 |
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15,649,081 |
Convertible debentures (note 5) |
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83,791,333 |
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69,134,395 |
Total liabilities |
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111,618,243 |
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126,466,245 |
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Shareholders' Equity |
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174,913,491 |
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148,382,510 |
Retained earnings / (deficit) |
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614,735 |
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(321,826) |
Total shareholders' equity |
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175,528,226 |
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148,060,684 |
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Commitments (note 4) |
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Contingent liabilities (note 11) |
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Total liabilities and shareholders' equity |
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$ |
287,146,469 |
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$ |
274,526,929 |
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See accompanying notes to unaudited interim
financial statements |
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FIRM CAPITAL MORTGAGE INVESTMENT
CORPORATION |
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Unaudited Condensed Interim Statements of
Comprehensive Income |
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(in Canadian dollars) |
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Three Months
Ended |
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Nine Months
Ended |
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Sep 30, 2012 |
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Sep 30, 2011 |
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Sep 30, 2012 |
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Sep 30, 2011 |
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Interest and fees earned |
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$ |
6,680,908 |
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$ |
6,015,202 |
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$ |
20,582,146 |
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$ |
16,321,016 |
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6,680,908 |
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6,015,202 |
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20,582,146 |
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16,321,016 |
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Corporation manager interest allocation (note
9) |
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514,866 |
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465,237 |
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1,603,111 |
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1,255,165 |
Interest expense (note 10) |
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1,817,676 |
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1,512,029 |
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5,444,541 |
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|
3,697,121 |
General and administrative expenses |
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213,038 |
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230,211 |
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|
650,527 |
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|
552,671 |
Impairment loss on investment portfolio (note
4) |
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- |
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- |
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200,000 |
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- |
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2,545,580 |
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2,207,477 |
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7,898,179 |
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5,504,957 |
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Total comprehensive income and profit for the
period |
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$ |
4,135,328 |
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$ |
3,807,725 |
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$ |
12,683,967 |
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$ |
10,816,059 |
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Profit per share (note 7): |
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Basic |
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$ |
0.241 |
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$ |
0.257 |
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$ |
0.765 |
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$ |
0.740 |
Diluted |
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$ |
0.241 |
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$ |
0.252 |
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$ |
0.747 |
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$ |
0.731 |
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See accompanying notes to
unaudited condensed interim financial statements |
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FIRM CAPITAL MORTGAGE INVESTMENT
CORPORATION |
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Unaudited Condensed Interim Statements of Changes
in Shareholders' Equity |
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(in Canadian dollars) |
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Nine Months
Ended |
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Sep 30, 2012 |
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Sep 30, 2011 |
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Shareholders' equity |
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Shares (note 6): |
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Balance, beginning of period |
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$ |
147,200,878 |
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$ |
137,343,502 |
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Proceeds from issuance of shares |
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21,989,048 |
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549,599 |
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Offering costs |
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(1,014,560) |
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- |
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Conversion of debentures to shares |
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4,977,000 |
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5,798,000 |
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Balance, end of period |
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$ |
173,152,366 |
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$ |
143,691,101 |
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Equity component of convertible debentures
(note 6): |
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Balance, beginning of period |
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$ |
1,181,632 |
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$ |
774,000 |
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Conversion of debentures to shares |
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(110,507) |
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(128,928) |
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Equity component of debentures issued during the
period |
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690,000 |
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276,000 |
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Balance, end of period |
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$ |
1,761,125 |
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$ |
921,072 |
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Total shareholders' equity |
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$ |
174,913,491 |
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$ |
144,612,173 |
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Retained earnings/(Deficit) |
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Deficit, beginning of period |
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$ |
(321,826) |
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$ |
(321,826) |
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Dividends to shareholders |
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(11,747,406) |
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(10,300,321) |
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Comprehensive income and profit for the
period |
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|
12,683,967 |
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|
10,816,059 |
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Retained earnings/(deficit), end of
period |
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$ |
614,735 |
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$ |
193,912 |
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Total Shareholders' Equity |
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$ |
175,528,226 |
|
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$ |
144,806,085 |
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Shares issued and outstanding (note 6) |
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17,274,653 |
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14,915,341 |
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See accompanying notes to unaudited condensed
interim financial statements |
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FIRM CAPITAL MORTGAGE INVESTMENT
CORPORATION |
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Unaudited Condensed Interim Statements of Cash
Flow |
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(in Canadian dollars) |
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Nine Months
Ended |
|
|
|
Sep 30, 2012 |
|
|
Sep 30, 2011 |
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Cash provided by (used in): |
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Operating activities: |
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Comprehensive income and profit for the
period |
|
$ |
12,683,967 |
|
$ |
10,816,059 |
Adjustments for: |
|
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|
|
|
|
Change in impairment loss on
investment portfolio |
|
|
200,000 |
|
|
- |
Implicit interest
rate in excess of coupon rate - convertible debentures |
|
|
185,890 |
|
|
66,253 |
Deferred finance cost amortization -
convertible debentures |
|
|
488,811 |
|
|
307,899 |
Net changes in non-cash operating
items: |
|
|
|
|
|
|
Decrease (increase) in amounts
receivable and prepaid expenses |
|
|
567,468 |
|
|
(1,421,662) |
Increase (decrease) in accounts
payable and accrued liabilities |
|
|
138,094 |
|
|
465,078 |
Increase (decrease) in unearned
income |
|
|
(44,066) |
|
|
214,874 |
Net cash flows from operating activities |
|
|
14,220,164 |
|
|
10,448,501 |
|
|
|
|
|
|
|
Financing activities: |
|
|
|
|
|
|
Proceeds from issuance of shares |
|
|
21,989,048 |
|
|
549,699 |
Proceeds from convertible debentures
issued |
|
|
20,485,000 |
|
|
25,738,000 |
Debenture offering costs |
|
|
(946,270) |
|
|
(1,261,167) |
Offering Costs (equity) |
|
|
(1,014,560) |
|
|
- |
Funding/repayment of loans payable
(net) |
|
|
(2,535,210) |
|
|
11,429,154 |
Dividends to shareholders paid during the
period |
|
|
(12,408,101) |
|
|
(11,264,770) |
Net cash flows from (used in) financing
activities |
|
|
25,569,907 |
|
|
25,190,916 |
|
|
|
|
|
|
|
Investing activities: |
|
|
|
|
|
|
Funding of investments |
|
|
(140,417,701) |
|
|
(186,602,507) |
Discharge of investments |
|
|
127,030,693 |
|
|
116,624,624 |
Net cash flows from (used in) investing
activities |
|
|
(13,387,008) |
|
|
(69,977,883) |
|
|
|
|
|
|
|
Bank indebtedness, beginning of period |
|
|
(37,763,021) |
|
|
(5,005,825) |
Net (increase)/decrease in bank indebtedness for
the period |
|
|
26,403,063 |
|
|
(34,338,466) |
Bank indebtedness, end of period |
|
$ |
(11,359,958) |
|
$ |
(39,344,291) |
|
|
|
|
|
|
|
Cash flows from operating activities
include: |
|
|
|
|
|
|
Interest received |
|
$ |
18,973,343 |
|
$ |
13,970,388 |
Interest paid |
|
$ |
4,986,510 |
|
$ |
2,488,066 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to
unaudited condensed interim financial statements |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FIRM CAPITAL MORTGAGE INVESTMENT CORPORATION
Unaudited Notes to Condensed Interim Financial Statements
Three and Nine months ended September 30,
2012 and 2011
(in Canadian dollars)
Firm Capital Mortgage Investment Corporation (the
"Corporation"), through its mortgage banker, Firm Capital
Corporation, in a non-bank lender providing residential and
commercial short-term bridge and conventional real estate
financing, including construction, mezzanine and equity
investments. The shares of the Corporation are listed on the
Toronto Stock Exchange under the symbol "FC". The Corporation
is a Canadian mortgage investment corporation and the registered
office of the Corporation is 1244 Caledonia Road, Toronto, Ontario, M6A 2X5. FC Treasury
Management Inc. is the Corporation's manager.
1. Organization of the Corporation:
On November 30, 2010, Firm Capital
Mortgage Investment Trust (the "Trust") entered into a plan of
arrangement ("Reorganization"), whereby the Trust was converted
from an income trust structure into the public corporation, Firm
Capital Mortgage Investment Corporation, effective January 1, 2011. The Corporation was
incorporated pursuant to the Laws of the Province of Ontario on October 22,
2010 for the purposes of participating in the
Reorganization.
Pursuant to the Reorganization, units of the Trust were
exchanged on a one-for-one basis for common shares of the
Corporation. Holders of units therefore became the sole
shareholders of the Corporation effective January 1, 2011.
As part of the Reorganization, the Trust was wound up and its
assets were distributed to the Corporation. The
Reorganization was treated as a change in business form rather than
a change in control, and therefore, has been accounted for as a
continuity of interest. The carrying amounts of assets,
liabilities, and shareholders' equity in the financial statements
of the Trust immediately prior to the Reorganization were the same
as the carrying values of the Corporation immediately following the
Reorganization.
2. Basis of presentation:
The unaudited condensed interim financial statements of the
Corporation have been prepared by management in accordance with
International Accounting Standards ("IAS") 34, Interim Financial
Reporting. The preparation of these unaudited condensed
interim financial statements is based on accounting policies and
practices in accordance with International Financial Reporting
Standards ("IFRS"). The accompanying unaudited condensed
interim financial statements should be read in conjunction with the
notes to the Corporation's audited condensed financial statements
for the year ended December 31, 2011,
since they do not contain all disclosures required by IFRS for
annual financial statements. These unaudited condensed
interim financial statements reflect all normal and recurring
adjustments which are, in the opinion of management, necessary for
a fair presentation of the respective interim periods
presented.
These unaudited condensed interim financial statements have been
prepared on the historical cost basis, except for financial
instruments classified as fair value through profit or loss, which
are measured at fair value. These financial statements are
presented in Canadian dollars, which is the Corporation's
functional currency.
3. Significant accounting policies:
The accounting policies applied by the Corporation in these
unaudited condensed interim financial statements are the same as
those applied by the Corporation in its financial statements for
the year ended December 31, 2011 and
accordingly should be read in conjunction with them.
4. Investment portfolio:
The following is a breakdown of the investment portfolio as at
September 30, 2012 and December 31, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sep. 30, 2012 |
|
|
|
Dec. 31, 2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conventional first mortgages
|
|
|
|
$ 192,766,981 |
|
|
|
67.06% |
|
|
|
$ 188,083,658 |
|
|
|
68.64% |
Conventional non-first mortgages
|
|
|
|
40,626,786 |
|
|
|
14.14% |
|
|
|
41,927,607 |
|
|
|
15.30% |
Related investments
|
|
|
|
23,884,669 |
|
|
|
8.31% |
|
|
|
19,958,571 |
|
|
|
7.28% |
Non-conventional mortgages
|
|
|
|
30,137,163 |
|
|
|
10.49% |
|
|
|
24,058,755 |
|
|
|
8.78% |
Total investments (at cost)
|
|
|
|
$ 287,415,599 |
|
|
|
100.00% |
|
|
|
$ 274,028,591 |
|
|
|
100.00% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment provision
|
|
|
|
(3,180,000) |
|
|
|
|
|
|
|
(2,980,000) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment portfolio
|
|
|
|
$ 284,235,599 |
|
|
|
|
|
|
|
$ 271,048,591 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conventional first mortgages are loans secured by a first
priority mortgage charge with loan to values not exceeding
75%. Conventional non-first mortgages are loans with mortgage
charges not registered in first priority with loan to values not
exceeding 75%. Related investments are loans that may not
necessarily be secured by mortgage charge security.
Non-conventional mortgages are loans that in some cases have loan
to values that exceed or may exceed 75% and are the investments
that are the source of all special profit participations earned by
the Corporation.
Investment portfolio is stated at amortized cost. The
impairment loss in the amount of $3,180,000 as at September
30, 2012 represents the total amount of management's
estimate of the shortfall between the investment principal balances
and the estimated recoverable amount from the collateral securing
the loans.
The loans comprising the Investment portfolio bear interest at
the weighted average rate of 9.14% per annum (December 31, 2011 - 9.06% per annum) and mature
between 2012 and 2016.
The un-advanced funds under the existing investment portfolio
(which are commitments of the Corporation) amounted to $51,850,141 as at September 30, 2012 (December 31, 2011 - $30,845,331).
Principal repayments based on contractual maturity dates are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance of 2012 |
|
|
|
|
|
|
|
|
|
|
|
|
$65,911,549 |
2013 |
|
|
|
|
|
|
|
|
|
|
|
|
140,913,747 |
2014 |
|
|
|
|
|
|
|
|
|
|
|
|
71,299,965 |
2015 |
|
|
|
|
|
|
|
|
|
|
|
|
9,093,038 |
2016 |
|
|
|
|
|
|
|
|
|
|
|
|
197,300 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$287,415,599 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowers who have open loans have the option to repay principal
at any time prior to the maturity date.
5. Convertible debentures:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended |
|
|
Nine Months Ended |
|
|
|
|
|
|
|
|
|
|
September 30, 2012 |
|
|
September 30, 2011 |
|
|
|
|
|
|
|
|
|
|
Total Debentures |
|
|
Total Debentures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal balance, beginning of period |
|
|
|
|
|
|
|
|
|
$69,134,395 |
|
|
$53,628,903 |
Issued |
|
|
|
|
|
|
|
|
|
18,848,730 |
|
|
24,200,834 |
Conversions of debentures to shares |
|
|
|
|
|
|
|
|
|
(4,977,000) |
|
|
(5,798,000) |
Adjustment to fair value of conversion option |
|
|
|
|
|
|
|
|
|
110,507 |
|
|
128,928 |
Implicit interest rate in excess
of coupon rate |
|
|
|
|
|
|
|
|
|
185,890 |
|
|
66,253 |
Deferred finance cost amortization |
|
|
|
|
|
|
|
|
|
488,811 |
|
|
307,899 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal balance, end of period |
|
|
|
|
|
|
|
|
|
$83,791,333 |
|
|
$72,534,817 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The breakdown of the Total Debentures for the nine months ended
September 30, 2012 presented in the
above table is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6.00% |
|
|
|
5.75% |
|
|
|
5.40% |
|
|
|
5.25% |
|
|
|
|
|
|
|
|
Convertible |
|
|
|
Convertible |
|
|
|
Convertible |
|
|
|
Convertible |
|
|
|
|
|
|
|
|
Debenture |
|
|
|
Debenture |
|
|
|
Debenture |
|
|
|
Debenture |
|
|
|
TOTAL |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal balance, beginning of period |
|
|
|
$15,225,091 |
|
|
|
$30,021,130 |
|
|
|
$23,888,174 |
|
|
|
$ - |
|
|
|
$69,134,395 |
Issued |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
18,848,730 |
|
|
|
18,848,730 |
Conversions |
|
|
|
(4,977,000) |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(4,977,000) |
Adjustment to fair value of conversion option |
|
|
|
110,507 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
110,507 |
Implicit interest rate in excess of coupon
rate |
|
|
|
45,927 |
|
|
|
21,692 |
|
|
|
75,658 |
|
|
|
42,613 |
|
|
|
185,890 |
Deferred finance cost amortization |
|
|
|
128,358 |
|
|
|
158,726 |
|
|
|
130,213 |
|
|
|
71,514 |
|
|
|
488,811 |
Principal balance, end of period |
|
|
|
$10,532,883 |
|
|
|
$30,201,548 |
|
|
|
$24,094,045 |
|
|
|
$18,962,857 |
|
|
|
$83,791,333 |
Maturity Date |
|
|
|
Jun 30, 2013 |
|
|
|
Oct 31, 2017 |
|
|
|
Feb 28, 2019 |
|
|
|
Mar 31, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The breakdown of the Total Debentures for the year ended
December 31, 2011 is as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6.00% |
|
|
|
5.75% |
|
|
|
5.40% |
|
|
|
|
|
|
|
|
Convertible |
|
|
|
Convertible |
|
|
|
Convertible |
|
|
|
|
|
|
|
|
Debenture |
|
|
|
Debenture |
|
|
|
Debenture |
|
|
|
TOTAL |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal balance, beginning of year |
|
|
|
$23,886,736 |
|
|
|
$29,742,067 |
|
|
|
$ - |
|
|
|
$53,628,803 |
Issued |
|
|
|
- |
|
|
|
- |
|
|
|
23,822,547 |
|
|
|
$23,822,547 |
Conversions |
|
|
|
(9,093,000) |
|
|
|
- |
|
|
|
- |
|
|
|
(9,093,000) |
Adjustment to fair value of
conversion option |
|
|
|
202,368 |
|
|
|
- |
|
|
|
- |
|
|
|
202,368 |
Implicit interest rate in excess
of coupon rate |
|
|
|
57,998 |
|
|
|
30,117 |
|
|
|
3,372 |
|
|
|
91,487 |
Deferred finance cost amortization |
|
|
|
170,989 |
|
|
|
248,946 |
|
|
|
62,255 |
|
|
|
482,190 |
Principal balance, end of year |
|
|
|
$15,225,091 |
|
|
|
$30,021,130 |
|
|
|
$23,888,174 |
|
|
|
$69,134,395 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In 2009, $536,000 of the 6.00%
convertible debentures were converted by the debenture holders to
45,617 shares of the Corporation. In 2010, $20,000 of the 6.00% convertible debentures were
converted by the debenture holders to 1,702 shares of the
Corporation. In 2011, $9,093,000 of the 6.00% convertible debentures
were converted by the debenture holders to 773,861 shares of the
Corporation. In 2012, $4,977,000 of the 6.00% convertible debentures
were converted by the debenture holders to 423,561 shares of the
Corporation.
In the first quarter of 2012, the Corporation completed a public
offering of 20,485, 5.25% convertible unsecured subordinated
debentures at a price of $1,000 per
debenture for gross proceeds of $20,485,000. The debentures mature on
March 31, 2019 and interest is paid
semi-annually on March 31 and
September 30. The debentures
are convertible at the option of the holder at any time prior to
the maturity date at a conversion price of $14.80. The debentures may not be redeemed
by the Corporation prior to March 31,
2015. On or after March 31,
2015, but prior to March 31,
2016, the debentures are redeemable at a price equal to the
principal, plus accrued interest, at the Corporation's option on
not more than 60 days' and not less than 30 days' notice, provided
that the weighted average trading price of the shares on the
Toronto Stock Exchange for the 20 consecutive trading days ending
five trading days preceding the date on which the notice of
redemption is given is not less than 125% of the conversion
price. On or after March 31,
2016 and prior to the maturity date, the debentures are
redeemable at a price equal to the principal amount plus accrued
interest, at the Corporation's option on not more than 60 days' and
not less than 30 days' prior notice. On redemption or at
maturity, the Corporation may, at its option, elect to satisfy its
obligation to pay all or a portion of the principal of the
debenture by issuing that number of shares of the Corporation
obtained by dividing the principal amount being repaid by 95% of
the weighted average trading price of the shares for the 20
consecutive trading days ending on the fifth trading day preceding
the redemption or maturity date.
The convertible debentures were allocated into liability and
equity components on the date of issuance as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liability |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$19,795,000 |
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
690,000 |
Principal |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$20,485,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at September 30, 2012,
debentures payable bear interest at the weighted average effective
rate of 5.56% per annum (December 31,
2011 - 5.68% per annum).
Notwithstanding the carrying value of the convertible
debentures, the principal balance outstanding to the debenture
holders is $88,040,000 as at
September 30, 2012.
6. Shareholders' equity:
On January 1, 2011, all
outstanding units were exchanged on a one-for-one basis for common
shares of the Corporation, as described in Note 1.
The beneficial interests in the Corporation are represented by a
single class of shares which are unlimited in number. Each
share carries a single vote at any meeting of shareholders and
carries the right to participate pro-rata in any dividends.
(a) Shares issued and outstanding:
The following shares were issued and outstanding as at
September 30, 2012:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
# of shares |
|
|
|
Amount |
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of period |
|
|
|
|
|
15,213,018 |
|
|
|
$147,200,878 |
|
|
|
|
|
|
|
|
|
|
|
New shares from conversion of debentures |
|
|
|
|
|
423,561 |
|
|
|
4,977,000 |
|
|
|
|
|
|
|
|
|
|
|
New shares from public offering |
|
|
|
|
|
1,541,000 |
|
|
|
20,726,450 |
|
|
|
|
|
|
|
|
|
|
|
New shares issued during the
period under Dividend Reinvestment Plan |
|
|
|
|
|
97,074 |
|
|
|
1,262,598 |
|
|
|
|
|
|
|
|
|
|
|
Offering costs |
|
|
|
|
|
- |
|
|
|
(1,014,560) |
Balance, end of period |
|
|
|
|
|
17,274,653 |
|
|
|
$173,152,366 |
|
|
|
|
|
|
|
|
|
|
|
The following shares were issued
and outstanding as at December 31, 2011: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
# of shares |
|
|
|
Amount |
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of year |
|
|
|
|
|
14,377,333 |
|
|
|
$137,343,502 |
|
|
|
|
|
|
|
|
|
|
|
New shares from conversion of debentures |
|
|
|
|
|
773,861 |
|
|
|
9,093,000 |
|
|
|
|
|
|
|
|
|
|
|
New shares
issued during the period under the Dividend Reinvestment Plan |
|
|
|
|
|
61,824 |
|
|
|
764,376 |
Balance, end of year |
|
|
|
|
|
15,213,018 |
|
|
|
$147,200,878 |
|
|
|
|
|
|
|
|
|
|
|
In the first quarter of 2012, the Corporation completed a public
offering of 1,541,000 shares at $13.45 per share.
(b) Incentive option plan:
As at September 30, 2012, no
options are outstanding (December 31,
2011 - nil).
(c) Dividend reinvestment plan and direct share purchase
plan:
The Corporation has a dividend reinvestment plan and direct
share purchase plan for its shareholders which allows participants
to reinvest their monthly cash dividends in additional Corporation
shares at a share price equivalent to the weighted average price of
shares for the preceding five-day period.
7. Per share amounts:
(a) Profit per share calculation:
The following table reconcile the numerators and denominators of
the basic and diluted profit per share for the three and nine
months ended September 30, 2012 and
2011.
Basic profit per share
calculation: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended |
|
|
|
Nine Months
Ended |
|
|
|
|
|
Sep 30, 2012 |
|
|
|
Sep 30, 2011 |
|
|
|
Sep 30, 2012 |
|
|
|
Sep 30, 2011 |
|
Numerator for basic
profit per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit |
|
|
|
|
$4,135,328 |
|
|
|
$3,807,725 |
|
|
|
$12,683,967 |
|
|
|
$10,816,059 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for basic
profit per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares |
|
|
|
|
17,187,465 |
|
|
|
14,840,699 |
|
|
|
16,578,057 |
|
|
|
14,625,573 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
profit per share |
|
|
|
|
$0.241 |
|
|
|
$0.257 |
|
|
|
$0.765 |
|
|
|
$0.740 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted profit per share calculation: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
Nine months
ended |
|
|
|
|
|
Sep 30, 2012 |
|
|
|
Sep 30, 2011 |
|
|
|
Sep 30, 2012 |
|
|
|
Sep 30, 2011 |
|
Numerator for diluted profit per
share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit: |
|
|
|
|
$4,135,328 |
|
|
|
$3,807,725 |
|
|
|
$12,683,967 |
|
|
|
$10,816,059 |
|
|
Interest on convertible debentures |
|
|
|
|
1,484,778 |
|
|
|
1,027,681 |
|
|
|
4,208,940 |
|
|
|
2,848,172 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net profit
for diluted profit per share |
|
|
|
|
$5,620,106 |
|
|
|
$4,835,406 |
|
|
|
$16,892,907 |
|
|
|
$13,664,231 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for
diluted profit per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares |
|
|
|
|
17,187,465 |
|
|
|
14,840,699 |
|
|
|
16,578,057 |
|
|
|
14,625,573 |
|
Net shares that would be issued: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assuming
debentures are converted |
|
|
|
|
6,038,151 |
|
|
|
4,355,606 |
|
|
|
6,038,151 |
|
|
|
4,056,279 |
|
Diluted
weighted average shares |
|
|
|
|
23,225,616 |
|
|
|
19,196,305 |
|
|
|
22,616,208 |
|
|
|
18,681,852 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
profit per share |
|
|
|
|
$0.241 |
|
|
|
$0.252 |
|
|
|
$0.747 |
|
|
|
$0.731 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8. Dividends:
The Corporation intends to make dividend payments to the
shareholders on a monthly basis on or about the 15th day of each
month. The operating policies of the Corporation set out that
the Corporation intends to distribute to shareholders within 90
days after the year end at least 100% of the net income of the
Corporation determined in accordance with the Income Tax Act
(Canada), subject to certain
adjustments.
For the nine months ended September 30,
2012, the Corporation recorded dividends of $11,747,406 (2011 - $10,300,321) to its shareholders. Dividends were
$0.702 per share (2011 - $0.702 per share).
9. Related party transactions and balances:
Transactions with related parties are in the normal course of
business and are recorded at the exchange amount which is the
amount of consideration established and agreed to by the related
parties, and are measured at fair value.
The Corporation's Manager (a company controlled by some of the
directors) receives an allocation of interest, referred to as
Corporation Manager spread interest, calculated at 0.75% per annum
of the Corporation's daily outstanding performing investment
balances. For the nine months ended September 30, 2012, this amount was $1,603,111 (2011 - $1,255,165), and for the three-month period
ending September 30, 2012 this amount
was $514,866 (2011 - $465,237). Included in accounts payable and
accrued liabilities at September 30,
2012 are amounts payable to the Corporation's Manager of
$149,727 (December 31, 2011 - $204,988).
The total directors' fee paid for the nine months ended
September 30, 2012 was $137,250 (2011 - $137,250). The listing of the members of
the board of directors is shown in the annual report. The key
management personnel are also directors of the Corporation and
receive compensation from the Corporation Manager.
The Mortgage Banker (a company controlled by a director)
receives certain fees from the borrowers as follows: loan
servicing fees equal to 0.10% per annum on the principal amount of
each of the Corporation's investments; 75% of all the commitment
and renewal fees generated from the Corporation's investments; and
25% of all the special profit income generated from the
non-conventional investments after the Corporation has yielded
a 10% per annum return on its investments. Interest and fee
income is net of the loan servicing fees paid to the Mortgage
Banker of approximately $206,000 for
the nine months ended September 30,
2012 (2011 - $167,000).
The Mortgage Banker also retains all overnight float interest and
incidental fees and charges payable by borrowers on the
Corporation's investments. The Corporation's share of
commitment and renewal fees is recorded in income and for the nine
months ended September 30, 2012 was
$761,519 (2011 - $691,579) and for the three month period ended
September 30, 2012 was $268,285 (2011 - $295,867) and applicable special profit income
for the nine months ended September 30,
2012 was $940,849 (2011 -
$218,307) and for the three month
period ended September 30, 2012 was
$259,488 (2011 - $67,932).
The Corporation's Management Agreement and Mortgage Banking
Agreement contains provisions for the payment and termination fees
to the Corporation Manager and Mortgage Banker in the event that
the respective agreements are either terminated or not renewed.
Several of the Corporation's investments are shared with other
investors of the Mortgage Banker, which may include members of
management of the Mortgage Banker and/or Officers or directors of
the Corporation. The Corporation ranks equally with other
members of the syndicate as to receipt of principal and income.
Mortgages totalling $13,800,000
(December 31, 2011 - $15,560,000) are outstanding to borrowers
controlled by an independent director of the Corporation. Each
investment is dealt with in accordance with the Corporation's
existing investment and operating policies.
10. Interest expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
Nine Months Ended |
|
|
|
|
|
|
|
Sep 30, 2012 |
|
|
|
Sep 30, 2011 |
|
|
|
Sep 30, 2012 |
|
|
|
Sep 30, 2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank interest expense |
|
|
|
|
|
|
$176,750 |
|
|
|
$366,199 |
|
|
|
$741,838 |
|
|
|
$651,043 |
Loans payable interest expense |
|
|
|
|
|
|
156,148 |
|
|
|
118,149 |
|
|
|
493,763 |
|
|
|
197,906 |
Debenture interest expense |
|
|
|
|
|
|
1,484,778 |
|
|
|
1,027,681 |
|
|
|
4,208,940 |
|
|
|
2,848,172 |
Interest expense |
|
|
|
|
|
|
$1,817,676 |
|
|
|
$1,512,029 |
|
|
|
$5,444,541 |
|
|
|
$3,697,121 |
Deferred finance cost amortization
- convertible
debentures |
|
|
|
|
|
|
(170,834) |
|
|
|
(115,632) |
|
|
|
(488,811) |
|
|
|
(307,899) |
Implicit interest rate in excess
of coupon rate -
convertible debentures |
|
|
|
|
|
|
(61,056) |
|
|
|
(21,531) |
|
|
|
(185,890) |
|
|
|
(66,253) |
Change in accrued interest |
|
|
|
|
|
|
(25,555) |
|
|
|
(927,447) |
|
|
|
216,670 |
|
|
|
(834,903) |
Cash interest paid |
|
|
|
|
|
|
$1,560,231 |
|
|
|
$447,419 |
|
|
|
$4,986,510 |
|
|
|
$2,488,066 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11. Contingent liabilities:
The Corporation is involved in certain litigation arising out of
the ordinary course of investing in loans. Although such
matters cannot be predicted with certainty, management believes the
claims are without merit and does not consider the Corporation's
exposure to such litigation to have an impact on these unaudited
condensed interim financial statements.
12. Fair value of financial instruments:
The fair values of amounts receivable, bank indebtedness,
accounts payable and accrued liabilities and shareholder dividend
payable approximate their carrying values due to their short-term
maturities.
The fair value of investment portfolio approximates its carrying
value as the majority of the loans are repayable in full at any
time without penalty.
The fair values of loans payable approximate their carrying
values due to the fact that the majority of the loans are: (i)
repayable in full, at any time upon the borrower under the
underlying loan that secures the loan payable repaying their loan
without penalty, and (ii) have floating interest rates linked to
bank prime.
The fair value of convertible debentures, including their
conversion option, has been determined based on the closing price
of the debentures of the Corporation on the Toronto Stock Exchange
for the respective date. The fair value has been estimated at
September 30, 2012 to be $89,780,955 (2011 - $73,655,835). This is a level 1 input which
is based on a quoted price in an active market.
SOURCE Firm Capital Mortgage Investment Corporation