TSX Symbol FC
TORONTO,
May 7, 2013 /CNW/ - Firm Capital
Mortgage Investment Corporation (the "Corporation") (TSX: FC),
today released its financial statements for the three months ended
March 31, 2013.
PROFIT & RETURN ON EQUITY
Comprehensive income and profit ("Profit") for the first quarter
ended March 31, 2013 increased by 7%
to $4,194,465 as compared to
$3,937,912 for the same period last
year. Basic weighted average profit per share for the first quarter
ended March 31, 2013 was $0.240, in comparison to the $0.258 reported for the first quarter ended
March 31, 2012. Profit for the
quarter ended March 31, 2013 exceeded
dividends to Shareholders by $97,007.
Profit for the three months ended March 31, 2013 represented an annualized return
on shareholders' equity of 9.45%. This return on shareholders'
equity represents 842 basis points per annum over the average
Government of Canada One Year Treasury Bill yield for the first
quarter of 2013 of 1.03%, and is well in excess of the
Corporation's stated target yield objective of 400 basis points per
annum over the average One Year Treasury Bill yield.
DIVIDEND OVERVIEW
For the first quarter ended March 31,
2013, the Corporation paid dividends totaling $4,097,458 or $0.234 per share versus $3,718,535 or $0.234 per share for the first quarter ended
March 31, 2012.
INVESTMENT PORTFOLIO HIGHLIGHTS
Details on the Corporation's investment portfolio as at
March 31, 2013 are as follows:
- Total gross investment portfolio equals $317,684,716, which is a 7% increase over
December 31, 2012.
- Conventional first mortgages, being those mortgages with loan
to values less than 75%, comprise 64.4% of our total portfolio, and
total conventional mortgages with loan to values under 75% comprise
73.5% of our total portfolio.
- Related investments total 13.6% of the portfolio.
- Non-conventional mortgages total 9.6% of the portfolio.
- Discounted debt investments total 3.3% of the portfolio.
- Approximately 65% of the portfolio matures by March 31, 2014. This results in a continuously
revolving portfolio, allowing management to assess market
conditions.
- The average face interest rate on the portfolio is 8.79% per
annum.
- Regionally, the portfolio is diversified approximately as
follows: Ontario (75.1%),
Alberta (10.7%), Quebec (9.4%) and British Columbia (4.8%).
- 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-$2,500,000 |
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103 |
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71% |
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$ |
90,478,832 |
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28% |
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$2,500,001 -
$5,000,000 |
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23 |
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16% |
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78,699,917 |
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25% |
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$5,000,001 - $7,500,000 |
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9 |
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6% |
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54,087,369 |
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17% |
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$7,500,000 + |
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10 |
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7% |
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94,418,598 |
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30% |
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145 |
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100% |
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$ |
317,684,716 |
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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% of the
gross loan portfolio.
UNRECOGNIZED INCOME COLLECTED
As at March 31, 2013, the Corporation
has recorded as a receivable on its books, banked non-refundable
fee income of $656,591, 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.
NEW COO APPOINTMENT
The Corporation also announces the retirement of Mr. Edward Gilbert as Chief Operating Officer of the
Corporation. Mr. Gilbert remains a management-appointed
director of the Corporation. The board of directors of the
Corporation has appointed Mr. Sandy
Poklar to act as Chief Operating Officer of the
Corporation.
Mr. Gilbert has served as Chief Operating
Officer and as a trustee or director since the initial public
offering of Firm Capital Mortgage Investment Trust, the
Corporation's predecessor, in 1999. Mr. Gilbert will continue to be
an important part of the Firm Capital Corporation management team
through his ongoing role with the Corporation's advisor and as a
director of the Corporation.
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.
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.
Condensed Interim Financial Statements of
FIRM CAPITAL MORTGAGE INVESTMENT CORPORATION
For the Three Months Ended March 31,
2013 and 2012 (unaudited)
FIRM CAPITAL MORTGAGE INVESTMENT
CORPORATION |
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Condensed Interim Balance Sheets |
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(in Canadian dollars) |
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March 31, 2013 |
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December 31, 2012 |
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(unaudited) |
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Assets |
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Amounts receivable and prepaid expenses |
$
3,274,449 |
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$ 3,026,057 |
Investment portfolio (note 4) |
314,504,716 |
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294,037,271 |
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Total assets |
$
317,779,165 |
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$ 297,063,328 |
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Liabilities and Shareholders' Equity |
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Bank indebtedness |
$
26,258,473 |
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$ 24,379,151 |
Accounts payable and accrued liabilities |
1,818,673 |
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1,741,192 |
Unearned income |
656,591 |
|
520,055 |
Shareholder dividend payable |
1,368,839 |
|
2,300,218 |
Loans payable |
8,678,562 |
|
9,045,731 |
Convertible debentures (note 5) |
100,578,227 |
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82,698,573 |
Total liabilities |
139,359,365 |
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120,684,920 |
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Shareholders' Equity |
178,644,619 |
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176,700,234 |
Deficit |
(224,819) |
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(321,826) |
Total shareholders' equity |
178,419,800 |
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176,378,408 |
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Commitments (note 4) |
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Contingent liabilities (note 11) |
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Total liabilities and shareholders'
equity |
$ 317,779,165 |
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$ 297,063,328 |
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See accompanying notes to unaudited condensed
interim financial statements |
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FIRM CAPITAL MORTGAGE INVESTMENT
CORPORATION |
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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March 31, 2013 |
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March 31, 2012 |
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Interest and fees earned |
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$6,624,220 |
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$6,387,310 |
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6,624,220 |
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6,387,310 |
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Corporation manager interest allocation (note 9) |
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525,365 |
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522,732 |
Interest expense (note 10) |
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1,718,927 |
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1,731,397 |
General and administrative expenses |
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185,463 |
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195,269 |
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2,429,755 |
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2,449,398 |
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Total comprehensive income and profit for the
period |
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$4,194,465 |
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$3,937,912 |
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Profit per share (note 7) |
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Basic |
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$0.240 |
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$0.258 |
Diluted |
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$0.229 |
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$0.232 |
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See accompanying notes to unaudited condensed
interim financial statements |
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FIRM CAPITAL MORTGAGE
INVESTMENT CORPORATION |
Unaudited Condensed Interim Statements of Changes
in Shareholders' Equity |
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(in Canadian dollars) |
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Three Months Ended |
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March 31, 2013 |
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March 31, 2012 |
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Shareholders' equity |
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Shares (note 6): |
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Balance, beginning of period |
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$ 174,982,358 |
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$ 147,200,878 |
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Proceeds from issuance of shares |
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595,636 |
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21,167,971 |
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Offering costs |
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- |
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(829,058) |
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Conversion of debentures to shares |
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931,000 |
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2,498,000 |
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Balance, end of period |
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$ 176,508,994 |
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$ 170,037,791 |
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Equity component of convertible debentures (note
6): |
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Balance, beginning of period |
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$
1,717,876 |
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$ 1,181,632 |
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Conversion of debentures to shares |
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(12,251) |
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(55,488) |
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Equity component of debentures issued during the
period |
430,000 |
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690,000 |
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Balance, end of period |
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$
2,135,625 |
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$ 1,816,144 |
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Total shareholders' equity |
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$ 178,644,619 |
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$ 171,853,935 |
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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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(4,097,458) |
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(3,718,535) |
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Comprehensive income and profit for the period |
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4,194,465 |
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3,937,912 |
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Retained earnings/(deficit), end of period |
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$ (224,819) |
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$ (102,449) |
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Total Shareholders' Equity |
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$ 178,419,800 |
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$ 171,751,486 |
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Shares issued and outstanding (note 6) |
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17,549,223 |
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17,000,465 |
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See accompanying notes to unaudited condensed
interim financial statements |
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FIRM CAPITAL MORTGAGE
INVESTMENT CORPORATION |
Unaudited Condensed Interim Statements of Cash
Flow |
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(in Canadian dollars) |
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Three Months Ended |
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March 31, 2013 |
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March 31, 2012 |
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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 |
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$ 4,194,465 |
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$ 3,937,912 |
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Adjustments for: |
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Interest Expense (net of implicit interest rate and accrued
interest) |
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1,483,644 |
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1,813,922 |
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Implicit interest rate in excess of coupon rate - convertible
debentures |
|
63,446 |
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64,671 |
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Deferred finance cost amortization - convertible
debentures |
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171,837 |
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142,806 |
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Net changes in non-cash operating items: |
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Decrease in accrued interest |
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(43,527) |
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(286,439) |
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Increase in amounts receivable and prepaid expenses |
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(248,392) |
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(139,350) |
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Increase (decrease) in accounts payable and accrued
liabilities |
|
77,481 |
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402,552 |
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Increase (decrease) in unearned income |
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136,536 |
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(90,666) |
Net cash flows from operating activities |
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5,835,490 |
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5,845,408 |
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Financing activities: |
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Proceeds from issuance of shares |
|
595,636 |
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21,167,971 |
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Proceeds from convertible debentures issued |
|
20,000,000 |
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20,485,000 |
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Debenture offering costs |
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(1,006,881) |
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(983,550) |
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Offering Costs (equity) |
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- |
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(829,058) |
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Funding/repayment of loans payable (net) |
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(367,168) |
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(934,476) |
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Cash interest paid |
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(1,440,117) |
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(1,527,483) |
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Dividends to shareholders paid during the
period |
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(5,028,837) |
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(4,400,618) |
Net cash flows from (used in) financing
activities |
|
12,752,633 |
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32,977,786 |
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Investing activities: |
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Funding of investments |
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(73,349,329) |
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(47,101,102) |
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Discharge of investments |
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52,881,884 |
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21,954,233 |
Net cash flows from (used in) investing
activities |
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(20,467,445) |
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(25,146,869) |
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Bank indebtedness, beginning of period |
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(24,379,151) |
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(37,763,021) |
Net (increase)/decrease in bank indebtedness for
the period |
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(1,879,322) |
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13,676,325 |
Bank indebtedness, end of period |
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$ (26,258,473) |
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$ (24,086,696) |
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Cash flows from operating activities
include: |
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Interest received |
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$ 6,578,245 |
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$ 5,296,730 |
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|
See accompanying notes to unaudited condensed
interim financial statements |
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FIRM CAPITAL MORTGAGE INVESTMENT
CORPORATION |
Unaudited Notes to Condensed Interim Financial
Statements |
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Three months ended March 31, 2013 and 2012 |
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(in Canadian dollars) |
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1. Organization of the Corporation:
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.
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 financial statements for the
year ended December 31, 2012, 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, 2012 and
accordingly should be read in conjunction with them.
New accountings policies:
(a) Investments in subsidiaries:
IFRS 10, Consolidated Financial Statements ("IFRS 10"), replaced
the guidance in IAS 27, Consolidated and Separate Financial
Statements, and SIC-12, Consolidation - Special Purpose
Entities. IFRS 10 provides a single control model to be
applied in the control analysis for all investors. In
addition, the consolidation procedures are carried financial
substantially unmodified from IAS 29 (2008). For the purpose
of this assessment, the Corporation determines it controls an
entity when:
(i) it is exposed, or has rights, to variable returns from its
involvement with that entity; and
(ii) it has the ability to affect those returns through its power
over that entity.
(b) Fair value measurements:
IFRS 13, Fair Value Measurement ("IFRS 13"), replaces the fair
value measurement guidance contained in individual IFRS's with a
single source of fair value measurement guidance. It defines
fair value as the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction betweeen
market participants at the measurement date, ie. an exit price.
The Corporation adopted IFRS 13 on January
1, 2013 on a prospective basis. The adoption of IFRS
13 did not require any adjustments to the valuation techniques used
the Corporation to determine fair value and did not result in any
measurement adjustments as at January 1,
2013.
4. Investment portfolio:
The following is a breakdown of the investment portfolio as at
March 31, 2013 and December 31, 2012:
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March 31, 2013 |
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December
31, 2012 |
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Conventional first mortgages |
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$ 204,562,488 |
64.39% |
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|
$ 185,038,057 |
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62.26% |
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Conventional non-first mortgages |
|
28,985,913 |
9.12% |
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34,472,723 |
|
11.60% |
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Related investments |
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|
43,197,899 |
13.60% |
|
|
34,916,788 |
|
11.75% |
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Discounted Debt Investments |
|
10,345,300 |
3.26% |
|
|
9,370,300 |
|
3.15% |
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Non-conventional mortgages |
|
30,593,116 |
9.63% |
|
|
33,419,403 |
|
11.24% |
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Total investments (at cost) |
|
$ 317,684,716 |
100.00% |
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|
$ 297,217,271 |
|
100.00% |
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Impairment provision |
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(3,180,000) |
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(3,180,000) |
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|
|
|
Investment portfolio |
|
|
$ 314,504,716 |
|
|
|
$
294,037,271 |
|
|
|
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 March 31,
2013 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 8.79% per annum (December 31, 2012 - 9.03% per annum) and mature
between 2013 and 2018.
The un-advanced funds under the existing investment portfolio
(which are commitments of the Corporation) amounted to $46,774,817 as at March
31, 2013 (December 31, 2012 -
$43,212,906).
Principal repayments based on contractual maturity dates are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013 |
|
|
|
|
|
|
|
|
$169,625,548 |
|
|
|
2014 |
|
|
|
|
|
|
|
|
104,962,696 |
|
|
|
2015 |
|
|
|
|
|
|
|
|
39,995,372 |
|
|
|
2016 |
|
|
|
|
|
|
|
|
2,681,100 |
|
|
|
2017 |
|
|
|
|
|
|
|
|
- |
|
|
|
2018 |
|
|
|
|
|
|
|
|
420,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$317,684,716 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowers who have open loans have the option to repay principal
at any time prior to the maturity date.
5. Convertible debentures:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended |
|
|
Year-Ended |
|
|
|
|
|
|
|
|
|
March 31, 2013 |
|
|
December
31, 2012 |
|
|
|
|
|
|
|
|
|
Total Debentures |
|
|
Total Debentures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liability component, beginning of period |
|
|
$82,698,573 |
|
|
$
69,134,395 |
|
|
Issued |
|
|
|
|
18,563,120 |
|
|
18,848,730 |
|
|
Conversions of debentures to shares |
|
|
(931,000) |
|
|
(6,349,000) |
|
|
Adjustment to fair value of conversion option |
|
12,251 |
|
|
153,756 |
|
|
Implicit interest rate in excess of coupon
rate |
|
63,446 |
|
|
247,853 |
|
|
Deferred finance cost amortization |
|
|
171,837 |
|
|
662,839 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liability component, end of period |
|
|
$100,578,227 |
|
|
$
82,698,573 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The breakdown of the Total Debentures for the
three months ended March 31, 2013 presented in the above table is
as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6.00% |
|
5.75% |
|
5.40% |
|
5.25% |
|
4.75% |
|
|
|
|
|
|
|
Convertible |
|
Convertible |
|
Convertible |
|
Convertible |
|
Convertible |
|
|
|
|
|
|
|
Debenture |
|
Debenture |
|
Debenture |
|
Debenture |
|
Debenture |
|
TOTAL |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liability component, beginning of
period |
$9,263,022 |
|
$30,262,286 |
|
$24,155,841 |
|
$19,017,424 |
|
- |
|
$82,698,573 |
|
Issued |
|
- |
|
- |
|
- |
|
- |
|
$18,563,120 |
|
18,563,120 |
|
Conversions |
(931,000) |
|
- |
|
- |
|
- |
|
- |
|
(931,000) |
|
Adjustment to fair value of conversion
option |
12,251 |
|
- |
|
- |
|
- |
|
- |
|
12,251 |
|
Implicit interest rate in excess of
coupon rate |
16,038 |
|
7,554 |
|
18,337 |
|
20,954 |
|
563 |
|
63,446 |
|
Deferred finance cost
amortization |
42,162 |
|
52,137 |
|
42,771 |
|
33,177 |
|
1,591 |
|
171,837 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liability component, end of
period |
$8,402,473 |
|
$30,321,976 |
|
$24,216,949 |
|
$19,071,555 |
|
$18,565,274 |
|
$100,578,227 |
|
Maturity Date |
Jun 30, 2013 |
|
Oct 31, 2017 |
|
Feb 28, 2019 |
|
Mar 31, 2019 |
|
Mar 31, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The breakdown of the Total Debentures for the year
ended December 31, 2012 is as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6.00% |
|
5.75% |
|
5.40% |
|
5.25% |
|
|
|
|
|
|
|
|
|
Convertible |
|
Convertible |
|
Convertible |
|
Convertible |
|
|
|
|
|
|
|
|
|
Debenture |
|
Debenture |
|
Debenture |
|
Debenture |
|
TOTAL |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liability component, beginning of
year |
$15,225,091 |
|
$30,021,130 |
|
$23,888,174 |
|
- |
|
$69,134,395 |
|
|
|
Issued |
|
- |
|
- |
|
- |
|
$18,848,730 |
|
18,848,730 |
|
|
|
Conversions |
(6,349,000) |
|
- |
|
- |
|
- |
|
(6,349,000) |
|
|
|
Adjustment to fair value of conversion
option |
153,756 |
|
- |
|
- |
|
- |
|
153,756 |
|
|
|
Implicit interest rate in excess of
coupon rate |
61,718 |
|
29,136 |
|
93,733 |
|
63,266 |
|
247,853 |
|
|
|
Deferred finance cost
amortization |
171,457 |
|
212,020 |
|
173,934 |
|
105,428 |
|
662,839 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liability component, end of year |
$9,263,022 |
|
$30,262,286 |
|
$24,155,841 |
|
$19,017,424 |
|
$82,698,573 |
|
|
|
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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In the first quarter of 2013, the Corporation completed a public
offering of 20,000, 4.75% convertible unsecured subordinated
debentures at a price of $1,000 per
debenture for gross proceeds of $20,000,000. The debentures mature on
March 31, 2020 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 $15.80. The debentures may not be redeemed
by the Corporation prior to March 31,
2016. On or after March 31,
2016, but prior to March 31,
2017, 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,
2017 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 |
|
|
|
|
|
|
|
$19,570,000 |
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
430,000 |
|
|
|
|
|
Principal |
|
|
|
|
|
|
$20,000,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at March 31, 2013, debentures
payable bear interest at the weighted average effective rate of
5.40% per annum (December 31, 2012 -
5.55% per annum).
Notwithstanding the carrying value of the convertible debentures,
the principal balance outstanding to the debenture holders is
$105,737,000 as at March 31, 2013.
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 March 31, 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
# of shares |
|
Amount |
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of period |
|
|
|
17,425,884 |
|
$ 174,982,358 |
|
|
|
|
|
|
|
|
|
|
|
New shares from conversion of debentures |
|
79,232 |
|
931,000 |
|
|
|
|
|
|
|
|
|
|
|
New shares issued during the period
under Dividend Reinvestment Plan |
|
|
44,107 |
|
595,636 |
Balance, end of period |
|
|
17,549,223 |
|
$ 176,508,994 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following shares were issued and outstanding as
at December 31, 2012: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
# of shares |
Amount |
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of year |
|
|
|
15,213,018 |
|
$ 147,200,878 |
|
|
|
|
|
|
|
|
|
|
|
New shares from conversion of debentures |
|
540,323 |
|
6,349,000 |
|
|
|
|
|
|
|
|
|
|
|
New shares from public offering |
|
|
|
1,541,000 |
|
20,726,450 |
|
|
|
|
|
|
|
|
|
|
|
New shares issued during the period
under the Dividend Reinvestment Plan |
|
131,543 |
|
1,720,590 |
|
|
|
|
|
|
|
|
|
|
|
Offering costs |
|
|
- |
|
(1,014,560) |
Balance, end of year |
|
|
|
17,425,884 |
|
$ 174,982,358 |
|
|
|
|
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 March 31, 2013, no options
are outstanding (December 31, 2012 -
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 quarter ended
March 31, 2013 and 2012.
Basic profit per share
calculation: |
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
Three months ended |
|
|
|
March 31, 2013 |
|
|
March 31, 2012 |
Numerator for basic profit per
share: |
|
|
|
|
|
|
|
Profit |
|
$ |
4,194,465 |
|
$ |
3,937,912 |
|
|
|
|
|
|
|
Denominator for basic profit per
share: |
|
|
|
|
|
|
|
Weighted average shares |
|
|
17,481,008 |
|
|
15,280,894 |
|
|
|
|
|
|
|
Basic profit per share |
|
$ |
0.240 |
|
$ |
0.258 |
|
|
|
|
|
|
|
Diluted profit per share
calculation: |
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
Three months ended |
|
|
|
March 31, 2013 |
|
|
March 31, 2012 |
Numerator for diluted profit per
share: |
|
|
|
|
|
|
|
Profit: |
|
$ |
4,194,465 |
|
$ |
3,937,912 |
|
Interest on convertible debentures |
|
|
1,434,524 |
|
|
1,244,608 |
|
|
|
|
|
|
|
Net profit for diluted profit per
share |
|
$ |
5,628,989 |
|
$ |
5,182,520 |
|
|
|
|
|
|
|
Denominator for diluted profit per
share: |
|
|
|
|
|
|
Weighted average shares |
|
|
17,481,008 |
|
|
15,280,894 |
Net shares that would be issued: |
|
|
|
|
|
|
|
Assuming debentures are converted |
|
|
7,107,974 |
|
|
7,100,194 |
|
|
|
|
|
|
|
Diluted weighted average
shares |
|
|
24,588,982 |
|
|
22,381,088 |
|
|
|
|
|
|
|
Diluted profit per share |
|
$ |
0.229 |
|
$ |
0.232 |
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 quarter ended March 31, 2013,
the Corporation recorded dividends of $4,097,458 (2012 - $3,718,535) to its shareholders. Dividends
were $0.234 per share (2012 -
$0.234 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 quarter ended March
31, 2013, this amount was $525,365 (2012 - $522,732). Included in accounts payable and
accrued liabilities at March 31, 2013
are amounts payable to the Corporation's Manager of $186,144 (December 31,
2012 - $179,141).
The total directors' fee paid for the quarter ended March 31, 2013 was $40,875 (2012 - $45,750). 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 $70,000 for the quarter ended March 31, 2013 (2012 - $70,000). 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 quarter ended March 31,
2013 was $251,840 (2012 -
$342,498) and applicable special
profit income for the quarter ended March
31, 2013 was $419,516 (2012 -
$55,928).
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 $16,000,000
(December 31, 2012 - $13,500,000) 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.
Key management compensation:
Aggregate compensation for key management personnel (all being
short term employee benefits) was $302,847 for the quarter ended March 31, 2013, all of which was paid by the
Mortgage Banker and nothing by the Corporation.
10. Interest expense:
|
|
|
|
|
|
|
|
|
|
Three months
ended |
|
|
|
March 31, 2013 |
|
|
March 31, 2012 |
|
|
|
|
|
|
|
Bank interest expense |
|
$ |
178,632 |
|
$ |
313,152 |
Loans payable interest expense |
|
|
105,771 |
|
|
173,637 |
Debenture interest expense |
|
|
1,434,524 |
|
|
1,244,608 |
Interest expense |
|
$ |
1,718,927 |
|
$ |
1,731,397 |
Deferred finance cost amortization - convertible
debentures |
|
|
(171,837) |
|
|
142,806 |
Implicit interest rate in excess of coupon rate
-
convertible debentures |
|
|
(63,446) |
|
|
(60,281) |
Change in accrued interest |
|
|
(43,527) |
|
|
(286,439) |
|
|
|
|
|
|
|
Cash interest paid |
|
$ |
1,440,117 |
|
$ |
1,527,483 |
|
|
|
|
|
|
|
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:
Fair value is the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between
market participants at the measurement date. The Corporation
uses various methods in estimating the fair values of assets and
liabilities that are measured at fair value on recurring or
non-recurring basis in the statement of financial position.
The fair value hierarchy reflects the significance of inputs used
in determining the fair values.
Level 1 - fair value is based on unadjusted quoted prices trades in
active markets for identical instruments;
Level 2 - fair value is based on models using significant
market-observable inputs other than quoted prices for the
instruments; and
Level 3 - fair value is based on models using significant inputs
that are not based on observable market data.
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
March 31, 2013 to be $107,150,471 (December 31,
2012 - $87,541,693).
This is a level 1 input which is based on a quoted price in an
active market.
SOURCE Firm Capital Mortgage Investment Corporation