FIRM CAPITAL MORTGAGE INVESTMENT CORPORATION FIRM CAPITAL
MORTGAGE INVESTMENT CORPORATION
CAPITAL PRESERVATION • DISCIPLINED INVESTING
REPORT TO
SHAREHOLDERS
YEAR ENDED
DECEMBER 31, 2023
FIRM CAPITAL
MORTGAGE INVESTMENT CORPORATION
CAPITAL PRESERVATION • DISCIPLINED INVESTING
MD&A
MANAGEMENT
DISCUSSION
AND ANALYSIS
YEAR ENDED
DECEMBER 31, 2023
NOTICE TO READER
The 2023 MD&A that was originally filed has been re-filed to update the return on total shareholders' equity of 8.51% (new), representing 372 (new) basis points per annum over the average one-year Government of Canada Treasury bill yield of 4.79%, on page 8 herein under the heading "NET INCOME AND COMPREHENSIVE INCOME".
No amendment has otherwise been made to any amount, balance or disclosure in the attached MD&A.
March 22, 2024
MANAGEMENT'S DISCUSSION AND ANALYSIS
OUR BUSINESS
Firm Capital Mortgage Investment Corporation (the "Corporation") is a non-bank lender, investing predominantly in short- term residential and commercial real estate mortgage loans and real estate related debt investments. The Corporation operates as a mortgage investment corporation under the Income Tax Act (Canada). Mortgage investment corporations are able to have no income tax payable provided that they satisfy the requirements in subsection 130.1(6) of the Income Tax Act (Canada). The Corporation's primary investment objective is the preservation of shareholders' equity, while providing shareholders with a stable stream of dividends from the Corporation's investments. The Corporation achieves its investment objectives by pursuing a strategy of investing in loans in select niche real estate markets that are under- serviced by larger financial institutions.
The Corporation's more specific objective is to hold an investment portfolio that:
- is widely diversified across many investments;
- is concentrated in first mortgages;
- reduces exposure as a result of participation in various loan syndicates; and
- is primarily short-term in nature.
Firm Capital Corporation (the "Mortgage Banker") is the Corporation's mortgage banker and acts as the Corporation's loan originator, underwriter, servicer, and syndicator. The Corporation's affairs are administered by FC Treasury Management Inc. (the "Corporation Manager").
The Corporation has in place a Dividend Reinvestment Plan ("DRIP") and a Share Purchase Plan (collectively, with the DRIP, the "Plans") that are available to its shareholders. The Plans allow participants to have their monthly cash dividends reinvested in additional common shares of the Corporation ("Shares") and grant participants the right to purchase additional Shares. Shareholders who wish to enroll or who would like further information about the Plans should contact Investor Relations at (416) 635-0221.
Additional information on the Corporation, its Plans, and its investment portfolio is available on the Corporation's web site at www.firmcapital.com. Additional information about the Corporation, including its Annual Information Form ("AIF"), can be found on the SEDAR website at www.sedar.com.
RECENT DEVELOPMENTS AND OUTLOOK
The Corporation's investment portfolio (the "Investment Portfolio") continued to revolve in 2023 with significant investment repayments and new fundings. During the year ended December 31, 2023, new fundings and discharges of investments were $250 million and $312 million respectively (2022 - $461 million and $443 million). The Corporation increased its allowance for impairment and fair value loss in 2023 by $12.5 million, to a total of $22.7 million as at December 31, 2023, while generating earnings per share of $0.990. At the end of 2023, the Investment Portfolio consisted of 87.5% of conventional first mortgages, and 80% maturing in 2024. In addition, the interest rates in 96% of the Investment Portfolio investments were floating allowing the Corporation to capture the benefit of rising rates throughout 2023. The Corporation continues to participate in new investments on a disciplined base with conservative underwriting on real estate in large urban centers.
In 2024, the Corporation expects to revolve the Investment Portfolio selectively, with an investment policy of holding a hard line on acceptable exposure levels, borrower quality and warranted interest rate pricing. There are no assurances on achievable portfolio size as the primary focus is on security. The Mortgage Banker continues to reject a significant number of potential investments that do not meet our investment criteria and risk tolerance. Active portfolio management will be key during 2024 with expected unpredictable market conditions.
BASIS OF PRESENTATION
The Corporation has adopted International Financial Reporting Standards ("IFRS"), as issued by the International Accounting Standards Board, as its basis of financial reporting. The Corporation's functional and reporting currency is the Canadian dollar.
The following Management's Discussion and Analysis ("MD&A") is dated as of March 20, 2024 and should be read in conjunction with the audited consolidated financial statements of the Corporation and the notes thereto as at, and for the years ended December 31, 2023, and 2022, as well as the Corporation's Management's Discussion and Analysis, including the section on "Risks and Uncertainties", and each of our quarterly reports for 2023 and 2022.
Firm Capital Mortgage Investment Corporation • 2023 • Fourth Quarter | Page 1 |
MANAGEMENT'S DISCUSSION AND ANALYSIS
HIGHLIGHTS
NET INCOME
For the three months ended December 31, 2023, net income increased by 4.8% to $8,335,525 as compared to $7,955,086 for the same period in 2022.
For the year ended December 31, 2023, net income increased by 6.0% to $34,164,416 as compared to $32,234,067 for the year ended December 31, 2022.
EARNINGS PER SHARE
Basic weighted average earnings per share for the three months ended December 31, 2023 was $0.242 (2022 - $0.231). Basic weighted average earnings per share for the year ended December 31, 2023, was $0.991 (2022 -
$0.939).
Diluted weighted average earnings per share for the three months ended December 31, 2023 was $0.241 (2022 - $0.230) Diluted weighted average earnings per share for the year ended December 31, 2023 was $0.984 (2022 -
$0.931).
REVENUES
Revenues for the three months ended December 31, 2023 increased by 5.0% to $18,118,118 as compared to $17,258,942 reported for the same period in 2022. Revenues for the year ended December 31, 2023 increased by 19.6% to $71,904,849 as compared to $60,119,205 for the year ended December 31, 2022. The increase is primarily a result of higher interest income due to a higher weighted average interest rate during the year (2023 weighted average interest rate - 11.15% vs 2022 weighted average interest rate - 9.28%) offset partially by a reduction in overall Investment Portfolio size.
INVESTMENT PORTFOLIO
The Corporation's Investment Portfolio decreased by $63 million to $598,059,570 as at December 31, 2023, in comparison to $661,003,596 as at December 31, 2022 (in each case, gross of impairment allowance, fair value adjustment, and unamortized fees). The allowance for impairment and fair value adjustment as of December 31, 2023 was $22,700,000 (December 31, 2022 allowance for impairment and fair value adjustment - $10,160,000), comprising (i) $10,653,000 (December 31, 2022 - $3,700,00) representing the total amount of management's estimate of the shortfall between the investment balances and the estimated recoverable amount from the security under the specific loans, (ii) $10,380,300 (December 31, 2022 - $4,700,000) representing the total amount of management's estimate of fair value adjustment on an investment stated at fair value through profit or loss ("FVTPL"), and (iii) a collective allowance balance of $1,666,700 (December 31, 2022 - $1,760,000). The unamortized commitment fees as at December 31, 2023 were $943,901 (December 31, 2022 - $1,101,863). The marketable securities as at December 31, 2023 were $39,072 (December 31, 2022 - $48,673).
CAPITAL ACTIVITIES
On December 31, 2023, the Corporation's 5.20% convertible unsecured subordinated debentures due December 31, 2023 (FC.DB.G) matured and were repaid in full. The repayment was completed with a cash payment of the aggregate principal amount of $22,500,000 and all accrued interest to the time of maturity.
Firm Capital Mortgage Investment Corporation • 2023 • Fourth Quarter | Page 2 |
MANAGEMENT'S DISCUSSION AND ANALYSIS
INVESTMENT PORTFOLIO
The Corporation's Investment Portfolio was $574,454,741 as at December 31, 2023 (net of the allowance for impairment of $12,319,700, fair value loss adjustment of $10,380,300, unamortized fees of $943,901 and marketable securities of $39,072) and was $649,790,406 (net of the allowance for impairment of $5,460,000, fair value loss adjustment of $4,700,000, unamortized fees of $1,101,863 and marketable securities of $48,673 as at December 31, 2022). On December 31, 2023, the total Investment Portfolio comprised of 243 investments (252 as at December 31, 2022). The average gross investment size was approximately $2.5 million, with 14 investments individually exceeding $7.5 million.
` | December 31, 2023 | December 31, 2022 | ||||||||
Total Amount | % of | (before | % of | % | ||||||
Mortgage Amount | Number | (before provision) | Portfolio | Number | provision) | Portfolio | Change | |||
$0 - $2,500,000 | 174 | $ | 175,897,086 | 29.4% | 173 | $ | 183,067,027 | 27.7% | (3.9%) | |
$2,500,001 | - $5,000,000 | 39 | 135,258,957 | 22.6% | 44 | 156,317,154 | 23.6% | (13.5%) | ||
$5,000,001 | - $7,500,000 | 16 | 97,433,745 | 16.3% | 22 | 142,381,503 | 21.5% | (31.6%) | ||
$7,500,001 | + | 14 | 189,469,782 | 31.7% | 13 | 179,237,912 | 27.1% | 5.7% | ||
Total Investments | 243 | $ | 598,059,570 | 100% | 252 | $ | 661,003,596 | 100% | (9.5%) | |
Add: Marketable securities | 39,072 | 48,673 | ||||||||
Less: Impairment allowance | (12,319,700) | (5,460,000) | ||||||||
Less: Fair value adjustment | (10,380,300) | (4,700,000) | ||||||||
Less: Unamortized fees | (943,901) | (1,101,863) | ||||||||
Investment Portfolio | $ | 574,454,741 | $ | 649,790,406 | (11.6%) |
Unadvanced committed funds under the existing Investment Portfolio amounted to $155 million as at December 31, 2023 (December 31, 2022 - $146 million).
The allocation of the Investment Portfolio between the five main investment categories (as well as the weighted average interest rate) is as follows:
December 31, 2023 | December 31, 2022 | ||||||||
W.A Interest | Outstanding | % of | W.A Interest | Outstanding | % of | % | |||
Investment Categories | Rate | amount | Portfolio | Rate | amount | Portfolio | Change | ||
Conventional First Mortgages | 10.9% | $ | 523,562,081 | 87.5% | 10.77% | $ | 551,779,067 | 83.5% | (5.1%) |
Related Debt Investments | 10.1% | 18,851,599 | 3.2% | 12.02% | 60,122,951 | 9.1% | (68.6%) | ||
Conventional Non-First Mortgages | 11.8% | 39,550,432 | 6.6% | 11.93% | 33,439,892 | 5.1% | 18.3% | ||
Non-Conventional Mortgages | 14.4% | 9,614,348 | 1.6% | 13.73% | 9,563,451 | 1.4% | 0.5% | ||
Debtor In Possession Loans | 12.0% | 6,481,110 | 1.1% | 11.25% | 6,098,235 | 0.9% | 6.3% | ||
Total Investments | 10.99% | $ | 598,059,570 | 100% | 10.99% | $ | 661,003,596 | 100% | (9.5%) |
Add: Marketable securities | 39,072 | 48,673 | |||||||
Less: Impairment allowance | (12,319,700) | (5,460,000) | |||||||
Less: Fair value adjustment | (10,380,300) | (4,700,000) | |||||||
Less: Unamortized fees | (943,901) | (1,101,863) | |||||||
Investment Portfolio | $ | 574,454,741 | $ | 649,790,406 | (11.6%) |
The related debt investments category is a basket of investments that are all participating in debt investments to a variety of third-party borrowers. Such debt investments are not secured by mortgage charges, and instead have other forms of security or recourse.
A debtor in possession loan ("DIP Loan"), is a loan obtained by an insolvent debtor while that debtor is restructuring its business under the Companies' Creditors Arrangement Act (Canada). A DIP Loan has "super-priority" security on the assets of the debtor company awarded by the court.
The $63 million decrease in the Investment Portfolio (before the allowance for impairment, fair value adjustments and unamortized fees) was due to the significant decrease in the amount of the conventional first mortgages and related debt investments. During 2023, new investment funding was $249.4 million (2022 - $461.8 million), while repayments during the period were $312.3 million (2022 - $443.0 million), resulting in a decrease in the Investment Portfolio size.
Conventional first mortgages decreased by 5.1% and represented 87.5% of the Investment Portfolio as at December 31, 2023 (83.5% as at December 31, 2022). Conventional non-first mortgages increased by 18.3% and represented 6.6% of the Investment Portfolio at December 31, 2023 (5.1% as at December 31, 2022). Related debt investments decreased by 68.6% and represented 3.2% of the Investment Portfolio as at December 31, 2023 (9.1% as at December 31, 2022). DIP Loan increased by 6.3% and represented 1.1% of the Investment Portfolio as at December 31, 2023 (0.9% as at
Firm Capital Mortgage Investment Corporation • 2023 • Fourth Quarter | Page 3 |
MANAGEMENT'S DISCUSSION AND ANALYSIS
December 31, 2022). Non-conventional mortgages increased by 0.5% and represented 1.6% of the Investment Portfolio as at December 31, 2023 (1.4% as at December 31, 2022).
The weighted average face interest rate on the Corporation's Investment Portfolio was 10.99% per annum as at December 31, 2023, which is in line with the average rate reported at December 31, 2022.
The allowance for impairment and fair value loss adjustment was $22,700,000 as at December 31, 2023 (December 31, 2022, allowance for impairment and fair value loss adjustment - $10,160,000), comprised of (i) $10,653,000 (December 31, 2022 - $3,700,000) representing the total amount of management's estimate of the shortfall between the investment balances and the estimated recoverable amount from the security under the specific loans, (ii) $10,830,300 (December 31, 2022 - $4,700,000) representing the total amount of management's estimate of fair value adjustment on an investment and (iii) a collective allowance balance of $1,666,700 (December 31, 2022 - $1,760,000).
The allocation of the Investment Portfolio between its 10 different loan categories is as follows:
December 31, 2023 | December 31, 2022 | ||||||||
Total Amount | % of | Total Amount | % of | % | |||||
Property Type | (before provision) | Portfolio | Number | (before provision) | Portfolio | Change | |||
Land & Housing Sites | 36 | $ | 151,442,650 | 25.3% | 45 | $ | 205,583,708 | 31.2% | (26.3%) |
Single Family Dwelling and Condo unit(s) | 82 | 151,209,871 | 25.3% | 79 | 138,885,010 | 20.8% | 8.9% | ||
Construction Mortgages | 72 | 142,640,836 | 23.8% | 65 | 116,639,876 | 17.7% | 22.3% | ||
Retail | 10 | 51,382,177 | 8.6% | 13 | 50,317,104 | 7.6% | 2.1% | ||
Multi Family Residential Mortgages | 9 | 38,034,552 | 6.4% | 6 | 23,480,240 | 3.6% | 62.0% | ||
Related Debt Investments | 8 | 18,851,599 | 3.2% | 14 | 60,122,951 | 9.1% | (68.6%) | ||
Land Servicing & Serviced Lots | 8 | 15,695,990 | 2.6% | 7 | 17,319,402 | 2.6% | (9.4%) | ||
Industrial | 5 | 11,656,431 | 1.9% | 7 | 18,720,431 | 2.8% | (37.7%) | ||
Mixed Use & Other | 6 | 12,347,500 | 2.1% | 7 | 23,110,993 | 3.5% | (46.6%) | ||
Office & Office Condos (owner occupied) & Other | 7 | 4,797,964 | 0.8% | 9 | 6,823,881 | 1.3% | (29.7%) | ||
243 | $ | 598,059,570 | 100% | 252 | $ | 661,003,596 | 100% | (9.5%) |
The Corporation continues to focus its lending into core markets that can be monitored closely during evolving economic conditions, with a strong focus in Ontario. The Mortgage Banker does not service or underwrite mortgages on hotels, hospitality properties or long-term care facilities and, as such, the Corporation does not have any investment exposure to these asset types.
As at December 31, 2023, the value of the Investment Portfolio that is secured by properties outside of Ontario was 13.2%, compared to 15.5% as at December 31, 2022.
December 31, 2023 | December 31, 2022 | |||||||||||
Total Amount | % of | Total Amount | % of | % | ||||||||
Geographic Segment | Number | (before provision) | Portfolio | Number | (before provision) | Portfolio | Change | |||||
Greater Toronto Area | 155 | $ | 327,580,878 | 56.6% | 150 | $ | 314,746,642 | 52.4% | 4.1% | |||
Non-GTA Ontario | 57 | 175,206,939 | 30.2% | 61 | 192,808,536 | 33.1% | (9.1%) | |||||
Quebec | 13 | 41,309,698 | 7.1% | 14 | 50,136,561 | 8.3% | (17.6%) | |||||
Western Canada | 7 | 17,253,389 | 3.0% | 8 | 21,644,358 | 3.6% | (20.3%) | |||||
United States | 3 | 17,857,066 | 3.1% | 5 | 21,544,548 | 3.6% | (17.1%) | |||||
Mortgage Investment Portfolio | 235 | $ | 579,207,970 | 100% | 238 | $ | 600,880,645 | 100% | 3.6% | |||
Related Debt Investments | 8 | 18,851,600 | 14 | 60,122,951 | (68.6%) | |||||||
243 | $ | 598,059,570 | 252 | $ | 661,003,596 | (9.5%) |
*The Related Debt Investments includes $1,890,000 investments at amortized cost and $16,961,599 investments at FVTPL and then adjusted for a fair value decrease of $10,380,300.
Firm Capital Mortgage Investment Corporation • 2023 • Fourth Quarter | Page 4 |
MANAGEMENT'S DISCUSSION AND ANALYSIS
The allocation of the Investment Portfolio between the underlying security types is as follows:
December 31, 2023 | December 31, 2022 | |||||||||||
Total Amount | % of | Total Amount | % of | % | ||||||||
Underlying Security Type | Number | (before provision) | Portfolio | Number | (before provision) | Portfolio | Change | |||||
Residential | 204 | $ | 472,680,304 | 78.9% | 192 | $ | 443,616,254 | 67.0% | 6.6% | |||
Commercial | 31 | 106,527,666 | 17.8% | 46 | 157,264,391 | 23.8% | (32.3%) | |||||
Related Debt Investments | 8 | 18,851,600 | 3.3% | 14 | 60,122,951 | 9.2% | (68.6%) | |||||
243 | $ | 598,059,570 | 100% | 252 | $ | 661,003,596 | 100% | (9.5%) |
The residential category includes mortgages on single family dwellings, residential condominiums, residential land, residential construction, and multifamily residential.
The commercial category includes mortgages on retail, industrial, retail or commercial land, offices, and DIP loans.
The Corporation's strategy is to mitigate loan loss risk by focusing on those areas of mortgage lending that have historically withstood market corrections and retained their underlying real estate asset value while limiting its exposure to those real estate asset classes that do not.
The weighted average loan to value ratio on conventional mortgages (being the combined conventional first and conventional non-first mortgages) is under 60% based on the appraisals obtained at the time of funding each mortgage loan.
Included in conventional first mortgages are two United States ("US") dollar denominated investments (at amortized cost) of $14,257,066 (US$10,779,575) (December 31, 2022 - four US dollar denominated investments of $17,044,548 (US$12,584,575)).
Included in related debt investments, classified at FVTPL, are two US dollar denominated investments totaling $10,421,233 (US $7,879,354), (December 31, 2022 - two US dollar denominated investments totaling $10,671,797 (US$7,879,354)). These investments are a participation by the Corporation in limited partnerships that have provided equity to real estate entities in the US.
For the three months ended December 31, 2023, income recorded on the US investments (at amortized cost and FVTPL) was $439,872 (US $326,137), (2022 - $282,039 (US $210,083)). For the year ended December 31, 2023, income recorded on the US investments (at amortized cost and FVTPL) was $1,753,140 (US $1,303,097) (2022 - $1,286,629 (US $987,271)). These amounts are included in interest and fees income.
Related debt investments (classified as FVTPL) as at December 31, 2023 also included five Canadian investments (December 31, 2022 - seven Canadian investments) totaling $6,540,366 (December 31, 2022 - $9,620,203).
As at December 31, 2023, the Investment Portfolio included six investments totaling $53,709,591 (December 31, 2022 - three investments totaling $24,789,855) for which a specific allowance of $10,653,000 (December 31, 2022 - $3,700,000) was recorded by the Corporation.
As at December 31, 2023, the Investment Portfolio included two investments totaling $10,421,234 (December 31, 2022 - one investment $6,902,502) for which a fair value adjustment of $10,380,300 (December 31, 2022 - $4,700,000) was recorded by the Corporation.
As at December 31, 2023, excluding investments for which there is an allowance or a fair value adjustment recorded against them by the Corporation, the Investment Portfolio had three investments totaling $5,203,609 (December 31, 2022
- one investment with a balance totaling $1,890,000) with contractual interest arrears greater than 60 days past due amounting to $617,675 (December 31, 2022 - $67,805).
The Investment Portfolio as at December 31, 2023, included fifteen investments totaling $56,461,478 (December 31, 2022 - four investments totaling $15,250,230) with maturity dates that are past due and for which no extensions or renewals were in place. One of these investments was paid out after December 31, 2023 for an amount of $1,863,750 (December 31, 2022 - one investment was paid out in the amount of $2,125,000). Two of these investments totaling $10,572,193 (December 31, 2022 - one investment totaling $7,363,355) have allowances recorded against them included in the Corporation's allowance for impairment. The remaining twelve investments with maturity dates that are past due and for which no extensions or renewals were in place amount to $44,025,535 (December 31, 2022 - two investments totaling $5,761,875) and do not require a specific allowance.
Firm Capital Mortgage Investment Corporation • 2023 • Fourth Quarter | Page 5 |
MANAGEMENT'S DISCUSSION AND ANALYSIS
As at December 31, 2023, the Investment Portfolio continued to be heavily concentrated in short-term investments, with approximately 80% maturing on or before December 31, 2024. The short-term nature of the portfolio provides the Corporation with the ability to continually revolve the portfolio and adapt to changes in the real estate market. Renewals are offered to borrowers when deemed appropriate. Of the 243 investments, 90% were underwritten (as part of a renewal process or for new fundings) between 2022 and 2023, while only 10% were underwritten in 2021 or prior to that.
The contractual maturity dates of the Investment Portfolio are as follows:
2024
2025
2026
December 31, 2023
Total Amount | |||
No. | (before allowance and Fair | % of Portfolio | |
market adjustment) | |||
199 | $ | 478,320,206 | 80.0% |
40 | 114,372,710 | 19.1% | |
4 | 5,366,654 | 0.9% | |
243 | $ | 598,059,570 | 100% |
A significant number of the Corporation's investments are shared with other syndicate partners, including several members of the Board of Directors and senior management of the Mortgage Banker and/or officers and directors of the Corporation. The Corporation ranks equally with other members of the syndicate as to receipt of principal, interest, and fees. As at December 31, 2023, 196 of the Corporation's 243 investments (investment amount of $550,640,011) are shared with other participants, and 28 of which (with a total investment amount of $111,458,033) the Corporation is a participant for less than 50% of the loan amount.
Certain members of our Board of Directors and senior management and their related entities co-invested approximately $40 million with the Corporation alongside its Investment Portfolio as at December 31, 2023.
The Mortgage Banker services the entire investment in which the Corporation is a participant, on behalf of all participants and except for the case of an investment with a first priority syndicate participant (i.e., loans payable), the Corporation ranks pari-passu with other members of the syndicate as to the receipt of principal, interest, and fees. As at December 31, 2023 and 2022, there were no mortgages with first priority participants.
As at December 31, 2023, the Corporation had unamortized commitment fees of $943,901 (December 31, 2022 - $1,101,863) which are netted against the Investment Portfolio. The Corporation's policy is to recognize commitment fees using the effective interest method over the contractual terms of the mortgages.
RESULTS OF OPERATIONS
REVENUES
For the three months ended December 31, 2023, revenues increased by 5% to $18,118,118 compared to $17,258,942 for the three months ended December 31, 2022. For the year ended December 31, 2023, revenues increased by 19.6% to $71,904,849 compared to $60,119,205 for the year ended December 31, 2022.
Revenues for the three months and year ended December 31, 2023 and 2022 are broken down as follows:
Three Months Ended | December 31, 2023 | December 31, 2022 | % Change | ||||
Interest | $ | 16,835,743 | 93.0% | $ | 16,195,195 | 93.8% | 4.0% |
Commitment & Renewal Fees | 540,017 | 3.0% | 573,861 | 3.3% | (5.9%) | ||
Other Income | 742,358 | 4.0% | 489,886 | 2.8% | 51.5% | ||
$ | 18,118,118 | 100% | $ | 17,258,942 | 100.0% | 5.0% | |
Year Ended | December 31, 2023 | December 31, 2022 | % Change | ||||
Interest | $ | 68,699,962 | 95.6% | $ | 56,933,513 | 94.7% | 20.7% |
Commitment & Renewal Fees | 2,241,949 | 3.1% | 2,707,674 | 4.5% | (17.2%) | ||
Other Income | 962,938 | 1.3% | 478,018 | 0.8% | 101.4% | ||
$ | 71,904,849 | 100% | $ | 60,119,205 | 100.0% | 19.6% |
For the three months ended December 31, 2023, interest income was $16,835,743, an increase of 4.0% over the $16,195,195 reported for the comparable period in 2022. For the year ended December 31, 2023, interest income was
Firm Capital Mortgage Investment Corporation • 2023 • Fourth Quarter | Page 6 |
MANAGEMENT'S DISCUSSION AND ANALYSIS
$68,699,962, an increase of 20.7% over the $56,933,513 as reported for 2022. The increase is mainly a result of an increase in the weighted average interest rate of the Investment Portfolio over the comparable period in 2022.
For the three months ended December 31, 2023, commitment and renewal fees were $540,017, a decrease of 5.9% from $ 573,861 reported for the comparable period in 2022. For the year ended December 31, 2023, fee income relating to commitment and renewal fees was $ 2,241,949, a decrease of 17.2% over the $2,707,674 reported for 2022.
For the three months and year ended December 31, 2023, other income was $742,358 and $962,938 (2022 - $ 489,018 and $478,018 respectively). The increase in other income in 2023 from 2022 is related to completion and full payout of two investments resulting in the distribution of special profits.
CORPORATION MANAGER INTEREST ALLOCATION
During the three months ending December 31, 2023, the Corporation Manager received $1,157,669 (2022 - $1,151,540), through a joint venture interest arrangement with the Corporation. For the year ended December 31, 2023, $4,848,896 (2022 - $4,690,384) was received by the Corporation Manager under this arrangement. The increase, notwithstanding the smaller average portfolio size, resulted mainly from payment on previously non-performing loans and were paid upon realization of the investments in 2023.
INTEREST EXPENSE
For the three months ended December 31, 2023, interest expense increased by 4.8% to $4,031,968 as compared to $3,845,571 for the three months ended December 31, 2022. For the year ended December 31, 2023, interest expense increased by 5.3% to $15,710,302 as compared to $14,924,812 for the year ended December 31, 2022. The increase in interest expenses is mainly the result of rising interest rates under the Corporation's Bank facility, and additional fees associated with the new credit syndication.
Interest expense is broken down as follows:
Three Months Ended | December 31, 2023 | December 31, 2022 | % Change | ||||
Bank Interest Expense | $ | 887,203 | 22.0% | $ | 557,540 | 14.5% | 59.1% |
Debenture Interest Expense | 3,144,765 | 78.0% | 3,288,031 | 85.5% | (4.4%) | ||
$ | 4,031,968 | 100% | $ | 3,845,571 | 100.0% | 4.8% | |
Year Ended | December 31, 2023 | December 31, 2022 | % Change | ||||
Bank Interest Expense | $ | 3,588,884 | 22.8% | $ | 1,807,363 | 12.1% | 98.6% |
Debenture Interest Expense | 12,121,418 | 77.2% | 13,117,449 | 87.9% | (7.6%) | ||
$ | 15,710,302 | 100% | $ | 14,924,812 | 100.0% | 5.3% |
GENERAL AND ADMINISTRATIVE (G&A) EXPENSES
For the three months ended December 31, 2023, G&A expenses were $663,571 (2022 - $467,455). For the year ended December 31, 2023, G&A expenses increased by $271,714 to $1,870,550 compared to $1,598,837 for the year ended December 31, 2022. The increase in G&A expenses is mainly the result of additional accounting and legal fees along with higher listing fees.
Firm Capital Mortgage Investment Corporation • 2023 • Fourth Quarter | Page 7 |
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Firm Capital Mortgage Investment Corporation published this content on 05 April 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 05 April 2024 22:05:06 UTC.
