95% of the Corporations’ Mortgages are at Floating Rates Structured to Capture the Benefit of Rising Interest Rates
14 April 2022 - 6:30AM
Firm Capital Mortgage Investment Corporation (the
"
Corporation") (TSX: FC) is issuing this press
release in response to the rising interest rate environment and how
it is impacting returns for the Corporation and, ultimately,
shareholders.
In summary, the Corporation has for years
protected shareholders in the event of rising interest rates by
requiring the vast majority of mortgage investments to be floating
at the greater of (i) Bank Prime Rate (“Prime”)
plus a spread and, (ii) a Fixed Floor Rate (collectively the
“Floating Rate Investment Feature”). Therefore, as
Prime rises, so does the overall interest rate charged to
borrowers.
As at March 31, 2022, Approximately 95% of the
Corporations mortgage investments have the Floating Rate Investment
Feature.
As of December 31, 2021, the weighted average
face interest rate of the Corporation’s mortgage investment
portfolio stood at 7.91%. As of March 31, 2022, the weighted
average face interest rate of the Corporation’s mortgage investment
portfolio stands at 8.05%, for a 14 basis point increase since the
beginning of 2022. This is correlated to the 25 basis
point increase in Prime that occurred in March of 2022 when Prime
went from 2.45% to 2.7%.
With the preservation of Shareholder’s Capital
at the forefront of our investment strategy, any opportunity cost
lost looking for the right investment in an uncertain market has
been offset by the rise in bank prime.
The Floating Rate Investment Feature has been a
long-term operating strategy of the Corporation as a specialist in
bridge financing.
ABOUT THE CORPORATION
Where Mortgage Deals Get
Done®
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 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. The Corporation is a Mortgage Investment Corporation
(MIC) as defined in the Income Tax Act (Canada). Accordingly, the
Corporation is not taxed on income provided that its taxable income
is paid to its shareholders in the form of dividends within 90 days
after December 31 each year. Such dividends are generally treated
by shareholders as interest income, so that each shareholder is in
the same position as if the mortgage investments made by the
Corporation had been made directly by the shareholder. 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 the Corporation, available on
the SEDAR website at www.sedar.com. In addition, supplemental
information is available on the Corporation’s website at
www.firmcapital.com.
FORWARD-LOOKING STATEMENTSThis
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
dividends, 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 most recent 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 MIC 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.
For further
information, please contact: |
|
|
|
Eli Dadouch |
Ryan Lim |
President & Chief Executive Officer |
Chief Financial Officer |
(416) 635-0221 |
(416) 635-0221 |
|
|
For Investor Relations information, please contact: |
|
|
|
Victoria Moayedi |
|
Director, Investor Relations |
|
(416) 635-0221 |
|
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