Firm Capital Mortgage Investment Corporation Announces Results

    




 TSX Symbol FC 

 TORONTO, May 9, 2012 /CNW/ - Firm Capital Mortgage Investment  Corporation (the "Corporation") (TSX FC), today released its financial  statements for the first quarter ended March 31, 2012. 

 PROFIT & RETURN ON EQUITY Profit for the quarter ended March 31, 2012 totaled $3,937,912 compared  to $3,546,919 for the quarter ended March 31, 2011.  Profit for the  quarter ended March 31, 2011 exceeded dividends by $219,377 or $0.013  per share.  The first quarter Profit represents an annualized return on  average Shareholders' equity of 10.03% per annum.  This return on  Shareholders' equity equates to 901 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: Monthly dividends for the first quarter totaled $0.234 per share ($0.078  per share per month). 

 INVESTMENT PORTFOLIO HIGHLIGHTS: Details on the Corporation's investment portfolio as at March 31, 2012  are as follows: 




        --  Total gross investment portfolio equals $299,175,460
        --  Conventional first mortgages, being those mortgages with loan
            to values less than 75%, comprise 70.8% of our total portfolio,
            and total conventional mortgages with loan to values under 75%
            comprise 84.3% of our total portfolio.
        --  Non-conventional mortgages total 8.1% of the portfolio.
        --  Related investments total 7.6% of the portfolio.
        --  Approximately 54% of the portfolio matures within 12 months.
            This results in a continuously revolving portfolio, allowing
            management to assess market conditions.
        --  The average face interest rate on the portfolio is 8.96% per
            annum.
        --  Regionally, the portfolio is diversified approximately as
            follows: Ontario 76.0%, Alberta 11.6%, British Columbia 7.4%,
            with the balance (5.0%) being in other provinces.
        --  Investment portfolio breakdown by loan size is as follows:




  





                         Investment Portfolio Breakdown

               Amount     Number of Investments   Total Amount

            $0-$2,500,000                    87  $  83,021,841

    $2,500,001-$5,000,000                    23     81,072,031

    $5,000,001-$7,500,000                    13     78,011,589

             $7,500,001 +                     6     57,070,000

                    Total                   129   $299,175,461






  

 IMPAIRMENT PROVISION UPDATE: Management has always taken a proactive approach to allowance provision  reserves. This is a prudent approach to protecting our Shareholders'  equity. Impairment provisions remained at $2,980,000 representing 1.00%  of the gross loan portfolio. 

 UNRECOGNIZED INCOME COLLECTED: As at March 31, 2012, the Corporation has banked non-refundable fee  income of $466,325, 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,  Unitholder 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  Months Ended March  31, 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                                               

    Condensed Interim Balance Sheets
    (unaudited)                                                           

                                                                          

    (in Canadian dollars)                                                 

                                                                          

                                          Mar. 31, 2012      Dec. 31, 2011

                                                                          

                                                                          

    Assets                                                                

                                                                          

    Amounts receivable and prepaid
    expenses                            $     3,617,688    $     3,478,338

    Investment portfolio (note 4)           296,195,461        271,048,591

                                                                          

    Total assets                        $   299,813,149    $   274,526,929

                                                                          

                                                                          

                                                                          

    Liabilities and Equity                                                

                                                                          

    Bank indebtedness                   $    24,086,696    $    37,763,021

    Accounts payable and accrued
    liabilities                               1,757,191          1,354,639

    Unearned income                             466,325            556,991

    Shareholder dividend payable              1,326,036          2,008,118

    Loans payable                            14,714,605         15,649,081

    Convertible debentures (note 5)          85,710,810         69,134,395

    Total liabilities                       128,061,663        126,466,245

                                                                          

    Shareholders' Equity                    171,853,935        148,382,510

    Deficit                                   (102,449)          (321,826)

    Total equity                            171,751,486        148,060,684

                                                                          

    Commitments (note 4)                                                  

    Contingent liabilities (note 11)                                      

                                                                          

    Total liabilities and equity        $   299,813,149    $   274,526,929

                                                                          

                                                                          

    See accompanying notes to unaudited
    interim financial statements                                          

                                                                          






  





    FIRM CAPITAL MORTGAGE INVESTMENT
    CORPORATION                                                            

    Condensed Interim Statements of
    Comprehensive Income (unaudited)                                       

                                                                           

    (in Canadian dollars)                                                  

                                                                           

                                                   Three Months Ended      

                                          March 31, 2012   March 31, 2011  

                                                                           

                                                                           

    Interest and fees earned                  $6,387,310       $5,166,007  

                                               6,387,310        5,166,007  

                                                                           

    Corporation manager interest
    allocation (note 9)                          522,732          379,911  

    Interest expense (note 10)                 1,731,397        1,044,315  

    General and administrative expenses          195,269          194,862  

    Impairment loss on investment
    portfolio (note 4)                                 -                -  

                                               2,449,398        1,619,088  

                                                                           

                                                                           

    Total comprehensive income and
    profit for the period                     $3,937,912       $3,546,919  

                                                                           

    Profit per share (note 7)                                              

      Basic                                       $0.258           $0.246  

      Diluted                                     $0.232           $0.244  

                                                                           

                                                                           

                                                                           

    See accompanying notes to unaudited
    interim financial statements                                           

                                                                           






  





    FIRM CAPITAL MORTGAGE INVESTMENT
    CORPORATION                                                            

    Condensed Interim Statements of
    Changes in Equity (unaudited)                                          

                                                                           

    (in Canadian dollars)                                                  

                                                                           

                                                     Three Months Ended

                                          March 31, 2012     March 31, 2011

                                                                           

    Shareholders' Equity                                                   

                                                                           

    Shares (note 6):                                                       

                                                                           

    Balance, beginning of period        $    147,200,878   $    137,343,502

                                                                           

    Proceeds from issuance of shares          21,167,971            204,220

                                                                           

    Offering Costs                             (829,058)                  -

                                                                           

    Conversion of debentures to shares         2,498,000          1,797,000

                                                                           

    Balance, end of period              $    170,037,791   $    139,344,722

                                                                           

                                                                           

    Equity component of convertible
    debentures (note 6):                                                   

                                                                           

    Balance, beginning of period       $       1,181,632   $        774,000

                                                                           

    Conversion of debentures to shares          (55,488)                  -

                                                                           

    Equity component of debentures
    issued during the period                     690,000                  -

                                                                           

    Balance, end of period              $      1,816,144   $        774,000

                                                                           

    TotalShareholders' equity           $    171,853,935   $    140,118,722

                                                                           

    Deficit                                                                

                                                                           

    Deficit, beginning of period        $      (321,826)   $      (321,826)

                                                                           

    Dividends to shareholders                (3,718,535)        (3,381,635)

                                                                           

    Comprehensive income and profit
    for the period                             3,937,912          3,546,919

                                                                           

    Deficit, end of period              $      (102,449)   $      (156,542)

                                                                           

    Total Equity                        $    171,751,486   $    139,962,180

                                                                           

    Shares issued and outstanding
    (note 6)                                  17,000,465         14,547,060

                                                                           

                                                                           

    See accompanying notes to
    unaudited interim financial
    statements                                                             

                                                                           






  





    FIRM CAPITAL MORTGAGE INVESTMENTCORPORATION    
                                                                           

    Condensed Interim Statements of Cash Flow
    (unaudited)                                                            

                                                                           

    (in Canadian dollars)                                                  

                                                                           

                                             Three Months Ended            

                                  March 31, 2012     March 31, 2011        

                                                                           

    Cash provided by (used
    in):                                                                   

                                                                           

    Operating activities:                                                  

      Total comprehensive
    income and profit for the
    period                      $      3,937,912   $      3,546,919        

      Adjustments for:                                                     

        Implicit interest rate
    in excess of coupon rate -
    convertible debentures                64,671             23,516        

        Deferred finance cost
    amortization - convertible
    debentures                           142,806             95,603        

      Net changes in non-cash
    items:                                                                 

        Increase in amounts
    receivable and prepaid             (139,350)          (649,800)
    expenses                                                               

        Increase in accounts
    payable and accrued
    liabilities                          402,552            338,252        

        Increase/(decrease) in
    unearned income                     (90,666)              2,617        

        Decrease in dividend
    payable                            (682,082)          (993,181)        

    Net cash flow from
    operating activities               3,635,843          2,363,926        

                                                                           

    Financing activities:                                                  

      Proceeds from issuance
    of shares                         21,167,971            204,326        

      Proceeds from
    convertible debenture
    issued                            20,485,000                  -        

      Debenture offering
    costs                              (983,550)                  -        

      Offering Costs (equity)          (829,058)                  -        

      Funding/repayment of
    loans payable (net)                (934,476)          (400,895)        

      Dividends to
    shareholders paid during
    the period                       (3,718,535)        (3,381,635)        

    Net cash flow from
    financing activities              35,187,352        (3,578,204)        

                                                                           

    Investing activities:                                                  

      Funding of investments        (47,101,102)       (39,548,508)        

      Discharge of
    investments                       21,954,233         26,169,084        

    Net cash flow used in
    investing activities            (25,146,869)       (13,379,424)        

                                                                           

                                                                           

    Bank indebtedness,
    beginning of period             (37,763,021)        (5,005,825)        

    Net (increase)/decrease
    in bank indebtedness
    for the period                    13,676,325       (14,593,702)        

    Bank indebtedness, end
    of period                   $   (24,086,696)   $   (19,599,527)        

                                                                           

    Cash flows from
    operating activities
    include:                                                               

      Interest received         $      5,296,730   $      4,126,742        

      Interest paid             $      1,527,483   $        255,055        

                                                                           

                                                                           

    See accompanying notes
    to unaudited interim
    financial statements                                                   

                                                                           






  

 FIRM CAPITAL MORTGAGE INVESTMENT CORPORATION 

 Notes to Condensed Interim Financial Statements 

 Three months ended March 31, 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. 

 1. Organization of 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 unitholders' 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. 

 The Corporation's mortgage banker is Firm Capital Corporation and the  Corporation's manager is FC Treasury Management Inc. 

 2. Basis of presentation: 

 The 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  condensed consolidated 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 consolidated 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 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  consolidated interim financial statements are the  same as those  applied by the Corporation's in its financial statements as at and for  the year ended December 31, 2011 and accordingly should be read in  conjunction. 

 4. Investment portfolio: 

 The following is a breakdown of the investment portfolio as at March 31,  2012 and December 31, 2011: 

  





                                                                           

                                Mar. 31, 2012             Dec. 31, 2011    

                                                                           

    Conventional first  $ 211,845,200    70.81%   $ 188,083,658    68.64%  
    mortgages

    Conventional           40,370,567    13.49%      41,927,607    15.30%  
    non-first mortgages

    Related investments    22,800,958     7.62%      19,958,571     7.28%  

    Non-conventional       24,158,736     8.08%      24,058,755     8.78%  
    mortgages  

    Total investments   $ 299,175,461   100.00%   $ 274,028,591   100.00%  
    (at cost)

                                                                           

    Impairment            (2,980,000)               (2,980,000)            
    provision

    Investment          $ 296,195,461             $ 271,048,591          
    portfolio






  

 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  as discussed in note  3(a).  The impairment loss in the amount of $2,980,000 as at March 31,  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 8.96% per annum (December 31, 2011 - 9.06% per  annum) and mature between 2012 and 2015. 

 The un-advanced funds under the  existing investment portfolio (which  are commitments of the Corporation) amounted to $46,273,533 as at March  31, 2012 (December 31, 2011 - $30,845,331). 

 Principal repayments based on contractual maturity dates are as follows: 

  





                                                                          

                                                                          

    2012                                                    $116,297,573  

    2013                                                     120,991,910  

    2014                                                      53,985,181  

    2015                                                       7,900,798  

                                                            $299,175,461

    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

                                           Mar. 31, 2012      Dec. 31, 2011

                                        Total Debentures   Total Debentures

                                                                           

    Principal balance,                       $69,134,395  
    beginning of period                                         $53,628,803

    Issued                                    18,811,450         23,822,547

    Conversions                              (2,498,000)        (9,093,000)

    Adjustment to fair                            55,488  
    value of conversion
    option                                                          202,368

    Implicit interest                             64,671  
    rate in excess of
    coupon rate                                                      91,487

    Deferred finance                             142,806  
    cost amortization                                               482,190

                                                                           

    Principal balance,                       $85,710,810        $69,134,395
    end of period                      






  

 The breakdown of the Total Debentures for the quarter ended March 31,  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         15,225,091      30,021,130      23,888,174               -      69,134,395
    balance,                                                                      
    beginning of
    period         $               $               $                               $

                                                                                    
    Issued                     -               -               -   $  18,811,450      18,811,450

                                                                                    
    Conversions      (2,498,000)               -               -               -     (2,498,000)


    Adjustment            55,488               -               -               -          55,488
    to fair                                                                         
    value of
    conversion


    Implicit
    interest              15,072           7,126          40,279           2,195          64,671
    rate in
    excess of
    coupon rate


    Deferred                                                                        
    finance cost          42,630          52,715          43,246           4,215         142,806
    amortization


    Principal         12,840,281      30,080,971      23,971,698      18,817,860      85,710,810
    balance, end
    of period      $               $               $               $               $

                                                                                      






  

 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% convertible debentures were  converted by  the debenture holders to 45,617 shares of the Corporation.  In 2010,   $20,000 of the 6% convertible debentures were  converted by the  debenture holders to 1,702  shares of the Corporation.  In 2011,  $9,093,000 of the 6% convertible debentures were  converted by the  debenture holders to 773,681 shares of the Corporation.  In 2012,  $2,498,000 of the 6% convertible debentures were  converted by the  debenture holders to 212,590 share  of 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 March 31, 2012, debentures payables bear interest at the weighted  average effective rate of 5.57% 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 $90,519,000  as at March 31, 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 March 31, 2012: 





     

                                              # of shares            $

    Balance, beginning of period                15,213,018    147,200,878

    New shares from conversion of debentures       212,590      2,498,000

    New shares from public offering              1,541,000     20,726,450

    New shares issued during the period under       33,857        441,521
    Dividend Reinvestment Plan

    Offering Costs                                              (829,058)

    Balance, end of period                     17,000,465   170,037,791  

                                                             

    The following shares were issued and outstanding as at December 31,
    2011:

                                              # of shares            $

    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       61,824        764,376
    Dividend

    Balance, end of year                         15,213,018   147,200,878






  

 In the first quarter of 2012, the Corporation completed a public  offering of 1,340,000  shares at $13.45 per share. 

 (b) Incentive option plan: 

 As at March 31, 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 tables reconcile the numerators and denominators of the  basic and diluted profit per share for the quarter ended March 31, 2012  and March 31, 2011. 

  





    Basic profit per share calculation:

                                      Three months ended Three months ended
                                          March 31, 2012     March 31, 2011

    Numerator for basic profit per                                         
    share:

      Profit                                  $3,937,912         $3,546,919

    Denominator for basic profit per                                       
    share:

      Weighted average shares                 15,280,894         14,406,864

    Basic profit per share                        $0.258             $0.246

                                       

    Diluted profit per share                                               
    calculation:

                                      Three months ended Three months ended
                                          March 31, 2012     March 31, 2011

    Numerator for diluted profit per                                       
    share:

      Profit:                                 $3,937,912         $3,546,919

      Interest on convertible                  1,244,608            928,477
      debentures

    Net profit for diluted profit per         $5,182,520         $4,475,396
    share

    Denominator for diluted profit                                         
    per share:

    Weighted average shares                   15,280,894         14,406,864

    Net shares that would be issued:                                       

      Assuming debentures are                  7,100,194          3,904,951
      converted  

    Diluted weighted average shares           22,381,088         18,311,815

    Diluted profit per share:                     $0.232             $0.244






  

 8. Dividends: 

 The Corporation intends to make dividend payments to the shareholders on  a monthly basis on or about the 15(th  )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, 2012,  the Corporation record dividends  of $3,718,535 (2011  - $3,381,635) to its shareholders. Dividends were  $0.234 per share (2011 - $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 Manager (a company controlled by some of the directors)  receives an allocation of interest, referred to as Corporation Manager  spread interest, calculated as 0.75% per annum of the Corporation's  daily outstanding performing investment balances. For the quarter ended  March 31, 2012, this  amount was $522,732 (2011 - $379,911). Included  in accounts payable and accrued liabilities at March 31, 2012 are  amounts payable to the Corporation Manager of $182,988 (December 31,  2011 - $204,988). 

 The total  directors' fee paid  for the quarter was $45,750 (2011 -  $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, 2012 (2011 - $50,000). 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 for  the quarter  ended March 31, 2012 was $342,498 (2011 - $169,534) and applicable  special profit income for the quarter ended March 31, 2012 was $55,928  (2011 - $30,518). 

 The Corporation 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 $15,560,000 (December 31, 2011 - $15,560,000) were  issued to  borrowers controlled by certain directors of the  Corporation.  Each investment is dealt with in accordance with the  Corporation's existing investment and operating policies and is  personally guaranteed by the related directors. 

 10. Interest expense: 





     

                                                  Three months ended  

                                         March 31, 2012   March 31, 2011  

    Bank interest expense                        $313,152          $75,927

    Loans payable interest expense                173,637           39,911

    Debenture interest expense                  1,244,608          928,477

    Interest expense                           $1,731,397       $1,044,315

    Deferred finance cost amortization -          142,806         (95,603)
    convertible debentures

    Implicit interest rate in excess of         (60,281)          (23,517)
    coupon rate - convertible debentures

    Change in accrued interest                 (286,439)         (789,260)

    Cash interest paid                        $1,527,483          $135,936






  

 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 financial statements. 

 12. Fair value of financial instruments: 

 The fair value 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 approximate its carrying value as  the majority of the loans are repayable in full at any time without  penalty, and have floating interest rates. 

 The fair value 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 the convertible debentures, including their  conversion option, has been determined based on the closing price of  the debentures of the Corporation on the TSX for the respective date.    The fair value  has been estimated at March 31, 2012 to be $92,562,984  (December 31, 2011 - $73,722,648).  This is a level 1 input which is  based on a quoted price in an active market. 

Firm Capital Mortgage Investment Corporation


CONTACT:  Firm Capital Mortgage Investment CorporationEli DadouchPresident & Chief Executive Officer(416) 635-0221 


    

Copyright