Firm Capital Mortgage Investment Corporation Firm Capital Mortgage Investment Corporation is a non-bank lender providing residential and commercial real estate financing. Investor Presentation November 2019 DISCIPLINED INVESTING ● CAPITAL PRESERVATION
CONTENTS PAGE INTRODUCTION 3 FIRM CAPITAL ADVANTAGE 4 INVESTMENT HIGHLIGHTS 5 ALIGNED MANAGEMENT INTERESTS 6 LENDING APPROACH 7 CAPITAL STACK 8 OPERATING STANDARDS 9 2019 Q3 FINANCIAL HIGHLIGHTS 10 2019 Q3 RESULTS OF OPERATIONS 11 ANNUALIZED RETURN ON SHAREHOLDERS’ EQUITY 12 STABLE CASH DIVIDENDS 13 INCREASING MORTGAGE PORTFOLIO 14 DEAL FLOW 15 ACCESSING THE CAPITAL MARKETS 16 AVERAGE SHARE PRICE & TRADING VOLUME 17 AN ATTRACTIVE INVESTMENT 18 2019 OUTLOOK 19 BOARD OF DIRECTORS 20 CONTACT INFORMATION 21 DISCLAIMER 22 2 DISCIPLINED INVESTING • CAPITAL PRESERVATION
INTRODUCTION Firm Capital with approximately $3.5 Billion of assets under management operates as a boutique real estate and financial services equity investment company deploying capital opportunistically between debt and equity in the real estate private and public markets across Canada and parts of the US. Since inception in 1988, Firm Capital has established exceptional track record demonstrated by past performance and prides itself risk management abilities to protect and preserve capital, while acting as disciplined investors. PROFICIENT SERVICES PROVIDED BY FIRM CAPITAL Mortgage Lender Principle Investor Capital Partner Activist and Innovative Investor Property and Asset Manager 3 DISCIPLINED INVESTING • CAPITAL PRESERVATION
FIRM CAPITAL ADVANTAGE • Experienced • Disciplined • Long term • Strong • Public entities Team investing track record alignment provide managing focused on creating value interest transparency, debt and real capital with attractive through direct safety & estate preservation yields for investment in liquidity as throughout a & consistent investors assets by well as are real estate dividends / management governed by cycle (30+ distributions team and rigid year track board investment & record with members operating combined of policies over 100 years industry experience) 4 DISCIPLINED INVESTING • CAPITAL PRESERVATION
INVESTMENT HIGHLIGHTS • Underlying Assets Portfolio comprised of 204 syndicated mortgage loans • Management Team & Board Members co-invested ~$65M alongside investors as at September 30, 2019 Alignment of • Approximately 542,587 shares held by Directors & Officers as at September 30, 2019 Interests • 25% pari-passu investment in all non-conventional mortgages • Strategically diversified by geography (mainly in Southern Ontario), mortgage type (mainly conventional Strategic Portfolio first mortgages not exceeding 75% LTV), loan amount (majority less than $2.5M), and by property type Diversification (mainly residential construction & land) Compelling • Monthly distributions of $0.078/Share plus additional “top up” dividend at year-end Investment Metrics • A $100 investment in Common Shares in October 5, 1999, assuming reinvested dividends, would be & Fundamental worth $795 as of September 30, 2019 (as opposed to $399 if invested in S&P/TSX Composite Index) • Loaned more than $9.898 Billion from 2000-2019 Growth • Conservative underwriting philosophy & default recovery program (no loan losses since inception) Disciplined • Have Impairment Allowance (Loan Loss Reserve) in place to soften effects of possible losses • Philosophy Short-term lending (78.4% maturing by Sept. 30, 2020 & 90.1% maturing by Dec. 31, 2020) • Performance driven compensation to Investment Manager (not on cash or non-performing loans) • TSX: FC • CDN$14.45/Share Traded on TSX • Market Capitalization $406.7 Million (as at November 20, 2019) • Shares Issued 28,148,208 • Yield of 6.48% + “top up” dividend expected at year-end 5 DISCIPLINED INVESTING • CAPITAL PRESERVATION
ALIGNED MANAGEMENT INTERESTS Performance Based Compensation Substantial Personal Investment • • MIC Manager receives 75 bps on performing 25% pari-passu investment in all non- investments, not cash balances conventional mortgages • • Mortgage Banker receives 10 bps servicing fee on Management and directors are co-investors in performing investments most investments • No payment on work outs for any defaulted loans • Commitment fee income is shared • Corporation receives 75% of profits from mezzanine and equity investments after first earning a 10% preferred return No acquisition or disposition fees charged! 6 DISCIPLINED INVESTING • CAPITAL PRESERVATION
CONSERVATIVE LENDING APPROACH • 70.5% conventional first mortgages • Experienced borrowers in proven markets • Conservative lending guidelines restricting investment exposure on loan size and related borrower groups Investment Portfolio Geographic Diversification Conventional Non-First Mortgages Quebec 8.6% 2.1% Western Related Canada Investments 3.9% 19.0% Other 2.9% Other Ontario 1.9% 91.1% Conventional First Mortgages 70.5% *(excluding Related Investments) 7 DISCIPLINED INVESTING • CAPITAL PRESERVATION
CAPITAL STACK (IN $MM) Current Capital Stack Convertible Debentures (1) Q3/2019 Q3/2019 $170.0 $501MM Millions $500 Series J 5.50% $15 $25.0 Bank Indebtedness Millions $153.0 Due Jan/2026 $450 $136.0 Series I 5.40% (1) $25.0 $167 $400 Due Jun/2025 Convertible Debentures $119.0 $350 Series H 5.30% $26.5 $102.0 Due Aug/2024 $300 $6 Other Liabilities $85.0 $250 Series G 5.20% $22.5 Due Dec/2023 $68.0 $200 Equity Series F 5.50% $23.0 $313 Due Dec/2022 $150 $51.0 $100 Series E 5.30% $34.0 $25.0 Due May/2022 $50 $17.0 Series D 4.75% $20.0 Due Mar/2020 $- $- 1 Total: $167M 8 (1) At par value DISCIPLINED INVESTING • CAPITAL PRESERVATION
RIGID OPERATING STANDARDS Investment Restrictions Independent Approval Risk Diversification • • • Maximum single first mortgage Independent director approval Co-investment by management restricted to 5% and 10% of capital, of every investment • Syndicated portfolio to depending on LTV (1) • $1M – $2M: at least one diversify risk • Maximum single non first mortgage • >$2M: no less than three restricted to 2.5% of capital (1) • Restrictions on the amount of non- first mortgage investments Credit Management Default Recovery Program Independent Reports • • • Internalized credit Mandatory enforcement within Appraisals, environmental management 15 days audits, structural audits • Reports directly to independent directors 9 Note: (1) Capital is based on total paid up Shareholder’s Equity and Convertible Debentures DISCIPLINED INVESTING • CAPITAL PRESERVATION
Q3/2019 FINANCIAL HIGHLIGHTS Quarter Quarter Quarter Quarter Quarter Ended Ended Ended Ended Ended Sept 30, 2019 Jun 30, 2019 Mar 31, 2019 Dec 31, 2018 Sep 30, 2018 Mortgage Portfolio $467 $539 $550 $521 $535 (millions) (1) Basic Profit Per Share $0.273 $0.251 $0.246 $0.233 $0.265 Dividends Per Share $0.234 $0.234 $0.234 $0.284 $0.234 Return on Equity 9.82% 9.06% 8.97% $9.01% 9.69% Loan Losses None None None None None (1) Gross of impairment provision 10 DISCIPLINED INVESTING • CAPITAL PRESERVATION
Q3/2019 RESULTS OF OPERATIONS Quarter Quarter Quarter Quarter Quarter Ended Ended Ended Ended Ended ($ in millions) Sep 30, 2019 Jun 30, 2019 Mar 31, 2019 Dec 31, 2018 Sep 30, 2018 Interest and Fees $12.23 $12.21 $11.86 $11.53 $12.39 Earned Interest and Operating $4.54 $5.16 $5.27 $5.43 $5.46 Expenses Profit $7.69 $7.05 $6.60 $6.10 $6.93 Dividends to $7.43 (1) $6.59 $6.57 $6.26 $6.11 Shareholders Impairment allowance $5.48 (2) $5.48 $4.95 $4.95 $5.0 (1) Fourth quarter dividends include one time payout of accumulated excess earnings throughout the year (2) Impairment allowance of $5.48 million does not include allowance for credit losses of $3.2 million 11 DISCIPLINED INVESTING • CAPITAL PRESERVATION
ANNUALIZED RETURN ON SHAREHOLDERS’ EQUITY FC 9.82% 12% 10% 8% *Q3/2019 ROE Spread 6% 808 bps 4% Gov’t of Canada 1-yr. T-bill 1.74% 2% % 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 12 DISCIPLINED INVESTING • CAPITAL PRESERVATION
STABLE CASH DIVIDENDS • Steady 7.8¢ dividend • In addition, spend “top up” dividend at year end 2015 2016 2017 2018 TOTAL : $0.991 TOTAL : $0.966 TOTAL : $1.006 TOTAL : $0.986 0.16 0.148 0.14 0.133 0.128 0.12 0.108 2019 YTD 0.1 $0.702 0.08 0.06 0.04 0.02 0 Jan. May. Sep. Jan. May. Sep. Jan. May. Sep. Jan. May. Sep. Jan. May. Sep. 13 DISCIPLINED INVESTING • CAPITAL PRESERVATION
INCREASING MORTGAGE PORTFOLIO (IN $MM) 204 Investments in Q3/2019 $562 $521 $467 $449 $403 $375 $375 $345 $340 $343 $311 $307 $291 $287 $285 $297 $262 $256 $254 $274 $236 $221 $213 $235 $226 $204 $210 $180 $205 $173 $169 $167 $167 $170 $147 $146 $140 $136 $150 $133 $96 $94 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019YTD Mortgage Portfolio Repayments New Investments 14 DISCIPLINED INVESTING • CAPITAL PRESERVATION
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