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Press release from CNW Group

Firm Capital Mortgage Investment Corporation Announces Results

Wednesday, May 09, 2012

Firm Capital Mortgage Investment Corporation Announces Results16:40 EDT Wednesday, May 09, 2012TSX Symbol FCTORONTO, 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 EQUITYProfit 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 $299,175,460Conventional 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 BreakdownAmountNumber of InvestmentsTotal Amount$0-$2,500,00087 $  83,021,841$2,500,001-$5,000,0002381,072,031$5,000,001-$7,500,0001378,011,589$7,500,001 +657,070,000Total129 $299,175,461IMPAIRMENT 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 CORPORATIONThe 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 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 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 ofFIRM  CAPITAL MORTGAGE INVESTMENT CORPORATIONFor the Three  Months Ended March  31, 2012  and 2011  (unaudited)NOTICE UNDER NATIONAL INSTRUMENT 51-102National 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  $3,478,338Investment 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 $37,763,021Accounts payable and accrued liabilities 1,757,191  1,354,639Unearned income 466,325  556,991Shareholder dividend payable 1,326,036  2,008,118Loans payable 14,714,605  15,649,081Convertible debentures (note 5) 85,710,810  69,134,395Total liabilities 128,061,663  126,466,245      Shareholders' Equity 171,853,935  148,382,510Deficit (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      Total Shareholders' 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 INVESTMENT CORPORATION              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 expenses (139,350)  (649,800)     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 CORPORATIONNotes to Condensed Interim Financial StatementsThree 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 mortgages$211,845,200 70.81% $188,083,658 68.64% Conventional non-first mortgages 40,370,567 13.49%  41,927,607 15.30% Related investments 22,800,958 7.62%  19,958,571 7.28% Non-conventional mortgages   24,158,736 8.08%   24,058,755 8.78% Total investments (at cost)$299,175,461 100.00% $274,028,591 100.00%            Impairment provision (2,980,000)    (2,980,000)   Investment portfolio$296,195,461   $271,048,591  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       $299,175,461Borrowers 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, beginning of period        $69,134,395 $53,628,803Issued        18,811,450 23,822,547Conversions        (2,498,000) (9,093,000)Adjustment to fair value of conversion option        55,488 202,368Implicit interest rate in excess of coupon rate        64,671 91,487Deferred finance cost amortization        142,806 482,190                      Principal balance, end of period       $85,710,810 $69,134,395The breakdown of the Total Debentures for the quarter ended March 31, 2012 presented in the above table is as follows:                   6.00%Convertible  5.75%Convertible  5.40%Convertible  5.25%Convertible      Debenture  Debenture  Debenture  Debenture  TOTALPrincipal balance, beginning of period $15,225,091 $30,021,130 $23,888,174  - $69,134,395Issued  -  -  - $18,811,450  18,811,450Conversions  (2,498,000)  -  -  -  (2,498,000)Adjustment to fair value of conversion  55,488  -  -  -  55,488Implicit interest rate in excess of coupon rate  15,072  7,126  40,279  2,195  64,671Deferred finance cost amortization  42,630  52,715  43,246  4,215  142,806Principal balance, end of period $12,840,281 $30,080,971 $23,971,698 $18,817,860 $85,710,810                The breakdown of the Total Debentures for the year ended December 31, 2011 is as follows:        6.00%Convertible5.75% Convertible 5.40%Convertible    Debenture Debenture Debenture TOTAL               Principal balance, beginning of year$23,886,736$29,742,067-$53,628,803Issued--23,822,54723,822,547Conversions(9,093,000)--(9,093,000)Adjustment to fair value of conversion option202,368--202,368Implicit interest rate in excess of coupon rate57,99830,1173,37291,487Deferred finance cost amortization170,989248,94662,255482,190Principal 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     $19,795,000Equity       690,000Principal     $20,485,000As 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 15,213,018 147,200,878New shares from conversion of debentures 212,590 2,498,000New shares from public offering 1,541,000 20,726,450New shares issued during the period under Dividend Reinvestment Plan33,857 441,521Offering Costs   (829,058)Balance, end of period17,000,465  170,037,791     The following shares were issued and outstanding as at December 31, 2011: # of shares  $Balance, beginning of year 14,377,333 137,343,502New shares from conversion of debentures 773,861 9,093,000New shares issued during the period under Dividend61,824 764,376Balance, end of year15,213,018147,200,878In 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 endedMarch 31, 2012Three months endedMarch 31, 2011Numerator for basic profit per share:   Profit$3,937,912$3,546,919Denominator for basic profit per share:   Weighted average shares15,280,89414,406,864Basic profit per share$0.258$0.246   Diluted profit per share calculation:   Three months endedMarch 31, 2012Three months endedMarch 31, 2011Numerator for diluted profit per share:   Profit:$3,937,912$3,546,919 Interest on convertible debentures1,244,608928,477Net profit for diluted profit per share$5,182,520$4,475,396Denominator for diluted profit per share:  Weighted average shares15,280,89414,406,864Net shares that would be issued:   Assuming debentures are converted  7,100,1943,904,951Diluted weighted average shares22,381,08818,311,815Diluted profit per share:$0.232$0.2448. 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, 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$75,927Loans payable interest expense173,63739,911Debenture interest expense1,244,608928,477Interest expense$1,731,397$1,044,315Deferred finance cost amortization - convertible debentures142,806(95,603)Implicit interest rate in excess of coupon rate - convertible debentures(60,281) (23,517)Change in accrued interest  (286,439) (789,260)Cash interest paid$1,527,483 $135,93611. 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.For further information: Firm Capital Mortgage Investment Corporation Eli Dadouch President & Chief Executive Officer (416) 635-0221