First Circle Mortgage Investment Corporation

First Circle Financial offers the public an opportunity to invest in diversified mortgage portfolios through its mortgage funds. Each fund is a Mortgage Investment Corporation or ‘MIC’ as defined by Section 130.1 of the Income Tax Act (Canada). The Company primarily focused on offering short-term residential mortgages to homeowners in B.C. Its manager, First Circle Financial Services Ltd., has been in the mortgage business since 1991.

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Exposure

We believe low-duration funds, such as MICs, offer attractive opportunities in a rising interest rate environment. Our Analysts believe FCMIC’s most appealing features are its above-average yields and high percentage of low-LTV/floating rate/first mortgages.

Equity Report

Mortgages outstanding were up 39% YoY to $200M by the end of Q3-FY2022 (ended June 2022) – the highest in FCMIC’s history. We believe FCMIC has a conservative mandate. At the end of Q3, 94% of its portfolio were first mortgages (primarily on already-built single family units).

Market Overview

Yield was 6.5% in FY2022 (9M), which we note is on the higher-end of comparable MICs. FCMIC has been able to generate higher yields as it uses higher leverage. Management is targeting a yield of 8.5%-9.0% in FY2023. 

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WHAT IS A MORTGAGE INVESTMENT CORPORATION (MIC)?

MICs are companies organized to allow individuals to invest in a pool of diversified and secured mortgages. Earnings are distributed quarterly by way of dividends, but are treated in the hands of the shareholders as interest income. Provided the company maintains its status as a MIC, it will pay no corporate income tax on normal revenues.

Shares of a MIC are qualified investments under the Income Tax Act for RRSPs, RRIFs, RESPs, and TFSAs. Because of the tax flow-through characteristics, purchasing Mortgage Investment Corporation shares is an excellent choice for retirement savings; they provide a steady and stable investment, plus a superior yield to most interest-bearing investment options.

First Circle Financial was established in 1991 by Alan Cross with the corporate objective to excel in the fields of mortgage portfolio management and mortgage banking. Shortly after incorporation, the company obtained a contract to manage the operations of Pacific Coast Mortgage Investment Corporation. In 2005 First Circle Financial elected to resign as manager of Pacific Coast MIC and moved to incorporate First Circle Mortgage Investment Corporation.

Over the past thirty years of portfolio management, despite several real estate market corrections, First Circle Financial has delivered balanced and reliable returns to its investors. As of June 30, 2022, we have almost $227 million in assets under management. Visit the First Circle website 

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