Builders Capital Mortgage Corp. Reports 2014 Third Quarter Results

CALGARY, ALBERTA--(Marketwired - Nov. 4, 2014) - Builders Capital Mortgage Corp. (TSX VENTURE:BCF) (Builders Capital or the company) today released financial results for the three months ended September 30, 2014, which represents the third quarter of the company's 2014 fiscal year and its third full quarter as a publicly traded mortgage investment corporation (MIC).

Third Quarter Results

For the three months ended September 30, 2014, mortgage revenue was $899,007, representing annualized gross revenue of 15.6% of gross share capital. This revenue consisted of $837,446 in interest and $61,561 in lender fees charged to borrowers. Third quarter lender fee revenue exceeded management fee expense by a small margin.

Consistent with expectations, third quarter operating expenses, excluding the provision for mortgage losses, were $100,561, or 11.2% of revenue. This was somewhat lower than the previous quarter, due to slightly reduced interest expense and the typical quarterly variation in general expenses.

Management estimated a provision for loan losses of $66,953. This amount was based on an analysis of historical bad debts by Builders Capital Management Corp., which manages Builders Capital's mortgage portfolio, as well as current analysis of the construction finance marketplace. This is a collective provision and does not relate to any individual mortgage.

Total comprehensive income for the third quarter was $731,493, or $0.30 per share, based on the weighted average number of shares outstanding for the period. This translates into earnings of $0.50 per Class A Non-Voting Share. Given the dividend priority granted to Class A Non-Voting Shares held by the public, the effective Class A Non-Voting Share dividend cover ratio for the quarter was 2.5 times.

In early July, as previously reported, the company completed a private placement of 82,500 Class A Non-Voting Shares at a price of $10.00 per share for gross aggregate proceeds of $825,000. Net proceeds of the placement were used to reduce Builders Capital's line of credit balance. During the quarter, to enhance liquidity, the company increased its line of credit from $2.5 million to $3.5 million.

"Our financial condition remained strong in Q3, which is a busy period for us due to the seasonal upsurge in construction activity," said Sandy Loutitt, President of Builders Capital. "The bulk of our funds were invested in mortgages to our target borrowers throughout the three months, and we had sufficient cash flows and net income to comfortably meet our targeted distributions."

Loutitt added that total mortgage advances during the quarter of $13.8 million were in step with mortgage repayments of $13.9 million, and said the company experienced no difficulties with borrowers or loan defaults. All mortgage transactions conducted during the quarter were consistent with Builders Capital's tight focus on financing short-term, wood-frame residential construction in strong urban markets.

Mortgage Portfolio

At September 30, 2014, Builders Capital's mortgage portfolio consisted of 32 mortgage loans with an aggregate value of $24.4 million. Of the 30 mortgages the company acquired at its start-up, 15 with values totaling $12.2 million at December 31, 2013 had been paid out by the end of the quarter. To date, mortgages representing 55% of the total value of Builders Capital's original portfolio have been turned over.

For the nine months ended September 30, 2014, cash advances and invoiced interest totaled $34.9 million. During this time, Builders Capital was repaid $32.4 million, propelling a $2.5 million net increase in its mortgage portfolio and a nine-month turn-over of 1.4 times its invested capital.

Distributions

On September 19, 2014, based on income for the third quarter, Builders Capital declared a dividend of $0.2016 per Class A Non-Voting share to shareholders of record on September 30, 2014. This distribution was paid on October 31, 2014. The dividend amount was calculated to provide an 8% return on the $10.00 initial Class A Non-Voting share price, prorated for the 92 days in the quarter. On an annual basis, this level of distribution is equivalent to $0.80 per Class A Non-Voting share.

Subsequent to the quarter-end, on October 27, 2014, based on Q3 income, the Board declared a dividend of $0.3918 per share to Class B Non-Voting Shareholders of record on October 27, 2014. This distribution was also paid on October 31, 2014.

Outlook

Builders Capital expects that continued steady housing starts and strong employment growth in southern Alberta, its primary market, will drive robust demand for construction financing for at least the next several years. "While we anticipate that demand will moderate somewhat through the end of 2014 and into 2015, net in-migration is expected to continue to increase, and CMHC forecasts that Alberta will remain among the economic growth leaders in Canada," said Loutitt.

In addition to strengthening its position in Alberta, the company intends to extend lending to other western Canadian markets in the future. Like Alberta, Saskatchewan is expected to continue to exceed average GDP growth in Canada, with employment growth forecasted by CMHC to be 1.8% in 2014 and 1.7% in 2015. Builders Capital believes that this employment growth, together with a strengthening economy and high levels of net migration, will make Saskatchewan a good market for expansion.

"Our well-defined business focus, established, full-service asset management platform and strong team of experienced professionals positions us well to generate above average risk weighted returns in existing and new markets," said Loutitt. "Over the near term, we expect to continue to have sufficient quality lending opportunities to easily keep our capital fully utilized. Should increasing competition or changing market conditions inhibit our ability to source new lending opportunities, we have solid strategies in place to keep Builders Capital competitive, profitable and growing in the future."

A more detailed discussion of the company's financial results can be found in Builders Capital's 2014 Third Quarter Management's Discussion and Analysis, which will be posted along with the unaudited interim condensed financial statements for the period on the company's website (www.builderscapital.ca) and SEDAR (www.sedar.com) on or before November 5, 2014.

About Builders Capital

Builders Capital is a mortgage lender providing short-term course of construction financing to builders of residential, wood-frame properties in Western Canada. The company was formed on March 28, 2013 but did not commence active operations until December 12, 2013, on the closing of its initial public offering, following which it acquired a portfolio of mortgages from two predecessor companies. Builders Capital's investment objective is to generate attractive returns, relative to risk, in order to provide stable and steady distributions to shareholders while remaining focused on capital preservation and staying within the criteria mandated for mortgage investment corporations, as defined in the Income Tax Act.

As a MIC, Builders Capital is not subject to income tax provided that it distributes all of its taxable income as dividends to shareholders within 90 days of its December 31^st year-end. Such dividends are generally treated by shareholders as interest income, so that each shareholder is in the same tax position as if their proportionate share of mortgage investments made by the company had been made directly by the shareholder.

Forward-Looking Information

This news release contains forward-looking statements within the meaning of applicable securities legislation, including 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 estimates and assumptions that are subject to risks and uncertainties which could cause actual results to differ materially from the forward-looking statements contained in this news release. These include, among other things, risks associated with mortgage lending, competition for mortgage lending, real estate values, interest rate fluctuations, environmental matters and the general economic environment. The company cautions that the foregoing list is not exhaustive, as other factors could adversely affect its results, performance or achievements. Readers are cautioned against undue reliance on any forward-looking statements. Although the forward-looking information contained in this news release is based upon what management believes are reasonable assumptions, there can be no assurance that actual results will be consistent with these forward-looking statements. Except as required by applicable law, Builders Capital undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.