Firm Capital Mortgage Investment Corporation (TSX: FC) reported a 10.7% year-on-year decline in net income for the three months ended June 30, 2026, to $8,636,306, down from $9,674,154 in the same period last year. The reduction was primarily driven by a smaller average investment portfolio and lower average portfolio yields during the period.

For the six months ended June 30, 2026, net income fell 12.2% to $17,247,771, compared to $19,647,419 in the prior year. Basic weighted average earnings per share for the quarter were $0.235, versus $0.263 in Q2 2025.

Portfolio Dynamics

The corporation’s gross investment portfolio decreased by 0.8% to $605.8 million as of June 30, 2026, from $610.9 million at December 31, 2025. Despite the overall contraction, new investment funding surged to $106.2 million in the quarter, significantly higher than the $63.3 million recorded in Q2 2025. Repayments remained stable at $69.7 million, slightly below the $70.6 million seen in the prior year.

The portfolio consisted of 231 investments, down from 242 at the end of 2025. The average gross investment size was approximately $2.6 million, with 16 individual investments exceeding $7.5 million. Conventional first mortgages comprised 96.4% of the total portfolio, an increase from 95.2% at year-end 2025.

Credit Quality and Yield

The allowance for expected credit losses and fair value adjustments stood at $32.8 million as of June 30, 2026, a decrease from $36.8 million at December 31, 2025. This figure included $28.9 million for specific loan shortfalls and $3.2 million for collective allowances. The fair value adjustment component dropped sharply to $0.7 million from $4.5 million in the prior year.

The average face interest rate on the portfolio declined to 9.13% from 9.50% at the end of 2025. Approximately 56.1% of the portfolio matures by December 31, 2026, indicating significant near-term refinancing activity. Geographically, Ontario dominated with 83.3% of the portfolio, followed by Quebec at 11.4% and the USA at 3.0%.

What the Numbers Show

A notable divergence exists between the volume of new capital deployed and the resulting profit impact. While new investment funding increased by nearly 68% year-on-year ($106.2 million vs $63.3 million), net income contracted by 10.7%. This suggests that the newly deployed capital is carrying lower yields than the retiring assets, consistent with management’s attribution of profit decline to "lower average portfolio yields." The sharp drop in fair value adjustments (from $4.5 million to $0.7 million) also contributed to stabilizing the credit loss allowance relative to the portfolio size.

Dividend Declaration

The board declared monthly cash dividends of $0.078 per common share for October and November 2026. Total distributions for Q2 2026 amounted to $8,597,044 ($0.234 per share), effectively covering the net income for the period. The dividend payout ratio remains high, reflecting the company’s structure as a mortgage investment vehicle focused on distributing cash flows to shareholders.