Firm Capital Mortgage Investment : Q3 2022 Report

MANAGEMENT'S DISCUSSION AND ANALYSIS

OUR BUSINESS

Firm Capital Mortgage Investment Corporation (the "Corporation") is a non-bank lender, investing predominantly in short- term residential and commercial real estate mortgage loans and real estate related debt investments. The Corporation operates as a mortgage investment corporation under the Income Tax Act (Canada). Mortgage investment corporations are able to have no income tax payable provided that they satisfy the requirements in subsection 130.1(6) of the Income Tax Act (Canada). The Corporation's primary investment objective is the preservation of shareholders' equity, while providing shareholders with a stable stream of dividends from the Corporation's investments. The Corporation achieves its investment objectives by pursuing a strategy of investing in loans in select niche real estate markets that are under- serviced by larger financial institutions.

The Corporation's more specific objective is to hold an investment portfolio that:

1. is widely diversified across many investments;
2. is concentrated in first mortgages;
3. reduces exposure as a result of participation in various loan syndicates; and
4. is primarily short-term in nature.

Firm Capital Corporation (the "Mortgage Banker") is the Corporation's mortgage banker and acts as the Corporation's loan originator, underwriter, servicer, and syndicator. The Corporation's affairs are administered by FC Treasury Management Inc. (the "Corporation Manager").

The Corporation has in place a Dividend Reinvestment Plan ("DRIP") and a Share Purchase Plan (collectively, with the DRIP, the "Plans") that are available to its shareholders. The Plans allow participants to have their monthly cash dividends reinvested in additional common shares of the Corporation ("Shares") and grant participants the right to purchase additional Shares. Shareholders who wish to enroll or who would like further information about the Plans should contact Investor Relations at (416) 635-0221.

Additional information on the Corporation, its Plans, and its investment portfolio is available on the Corporation's web site at www.firmcapital.com. Additional information about the Corporation, including its Annual Information Form ("AIF"), can be found on the SEDAR website at www.sedar.com.

RECENT DEVELOPMENTS AND OUTLOOK

The Corporation's investment portfolio (the "Investment Portfolio") has continued to revolve in 2022 with significant investment repayments and new fundings. During the nine months ended September 30, 2022, new fundings and discharges of investments were $326 million and $333 million, respectively (2021 - $346 million and $330 million, respectively).

During the remainder of 2022, the Corporation expects to continue its investment policy of holding a hard line on acceptable exposure levels, borrower quality and warranted interest rate pricing. A significant component of the Corporation's investments have interest rates that are bank prime rate based. As such, the increases in the bank prime rate in fiscal 2022 have translated into increases in the Corporation's average portfolio interest rate.

BASIS OF PRESENTATION

The Corporation has adopted International Financial Reporting Standards ("IFRS"), as issued by the International Accounting Standards Board, as its basis of financial reporting. The Corporation's functional and reporting currency is the Canadian dollar.

The following Management's Discussion and Analysis ("MD&A") is dated as of November 7, 2022 and should be read in conjunction with the unaudited interim condensed consolidated financial statements of the Corporation and the notes thereto as at, and for the three and nine months ended September 30, 2022 and 2021, as well as the Corporation's audited consolidated financial statements for the years ended December 31, 2021 and 2020, and the related Management's Discussion and Analysis, including the section on "Risks and Uncertainties", and each of our quarterly reports for 2022 and 2021.

Firm Capital Mortgage Investment Corporation • 2022 • Third Quarter Page 1

MANAGEMENT'S DISCUSSION AND ANALYSIS

HIGHLIGHTS

NET INCOME

For the three months ended September 30, 2022, net income increased by 8.1% to $8,179,541 as compared to $7,565,816 reported for the same period in 2021. Net income for the nine months ended September 30, 2022 increased by 9.1% to $24,278,981 as compared to $22,251,107 reported for the same period in 2021.

EARNINGS PER SHARE

Basic weighted average earnings per share for the three months ended September 30, 2022 were $0.237 (2021 - $0.241). Diluted weighted average earnings per share for the three months ended September 30, 2022 were $0.234 (2021 - $0.238).

Basic weighted average earnings per share for the nine months ended September 30, 2022 were $0.708 (2021 - $0.716). Diluted weighted average earnings per share for the nine months ended September 30, 2022 were $0.699 (2021 - $0.706).

REVENUES

Revenues for the three months ended September 30, 2022 increased by 37.4% to $16,372,230 as compared to $11,915,212 reported for the same period in 2021. Revenues for the nine months ended September 30, 2022 increased by 23.0% to $42,860,263 as compared to $34,858,732 reported for the same period in 2021.The increase is primarily a result of higher interest income due to a larger average Investment Portfolio size (the Investment Portfolio size was on average $100 million higher), with higher interest rates (September 30, 2022 - 10.36% vs September 30, 2021 - 7.92%) and an increase in fee income offset by a decrease in Special Income.

INVESTMENT PORTFOLIO

The Corporation's Investment Portfolio decreased by $6.5 million to $636,050,388 as at September 30, 2022, in comparison to $642,531,533 as at December 31, 2021 (in each case, gross of impairment allowance and fair value adjustment). The allowance for impairment and fair value adjustment as of September 30, 2022 increased by $1,400,000 to $7,360,000 (December 31, 2021 allowance for impairment and fair value adjustment - $5,750,000).

RETURN ON EQUITY

The Corporation continues to exceed its yield objective of producing a return on shareholders' equity in excess of 400 basis points over the average one-year Government of Canada Treasury bill yield. Income for the three months ended September 30, 2022 represented a return on total shareholders' equity (based on the month end average total shareholders' equity in the quarter) of 8.20%, representing an annualized return on total shareholders' equity of 424 basis points per annum over the average one-year Government of Canada Treasury bill yield of 3.96%. The above return on total shareholders' equity is a non-IFRS financial measure and does not have any standardized meaning prescribed by IFRS and is therefore unlikely to be comparable to similar measures presented by other issuers. This non-IFRS measure provides useful information to the Corporation's shareholders as it provides a measure of return generated on the Corporation's equity base.

Firm Capital Mortgage Investment Corporation • 2022 • Third Quarter Page 2