Timbercreek Financial Announces 2022 Fourth Quarter Results

TORONTO, Feb. 22, 2023 (GLOBE NEWSWIRE) -- - Timbercreek Financial (TSX: TF) (the “Company”) announced today its financial results for the three months and year ended December 31, 2022 (“Q4 2022”).

Q4 2022 Highlights1

  • Record quarterly net investment income of $31.3 million (up 39.7% from Q4 2021) and record annual net investment income of $109.8 million (up 21.7% from 2021).
  • Net income and comprehensive income of $14.8 million. After adjusting for $0.1 million of fair value gains on mortgages and real estate properties measured at fair value through profit and loss, adjusted net income and comprehensive income was $14.7 million for the period, up from $14.0 million in the same period last year. Basic and diluted earnings per share were $0.18, and basic and diluted adjusted earnings per share were $0.17. Net income and comprehensive income include an increase of $2.8 million in allowance for credit losses in Q4 2022.
  • Delivered distributable income and adjusted distributable income of $18.4 million, or $0.22 per share (Q4 2021 – $16.2 million, $0.20 per share) representing a payout ratio of 78.7% on both distributable income and adjusted distributable income which continues to be ahead of Management's target payout range.
  • Declared $14.5 million in dividends to shareholders, or $0.17 per share, reflecting a payout ratio of 98.6% (Q4 2021 – 100.9%) on an adjusted net income basis (inclusive of allowance for credit losses).
  • Q4 2022 results were highlighted by strong interest income and a healthy mortgage portfolio. Net new mortgage fundings were $138.6 million and advances on existing mortgages were $13.1 million, offset by net mortgage repayments of $211.4 million and net syndications of $2.7 million. Mortgage repayment activity resumed in the fourth quarter as expected, after muted activity in Q2 and Q3, resulting in portfolio turnover of 17.2%.
  • At the end of the period, net mortgage investments were $1,195.8 million (versus $1,159.6 million at year-end 2021) bearing interest at an average rate of 9.7% (versus 6.9% at year end 2021).
  • Three loans were moved into Stage III in Q4 2022 for a total of $80.8 million in carrying value with a corresponding increase to the loan loss provisions of $2.8 million in the period. Two of the loans ($72.4 million) are included in CCAA proceedings with the sponsorship group. The Company’s asset management team is actively pursuing a multi-pronged strategy to preserve our secured investments and remains optimistic on the outcome.
  • Maintained conservative portfolio risk composition focused on income-producing commercial real estate
    • 68.3% weighted average loan-to-value;
    • 92.4% first mortgages in mortgage investment portfolio; and
    • 87.4% of mortgage investment portfolio is invested in cash-flowing properties.

“We closed 2022 with a very strong fourth quarter for interest income and distributable income, reflecting the benefit of increases in the prime rate on our variable rate portfolio,” said Blair Tamblyn, CEO of Timbercreek Financial. “As is to be expected following a period of rapidly rising rates, we have taken specific provisions against a few assets owned by borrowers that are experiencing a more challenging operating environment - and the substantial increase in portfolio income provides ample cushion to take these provisions. As rates stabilize, commercial transaction activity will increase, and we have the team and balance sheet ready to capitalize. Regardless of broader market/macro conditions, we continue to focus on our core investment strategy: providing financing to strong sponsors who are executing on value-add strategies to improve income-producing properties. Active management has also always been part of our investment approach, and we continue to work through select situations to optimize outcomes for our investors. We do so from a position of financial strength, with strong income generation and liquidity.”

Quarterly Comparison

$ millionsQ4 2022  Q4 2021 Q3 2022
Net Mortgage Investments1$1,195.8   $1,159.6  $1,255.4 
Enhanced Return Portfolio Investments1$72.9   $84.6  $71.2 
Land Inventory$30.2   $  $30.1 
Net Investment Income$31.3   $22.4  $30.0 
Income from Operations$25.2   $7.2  $22.6 
Net Income and comprehensive Income$14.8   $2.4  $13.5 
--Adjusted Net Income and comprehensive Income$14.7   $14.0  $13.9 
Distributable Income$18.4   $16.2  $16.8 
Dividends declared to Shareholders$14.5   $14.2  $14.5 
$ per shareQ4 2022  Q4 2021 Q3 2022
Dividends per share$0.17   $0.17  $0.17 
Distributable Income per share$0.22   $0.20  $0.20 
Adjusted distributable Income per share$0.22   $0.20  $0.20 
Earnings per share$0.18   $0.03  $0.16 
--Adjusted Earnings per share$0.17   $0.17  $0.17 
Payout Ratio on Distributable Income1 78.7%   87.6%  86.2%
Payout Ratio on Earnings per share 97.7%   587.6%  107.2%
--Payout Ratio on Adjusted Earnings per share 98.6%   100.9%  104.3%
Net Mortgage InvestmentsQ4 2022  Q4 2021 Q3 2022
Weighted Average Loan-to-Value 68.3%   70.1%  69.4%
Weighted Average Remaining Term to Maturity0.9 yr  1.0 yr 0.9 yr
First Mortgages 92.4%   93.2%  90.9%
Cash-Flowing Properties 87.4%   88.3%  89.3%
Multi-family residential 52.5%   48.0%  55.4%
Floating Rate Loans with rate floors (at quarter end) 88.5%   84.6%  87.3%
Weighted Average Interest Rate      
For the quarter ended 9.7%   6.9%  8.5%
Weighted Average Lender Fee      
New and Renewed 1.2%   0.9%  0.7%
New Net Mortgage Investment Only 1.4%   1.3%  1.2%
1. Refer to non-IFRS measures section below for net mortgages, enhanced return portfolio investments, adjusted net income and comprehensive income, distributable income and adjusted distributable income.

Quarterly Conference Call

Interested parties are invited to participate in a conference call with management on Thursday, February 23, 2023 at 1:00 p.m. (ET) which will be followed by a question and answer period with analysts. To join the call:

Meeting ID: 895 9827 7563
Passcode: 1234

The playback of the conference call will also be available on www.timbercreekfinancial.com following the call.

About the Company

Timbercreek Financial is a leading non-bank, commercial real estate lender providing shorter-duration, structured financing solutions to commercial real estate professionals. Our sophisticated, service-oriented approach allows us to meet the needs of borrowers, including faster execution and more flexible terms that are not typically provided by Canadian financial institutions. By employing thorough underwriting, active management and strong governance, we are able to meet these needs while generating strong risk-adjusted yields for investors. Further information is available on our website, www.timbercreekfinancial.com.

Non-IFRS Measures

The Company prepares and releases financial statements in accordance with IFRS. As a complement to results provided in accordance with IFRS, the Company discloses certain financial measures not recognized under IFRS and that do not have standard meanings prescribed by IFRS (collectively the “non-IFRS measures”). These non-IFRS measures are further described in Management's Discussion and Analysis ("MD&A") available on SEDAR. Certain non-IFRS measures relating to net mortgages, adjusted net income and comprehensive income and adjusted distributable income have been shown below. The Company has presented such non-IFRS measures because the Manager believes they are relevant measures of the Company’s ability to earn and distribute cash dividends to shareholders and to evaluate its performance. The following non-IFRS financial measures should not be construed as alternatives to total net income and comprehensive income or cash flows from operating activities as determined in accordance with IFRS as indicators of the Company’s performance.

Certain statements contained in this news release may contain projections and "forward looking statements" within the meaning of that phrase under Canadian securities laws. When used in this news release, the words "may", "would", "should", "could", "will", "intend", "plan", "anticipate", "believe", "estimate", "expect", "objective" and similar expressions may be used to identify forward looking statements. By their nature, forward looking statements reflect the Company's current views, beliefs, assumptions and intentions and are subject to certain risks and uncertainties, known and unknown, including, without limitation, those risks disclosed in the Company's public filings. Many factors could cause actual results, performance or achievements to be materially different from any future results, performance or achievements that may be expressed or implied by these forward looking statements. The Company does not intend to nor assumes any obligation to update these forward looking statements whether as a result of new information, plans, events or otherwise, unless required by law.

Net Mortgage Investments

The Company’s exposure to the financial returns is related to the net mortgage investments as mortgage syndication liabilities are non-recourse mortgages with periodic variance having no impact on Company's financial performance. Reconciliation of gross and net mortgage investments balance is as follows:

Net Mortgage Investments December 31, 2022 December 31, 2021
Mortgage investments, excluding mortgage syndications $1,189,215  $1,159,210 
Mortgage syndications  611,291   444,429 
Mortgage investments, including mortgage syndications  1,800,506   1,603,639 
Mortgage syndication liabilities  (611,291)  (444,429)
   1,189,215   1,159,210 
Interest receivable  (10,812)  (10,824)
Unamortized lender fees  6,801   8,278 
Allowance for mortgage investments loss  10,605   2,970 
Net mortgage investments $1,195,809  $1,159,634 

Enhanced return portfolio

As at December 31, 2022 December 31, 2021
Collateralized loans, net of allowance for credit loss $59,956  $58,000 
Finance lease receivable, measured at amortized cost  6,020   6,020 
Investment, measured at FVTPL  4,744   4,985 
Investment in indirect real estate development  2,225   2,225 
Total Other Investments  72,945   71,230 
Investment properties     44,063 
Credit facility (investment properties)     (30,690)
Net equity in investment properties     13,373 
Total Enhanced Return Portfolio $72,945  $84,603 

 Three months ended
December 31,

  Year ended
December 31,

NET INCOME AND COMPREHENSIVE INCOME 2022  2021   2022  2021  2020 
Net Investment Income on financial assets measured at amortized cost$31,342 $22,378  $109,803 $90,249 $95,940 
Total fair value (loss) gain and other income on financial assets measured at FVTPL$736 $(7,404) $1,388 $(10,291)$(16,778)
Net rental (loss) income$(278)$389  $(151)$1,499 $1,453 
Total fair value gain (loss) on real estate properties$82 $(4,374) $(296)$(4,374)$ 
Expenses$6,671 $3,761  $22,592 $16,237 $18,024 
Income from operations$25,211 $7,228  $88,152 $60,846 $62,591 
Financing costs:      
Financing cost on credit facilities$8,137 $4,045  $23,234 $16,734 $18,025 
Financing cost on convertible debentures$2,260 $1,767  $9,022 $6,745 $8,624 
Fair value (gain) loss on derivative contract$ $(994) $ $(3,940)$3,940 
Net income and comprehensive income$14,814 $2,410  $55,896 $41,307 $32,002 
Payout ratio on earnings per share 97.7% 587.6%  103.3% 135.9% 176.4%
Net income and comprehensive income$14,814 $2,410  $55,896 $41,307 $32,002 
Less: fair value gain on derivative contract (interest rate swap)$ $(994) $ $(3,940)$3,940 
Add: net unrealized (gain) loss on financial assets measured at FVTPL$(122)$8,237  $1,546 $13,748 $18,949 
Add: Net unrealized loss on real estate properties$ $4,374  $95 $4,374 $ 
Adjusted net income and comprehensive income1$14,692 $14,027  $57,537 $55,489 $54,891 
Payout ratio on adjusted earnings per share1 98.6% 100.9%  100.3% 101.2% 102.8%
Dividends declared to shareholders$14,480 $14,160  $57,721 $56,142 $56,447 
Weighted average common shares (in thousands) 83,970  82,011   83,622  81,325  81,870 
Dividends per share$0.17 $0.17  $0.69 $0.69 $0.69 
Earnings per share (basic)$0.18 $0.03  $0.67 $0.51 $0.39 
Earnings per share (diluted)$0.18 $0.03  $0.67 $0.51 $0.39 
Adjusted earnings per share (basic)1$0.17 $0.17  $0.69 $0.68 $0.67 
Adjusted earnings per share (diluted)1$0.17 $0.17  $0.69 $0.68 $0.67 

1. Refer to non-IFRS measures section.

 Three months ended
December 31,

  Year ended
December 31,

DISTRIBUTABLE INCOME 2022   2021   2022  2021 
Adjusted net income and comprehensive income1$14,692  $14,027  $57,537 $55,489 
Less: amortization of lender fees (1,748)  (2,135)  (8,726)$(9,275)
Add: lender fees received and receivable 2,056   3,720   7,708 $10,746 
Add: amortization of financing costs, credit facility 262   189   984 $1,022 
Add: amortization of financing costs, debentures 253   199   1,006 $1,060 
Add: accretion expense, debentures 114   77   454 $323 
Add: unrealized fair value (gain) loss on DSU (33)  (17)  (201) 104 
Add: allowance for expected credit loss 2,800   103   7,482  1,660 
Distributable income1$18,396  $16,163  $66,244 $61,129 
Payout ratio on distributable income1 78.7%  87.6%  87.1% 91.8%
Distributable income$18,396  $16,163  $66,244 $61,129 
Less: One-time distribution income         (707)
Adjusted Distributable income1$18,396  $16,163  $66,244 $60,422 
Payout ratio on adjusted distributable income1 78.7%  87.6%  87.1% 92.9%
Dividends declared to shareholders$14,480  $14,160  $57,721 $56,142 
Weighted average common shares (in thousands) 83,970   82,011   83,622  81,325 
Dividends per share$0.17  $0.17  $0.69 $0.69 
Distributable income per share1$0.22  $0.20  $0.79 $0.75 
Adjusted distributable income per share1$0.22  $0.20  $0.79 $0.74 

1. Refer to non-IFRS measures section.

SOURCE: Timbercreek Financial

For further information, please contact:

Timbercreek Financial
Blair Tamblyn, CEO
Tracy Johnston, CFO
Karynna Ma, Vice President, Investor Relations