Record Reenue, Strong Loan Growth, and Resilient Portfolio

• BCF reported record Q2 revenue and EPS. Mortgage advancements rose 46% YoY to $15M, the highest Q2 on record, while repayments increased 70% YoY. As a result, revenue grew 67% YoY and EPS rose 15%. 
• While the BoC has cut rates 225 bps since May 2024, BCF’s lending rate fell only 40 bps, reflecting lower elasticity. Consequently, revenue exceeded our estimate by 7%, and EPS beat by 13%.
• Annual dividend remained $0.80/share, representing an 8.18% yield.
• Portfolio quality remained stable, with 99% first mortgages and an LTV of 76%. Stage 3 (impaired) mortgages rose 3% QoQ to 2.8%, still well below the sector average of 5%. No material realized losses in Q2.
• Loan growth remained surprisingly strong, despite weak development and construction activity due to high rates, affordability pressures, and macro uncertainty.

• BCF is up 11% since our previous report. Sector outlook has improved since June, with multiples up 5% (10% YoY). Industry revenue growth is forecast at 4% in 2025 vs 1% in 2024, supported by falling rates, which historically benefit MICs and financials.
• We expect two additional BoC rate cuts over the next six months amid slowing GDP growth, elevated trade tensions, high unemployment, and easing inflation. While mortgage delinquencies remain a concern, falling rates should help mitigate risks. We anticipate a rebound in pre-sales, lower financing costs for developers, and higher transaction volumes for real estate lenders next year.
• With Q2 results beating forecasts, we are raising full-year revenue and EPS estimates. Stress tests indicate BCF can comfortably sustain its $0.80/share annual dividend.

Price and Volume (1-year)

Portfolio Update

Mortgage advancements increased 46% YoY to $15M, the highest Q2 on record, while repayments rose 70% YoY

Mortgage receivables (net) declined 6% QoQ to $48M, as the MIC sold $6M of mortgages to a related party. Excluding this sale, receivables would have increased 5% QoQ

Most of the key portfolio metrics (presented below) remained largely unchanged. First mortgages were 99% vs a five-year average of 91%, with the portfolio remaining focused on AB and B.C

APPENDIX