Earnings call transcript: Timbercreek Financial Q2 2025 misses estimates

Timbercreek Financial Corp reported its second-quarter earnings, revealing a miss in both earnings per share (EPS) and revenue compared to analyst forecasts. The company posted an EPS of $0.15, falling short of the expected $0.1702, representing an 11.87% negative surprise. Revenue was reported at $25.2 million, below the forecasted $28.23 million, a 10.73% miss. Despite these results, Timbercreek’s stock price rose modestly by 0.87% to $7.79. According to InvestingPro data, the company maintains a strong dividend yield of 8.93% and trades at an attractive P/E ratio of 13.8x, suggesting investors may be focusing on income potential over short-term earnings performance.

Key Takeaways

• Timbercreek Financial missed EPS and revenue forecasts for Q2 2025.
• The company’s stock price rose slightly by 0.87% post-earnings.
• Portfolio value increased by $111 million year-over-year.
• Focus remains on multifamily residential real estate.
• Anticipated stronger transaction activity in the latter half of the year.

Company Performance

Timbercreek Financial’s overall performance in Q2 2025 reflected challenges, as both net investment income and distributable income saw declines compared to previous quarters. Despite these setbacks, the company maintained its strategic focus on multifamily residential real estate, which is considered resilient amid economic uncertainties. The portfolio’s value grew by $111 million year-over-year, signaling strong asset management. InvestingPro analysis shows the company’s financial health score as FAIR, with particularly strong marks in profit and price momentum metrics. The company’s current ratio of 65.3 indicates robust liquidity management, while trading below its Fair Value suggests potential upside opportunity. For detailed insights into Timbercreek’s valuation and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively on InvestingPro.

Financial Highlights

• Revenue: $25.2 million, down from $28.6 million in Q1 and $26.4 million in Q2 last year.
• Earnings per share: $0.15, missing the forecast of $0.1702.
• Net income: $12.4 million.
• Portfolio value: Just over $1.1 billion, up $111 million year-over-year.

Earnings vs. Forecast

Timbercreek Financial’s Q2 earnings per share of $0.15 missed the forecasted $0.1702 by 11.87%. The revenue of $25.2 million also fell short of the expected $28.23 million, a 10.73% miss. This performance marks a significant deviation from previous quarters, where the company had typically met or exceeded expectations.

Market Reaction

Despite the earnings miss, Timbercreek Financial’s stock price increased by 0.87% to $7.79. This movement suggests that investors may be optimistic about the company’s strategic initiatives and future growth prospects, even as the current quarter’s results were disappointing.

Outlook & Guidance

Looking forward, Timbercreek Financial aims to grow its portfolio to $1.3 billion by year-end. The company anticipates stronger transaction activity in the third and fourth quarters and expects to continue resolving outstanding loans. InvestingPro data confirms the company’s strong dividend track record, having maintained payments for 10 consecutive years. With a beta of 1.16, the stock offers a balanced risk profile while maintaining its attractive yield. InvestingPro subscribers have access to 6 additional key insights about Timbercreek’s financial strength and market position through exclusive ProTips and detailed analysis tools.

Executive Commentary

CEO Blair highlighted the resilience of the multifamily asset class amid economic uncertainties, stating, "Despite ongoing tariff-related macro volatility, commercial real estate conditions remain generally positive." This focus on multifamily properties is expected to drive future growth and stability.

Risks and Challenges

• Continued macroeconomic volatility could impact transaction activity.
• Lower weighted average interest rates may affect profitability.
• The high payout ratio could limit reinvestment opportunities.
• Market saturation in key urban areas may pose challenges.

Q&A

During the Q&A session, analysts inquired about the variability in the payout ratio and the company’s strategy for managing land inventory. Timbercreek Financial’s management addressed these questions, emphasizing their focus on resolving loans and renewing credit facilities to support growth.

Full transcript - Timbercreek Financial Corp (TF) Q2 2025:

Blair, Executive/Leader, Timber Creek Capital: Thank you, operator. Good afternoon, everyone. Thanks for joining us to discuss the first quarter financial results. I’m joined as usual by Scott Rolland, CIO Tracy Johnston, CFO and Jeff McTate, Head of Canadian Originations and Global Syndications. The second quarter delivered solid performance across key metrics.

We expanded the portfolio from Q1 levels with significant year over year growth. This supported net investment income of 25,200,000.0 Distributable income was $0.18 per share, consistent with our historically quarterly range. As we signaled on our last earnings call, we resolved a material portion of Stage two and Stage three loans, close to $83,000,000 since that time. And we’re pleased to report that the renewal of our credit facility is nearly complete, featuring a substantial upsize and improved margin terms to support our plans for growth. Transaction activity was healthy in the second quarter, and the pipeline is building despite some lingering effects from the broader macro environment.

While this tariff related uncertainty poses challenges for certain sectors, our focus on multifamily residential real estate, an essential and resilient asset class, positions us to deliver stable income and protect investor capital. As rates have stabilized in a more typical range, we’ve seen an overall improvement in market conditions for commercial real estate this year, creating a positive backdrop as we look to further growth in the portfolio. With improving fundamentals, we’ve increased our proactive engagement with the investment community, highlighting our cycle tested track record, strengthening outlook and the attractive yield. Our dividend is currently yielding roughly 9% or more than 6% premium of our short term Canadian bond yields. And at $8.26 per share, our current book value is roughly 18% above the weighted average trading price in Q2.

I’ll now ask Scott to cover the portfolio review. Scott? Thanks, Blair, good afternoon. I’ll quickly cover the portfolio metrics and provide a brief update on key developments with the stage loans, and Jeff will comment on the originations activity and lending environment. Portfolio KPIs, most were stable relative to recent periods and consistent with historical averages.

At quarter end, 76.3% of our investments were in cash flowing properties. Multi residential real estate assets continue to comprise the largest portion of the portfolio at roughly 55%. As Blair highlighted, this core asset class has shown to be durable in periods of economic uncertainty. First mortgages represented 92% of the portfolio. The weighted average LTV for Q2 was 66%, similar to Q1.

And the portfolio’s weighted average interest rate was 8.6% in Q2 versus 8.7% in Q1 and 9.8% in Q2 last year. Decrease reflects the Bank of Canada’s policy rate cuts, bringing the Wehr closer to a long term average of roughly 8%. With rates coming down, we have seen a corresponding decrease in interest expense on the credit facility, supporting a healthy net interest margin. The portfolio WARE is also protected by the high percentage of floating rate loans with rate floors above 87% of the portfolio at quarter end. Roughly 90% of the loans with floors are currently at their floor rates.

In terms of asset allocation by region, there were no major shifts to highlight. Approximately 93% of the capital invested in Ontario, BC, Quebec and Alberta and focused on urban markets. From an asset management perspective, it was a productive quarter as we resolved close to $83,000,000 in Stage two and three loans since our last earnings call. Thanks to the team for their great work on these files. We are actively working towards the resolution and monetization of the outstanding stage loans and continue to advance the remaining files.

While challenges remain, we expect to see further progress over the coming quarters with the goal of ultimately returning this portion of the portfolio to historical norms. On that note, I’ll ask Jeff to comment on the transaction activity within the portfolio. Thanks, Scott. It was a solid quarter for new investments as we build back the portfolio to historical levels. Portfolio was 11% or $111,000,000 higher than Q2 of last year.

During the quarter, we advanced over $168,000,000 in new mortgage investments, all targeting multifamily and industrial assets. Continued uncertainty from tariff issues caused some transaction delays, pushing more of our origination volume to the end of the quarter, while other deals have moved into the back half of 2025. Total mortgage portfolio repayments in the quarter were $132,000,000 resulting in a turnover ratio of 12.9%. We ended the period with a portfolio balance a bit over $1,100,000,000 which was a $35,000,000 increase from Q1. Looking at these trends over the past several years, you see a recovery in volume in 2024 as activity began its return to more normalized levels, along with the wear also returning to historical levels.

While CRE transaction activity has improved, uncertainty tied to the Trump administration’s tariff policies has continued to moderate the recovery somewhat, resulting in lengthier transaction time lines or deferred decisioning altogether. That said, the multifamily asset class most specifically remains the least impacted by this broader economic uncertainty. The resiliency of the fundamentals supporting continued trades, which in conjunction with recent risk off messaging from CMHC, generating continued opportunity in a conventional multifamily bridge and construction lending space. The market also continues to respond well to Timber Creek Capital’s status as a CMHC approved lender with the prospect of an eventual term takeout option, driving more bridge opportunities with existing clients and interest for both products from new prospects. In summary, despite delays to a more fulsome market recovery, our positioning in the market and strong client relationships continue to support our ability to deploy capital into high quality loans in the second half of this fiscal year and shift to growth mode as transaction activity normalizes thereafter.

I will now pass the call over to Tracy to review the financial highlights. Tracy?

Tracy Johnston, CFO, Timber Creek Capital: Thanks, Jeff, and good afternoon, everyone. As we look at the main drivers of income, the portfolio has grown year over year, offset by The WARE returning to a more typical range following the Bank of Canada rate cuts. Q2 net investment income on financial assets measured at amortized cost was $25,200,000 down from $28,600,000 in Q1 and twenty six point four million dollars in Q2 last year. We reported distributable income of $14,600,000 or $0.18 on a per share basis versus $16,300,000 and $0.20 per share in Q2 last year. The payout ratio on DI was 97.8% this quarter.

The payout ratio will bump around a bit quarter to quarter. However, we expect it to land the 95% range over the full year, consistent with our past performance. In addition to the deployment lag that Jeff mentioned, the DI this quarter reflects a modest decrease in the weighted average lender fee this quarter as one sizable transaction was structured with a back end fee instead. We recorded a reserve of $2,100,000 this quarter, driven by the extended holding period associated with the remaining Stage two and Stage three loans. Net income was $12,400,000 this quarter and net income before ACL was $14,500,000 versus $15,300,000 in Q2 twenty twenty four.

Looking at quarterly EPS over the past three years with and without ECLs, you will see it’s been quite stable as has DI per share. Over the medium term, quarterly DI per share has been between $0.17 and $0.21 averaging just over $0.19 per share over this time period. Looking quickly at the balance sheet. The value of the net mortgage portfolio, excluding syndications, was just over $1,100,000,000 at the end of the quarter, an increase of about $111,000,000 year over year. The balance on the credit facility was $345,000,000 at the end of Q2, up modestly from $331,000,000 at the end of Q1.

Credit utilization rate at the end of the quarter was 87%. We have ample capacity to deploy new capital against the pipeline Jeff and team are building. I’ll now turn the call back to Scott for closing comments.

Blair, Executive/Leader, Timber Creek Capital: Thanks, Tracy. We’re encouraged by the results for the year to date and our outlook. The portfolio is growing, and we anticipate this continuing. Despite ongoing tariff related macro volatility, commercial real estate conditions remain generally positive, and this is reflected in our growing pipeline. We are delivering a stable monthly dividend, currently yielding close to 9%, and we continue to resolve stage loans, freeing up this capital for new investments.

That completes our prepared remarks. With that, we will open the call to questions.

Operator: We’ll now take any analyst questions. Our first question comes from Zach. Zach, your line is now open. Please go ahead. Zach, you’ll just need to unmute yourself.

I’ll turn it to our next question, which is from Steven. Steven, your line is open. Please go ahead.

Stephen, Analyst: Can you hear me okay?

Blair, Executive/Leader, Timber Creek Capital: Good afternoon, Stephen. Great.

Stephen, Analyst: Remind me again, like with the payout ratio, 98%, if you can remind me how close do you get to that 100% over time? Has it been up this high? Forgive me for not looking this up before, but I’m just curious about distributable income versus the payout ratio.

Blair, Executive/Leader, Timber Creek Capital: Versus the payout or as part of the payout ratio? Let’s just if you’re talking about the distributable income ratio just for a second, right? Yes. As a mix, right, we have to for compliance reasons, right, we have to distribute 100% of our income a year, right? So 100% is sort of that theoretical target.

But of course, that’s too high. So as a management team, we’re typically targeting in the mid-90s for payout ratio. That said, for sure, quarter to quarter, there’s variance, right? And that can be driven by the book was a slightly smaller one quarter, larger, maybe we received some more fees in a given quarter. So you’re going to have that variance.

I can think of some quarters even where we were over 100 and certainly there were some quarters where we’re in the mid-80s. I think it bounces around a bit. I think one of Tracy’s remarks was this year, we’re sort of we think we’re going to average 95%. This quarter is a little high. Was a little elevated.

I think going back to some of Jeff’s comments, where if I look at this past quarter, what sort of practically happened was we had some early repayments in the quarter. And then we had some and normally, are replaced very quickly with new deals because of some of the Trump implications from Q1, we had some deals that slipped. So we did get those deals. We did close the deals. We had a successful end of the quarter.

So we actually ended the quarter up another $30,000,000 But net net through the quarter, if you look at our average AUM, it was a little lower than we would have liked. And that sort of drives up that payout ratio to that 90 higher 90s, which I would expect that to reverse that itself in Q3 based on the higher balance that we’re starting Q3 with, if that makes sense.

Stephen, Analyst: Yes, it does. Apologize if that was a confusing way to ask that question, but you certainly. And maybe just, I think the goal is 300,000,000.0 for the to the 2025. Is that the public goal is I think you’ve said that before, right? Or maybe it’s in the disclosure, I apologize again.

Blair, Executive/Leader, Timber Creek Capital: No, yes, that is where we think we’ll be able to grow the book to by the end of the year. And so

Stephen, Analyst: that January, 01/1950, it Q3, Q4, like does, I presume the winter, the seasonality does impact how much business you do towards the end of the year, I guess?

Blair, Executive/Leader, Timber Creek Capital: Yes, in our business too, as a private lender, we normally find for us in first six months of the year, it’s a more competitive market, right, because you have more of the traditional players, some of the banks are trying and life goes trying to fill their books earlier in the year. And so sometimes the private guys are a little more on the back foot. Some are going to be a little slower. And normally that sort of final trimester, September to December, is a very strong period for mix like ourselves. It’s Blair.

I’m just going to jump in there quickly. I agree with Scott, but I think just to clarify, the banks have a cheaper cost. They’re lending deposits, right, and we’re lending equity. So we just don’t want to do deals earlier in the year at the pricing that the banks are going to do it rather than losing them per se.

Operator: We’ll try again with Zach. Zach, your line is now open. You can go ahead and unmute yourself.

Zach, Analyst: Good afternoon. With a slowdown in multifamily construction activity expected over the next few years, are you expecting a change in the asset mix with maybe greater weighting toward commercial assets?

Blair, Executive/Leader, Timber Creek Capital: Well, listen, we actually don’t do a lot of construction loans out of the gate just for you on the multifamily space. We typically are lending on existing product. So the existing universe of income producing assets. So although we do some construction, not a ton. I think for us, we sort of target we’re going to do sort of that 50% to 70% multi, and I don’t think that, that really changes.

And I’m across at Jeff here, maybe he’ll comment as well. We’re kind of a twothree, onethree, and that onethree will be a variety of commercial asset classes to fill the rest of the book. Yes. I think that’s right generally for sure. The only other comment I would say, certainly, multifamily construction activity has declined nationally overall, but it’s not an equivalent reality market to market.

So certainly, Toronto, Vancouver, much softer in the current environment. There are other markets outside of those major geographies and where there the economics still can make sense. There are still opportunities to continue to build on economically viable multi residential construction deals. And obviously, the fundamentals underlying the reality are irrespective of the softness here is still strong demand and need for new supply. So we’re continuing to expect to see, and again, as Scott noted, it’s a smaller allocation as it relates to our overall book, but we still do expect to see some construction activity and opportunities to lend into those opportunities.

But the primary focus is on the income producing existing assets.

Zach, Analyst: Okay. Got it. Appreciate it. And in the quarter, there was a noncash transfer out of the other loan investments. Can you provide a little bit more detail on that?

Tracy Johnston, CFO, Timber Creek Capital: Yes. So that was one of the Stage two, three loan resolutions. So there was $20,000,000 so loan $23,000,000 loan in other loans, which then returned to performing, so into stage one. But as part of the restructure of that, it moved from another loan like a mezzanine position to an actual mortgage position. So it just moved up to mortgages.

So you’ll see it there as a transfer. Essentially, it is one of the resolutions we noted and returning to a performing loan.

Zach, Analyst: Okay. Got it. And my last question, with the land inventory you’re holding not producing any income, is there a greater urgency to sell this type of asset versus a fully developed stabilized property?

Blair, Executive/Leader, Timber Creek Capital: Urgency? It’s a little different. We look at that particular land, which is sort of single family residential development land. And for us, really, same as the land. I can tell you there’s like farmer on it that we receive income that covers the taxes.

And so we kind of sit there and say, hey, what’s the it’s not the it doesn’t generate the same sort of active yield that we would like. So, yes, I would like to move that position. But I look at the current environment and the and the sort of the players we’d like to sell it to. This is a very challenging time in Ontario for some of these developers. So I think for us, I’m probably looking this probably doesn’t get sold.

I would have I know this is between us. I would sit there and say, I would like to have sold that land in this year, but it’s probably gonna move into next year.

Zach, Analyst: Understood. Thanks everyone for the color. I’ll turn it back.

Operator: Thanks, Zach. Thank you. The next call will come from James. James, your line is open. Please go ahead.

Dave, your line is open. You can go ahead.

Blair, Executive/Leader, Timber Creek Capital: So

Stephen, Analyst: I just wanted to just get a little

Dave, Analyst: bit more color from you guys in terms of the loans that are still impaired and what gives you the confidence that you’ll be able to get resolutions, not on all of them, but on some of them through the end of the year. Is it borrowers returning to current on their payments? Is it asset sales? What where are you seeing the pockets of positivity and how do you expect that to play out?

Blair, Executive/Leader, Timber Creek Capital: Yes. So I think each of the loans are left in staging and sort of have a different story. I would sit there and say one of the larger ones is our exposure to Vancouver, the Vancouver retail assets which is undergoing an entitlement process for multifamily development. That particular story is really tied to entitlement timing and approvals which we are on track to before the end of the year to receive that final approval. It’s been a process ongoing for a long time, but they’re in those final stages.

You have to get that entitlement approved before you look to move the assets. So for us it’s sort of like year end is not so much I think we’ll be off that position, but year end I think we get to a position where then we can get that the board working get that those assets to market. That’s probably sort of a Q1, Q2 twenty twenty six off the books. But that is sort of meaningfully progressed by year end. I can think of two or three other ones where in the various stages where we’re moving forward with our various legal remedies.

But a lot of the time getting ourselves into a position to get off of a file is moving it into the position that it can be sold or be cleaned up structurally. So there’s two or three of the other smaller files that whether we put in a receiver or we’re doing an active sales process, those are ongoing in sort of September, October. I can get us closer to resolution on some of those files by year end. Our

Operator: next call comes from Michael McHugh. Michael, your line is now open. You can go ahead.

Michael McHugh, Analyst: Hi, guys. Thanks for taking my question. You mentioned the upsize of the credit facility and noticed that your cost of debt was down quarter on quarter. It looks like about 10 basis points. Just wondering about any new terms on the renewal or the upsize?

What type of spread you might be paying? And if the upsize of this facility will allow you to reach that $1,300,000,000 portfolio goal on its own without any additional funding sources?

Blair, Executive/Leader, Timber Creek Capital: Mike, it’s Blair. Yes, so your last question first. Yes, it will be provide sufficient capacity to get to the 1,300,000,000 You’d note if you went back a couple of years and looked at our disclosures, the line was at $600,000,000 for a period of time. So you can sort of use that as guidance if you want. It’s not technically closed yet.

It will close next week and we’ll sort of share the details then, but you can use that kind of for now. And generally speaking, we’re not putting out what the sort of the spread is, what the cost of debt is. What you saw, I’m actually not sure what you saw, Tracy might be looking right now, because the reduction in, I guess the reduction in interest expenses just because of SOFR or CORA, sorry. You’ll see the reduction in our contractual reduction spread starting you’ll see a reduction in interest expense because of the new facility starting next quarter. It increased modestly on the last renewal and we’ve the banks have been very supportive on this renewal in a variety of ways, including sort of being flexible on pricing.

So it’s we’re really happy with the way it worked out. And it’s very much part generating more net income.

Michael McHugh, Analyst: Great, thanks for that detail. And obviously, progress on the Stage two and three resolutions in the quarter, certainly positive momentum there. Just noted that there was a $9,000,000 incremental add to Stage three under other mortgage investments. Just wondering if you have any detail on if that was a single loan or a combination of loans or just that movement in Stage three other investments?

Tracy Johnston, CFO, Timber Creek Capital: Yes, sure. Hi, Mike. I’ll take that one. So that was a loan that was in Stage two in Q1 and just purely by the passage of time and interest arrears have moved into stage three. So this is one of the assets that we’ll be looking that it will be put up for sale in Q3, Q4.

Michael McHugh, Analyst: Great. And just one more quick one, if I may, and then I’ll leave the queue. Just noticed that the average rate on new loans originated in the quarter was 7.5%, and the average rate on the paid off loans in the quarter was up in the 9s, I think 9.3%. So just wondering what the outlook is there as sort of some of these lower rate loans are coming on board, higher rate loans are being paid off and we’re in a sort of flat to uncertain policy rate environment, if you have any outlook on the war for the next couple of quarters?

Blair, Executive/Leader, Timber Creek Capital: Yes. I mean, listen, when I think of where there, I mean, I think that is a fact, right? So we’re going to have repayment of higher paying loan of higher historically higher yielding loans will start to come off. New loans will obviously just come on naturally. But when we look at it, we look at it more on each loan as sort of what is the retained yield, So when we do a new loan, whether we’re using our credit line or we’re using a third party A Note syndication, those prices on the credit line, the price on the third party A Notes are also coming down, right?

So we maintain a margin above, obviously, what we need to pay our dividend, right? So that’s the analysis that we do as we go. So it doesn’t like over time, but I think forward to the next few quarters, we will continue to see that wear compression. But we don’t expect it to have a material impact on DI ratio, if that makes sense.

Operator: There are no other questions at this time. So I’ll turn the meeting back to Blair for closing remarks.

Blair, Executive/Leader, Timber Creek Capital: Great. Thanks everyone for joining us today. As usual, look forward to speaking again when we release Q3. And of course, if there are any questions in the interim, feel free to reach out to any of us. We’d be happy to chat.

Have a good afternoon.

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