MANAGEMENT‘S DISCUSSION OF FINANCIAL ACTIVITIES

Fiscal Year Ended June 30, 2021 As Compared To Fiscal Year Ended June 30, 2020

During fiscal year ended June 30, 2021, interest revenues decreased 16.27%, or $1,301,073 over fiscal year ended June 30, 2020. Church mortgage loans decreased approximately 14% for the same period. The weighted average return on church mortgage loans outstanding decreased at fiscal year ended 2021 to 4.13%, compared to 4.38% at fiscal year ended 2020.

As a result of excess principal reduction on church mortgage loans, BCLC reduced its bank debt by $18,690,433 over fiscal year 2021. The decrease in borrowed funds resulted in a decrease in interest expense of 28.66%, or $786,543. Total outstanding bank debt was $44,623,218 for fiscal year ended 2021, compared to $63,313,651 at June 30, 2020.

Lower outstanding loan volume and a decrease in market interest rates contributed to a lower yield on earning assets, 4.08% for fiscal year 2021, compared to 4.58% for fiscal year 2020. Lower outstanding bank debt contributed to a lower cost of funding earning assets, 1.19% for fiscal 2021, compared to 1.58% for fiscal 2020. The decrease in yield on earning assets exceeded the decrease in the cost of funding earning assets, resulting in a slightly lower net interest margin for the fiscal year 2021, 2.89%, compared to 3.01% for fiscal year 2020.

BCLC originated 29 church mortgage loans, in the amount of $21,390,406 during fiscal year ended 2021, compared to 33 church mortgage loans, in the amount of $20,373,918 during fiscal year ended 2020. The average dollar amount of each new church mortgage loan originated and closed during fiscal year ended 2021 increased from $617,391 per loan to $737,600.

BCLC had 0.28% past due loans for fiscal year ended June 30, 2021, and 0.29% for fiscal year ended June 30, 2020.

At fiscal year ended June 30, 2021, net earnings increased $48,074 to $2,646,898, compared to $2,598,824 at fiscal year ended June 30, 2020. Due to stability of the loan portfolio, BCLC did not make provisions for loan losses during fiscal year ended 2021. The lack of provision for loan losses, along with the decrease in interest expense of $786,692, were the primary factors that led to BCLC’s increase in net earnings for fiscal year ended June 30, 2021. Operating expenses remained relatively flat for fiscal year ended June 30, 2021, decreasing approximately $74,000 to $2,094,933.

Fiscal Year Ended June 30, 2020 As Compared To Fiscal Year Ended June 30, 2019

During fiscal year ended June 30, 2020, interest revenues increased 4.54%, or approximately $346,000, over fiscal year ended June 30, 2019. Church mortgage loans decreased approximately 3.27% for the same period. The weighted average return on church mortgage loans outstanding decreased from 4.59% at fiscal year ended 2019 to 4.38% at fiscal year ended 2020.

BCLC increased its bank debt by $10,000,000 at the beginning of fiscal year ended June 30, 2020 to meet an increase in loan demand. The increase in borrowing resulted in an increase in interest expense of 10.11%, or approximately $252,000. BCLC used excess cash throughout the year to reduce bank debt, resulting in a net decrease of approximately $511,000, bringing total outstanding bank debt to $63,313,651 for fiscal year ended June 30, 2020, compared to $63,824,495 at June 30, 2019.

The increase in interest expense was offset by an increase in yield on earning assets of 4.45% for fiscal year ended June 30, 2020, compared to 4.32% for fiscal year ended June 30, 2019. The higher yield on earning assets contributed to BCLC’s improved net interest margin of 3.06% at fiscal year ended June 30, 2020, compared to 2.95% for fiscal year ended June 30, 2019.

BCLC originated 33 church mortgage loans, in the amount of $20,373,918 during fiscal year ended 2020, compared to 36 church mortgage loans, in the amount of $20,808,115 during fiscal year ended 2019. The average dollar amount of each new church mortgage loan originated and closed during fiscal year ended 2020 increased from $578,003 to $617,391 per loan. Total church mortgage loans outstanding decreased from $173,745,236 at fiscal year ended June 30, 2019, to $168,060,469, at fiscal year ended June 30, 2020. BCLC had 0.29% past due loans for fiscal year ended June 30, 2020, and 0.00% for fiscal year ended June 30, 2019.

At fiscal year ended June 30, 2020, net earnings decreased $461,622 to $2,598,824, compared to $3,060,446 at fiscal year ended June 30, 2019. The decrease in net earnings for fiscal year ended June 30, 2020 was attributable to a $500,000 provision for loan losses. BCLC increased its allowance for loan loss reserve to mitigate potential risks associated with the Corona Virus Disease (COVID-19). Operating expenses remained relatively flat for fiscal year ended June 30, 2020, increasing approximately $60,000 over operating expense during fiscal year ended June 30, 2019.

WHO KNOWS GREAT ENTHUSIASMS, THE GREAT DEVOTIONS; WHO SPENDS HIMSELF IN A WORTHY CAUSE; WHO AT THE BEST KNOWS IN THE END THE TRIUMPH OF HIGH ACHIEVEMENT,

AND WHO AT THE WORST, IF HE FAILS, AT LEAST FAILS WHILE DARING GREATLY, SO THAT HIS PLACE SHALL NEVER BE WITH THOSE COLD AND TIMID SOULS WHO NEITHER KNOW VICTORY NOR DEFEAT.”

Theodore Roosevelt