Management’s Discussion of Financial Activities

Fiscal Year Ended June 30, 2022 As Compared To Fiscal Year Ended June 30, 2021 Fiscal Year Ended June 30, 2021 As Compared To Fiscal Year Ended June 30, 2020

During fiscal year ended June 30, 2022, interest revenues decreased approximately 13%, or $889,179 over fiscal year ended June 30, 2021. Church mortgage loans decreased approximately 8% for the same period. The weighted average return on church mortgage loans outstanding increased slightly at fiscal year ended 2022 to 4.15%, compared to 4.13% at fiscal year ended 2021.

As a result of excess principal reduction on church mortgage loans, BCLC reduced its bank debt by $11,196,472 over fiscal year 2022. The decrease in borrowed funds resulted in a decrease in interest expense of approximately 33%, or $640,116. Total outstanding bank debt was $33,426,746 for fiscal year ended 2022, compared to $44,623,218 at June 30, 2021.

Lower outstanding loan volume and a decrease in market interest rates contributed to a lower yield on earning assets, 3.90% for fiscal year 2022, compared to 4.08% for fiscal year 2021. Lower outstanding bank debt contributed to a lower cost of funding earning assets, 0.89% for fiscal 2022 compared to 1.19% for fiscal 2021. The decrease in cost of funding earning assets contributed to an improved net interest margin for fiscal year 2022, 3.02%, compared to 2.89% for fiscal year 2021.

BCLC originated 26 church mortgage loans, in the amount of $41,004,749 during fiscal year ended 2022, compared to 29 church mortgage loans, in the amount of $21,390,406 during fiscal year ended 2021. The average dollar amount of each new church mortgage loan originated and closed during fiscal year ended 2022 increased from $737,600 per loan to $1,577,106. BCLC had 0.14% past due loans for fiscal year ended June 30, 2022 and 0.28% for fiscal year ended June 30, 2021.

At fiscal year ended June 30, 2022, net earnings increased $460,299 to $3,107,197 compared to $2,646,898 at fiscal year ended June 30, 2021. Due to the continued stability of the loan portfolio and decrease in outstanding loan volume, BCLC reduced its allowance for loan losses from $4,167,872 to $3,167,872 during fiscal year ended 2022. The change in allowance for loan losses, along with the decrease in interest expense of $640,116, were the primary factors that led to BCLC’s increase in net earnings for fiscal year ended June 30, 2022. Operating expenses increased $326,837 to $2,421,770 during fiscal year 2022, compared to $2,094,933 during fiscal year 2021. The primary reasons for the increase in operating expenses during fiscal year 2022 were ministry development expenses returning to pre-pandemic levels and an increase in facilities expenses.

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.