Timbercreek Financial Reports Q2 2026 Results: Full Earnings Call Transcript

Timbercreek Financial (TSX: TF ) released second-quarter financial results and hosted an earnings call on Thursday. Read the complete transcript below. This content is powered APIs. 7%.

The company advanced approximately $154 million in new loans and continued to reduce staged loan exposure, with significant progress in resolving Stage 3 balances. 3%. 6%, and approximately 90% of the portfolio is invested in floating-rate loans. 9 million, supported by increased syndication activity and lower borrowing costs.

Management emphasized ongoing strategic initiatives in asset management and capital redeployment to enhance earnings generation. The company expects continued robust origination activity and is optimistic about future growth opportunities, particularly in multi-residential and industrial sectors. Syndication activity remained strong, providing balance sheet capacity and supporting distributable income. Management is confident in resolving remaining Stage 2 and 3 positions by the end of the year, aiming for full recoveries where possible.

Full Transcript OPERATOR Good day, ladies and gentlemen. Welcome to Timbercreek Financial's second quarter earnings call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session for analysts.

Analysts are asked to raise their hand to register for a question. As a reminder, today's call is being recorded. I would now like to turn the meeting over to Blair Tamblyn. Please go ahead.

Blair Tamblyn, Chief Executive Officer Thank you, operator. Good afternoon, everyone, and thank you for joining us today. With me on the call today are Scott Rowland, our Chief Investment Officer, Tracy Johnston, our Chief Financial Officer, and Geoff McTait, who leads the Canadian Originations and Global Syndications business. The second quarter reflected steady execution against our key priorities.

We maintained stable distributable income, delivered strong origination activity, and continued to reduce our staged loan exposure. During the quarter we advanced approximately 154 million, reflecting positive market conditions. 9 million. 7%.

We believe our current earnings profile continues to support the monthly dividend while providing opportunities for further improvement as capital tied up in staged positions continues to be redeployed into performing investments. At the same time, we continue to execute on several important asset management initiatives and made meaningful progress reducing our staged loan exposure through a combination of resolutions, sale processes, and other asset-specific strategies. Overall, we're very encouraged by the underlying activity levels in the business and the stability of distributable income and the progress we're making against our key priorities for 2026.

With that, I'll turn the call over to Scott to walk through the portfolio in more detail. Scott Rowland, Chief Investment Officer Thanks, Blair, and good afternoon, everyone. I'll spend a few minutes reviewing portfolio composition and performance as well as asset management activity related to staged loans and then hand things over to Jeff to discuss originations, trends, and the lending environment at a high level. The portfolio remains well aligned with our long-standing investment strategy and risk framework.

At quarter end, just over 81% of the portfolio was invested in cash-flowing properties, and multi-residential assets represented approximately 60% of investments. The emphasis on income-producing real estate has been a core element of our strategy through multiple market cycles and remains unchanged today. At quarter end, first mortgages represented approximately 94% of investments. 3%.

6% a year ago. The decline primarily reflects lower benchmark rates and the repayment of certain higher-rate investments. Importantly, approximately 90% of the portfolio remains invested in floating-rate loans with contractual floors, and substantially all of those loans are currently operating at their floor rates. This continues to provide meaningful support to portfolio yields despite the lower-rate environment.

While lower benchmark rates have reduced portfolio yields over the past year, the earnings impact has been moderated by increased syndication activity, healthy fee generation, and lower borrowing costs. Together, these factors continue to support the portfolio's overall earnings profile and distributable income generation. The portfolio remains well diversified by geography and asset type. Ninety-seven percent of invested capital remains concentrated in Ontario, BC, Quebec, and Alberta, with a focus on major urban markets that benefit from stronger liquidity.

As Blair mentioned, we continue to make meaningful progress on our remaining Stage 2 and Stage 3 positions during the quarter. Since year end, Stage 3 balances have declined by more than 51%, reflecting the successful execution of multiple asset-specific resolution strategies and completed exits during the quarter. We resolved two Calgary Stage 3 positions through receiver-led sales processes and continue advancing several of our larger remaining files.

In terms of expected credit losses during the quarter, a significant portion was related to the Vancouver retail portfolio and reflects the carrying costs associated with positioning the asset for sale and advancing the exit strategy. We also updated valuation assumptions on certain Victoria assets to reflect current transaction activity and evolving sale processes. While these adjustments impacted earnings in the quarter, they are occurring alongside continued progress on the underlying exit strategies.

Although additional work remains, we believe we are now in the later stages of resolving many of the larger staged positions that have weighed on the portfolio in recent years. As these assets are resolved and capital is recycled into new mortgage investments, we expect an increasing proportion of the portfolio to contribute to earnings and distributable income generation. At this point, I'll turn things over to Jeff. Geoff McTait, Managing Director Thanks, Scott, and good afternoon, everyone.

Commercial real estate activity continued to improve through the second quarter, supported by increasing transaction volumes, improving financing market stability, and healthy borrower demand across our target markets. We advanced approximately 154 million during the quarter, including 11 new mortgage investments and additional advances on existing relationships. Originations remain concentrated within our core lending categories, particularly multi-residential opportunities with attractive risk-adjusted returns. Year to date, we've advanced approximately 350 million through 24 new investments, representing a meaningful increase over the same period last year.

Repayments totaled approximately 250 million during the quarter. While elevated, this activity was consistent with our expectations and reflects the healthy turnover characteristics of a transitional lending portfolio. More importantly, these repayments provide meaningful capacity to recycle capital into new opportunities while generating fee income that supports distributable income. Additionally, I would note that the quarter-end portfolio balance is a point-in-time measure that excludes an additional 100 million net that was subsequently deployed in early July.

24 billion. Syndication activity also remained strong during the quarter, continuing to support balance sheet capacity while contributing to earnings and distributable income. In summary, we continue to see an active flow of opportunities across our core markets and believe conditions remain supportive of robust origination activity through the balance of the year. I'll now turn the call over to Tracy.

Tracy Johnston, Chief Financial Officer Thanks, Jeff. Good afternoon, everyone. 9 million during Q2, essentially unchanged from both the prior quarter and the comparative period. Portfolio growth, increased fee generation, and lower funding costs largely offset the impact of lower benchmark interest rates.

5 million in the first quarter. 7%. 4 million in the prior period. As Scott discussed, the increase in expected credit losses reflects updated assumptions related to certain Stage 2 and Stage 3 positions and capital advances as part of ongoing resolution strategies.

17 per share in Q2 of last year. We believe this provides a useful view of the underlying earning capacity of the portfolio as staged loan resolutions continue to progress. This slide highlights the stability of our distributable income over time despite fluctuations in IFRS earnings resulting from the timing of credit provisions and valuation adjustments. As we've consistently said, distributable income remains the best measure of the recurring cash-generating ability of the portfolio and its capacity to support the monthly dividend over the medium term.

19 per share. The consistency of our distributable income profile reflects both the underlying earning power of the portfolio and the benefits of active capital deployment across the business. 14 billion at quarter end, an increase of approximately 30 million year over year. Credit utilization increased during the quarter, reflecting the pace of origination activity.

At the same time, the company continued to generate liquidity through repayments, syndication activity, and staged asset resolutions, supporting the ongoing recycling of capital into new lending opportunities. With an active pipeline and several resolution initiatives continuing to progress, we believe we are well positioned to redeploy capital into opportunities that meet our risk and return objectives. With that, I'll turn the call back to Scott for closing remarks. Scott Rowland, Chief Investment Officer Thanks, Tracy.

As we enter the second half of 2026, our focus remains on executing against the same priorities that drove results in the first half of the year: disciplined originations, staged loan resolutions, and redeploying capital into investments that enhance earnings generation. The progress achieved on staged loan resolutions over the past several quarters is creating an increasingly attractive opportunity set for capital redeployment. With more than 314 million of originations completed year to date and an active near-term pipeline, we continue to see opportunities to put recovered capital back to work across our core lending categories. That concludes our prepared remarks.

We'll now open the call to questions. OPERATOR We will now take any analyst questions. If you have a question, please click the raise hand button at the bottom right screen below. The first question comes from Stephen Boland.

Stephen, your line is open. Please go ahead. Stephen Boland, Analyst Hi there. Can you just talk about, you know, obviously multi-unit is your kind of bread and butter, but can you just talk about the environment for some of the other segments?

Like the market, as you mentioned, has stabilized, but I'm just curious which ones are leading and which ones are trailing? Geoff McTait, Managing Director You don't mind? Yeah, no, listen, it's Jeff. Hi, happy to answer that question.

I mean, yeah, obviously, you know, the multi-res space continues to kind of be a primary focus of ours as a MIC, obviously, and given the historical stability in this market, irrespective of some softness in the broader residential markets over the last period of time. But we do continue to see that as a primary focus for sure. Additionally, we are starting to see some broader activity.

Again, somewhat of a broader indication of improving transactional and market activity outside of multi-res, and industrial would kind of be the second primary class that I think we've been speaking about over the last number of quarters as kind of the other primary food group for us to this point in time. But listen, of late we are starting to see, I mean, retail continues to be an opportunity that's out there. We're looking at opportunities, they get bid pretty competitively. So again it's one-offs on those and we don't expect to do a ton of that business.

But we are seeing some increased trading activity in the retail space and then we are also starting to see more office opportunities. Again I think we're looking at those cautiously out of the gate for sure. But the frequency of office transactions and the opportunities to consider financing them has been more prevalent certainly over the last quarter than we've seen in the months or years prior to that point. So that's again I think a broader indication of where transaction activity is occurring.

We're seeing activity in the student residence space, in the retirement home space, some lesser activity, but a product we like in the self-storage space and the manufactured housing space. Again, you know, that tends to be—these are smaller one-off opportunities, but again pretty historically stable. Manufactured housing in particular much more aligned with residential generally. But again it is a broadening scope of asset classes that we're starting to see more so than has been the case in prior quarters or the last year or two.

Yeah, I don't, I don't know if it's—I mean, like, I think it's in line with what we would typically expect and I don't know if it's necessarily a high-water mark in Q2 per se. Like, I think it is generally fairly consistent throughout the year. You know, again it'll ebb and flow a little bit, you know, in that, you know, in and around that range. But I don't think it's an overly seasonal thing.

I think it's more originations activity tends to be more seasonal than repayment activity. And frankly first half we've been very, very pleased with the levels of activities. I'd say it's been higher than would seasonably be the case for the first half and the second half generally for us is where we do the majority of our business and we continue to expect that to be the case. Repayments I think are a little bit more consistent throughout the year.

Scott Rowland, Chief Investment Officer Yeah, I'll add to that. Like, it's Scott. Often, actually, we see Q4 as a major repayment. Like, so this was a little high for Q2, but exactly to Jeff's point for us, right.

Repayments sort of create the capacity for loans. So sometimes it is a little random. You know, some projects get completed sooner or there's a moment in the market that borrowers feel they could refinance. We normally get sort of 60 days' heads-up on that happening, right.

And that helps us create the, you know, the runway for future loans. So as an example, like Q2, there were significant repayments and so—but like I can tell you, in July we had significant fundings. So it's just kind of sometimes just sort of one falls after the other. OPERATOR Next call comes from Graham.

Graham, your line is open. Please go ahead. Gabriel, Analyst at Bullpen Hey, it's Gabriel from Bullpen. Nice to see that syndication picked up.

Obviously it's a high return for Timbercreek Financial. I'm just wondering, can you talk about how the team's thinking about this part of the book a bit? Geoff McTait, Managing Director Sorry, who's speaking? We couldn't quite hear you there.

Gabriel, Analyst at Bullpen Sorry, can you hear me now? Gabriel, Gabriel from Bullpen. Geoff McTait, Managing Director Hey, Gabriel, sorry, I couldn't hear you quite there. Would you mind just repeating that question?

Gabriel, Analyst at Bullpen Yeah, sorry about that. Hopefully this is better. Geoff McTait, Managing Director Yeah, that is better. Yeah, thanks.

Gabriel, Analyst at Bullpen Okay, perfect. Yes, I was thinking about the syndication. It's picked up in the quarter, obviously, higher return. I'm just wondering how you're thinking about this part of the book.

Geoff McTait, Managing Director Yeah, so listen, I think like syndications for us, we think about it like we utilize it for a handful of reasons, right. I mean, I think it's a combination of managing exposure on a given deal. Secondarily, we utilize it to create incremental originations capacity, right. So obviously as we syndicate an A note and hold a B note, that capital can be deployed into another opportunity.

And then obviously, you know, it really is a yield enhancement strategy as well, right.