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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____to_____

Commission file number: 333-4028-LA

MINISTRY PARTNERS INVESTMENT COMPANY, LLC

(Exact name of small business issuer in its charter)


CALIFORNIA		26-3959348
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)


1 Pointe Drive, Brea, CA 92821	92821
(Address of principal executive offices)	(Zip Code)

Issuer’s telephone number:	(714) 671-5720
Securities registered under 12(b) of the Exchange Act:	None
Securities registered under 12(g) of the Exchange Act:	None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☑.

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☑.

Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐.

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit). Yes ☑ No ☐.

Indicate by check mark whether registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer ☐	Accelerated filer ☐	Non-accelerated filer ☑	Emerging Growth Company ☐	Smaller reporting company filer ☑

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revise accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. Yes ☐ No ☑.

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑.

As of May 4, 2017 (the last date any sale or exchange was made of our Class A Common Units), the aggregate market value of the registrant’s Class A Common Units held by non-affiliates was estimated to have no value. As of June 29, 2018 (the last date any sale or exchange was made of our Series A Preferred Units), the market value of the Series A Preferred Units was estimated at $67.50 per share or $7,904,250. The registrant has sold no Class A Common Units within the past sixty days and there is no public market value for the registrant’s Class A Common Units. The number of Class A Common Units outstanding, as of December 31, 2024, was 146,522.

DOCUMENTS INCORPORATED BY REFERENCE: None

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MINISTRY PARTNERS INVESTMENT COMPANY, LLC

FORM 10-K

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			Page No.

Part I
	Item 1.	Business	3
	Item 1A.	Risk Factors	20
	Item 1B.	Unresolved Staff Comments	36
	Item 1C.	Cybersecurity	36
	Item 2.	Properties	37
	Item 3.	Legal Proceedings	37
	Item 4.	Mine Safety Disclosures	38

Part II
	Item 5.	Market for our Common Equity, Related Member Matters and Issuer Purchases of Equity Securities	39
	Item 6.	[Reserved]	40
	Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	41
	Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	62
	Item 8.	Financial Statements and Supplementary Data	63 – F-63
	Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	64
	Item 9A.	Controls and Procedures	64
	Item 9B.	Other Information	65
	Item 9C.	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	65

Part III
	Item 10.	Managers and Executive Officers and Corporate Governance	66
	Item 11.	Executive Compensation	73
	Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Member Matters	75
	Item 13.	Certain Relationships and Related Transactions, and Director Independence	76
	Item 14.	Principal Accounting Fees and Services	77

Part IV
	Item 15.	Exhibits and Financial Statements Schedules	78
	Item 16	Form 10-K Summary	79

SIGNATURES			79

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Explanatory Note for Purposes of the “Safe Harbor Provisions” of Section 21E of the Securities Exchange Act of 1934, as amended

Certain statements in this 2024 10-K Report (“Report”), other than purely historical information, including estimates, projections, statements relating to our business plans, objectives and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are included with respect to, among other things, our current business plan, core strategy and portfolio management. These forward-looking statements generally are identified by the words “believe,” “project,” “expect,” “anticipate,” “estimate,” “intend,” “strategy,” “plan,” “may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties, which may cause actual results or outcomes to differ materially from those contained in the forward-looking statements. Important factors that we believe might cause such differences are discussed in the section entitled, “Risk Factors” in Part I, Item 1A of this Form 10-K or otherwise accompany the forward-looking statements contained in this Form 10-K. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise. In assessing all forward-looking statements, readers are urged to read carefully all cautionary statements contained in this Form 10-K.

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OUR COMPANY

Contact Information


Location of principal office	1 Pointe Drive, Suite 205, Brea, California 92821

Telephone number	(800) 753-6772

Website address	www.ministrypartners.org The Company’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports are available free of charge on the Company’s website at www.ministrypartners.org as soon as reasonably practicable after such material is electronically filed with, or furnished to, the U.S. Securities and Exchange Commission.

Throughout this document, we refer to Ministry Partners Investment Company, LLC and its subsidiaries as “the Company,” “we,” “us,” or “our.”

Our Identity and History

Purpose and Mission

We are a financial services company whose mission is to strengthen Christian stewardship by providing financial products and services to organizations, businesses, and individuals.

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We serve churches, ministries, individuals, businesses, and other financial institutions. We provide our clients with high quality advice based upon sound biblical and business principles through our investment advisory, insurance agency, broker-dealer, church financing, or servicing operations.

Organization

We are a credit union service organization (CUSO) owned by 11 credit unions and organized as a California limited liability company. We commenced operations in 1991.

Our Subsidiaries:

●

Ministry Partners Securities, LLC. (“MP Securities”);

●

Ministry Partners for Christ, Inc. (“MPC”);

●

Ministry Partners Funding, LLC. (“MPF”); and

●

MP Realty Services, Inc. (“MP Realty”)

MP Securities is a Delaware limited liability company we formed on April 26, 2010. We began conducting business operations through MP Securities in 2012. MP Securities provides investment advisory, insurance, and financial planning solutions for individuals, businesses, and faith-based organizations. MP Securities also serves as the selling agent for the Company’s public and private placement debt certificates.

MPC is a not-for-profit corporation formed and organized under Delaware law. We founded MPC in order to make charitable grants to Christian organizations, and provide consulting, and financial expertise to aid evangelical Christian ministries. The Internal Revenue Service has granted MPC tax-exempt status under Section 501(c)(3) of the Internal Revenue Code.

MPF serves as the custodian of assets pledged to investors in our secured investment debt certificates. As of December 31, 2024 and 2023, we have no secured investment debt certificates outstanding.

Our Competition

Investment advisory, broker-dealer, insurance, and financial planning services

There are many mainstream financial services organizations that serve the faith-based market segment throughout the United States. Most of the competitors in this institutional market segment include banks, credit unions, denominational investment funds, as well as larger investment and insurance organizations. However, the overall size of the market segment provides ample opportunities for quality firms with specialized knowledge of the

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governance surrounding churches and ministries to effectively provide and expand the services we offer. We also serve the retail marketplace throughout the United States. While the retail market segment has large national competitors as well as local investment advisors that offer alternative options, MP Securities’ comprehensive approach to offering investment and insurance advice with a missional purpose of strengthening Christian stewardship of financial resources enables us to provide services and products to an expanding market of potential clients.

The religious loan market segment

This segment has grown since our launch in 1991, and the demand for ministry loans originated and serviced by niche lenders to churches and ministries has continued to exceed available lending and financing sources for this sector. The availability of lenders serving this market has been unpredictable as larger financial institutions expand, contract, or vacate this niche market during periods of fluctuating demand and changing market conditions. We have specialized in helping these organizations since we began operations in 1991 and believe that the lack of predictable financing sources for evangelical Christian churches and organizations enables us to serve ministries that otherwise may not be able to obtain cost-effective mortgage loans.

Although the demand for church financing is both broad and fragmented, no one lender has a dominant competitive position in the market. We compete with church bond financing companies, banks, credit unions, denominational loan funds, and other financial institutions to service this market. Many of these entities have greater marketing resources, extensive networks of offices, larger staffs, and lower cost of operations due to their size. However, we believe we have developed an efficient, effective, and economical operation that (i) specializes in identifying and creating a diversified portfolio of church mortgage loans that we or other credit unions originate and (ii) preserves our capital base and generates consistent income for payments on our debt obligations and generates investment returns for our equity investors.

We rely upon the extensive experience of our officers, management team, and Board of Managers in working with ministry related financing transactions, loan origination, and investment in churches, schools, ministries, and non-profit organizations.

Our Principal Business and Markets

Overview

We serve churches, ministries, individuals, businesses, and financial institutions through two primary business segments. One is our investment advisory practice, broker-dealer firm, and insurance agency and the other consists of our ministry and business lending

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group. Within these segments, we offer a wide range of products and services for investors, borrowers, ministries, businesses, and individuals. The wide range of products and services has enabled the Company to generate revenue from multiple product lines, which we believe creates a more resilient business model. Our business plan seeks to grow our revenue streams as well as invest in new revenue sources from our two primary business segments.

We generate our revenue primarily from the following sources:

•

interest income earned on our loan and cash investments;

•

fee and/or commission income earned from the sale of securities, insurance, and investment products by our wholly owned broker-dealer firm;

•

fees received for performing investment advisory services for our clients;

•

fee income earned from originating and servicing our loan investments; and

•

gains realized on the sale of loans and loan participation interests to financial institutions.

The chart below summarizes the breakdown of these revenue sources for the year ended December 31, 2024:

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Investment Advisory, Broker-Dealer, Insurance, and Financial Planning Solutions Segment

We provide investment advisory, broker-dealer, insurance, and financial planning solutions for individuals and businesses, as well as churches and ministries. We provide these investment products and services through our wholly owned broker-dealer, MP Securities, which serves as an investment advisory and broker-dealer firm with access to mainstream investment platforms that offer high quality products and services. MP Securities serves its clients through a comprehensive approach based upon identifying the client’s needs and objectives. This financial planning process considers all options available to our clients as we act in their best interest to meet our fiduciary duty of care.

For individuals, organizations, and businesses, our mission is to strengthen their stewardship of personal wealth through biblically based financial and legacy planning, ethically responsible investment and insurance advice. For these clients the Company provides planning for retirement, college funding, insurance, inheritance, and tax management.

For our church and ministry clients, through MP Securities, we strengthen their stewardship of resources through prudent treasury management services, ethically responsible investments, sound employee benefits, and risk planning.

MP Securities offers its insurance products and services through our California insurance agency to help protect clients from unexpected life events. MP Securities also offers life, disability, long-term care, fixed, variable, and indexed annuities to its retail and institutional clients. With respect to the annuity products available through MP Securities, many of our clients use annuity products that mitigate risk through income guarantees. In all cases, MP Securities and its advisors have an obligation to act in the best interest of its clients.

The table below shows the breakout of MP Securities’ assets under management of $225.6 million as of December 31, 2024 (dollars in thousands):

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MP Securities keeps a clearing firm relationship with Royal Bank of Canada Dain Rauscher (“RBC Dain”), which provides additional investment platform options for our clientele. As a non-carrying broker-dealer, MP Securities opens brokerage accounts for its customers through its clearing firm agreement with RBC Dain.

MP Securities is a registered broker-dealer firm under Section 15 of the Securities Exchange Act of 1934 and a member of the Financial Industry Regulatory Authority (“FINRA”) and the Securities Investor Protection Corporation (“SIPC”). In addition, MP Securities holds a resident license from the California Department of Insurance to act as an Insurance Producer under the name Ministry Partners Insurance Agency, LLC.

MP Securities also serves financial institutions by providing securities brokerage services to credit unions, CUSOs, and the customers and institutions it serves. It also acts as a selling agent for the Company’s debt certificates offered through both public and private note offerings.

The SEC, FINRA, California’s Department of Financial Protection and Innovation (“DFPI”), and the California Department of Insurance all directly regulate MP Securities due to its broad offering of products and professional services. In addition, state insurance or securities divisions have granted MP Securities a license to do business in every state in which we offer services. As of December 31, 2024, MP Securities was licensed to serve as an insurance broker in 16 states and offers investments in 25 states.

Ministry and Business Loan Financing Segment

Overview

We help evangelical Christian churches and organizations by providing financing for the acquisition, development, and/or renovation of churches or church-related properties and provide investors the opportunity to participate in funding those projects. We typically secure these loans by real property owned by evangelical churches or church-related organizations such as Christian schools and ministries. As of December 31, 2024, real estate secured 99.9% of the loans in our portfolio. We also invest in for-profit commercial and business loans to entities run by Christian principals. Currently, we conduct all our business operations in California. However, we own loan interests in 28 different states, including the District of Columbia.

We acquire loans either through originating loans internally or buying loans or loan participation interests from other financial institutions. When we originate a loan, we rely on our own underwriting capabilities and standards. For loans that we buy, we apply our internally developed underwriting criteria and loan acquisition policies and review the underwriting procedures carried out by the financial institution that is selling the loan or participation interest.

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Funding Our Operations

We utilize three primary on-balance sheet sources to finance our church and ministry loan investments: (i) investor debt certificates; (ii) borrowings from financial institutions; and (iii) capital investments of our equity members. A significant portion of our loan investments is funded through the sale debt certificates to new and repeat investors, primarily targeting individuals, businesses, churches, and ministries within the Christian community. Additionally, we have financed our loan investments through borrowings from financial institutions and, periodically, by selling participation interests in our loans to other financial institutions. Furthermore, the Company's owners have made substantial capital investments to support the balance sheet alongside ongoing earnings.

In recent years, we have reduced our reliance on borrowings from financial institutions, instead focusing on increasing funding through the sale of investor securities and member equity. By reducing our secured debt credit facilities, we have significantly increased our net capital and strengthened our balance sheet.

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The chart below illustrates the evolution of our financing strategy for investments and business operations (dollars in thousands):

Sale of Loan Participations as a Funding Source

The table below shows the activity in our participation sold portfolio (dollars in thousands).


	As of and for the years ended
	December 31,		December 31,
	2024		2023
Participation loan interests sold by the Company during the year	$	8,370	$	502
Total participation interests sold and serviced by the Company		32,475		31,466
Servicing income		126		134

Servicing Assets
Balance, beginning of period	$	98	$	123
Additions:
Servicing obligations from sale of loan participations		123		18
Subtractions:
Amortization		(44)		(43)
Balance, end of period	$	177	$	98

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Human Capital Resources

The Company relies on the experience of its lending, financial services, underwriting, loan servicing skills, and experience of our management team. A substantial number of our employees have extensive experience in the financial services industry. We have staff located in our Brea, Glendora, and Fresno, California offices. As the Company expands the range of services, products, and investment services it offers, the Company will look to find and recruit qualified personnel that will enable the Company to further diversify the services and products it offers and increase its revenues and profitability.

Effect of Government Regulations on the Business

General

Because we are a credit union service organization we are subject to the regulations issued by the National Credit Union Administration (“NCUA”) that apply to CUSOs. As a CUSO, we primarily serve the interests of our credit union equity investors and members of such credit unions.

We are also subject to various laws and regulations that govern:

●

credit granting activities;

●

establishment of maximum interest rates;

●

data privacy standards;

●

disclosures to borrowers and investors in our equity securities;

●

secured transactions;

●

foreclosure, judicial sale, and creditor remedies that are available to a secured lender; and

●

the licensure requirements of mortgage lenders, finance lenders, securities brokers, and financial advisers.

As a CUSO, we are limited in the scope of activities we may provide. In addition, our federal credit union equity investors are permitted to invest in or lend to a CUSO only if the CUSO primarily serves credit unions, its membership or the membership of credit unions contracting with the CUSO. While the NCUA lacks direct supervisory authority over our operations, our federal credit union equity owners are subject to regulations which govern the rules and conditions of an investment or loan they make or sell to a CUSO. In addition, state-chartered credit unions must follow their respective state’s guidelines which

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govern investments by a state-chartered credit union. California’s DFPI regulates several of our equity owners. These credit union owners must follow DFPI regulations that govern the investment in a loan they make to a CUSO.

Tax Status

Effective with our conversion from a corporate form of organization to a limited liability company organized under the laws of the State of California on December 31, 2008, we have chosen to be treated as a partnership rather than a corporation for U.S. tax law purposes. As a result, profits and losses will flow directly to our equity investors under the provisions of our governing documents. If we fail to qualify as a partnership in any taxable year, we will be subject to federal income tax on our net taxable income at regular corporate tax rates. As a limited liability company organized under California law, we are also subject to an annual franchise fee plus a gross receipts tax on our gross revenues from our California based activities if our gross revenues are in excess of $250 thousand per year.

Regulation of Mortgage Lenders

We conduct loan originating activities for churches, ministries, faith-based organizations and business owners. Many states regulate the investment in or origination of mortgage loans. Under the California Finance Lender’s Law, no lender may engage in the business of providing services as a “finance lender” or “broker” without obtaining a license from the DFPI, unless otherwise exempt under the law. We conduct our commercial lending activities under a California finance lender license.

As a finance lender, we are licensed with the DFPI and file reports from time to time with the DFPI. Accordingly, the DFPI has enforcement authority over our operations as a finance lender, which includes, among other things, the ability to assess civil monetary penalties, issue cease and desist orders and initiate injunctive actions. We also are subject to licensing requirements in other jurisdictions in connection with our mortgage lending activities. Various laws and judicial and administrative decisions may impose requirements and restrictions that govern secured transactions, require specific disclosure to our borrowers and customers, establish collection, foreclosure, and repossession standards and regulate the use and reporting of certain borrower and customer financial information.

As we offer and originate loans outside of the State of California, we need to comply with laws and regulations of those states. The statutes which govern mortgage lending and origination activities vary from state to state. Because these laws are constantly changing, due in part, to the challenge facing the real estate industry and financial institutions from residential lending activities, it is difficult to comprehensively identify, accurately interpret and effectively train our staff with respect to all of these laws and regulations. We intend to

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comply with all applicable laws and regulations wherever we do business and will undertake a best-efforts program to do so, including the engagement of professional consultants, legal counsel, and other experts as deemed necessary by our management.

Environmental Issues Associated with Real Estate Lending

The Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), a federal statute, generally imposes strict liability on all prior and current “owners and operators” of sites containing hazardous waste. However, Congress acted to protect secured creditors by providing that the term “owner and operator” excludes a person whose ownership is limited to protecting its security interest in the site. Since the enactment of the CERCLA, this “secured creditor exemption” has been the subject of judicial interpretations which have left open the possibility that lenders could be liable for clean-up costs on contaminated property that they hold as collateral for a loan. To the extent that legal uncertainty exists in this area, all creditors that have made loans secured by properties with potential hazardous waste contamination (such as petroleum contamination) could be subject to liability for clean-up costs, which costs often substantially exceed the value of the collateral property. In addition, state and local environmental laws, ordinances and regulations can also impact the properties underlying our mortgage loan investments. An owner or control party of a site may also be subject to common law claims by third parties based on damages and costs resulting from environmental contamination emanating from a site.

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Regulation of Financial Services

The financial services industry in the U.S. is subject to extensive regulation under federal and state laws. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank Act”) was enacted on July 21, 2010. The Dodd-Frank Act resulted in sweeping changes in the regulation of financial institutions and created a new Consumer Financial Protection Bureau and Financial Stability Oversight Council with authority to identify institutions and practices that might pose a systemic risk. The Dodd-Frank Act has increased regulation of the financial industry with the intent of better protecting customers of the financial services industry. We believe that the Dodd-Frank Act and regulations adopted thereunder have not had a material impact on our business and operations. U.S. broker dealers are subject to rules and regulations imposed by the SEC, FINRA, other self-regulatory organizations, and state securities administrators covering all aspects of the securities business. Our wholly owned broker-dealer firm, MP Securities, commenced operations in 2012. As a registered broker-dealer under Section 15 of the Securities Exchange Act of 1934 (the “Exchange Act”), MP Securities is subject to regulation by the SEC and regulation by state securities administrators in the states in which it conducts its activities.

We have registered MP Securities in the following states:


Arizona	Idaho	Massachusetts	Ohio	South Carolina
California	Illinois	Minnesota	Oklahoma	Tennessee
Colorado	Indiana	Missouri	Oregon	Texas
Florida	Kansas	Nevada	Pennsylvania	Virginia
Georgia	Kentucky	New York	Rhode Island	Washington

MP Securities is subject to rules and regulations regarding:

●

net capital;

●

sales practices;

●

public and private securities offerings;

●

capital adequacy;

●

record keeping and reporting;

●

conflicts of interest involving related parties;

●

conduct of officers;

●

directors and employees;

●

qualification and licensing of supervisory and sales personnel;

●

marketing practices; and

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●

supervisory and oversight of personnel to ensure compliance with securities laws.

MP Securities is also subject to the financial responsibility, net capital, customer protection, record keeping, and notification rule amendments adopted by the SEC on July 30, 2013. Because MP Securities does not carry or hold customer funds or securities and relies upon a clearing firm to conduct these transactions, Rule 17a-5 requires that it file an exemption report as well as reports prepared by an independent public accountant confirming that it meets the exemption provisions. As amended, the net capital rule requires that MP Securities consider in its computation of regulatory net capital any liabilities the Company assumes as its parent entity.

MP Securities is also subject to routine inspections and examinations by the SEC staff under Rule 17(b) of the Exchange Act and the SEC is authorized to review, if requested, the work papers of the broker dealer’s independent public accounting firm that conducts the audit. As required by amendments to Rule 17a-5 of the Exchange Act, MP Securities files an annual report with the SEC and FINRA that includes its audited financial statements, supporting schedules and its exemption report as a non-carrying broker-dealer. MP Securities is a member of the SIPC and files a copy of its annual report with SIPC. FINRA, state securities and financial service regulators periodically examine the operations, sales practices and financial condition of MP Securities.

Much of the regulation of broker-dealers in the U.S. has been delegated to self-regulatory organizations, principally FINRA and the securities exchanges. FINRA adopts and amends rules (which are subject to approval by the SEC) for regulating the industry and conducts periodic examinations of member firms. The SEC, FINRA, and state securities administrators may conduct administrative proceedings that can result in censure, cease and desist orders, fine, suspension, or expulsion of a broker-dealer, its officers, or employees. We could incur substantial expenses and reputational damage in connection with a regulatory action initiated by the SEC, FINRA, or state regulator. Certain infractions and violations could also affect our ability to sell our investor notes and finance our business.

As of the date of this Annual Report on Form 10-K, we are responding to and furnishing information to FINRA in connection with a regular FINRA exam that is focusing on our compliance with Regulation BI, due diligence and supervisory obligations when conducting sales activities for our investor notes. We are cooperating with FINRA’s examination staff when undertaking this review and have implemented improvements in our practices and procedures for our investor notes program.

Due to our close affiliation with MP Securities, we are subject to related party transaction disclosure issues under federal and state securities laws and rules adopted by FINRA. In particular, related party transactions can raise regulatory concerns:

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●

in determining whether MP Securities meets its net capital requirements;

●

in whether the allocation of costs is fairly treated in any expense sharing arrangements or management services agreements entered into with the Company;

●

with regard to compensation paid to sales representatives in selling proprietary securities products offered by the Company; and

●

complying with the suitability, know your customer, and fair practices and dealings obligations under federal and state law, and rules imposed by FINRA on broker dealer firms.

MP Securities is also subject to FINRA’s review and policies governing disclosure practices when offering proprietary securities products, training its staff to identify and manage conflicts of interest and reporting on significant conflict issues, including the firm’s adopted measures to identify and manage conflicts, to the MP Securities Board of Managers and its Chief Executive Officer.

As a broker-dealer firm, MP Securities is subject to regulation regarding:

●

sales methods;

●

use of advertising materials;

●

arrangements with clearing firms or exchanges;

●

record keeping;

●

regulatory reporting; and

●

conduct of managers, officers, employees, and supervision.

To the extent MP Securities solicits orders from customers; it will be subject to additional rules and regulations governing sales practices and suitability rules imposed on member firms.

MP Securities acts as a selling agent for the Company’s public and private debt certificates. Due to this role, MP Securities must comply with FINRA’s filing requirements for these offerings. We believe that MP Securities has fully complied with its filing obligations as required under applicable FINRA, SEC, and state securities laws.

MP Securities must also maintain minimum net capital pursuant to rules imposed by FINRA. In general, net capital is the net worth of the entity (assets minus liabilities) less any other imposed deductions or other charges. A member firm that fails to maintain the required net capital must cease conducting business. If it does not do so, it may be subject

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to suspension or revocation of registration by the SEC and suspension or expulsion by FINRA. Under its Membership Agreement entered into with FINRA, MP Securities is required to maintain minimum net capital of the greater of $5,000 or one fifteenth of its aggregate indebtedness. As required by the 2013 amendments adopted by the SEC, MP Securities is required to include any liabilities assumed by the Company unless the Company is able to demonstrate that it has adequate capital to pay such expenses.

Regulation Best Interest / Fiduciary Standards

On June 5, 2019, the SEC adopted a package of rules and interpretations designed to improve disclosures made to retail investors, assist investors better understand the services offered by investment advisors and broker dealer firms and make informed decisions. Regulation BI established a “best interest” standard of conduct when recommendations are made to a retail customer involving an investment strategy or purchase of a security. Under the Regulation BI rule, the broker-dealer firm and investment adviser must provide the customer with a brief relationship summary known as Form CRS. Regulation BI requires that MP Securities, when making recommendations, act in the best interest of retail customers and place the investor’s interests above the financial or other interests of the broker-dealer or sales representative. Regulation BI also establishes a standard of conduct and imposes obligations related to disclosure, duty of care, conflicts of interest and compliance. The SEC, FINRA and state regulators are placing a priority on Regulation BI compliance for broker dealer and financial services firms in their regulatory announcements, policy initiatives and enforcement actions involving broker dealer firms.

On April 20, 2023, the SEC issued a SEC Staff Bulletin entitled “Standards of Conduct for Broker-Dealers and Investment Advisor Care Obligations.” In this Staff Bulletin, the SEC focused on the care obligations under Regulation BI for broker dealers and duty of care obligation on investment advisers under the Investment Advisers Act of 1940 which the SEC staff refers to as the “IA Fiduciary Standard.” Both Regulation BI and IA Fiduciary Standard focus on three key components:

(i)does the firm or adviser have an understating of the risks, rewards and costs associated with a product, investment strategy account type or transactions being considered;

(ii)does the firm or adviser have a reasonable understanding of the retail investor’s investment profile, financial situation, income, needs, assets and debts, marital status, age, liquidity needs, investment experience, risk tolerance, investment horizon and financial goals; and

(iii)once the firm or advisor understands and analyzes the first two components, and considers reasonable available alternatives, does the firm or advisor have a reasonable

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basis to conclude that the recommendation made or advice given is in the retail investor’s best interest.

Our subsidiary, MP Securities, reviews and maintains compliance procedures to comply with Regulation BI and the IA Fiduciary Standard and engages compliance professionals to assist in complying with these rules adopted by the SEC, FINRA and particular states that have adopted rules to govern transactions occurring within their respective states. We are monitoring developments in industry compliance practices as well as regulatory initiatives, examinations and enforcement actions undertaken by the SEC, FINRA and state regulators under the Regulation BI standard of conduct. We also have made improvements in MP Securities’ operating and supervisory procedures as needed to address the best interest standard of conduct. The ultimate impact on industry practices and MP Securities of these rules and regulations, however, cannot be known at this time.

Regulation of Investment Advisers

On July 11, 2013, the State of California granted its approval for MP Securities to provide investment advisory services. As a California registered investment advisory firm, MP Securities is required to develop and maintain compliance procedures, record keeping procedures, comply with custody rules, marketing and disclosure obligations. MP Securities is also subject to the Investment Advisers Act of 1940, as amended, and related regulations. The SEC is authorized to institute proceedings and impose fines and sanctions for violation of the Investment Advisers Act. In addition to ensuring MP Securities’ compliance with federal and state laws governing its activities as a California registered investment advisory firm, the California DFPI requires that representatives hired by MP Securities meet certain qualification requirements, including complying with certain testing requirements and examinations.

Our failure to comply with the requirements of the Investment Advisers Act, related SEC rules or regulations and provisions of the California Corporations Code and Code of Regulations could have a material effect on us. We believe we are in full compliance in all material aspects with SEC requirements and California laws and regulations. As MP Securities hires new registered investment advisers, it will be required to monitor its compliance with SEC and DFPI regulations.

Privacy Standards

The Gramm-Leach-Bliley Financial Services Modernization Act of 1999 (“GLBA”) modernized the financial services industry by establishing a comprehensive framework to permit affiliations among commercial banks, insurance companies, securities firms and other financial service providers. We are subject to regulations implementing the privacy protection provisions of the GLBA. These regulations require us to disclose our privacy policy, including identifying with whom we share “non-public personal information” to

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our investors and borrowers at the time of establishing the customer relationship and annually thereafter. The State of California’s Financial Information Privacy Act also regulates consumer’s rights under California law to restrict the sharing of financial data. The California Consumer Privacy Act of 2018, as amended, also has added protections that are designed to enable consumers to protect third party access to their personal information. In recent years, there has been a heightened legislative and regulatory focus on data security, including requiring customer notification in case of a data breach. The SEC also requires that public reporting entities report cybersecurity incidents on a Current Report on Form 8-K as an additional reporting obligation within four days of management’s determination that the incident is material. Congress has held several hearings in the subject and legislation has been introduced which would impose more rigorous requirements for data security and response to data breaches. As MP Securities expands its investment advisory business operations, it will also need to monitor regulatory initiatives promulgated under the Dodd-Frank Act that affect investment advisers.

Certain Legal Aspects of Our Mortgage Loan Investments

Description of Legal Aspects

The mortgage loans are in the form of promissory notes secured by deeds of trust or mortgages on real property or other assets. In general, these notes require the borrower to pay principal and interest on specified dates. The deed of trust or mortgage securing the mortgage loan generally provides that in the event the borrower fails to timely pay principal or interest on the note or fails to satisfy any other obligations under the note, such as the failure to maintain the property in good repair, we may declare the entire balance of principal and interest under the note then due and payable.

Debtor Protection Statutes

In the event the principal and interest is not paid within a specified period, we must first attempt to collect on the mortgage loan by foreclosing on the real property or other asset securing the loan. In general, California law will not allow us to disregard the security and to proceed directly against the maker on the mortgage loan note. We must foreclose on the property under the deed of trust. Our ability to recover the value of the mortgage loan under such circumstances is affected by certain legal procedures and rights. Mortgage loans secured by real property are subject to the laws of the state in which the property is located and as applicable, federal law, including federal bankruptcy laws.

California, as most states, imposes statutory prohibitions which limit the remedies of a secured lender. A secured lender is limited in its right to receive a deficiency judgment against the borrower following foreclosure on the secured real property. These statutory prohibitions offer substantial protections to borrowers and effectively require a mortgage

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lender to look only to the value of the property securing the mortgage loan through a private sale foreclosure.

In addition to the California state laws restricting actions against borrowers, numerous other statutory provisions, including the federal bankruptcy laws, afford additional relief to debtors which may interface with or affect the ability of a secured lender to realize the value of its mortgage loan in the event of a default.

Under the Internal Revenue Code of 1986, as amended, certain liens in favor of the Internal Revenue Service for tax payments are provided priority over existing mortgage loans. Also, mortgage lenders are subject to other statutory and administrative requirements under various laws and regulations regarding the origination and servicing of mortgage loans, including laws and regulations governing federal and state consumer protection, truth-in-lending laws, the Federal Real Estate Settlement Procedures Act, the Equal Credit Opportunity Act, the Fair Credit Billing Act, the Fair Credit Reporting Act, and related statutes and regulations.

As a result of these debtor protection laws, we could sustain a loss because of any of the foregoing federal or state laws and regulations restricting and/or regulating the origination and servicing of mortgage loans. Also, these laws and regulations are subject to continual change and evolution, and it is always possible that inadvertent violations or liabilities may be incurred by reason of one or more of these provisions.

ITEM 1A.RISK FACTORS

Any of the following identified risks, along with other unidentified risks, or risks we believe are immaterial or unlikely, could harm the Company. The risks and uncertainties described below are not the only risks that may have a material, adverse effect on us. Other risks and uncertainties which are not identified below also could adversely affect our business, financial condition, and results of operations. The risks discussed below include forward-looking statements, and our actual results may differ substantially from those discussed in these forward-looking statements. Investors should carefully consider the risks described below in conjunction with the other information in this Form 10-K.

Risks Related to the Company

We may be unable to obtain sufficient capital to meet the financing requirements of our business.

Our ability to finance our operations and repay maturing obligations to our investors and credit facility lenders depends on our ability to raise funds from the sale of our debt certificates. Some of the factors that affect our ability to sell our debt certificates include:

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quality of the mortgage loan and business loan investments we make;

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the profitability of our operations; and

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attracting investors that are motivated by our emphasis on Christian stewardship, financing religious ministries and are willing to accept certain risk factors that accompany an investment in our debt securities.

Our growth is dependent on leverage, which may create other risks.

We use responsible leverage, which means borrowing to invest in mortgage assets. This mechanism creates net interest income for the Company. Our Board of Managers has overall responsibility for our financing strategy. Our success is dependent, in part, upon our ability to manage our leverage effectively. Leverage creates an opportunity for increased net income, but at the same time creates risks. For example, leveraging magnifies changes in our net worth. We will incur leverage only when we expect that it will enhance our investment returns. To generate a quick sell on an asset, the asset often sells at a discount. There can be no assurance that we will be able to meet our debt service obligations; and, if we must quickly sell assets to meet our debt service obligations, we risk incurring a loss on some or all those assets. Our management has been working on reducing the Company’s reliance on leverage by increasing revenue from non-balance sheet sources that do not require leverage, such as our broker-dealer commissions and loan servicing income.

We may be unable to successfully implement our strategy to grow our mortgage loan and non-interest generating segments of our business.

In recent years, we gradually decreased the total amount of mortgage loans on our balance sheet as part of an effort to reduce risk in the portfolio, dispose of or restructure non-performing loans and eliminate our outstanding term-debt through discounted principal payments when a favorable opportunity has arisen. We also implemented a strategy of transitioning to a more diversified financial services company that is focused on Christian stewardship. To effectively implement this strategy, we will need to increase our investment in technology, streamline our loan origination and underwriting process, and become more efficient in carrying out the operations of the Company. We also intend to continue our strategy of offering our financial products and services to our equity owners, strategic partners, and clients. Continuing to grow our business and investment loan portfolio will depend, in part, on our ability to address the needs of our clients, borrowers, investors, and strategic partners by effectively using technology to provide products and services that will enable us to create additional efficiencies in our business and expand the scope of and volume of financial transactions we are able to complete.

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The loss of our management team or the ability to attract and keep key employees could harm our business.

We are dependent on the industry knowledge, professional skillsets, institutional contacts, and overall financial services experience of our senior management team. We rely on our management team to develop relationships with current and potential clients and strategic business partners. We also rely on our management team to develop new products and services for our clientele, as well as the continued expansion of complimentary lines of business to diversify the Company’s value proposition further. We can give no assurances that we will be able to recruit and keep qualified senior managers that will enable us to achieve our core strategic aims and continue to grow our business profitably.

Our broker-dealer and investment advisory business depends on fees generated from the distribution of financial products and advisory fees.

One of our strategic goals is to increase non-interest revenues from fees generated from the distribution of financial products, such as managed accounts, mutual funds, and annuity products. Changes in the structure or amount of fees paid by sponsors of these products could directly affect our non-interest revenue. In addition, if these products experience losses or increased investor redemptions, the revenue we earn from these products may decline.

The ability to attract and keep qualified financial advisors and associates is critical to MP Securities’ continued success.

As we continue to expand our non-interest revenue sources, we will need to expand our team of qualified investment and financial advisors that complement the services we provide to our clients. If we are unable to recruit and keep qualified professionals, we could jeopardize our strategic goal of increasing non-interest income, thereby adversely affecting our net earnings and financial condition.

From time to time, we have engaged in transactions with related parties and our policies and procedures on these transactions may be insufficient to address any conflicts of interest that may arise.

Under our code of business conduct, we have set up procedures for the review, approval, and ratification of transactions that may give rise to a conflict of interest between us and a related party. A related party is any employee, officer, board member, equity owner, trustee, their immediate family members, other businesses under their control, and other related persons. In the ordinary course of our business operations, we have ongoing relationships and engage in transactions with several related entities. This includes transactions with our equity owners. Conflicts of interest are inherent in any transactions involving credit facilities, funds on deposit with, mortgage loans bought, sold, participated, or serviced in our dealings with our equity owners. While the Company believes that it has

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taken reasonable measures to mitigate any risks, these procedures may not be sufficient to address conflicts of interest that may arise.

Risks Related to the Financial Services Industry and Financial Markets

The deterioration of market conditions could negatively affect our business.

Several factors that we cannot control affect the market in which we operate. These factors can have a potentially significant negative impact on our business. Some of these factors are:

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interest rates and credit spreads;

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the availability of credit, including the price, terms, and conditions under which it can be obtained;

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loan balances relative to the value of the underlying real estate assets;

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default rates on special purpose mortgage loans for churches and ministries, and the amount of the related losses;

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the actual and perceived state of the real estate markets for church properties and special use facilities;

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deterioration of local, global, and national economic conditions including epidemics or pandemics that may affect the local or global economy; or

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unemployment rates.

External Risks and Uncertainties could harm our operations.

The long-term impact of external factors such as the COVID-19 pandemic, Russia’s invasion of Ukraine, increased inflation, and global supply chain disruptions on our loan investments is still uncertain. These factors have already caused significant disruptions in the U.S. economy, leading to operational changes in churches, Christian schools, ministries, and businesses. Other challenges including geopolitical conflicts and economic uncertainties pose further stress on the economy and consumers. As our business heavily relies on timely loan payments from ministry borrowers, any disruption in giving trends due to these factors could materially affect our liquidity, loan loss reserves, and financial condition.

Declining real estate values could harm our operations.

We believe the risks associated with our business are more severe during periods in which an economic slowdown or recession is accompanied by declining real estate values. Declining real estate values often reduce the level of new mortgage loan originations, since

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borrowers often use increases in the value of their existing properties to support the purchase of, investment in, or renovation of their worship facilities. Borrowers may also have difficulty paying principal and interest on our loans if the real estate economy weakens. Further, declining real estate values significantly increase the likelihood that we will incur losses on our foreclosed assets and on our loans in case of default because the value of our collateral may be insufficient to cover our investment in such assets.

Any sustained period of increased payment delinquencies, foreclosures, or losses could adversely affect both our net interest income from loans as well as our ability to originate, sell, and securitize loans. These events would significantly harm our revenues, results of operations, financial condition, liquidity, and business prospects.

The Company is subject to interest rate risk.

Interest rate fluctuations and shifts in the yield curve may cause losses. Our primary interest rate exposures relate to our mortgage loan investments and floating rate debt obligations. Typically, our loan investments have a fixed interest rate with a five-year interest rate adjustment or maturity date. However, some of the borrowing arrangements with our investors use variable interest rates that are indexed to short-term borrowing rates or fixed rates on short-term maturities.

Changes in interest rates, including changes in expected interest rates or “yield curves,” affect our business in multiple ways. Changes in the general level of interest rates can affect our net interest income. Net interest income is the difference between the interest income we earn on our interest-earning assets and the interest expense we incur on our interest-bearing liabilities. Changes in the level of interest rates also can affect, among other things, our ability to originate and acquire mortgages, and the market value of our mortgage investments. In the case of a significant rising interest rate environment, default by our mortgage loan obligors could increase our losses and negatively affect our liquidity and operating results.

Our ability to expand the size of our loan portfolio is dependent on our ability to obtain debt financing at rates that result in a positive net interest income spread. We have used borrowing facilities obtained from institutional lenders and relied upon offerings of debt certificates in SEC registered offerings and private placement offerings to fund our mortgage loans investments. Our ability to fund future investments will be severely restricted if spreads on debt financing widen or if availability of credit facilities ceases to exist. In addition, an increase in our borrowing costs could decrease the spread we receive on our mortgage loan investments, which could adversely affect our ability to pay interest and redeem the outstanding debt certificates as they mature. To mitigate our interest rate risks, we have previously and may in the future use interest rate hedging transactions such as interest rate caps and interest rate swaps. We cannot guarantee the results of using these

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types of instruments to mitigate interest rate risks, and as a result, the volatility of interest rates could result in reduced earnings or losses for us.

In addition, increases in interest rates during the term of a loan may adversely affect a borrower’s ability to repay a loan at maturity or to prepay a loan. Our mortgage loans typically have large balloon payments due at maturity. When the loan matures and the balloon payment is due, the borrower must either pay the loan balance or refinance the loan with us or another lender. If interest rates are higher when the loan matures, the borrower’s payment on new financing may be higher. The borrower may not be able to afford the higher debt service, hindering its ability to refinance our loan. In addition, the borrower may not be able to refinance the loan because the value of the property has decreased. If a borrower is unable to repay our loan at maturity, we could suffer a loss and we would not be able to reinvest proceeds in assets with higher interest rates. As a result, it could adversely affect our business and profitability.

Regulatory compliance failures could adversely affect our reputation, operating business, and core strategic goals.

We rely on publicly offered debt certificates to fund a substantial part of our operations. As a result, we are subject to U.S. securities laws, rules, and regulations promulgated by the SEC and applicable state securities statutes. Our subsidiary, MP Securities, is subject to oversight from the SEC, FINRA, the Department of Insurance, California’s DFPI, and securities regulators in the states where MP Securities conducts business. To the extent MP Securities engages in securities and insurance-related activities in a particular state, state securities and insurance administrators will have authority over the activities of our broker-dealer affiliated entity. MP Securities is also subject to the Regulation Best Interest standard adopted by the U.S. Securities and Exchange Commission on June 5, 2019, which imposes additional regulatory burdens on broker-dealer firms when making a recommendation to purchase a security to a retail customer.

The regulatory environment for financial advisors and broker-dealer firms, including changes governing the standard of care applicable to investment advice and when sales of our investor notes are recommended for purchase to retail investors, increases the complexity and cost of operating our business. As a registered broker-dealer and FINRA member, MP Securities must maintain registrations under the securities laws in those states in which it conducts business. The North American Securities Administration Association (“NASAA”) has proposed a model conduct rule for broker-dealers for review by state regulators and possible adoption as a statutory mandate. It remains unclear how and whether regulators, including the SEC, FINRA, DOL, state securities, and financial service regulators may adopt, enforce, and respond to these new standards of conduct. The failure to follow obligations imposed by any regulatory authority binding on our subsidiaries or us

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or to keep any of the required licenses or permits could result in investigations, sanctions, and reputation damage.

Risks Related to Our Use of Technology

Our systems may experience a breach in security, which could subject us to increased operating costs as well as litigation and other liabilities.

We rely heavily on communications and information systems to conduct our business, process, send, and store electronic financial information. Any failure, interruption, or breach in the security of these systems could result in failures or disruptions in our critical business systems. The secure transmission of confidential information over the Internet, a technology outage of our or of a third party vendor and other electronic transmission and communication systems we use in our business is essential to keeping customer confidence in our services. Security breaches, computer viruses, acts of vandalism, and developments in computer capabilities could result in a breach or breakdown of the technology we use to protect customer and investor information and transaction data.

While we have policies and procedures designed to prevent or limit the effect of the possible failure, interruption, or security breach of our information systems, there can be no assurance that any such failure, interruption or security breach will not occur or, if they do occur, that they will be adequately addressed. Any breakdown or failures of our systems or one we rely upon maintained by a third party vendor could adversely affect our operations. The occurrence of any failure, interruption, or security breach of our information systems could damage our reputation, result in a loss for a borrower, investor, or customer’s business, or expose us to civil litigation and possible financial liability.

Our critical business systems may fail due to events out of our control, such as:

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unforeseen catastrophic events;

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cyber-attacks;

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human error;

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changes in operational practices of our system vendors; or

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unforeseen problems met while implementing major new computer systems or upgrades to existing systems.

These events could potentially result in data loss and adversely affect our ability to conduct our business. As of the date of this Report, to our knowledge, we have not experienced any material impacts relating to cyber-attacks or information system security breaches.

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We rely extensively on electronic storage of data, electronic communications, data processing and third party vendors to effectively operate our business.

We use third party vendors and contractors to prepare loan documentation, provide loan and closing services, title reports and commitments for our mortgage loan investments, electronically submit and store information regarding the Company’s loan investments as well as records relating to investments made in our debt securities. Our electronic records include confidential investor information as well as borrower and proprietary information of the ministries, clients and individuals we serve. Loss of data, hardware failure, virus or malware infection, data theft or the inability to access information when needed are risks that could adversely affect our operations.

We face cyber security risks and threats that could have a material adverse effect on our operations.

Cyber threats have become a major risk facing financial institutions that rely upon a network infrastructure and computer systems. Despite our reasonable efforts, we may not be able to anticipate all security breaches and we cannot provide any assurance that such perpetrators will not gain access or engage in improper conduct that could adversely affect our operations or information regarding your investment or loan information. Given rapid changes in the platforms, technology and vendor products we rely upon, the Company may be required to make significant investments in financial and human capital to maintain and upgrade the capabilities of our systems in order to effectively serve our clients, support regulatory compliance and meet our reporting obligations, retain qualified information technology employees and protect personal protected information of the clients we serve. If we fail to maintain, improve and implement our efforts to efficiently use these third-party vendor systems, our operations, reputation, financial condition and results of operations could be materially and adversely affected.

Our communications, data processing and communications systems could be impacted by downtime and service interruption.

We have implemented policies designed to plan for resiliency in the technology systems and networks that we rely upon to conduct our operations. The failure of our financial, accounting, data processing or other operating systems and facilities we rely upon to operate and report data properly could be adversely impacted by connectivity disruptions or otherwise become disabled as a result of events that are wholly or partially beyond our control. Because we rely upon third party service providers and vendors, certain technology and business functions and services, we face the risk of their operational failure. We use only providers and third party vendors we believe to be recognized in the industry as providing quality related services and we have required that these vendors implement reasonable security practices to safeguard any confidential, proprietary or personal information. No assurances can be given, however, that outside hackers or

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persons or perpetrators will not gain access to such provider systems or personal confidential information or will not engage in improper conduct with respect to such information such as committing identity theft or other illegal or improper activity.

Our business requires that we maintain appropriate oversight and organizational control of our technology systems.

We face operational risk if we fail to maintain organizational control, proper oversight of our employees and external third party vendors to record and process transactions and maintain proper reporting controls. We maintain internal controls intended to safeguard and maintain the integrity and accuracy of our operational infrastructure and information. We remain subject, however, to disruptions of our operating technology systems arising from events that our beyond our control.

Risks Related to Our Mortgage Loan Investments

We may need, from time to time, to sell or pledge as security our mortgage loan investments.

The market for church mortgage loans is specialized and therefore not as liquid as for a residential or commercial loan portfolio. As a result, in the event we need additional liquidity we may have difficulty in disposing of our mortgage loan portfolio quickly or at all. The amount we would realize is dependent on several factors, including the quality and yield of similar mortgage loans and the prevailing financial market and economic conditions. It is possible that we could realize substantially less than the face amount of our mortgage loans, should we be required to sell the loans or pledge them as collateral for debt. Thus, the amount we could realize for the liquidation of our mortgage loan investments is uncertain and unpredictable.

We are subject to risks related to prepayment of mortgage loans held in our portfolio, which may negatively affect our business.

Our borrowers may prepay the principal amount of their mortgage loans at any time. There is intense competition from financial institutions that are looking to make commercial loans at competitive rates to qualified borrowers. If a significant number of borrowers refinance their loans with other lenders, our profitability could be adversely affected.

We are subject to the risks associated with loan participations, such as less than full control rights.

We have sold participation interests in loans we have originated and service. We may need the consent of the parties to which we have sold the participation interest to exercise our rights under such loans, including rights with respect to amendment of loan documentation, enforcement proceedings in case of default, and the institution of, and

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control over, foreclosure proceedings. Similarly, a majority of the participants may be able to take actions to which we object but must comply with if our participation interest represents a minority interest. The lack of full control on participation interests sold may adversely affect our business.

Church revenues fluctuate and may substantially decrease during times of economic hardship and global pandemics.

To pay their loans, churches depend on revenues from church member contributions. Donations typically fluctuate over time for multiple reasons, including, but not limited to:

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changes in church leadership and church membership;

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local unemployment rates, credit conditions and real estate markets; and

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other local economic conditions, including epidemics or pandemics that may affect the local economy.

When a mortgage loan is made to a church, the senior pastor usually plays a critical role in determining whether the loan will be repaid.

The senior pastor of a church ministry usually performs a critical role in the leadership, management, effectiveness of the church’s governance and conflict of interest practices, and continued viability of the church. A leadership crisis faced by a church that loses its senior pastor due to death, disability, resignation, or retirement can negatively affect the church’s ability to meet its debt service obligations on a mortgage loan we make.

The quality of our mortgage loans depends on consistent application of sound underwriting standards.

The quality of the mortgage loans in which we invest depends on the adequacy and implementation of sound underwriting standards as described in our Board adopted loan policy. To achieve our desired loan risk levels, we must properly observe and implement our underwriting standards, which may change depending on the state of the economy.

We may suffer losses on loans due to not having all the material information relating to a potential borrower at the time that we make a credit decision with respect to that potential borrower or at the time we advance funds to the borrower.

There is typically no publicly available information about the churches and ministries to whom we lend. Therefore, we must rely on our borrowers and the due diligence efforts of our staff to obtain the information that we consider when making our credit decisions. Our staff partially depends and relies upon the pastoral staff to supply full and correct disclosure of material information concerning their operations and financial condition. We may not have access to all the material information about a particular borrower’s

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operations, financial condition, and prospects. In addition, a borrower’s accounting records may become poorly kept or organized. The financial condition and prospects of a church may also change rapidly in the current economic environment. In such instances, we may not make a fully informed credit decision, which may lead to a failure or inability to recover our loan in its entirety.

Because we primarily invest in specialized purpose mortgage loans, our loan portfolio is riskier than if it were diversified.

We are among a limited number of non-bank financial institutions specialized in supplying loans to evangelical churches and church organizations. Most of our loans are secured by church and ministry real properties and the secondary market for these loans is regional and limited. Our mortgage loan agreements require that the borrower insure the property. This requirement secures the loan against liability and casualty loss. However, certain types of losses, those of a catastrophic nature such as earthquakes, floods or storms, health emergencies such as the COVID-19 pandemic, and losses due to civil disobedience, are either uninsurable or are not economically insurable. If an uninsured loss destroys a property, we could suffer loss of all or a substantial part of our mortgage loan investment.

Our loan portfolio is concentrated geographically and focused on loans to churches and religious organizations.

Our loans are concentrated geographically, as shown in the table below. Economic conditions in each of these states could differ in a significant manner from the loan investments we have made in other states and the real estate values which serve as collateral in those states will depend, to a substantial degree, on the real estate markets in those markets.

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(in thousands)


	December 31, 2024
	Unpaid Balance of Loans		Percent of Total Loans		Number of Loans	Percent of Total Loans
California	$	7,557	8.0	%	23	17.2	%
Maryland		19,146	20.2	%	7	5.2	%
Illinois		13,567	14.3	%	19	14.2	%

	December 31, 2023
	Unpaid Balance of Loans		Percent of Total Loans		Number of Loans	Percent of Total Loans
California	$	9,019	9.0	%	25	18.7	%
Maryland		19,531	19.5	%	7	5.2	%
Illinois		11,173	11.1	%	15	11.2	%
District of Columbia		9,574	9.5	%	4	3.0	%

We may be unable to recognize or act upon an operational or financial problem with a church in a timely fashion to prevent a loss of our loan to that church.

Our borrowers may experience operational or financial problems that, if not timely addressed by us, could result in a substantial impairment or loss of the value of our loan to the borrower. We may fail to identify problems because our borrowers did not report them in a timely manner or, even if the borrower did report the problem, we may fail to address it quickly enough, or at all. We try to minimize our credit risk through prudent loan approval and monitoring practices in all categories of our lending. However, we cannot assure you that such monitoring and approval procedures will reduce these lending risks. We also cannot assure you that our credit administration personnel, policies, and procedures will properly adapt to changes in economic or any other conditions affecting our borrowers and the quality of our loan portfolio. As a result, we could suffer loan losses that could have a material adverse effect on our revenues, net income, and results of operations.

We make assumptions about the collectability of our loan portfolio.

We make various assumptions and judgments about the collectability of our loan portfolio, including the creditworthiness of our borrowers and the value of the real estate and other assets serving as collateral for the repayment of our loans. If we decide that it is probable that we will not be able to collect all amounts due to us under the terms of a particular loan agreement, we may have to recognize an impairment charge or a loss on the loan unless the value of the collateral securing the loan exceeds the carrying value of the loan.

If our assumptions regarding, among other things, the present value of expected future cash flows or the value of the collateral securing our loans are incorrect or general economic and financial conditions cause one or more borrowers to become unable to make payments

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under their loans, we may have to recognize impairment charges. These impairment charges could result in a material reduction in earnings in the period in which the loans are determined to be impaired. The impairment may have a material negative impact on our financial condition, liquidity, and ability to make debt service payments.

Our reserves for loan losses may prove inadequate, which could have a material, adverse effect on us.

Although we regularly evaluate our financial reserves to protect against future losses based on the probability and severity of the losses, there is no guarantee that our assessment of this risk will be adequate to cover any future potential losses. As of December 31, 2024, our allowance for loan losses totaled $1.2 million, or 1.22%, of our total loans.

Unanticipated adverse events may result in reserves that will be inadequate over time to protect against potential future losses. Examples of these adverse events are:

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significant negative changes in the economy;

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events affecting specific assets;

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events affecting specific borrowers;

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mismanaged construction;

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loss of a senior pastor;

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rising interest rates;

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failure to sell properties or assets;

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epidemics or pandemics that may affect the local or global economy; or

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events affecting the geographical regions in which our borrowers or their properties are located.

Maintaining the adequacy of our allowance for loan losses may require that we make significant and unanticipated increases in our provisions for loan losses, which would materially affect our results of operations and capital levels. See the section captioned “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Report for further discussion related to our process for determining the appropriate level for the allowance for loan losses.

Some of our mortgage loan investments currently are, and in the future may be, nonaccrual loans or may be restructured, which subject us to increased risks compared to performing loans.

Some of the loans in our mortgage loan portfolio currently are, or in the future may become a non-performing loan. Such loans may become non-performing if the church falls

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upon financial distress, the community or congregation the church serves suffers financial hardship, or there is an adverse change in leadership of the church. These circumstances could result in the borrower being unable to meet its debt service obligations to us. Non-performing loans may require our management team to devote a substantial amount of their resources to workout negotiations and restructuring efforts. These restructuring efforts may involve modifications to the interest rate, extension, or deferral of payments to be made under the loan or other concessions. For restructured loans, a risk still exists that the borrower may not be able or willing to continue the restructured payments or refinance the restructured mortgage at maturity. Our troubled assets could increase significantly if borrowers become delinquent and we are unsuccessful in managing our non-performing assets. This in turn could have a material, unfavorable effect on our results of operations and financial condition. For more information on our non-performing assets, see the caption titled “Nonaccrual, Past Due, Non-performing Modified Loans, and Foreclosed Assets” in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of this Report.

In the event a borrower defaults on one of our mortgage loan investments, we may need to recover our investment through the sale of the property securing the loan.

In that event, the value of the real property security may prove insufficient to recover the amount of our investment. Even though we may obtain an appraisal of the property at the time we originate the loan, the property’s value could decline after the appraisal is performed because of various events, including:

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uninsured casualty loss (such as an earthquake or flood);

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a decline in the local real estate market;

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undiscovered defects on the property;

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waste or neglect of the property;

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a downturn in demographic and residential trends;

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epidemics or pandemics that may affect the local or global economy;

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environmental hazards;

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a decline in growth in the area in which the property is located; and

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churches and church-related properties are typically not as marketable as more common commercial, retail, or residential properties.

The occurrence of any of these events could severely impair the market value of the security for our mortgage loan investments. In case of a default under a mortgage loan held directly by us, we will bear the risk of loss of principal to the extent of any deficiency

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between the value of the collateral and the principal and the accrued interest of the mortgage loan. Foreclosure of a church mortgage can be an expensive and lengthy process, which could have a significant effect on our expected return on the foreclosed mortgage loan. Such delays can cause the value of the mortgaged property to deteriorate further. The properties also incur operating expenses pending their sale, including property insurance, management fees, security, repairs, and maintenance. Any added expenses incurred could adversely affect our ability to recover the full value of our collateral. In addition, if we foreclose on a mortgage loan and take legal title to the real property, we could become responsible for real estate taxes levied and assessed against the foreclosed property as well as other costs such as property maintenance and insurance costs. These costs would be our responsibility and could reduce our recovery on our investment.

The risks of cost overruns and non-completion of the construction or renovation of the mortgage properties securing construction loans we invest in may have a material and adverse effect on our investment.

The renovations, refurbishment, or expansion by a borrower of a mortgage property involves risks of cost overruns and non-completion. Costs of construction or improvements to bring a mortgage property up to the required standards for that property might exceed original estimates, possibly making a project uneconomical. Such delays and cost overruns are often the result of events outside both our and the borrower’s control such as material shortages, labor shortages, labor strikes, pandemics, and unexpected delays caused by weather and other acts of nature. In addition, environmental risks and construction defects may cause cost overruns, and completion delays. If the borrower does not complete such construction or renovation in a timely manner, or if it costs more than expected, the borrower may experience a prolonged impairment of the borrower’s revenues impacting their ability to make their payments on our loan.

We face potential environmental liabilities related to properties we acquire.

As part of our business operations, we may acquire real estate through foreclosure on mortgage loan investments. If we take ownership of a property, we may be exposed to environmental liabilities concerning this property. This exposure could lead to liability claims from government entities or third parties for property damage, personal injury, and the costs associated with investigating and cleaning up environmental contamination. Furthermore, we might be obligated to address hazardous substances, toxic materials, or chemical releases at a property, with the possibility of incurring substantial costs for investigation or remediation activities. If we were to encounter significant environmental liabilities, it could materially and adversely impact our business, financial condition, liquidity, and results of operations.

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Risks Relating to Our Debt Certificates

Unexpected large withdrawals by investors that hold our debt certificates can reduce our overall liquidity.

We continue to expand our methods of raising funds, including selling participations in our mortgage loan investments, expanding the sales of our debt certificates, and maintaining lines of credit at financial institutions. If this strategy becomes less effective, we will need to find alternative sources of borrowing to finance our operations. Alternative solutions may be selling assets, deleveraging our balance sheet, and reducing operational expenses.

We depend on repeat purchases by a significant number of investors in our debt certificates to finance our business.

A significant percentage of the investors who buy our debt certificates roll their matured debt certificate into a new one. Historically, we have been able to sustain a high rate of renewal investments. If the rate of repeat investments declines, our ability to maintain or grow our asset base could be impaired.

The table below shows the renewal rates of our maturing debt certificates over the prior three years:


2024	75	%
2023	82	%
2022	63	%

Some of our investors may be unable to purchase our public offered debt certificates due to FINRA’s investor suitability rule.

When handling sales of our investor debt certificates, we must comply with FINRA’s “know your customer” and “suitability” rule. Some investors may not qualify under our suitability criteria. These suitability eligibility standards help ensure that investors make appropriate investments given the:

●

age;

●

investment experience;

●

net worth;

●

need for liquidity; and

●

the mix of the investor’s portfolio.

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If MP Securities is unable to offer a potential investor a Class A Certificate that will enable such investor to meet the applicable suitability standards, we will need to find other qualified investors to implement our strategic objectives.

ITEM 1B.UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 1C. CYBERSECURITY

Risk Management

We maintain a comprehensive cybersecurity program designed to protect both customer data and our proprietary information. Our cybersecurity framework is governed by our Board of Managers and driven by a dedicated Information Security Officer, ensuring that all processes comply with regulatory requirements and industry best practices. This framework is documented in our Cybersecurity Policy and Information Security Program Policy, which outlines the risk management, preventive, detective, and corrective controls we have implemented across the organization.

Our approach begins with regular, in-depth risk assessments that identify both inherent and residual cybersecurity risks. Utilizing standards such as the National Institute of Standards and Technology Cybersecurity Framework, Federal Financial Institutions Examinations Council guidance, and the foundational safeguards outlined in CIS Controls v8, we continuously monitor, evaluate, and update our security controls. These assessments allow us to effectively manage vulnerabilities across our Company assets and software, ensuring that only authorized and securely configured systems are connected to our network.

In addition to proactive risk identification, our cybersecurity process includes a robust incident response capability. We maintain detailed procedures for detecting, containing, and remediating cyber threats, which are regularly tested through internal audits and third-party assessments. This ensures that should an incident occur; our team can swiftly activate the Incident Response Plan to minimize potential impacts and restore secure operations.

We extend our cybersecurity diligence to third-party service providers and require periodic employee training. All external partners are required to adhere to our cybersecurity standards, and our employees receive ongoing training to stay current with emerging threats and best practices. This comprehensive, layered approach not only safeguards critical data but also reinforces our commitment to continuous improvement and compliance with statutory and regulatory requirements.

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Governance

Our Board of Managers retains supervisory oversight responsibility for enterprise risk management and cybersecurity risks. The primary responsibility for maintaining an information security has been assigned to an Information Security Officer (“ISO”). The ISO works with the Audit Committee to address information security risks found by each business segment. Our ISO conducts an annual risk assessment report and submits the report to the Audit Committee for its review. The Audit Committee meets with Company management, the ISO and external auditors to review the Company’s risk management processes and enterprise-wide risks found by the Company. The scope of this review is intended to address cybersecurity governance risks and related controls and identify any deficiencies that could adversely affect the Company’s ability to record, process and report financial data. As of the date of this Report on Form 10-K, there have been no cybersecurity incidents we believe have had a material effect on our operations, business, results of operations or financial condition.

ITEM 2.

PROPERTIES

Corporate Offices

As of December 31, 2024, the Company conducted most of its operations from its main corporate office at 1 Pointe Drive, Suite 205, Brea, California. In addition, the Company has a branch office in Fresno, California. The Brea corporate office and Fresno branch locations have operating leases. Ministry Partners Securities, LLC also keeps networking agreement office locations in Glendora, California; Elgin, Illinois; Brentwood, Tennessee; and Nampa, Idaho.

ITEM 3.

LEGAL PROCEEDINGS

Given the nature of our investments made in mortgage loans, we may from time to time have an interest in, or be involved in, litigation arising out of our loan portfolio. We consider litigation related to our loan portfolio to be routine to the conduct of our business. As of December 31, 2024, we are not involved in any litigation matters that could have a material adverse effect on our financial position, results of operations, or cash flows.

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ITEM 4.

MINE SAFETY DISCLOSURES

Not applicable.

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PART II

ITEM 5. MARKET FOR OUR COMMON EQUITY, RELATED MEMBER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Price Range of Common Units

There is no public market for our Class A Units and Series A Preferred Units. As of December 31, 2024, a total of 146,522 Class A Units were issued, with 11 holders of record, and a total of 117,100 Series A Preferred Units were issued, with 11 holders of record.

Sale of Equity Securities by Issuer

None.

Purchases of Equity Securities by Issuer

None.

Dividends and Distributions

The Series A Preferred Unit holders are entitled to receive two types of dividend distributions. First, they are entitled to receive a quarterly cash dividend at the rate of one-year LIBOR plus 25 basis points (the “Series A Dividend”). On July 1, 2023, the LIBOR index was replaced by the one-year Secured Overnight Financing Rate (“SOFR”). The Federal Reserve Bank of New York establishes the SOFR, with adjustments made as deemed appropriate. Payment of the Series A Dividend will have priority over all other distributions to equity owners. In addition, the Company must pay any accrued and undistributed Series A Dividend before we can distribute other dividends.

Our Series A Preferred Unit holders are also entitled to receive 10% of our net profits after subtracting the amount of quarterly Series A Dividends paid earned for any fiscal year. This payment will be made to holders of the Series A Preferred Units on a pro rata basis (“Net Profits Dividend”). The Company had a net loss in 2024, therefore no Net Profits

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Dividend was accrued. For the year ended December 31, 2023, the Company had a net loss and paid no Net Profits Dividend on our Series A Preferred Units.

For 2024, we made no distributions to the holders of our Class A Units.

During the years ended December 31, 2024 and 2023, we declared distributions on our Series A Preferred Units as follows:

SERIES A UNITS


	Distributions Declared per Unit
Quarter	2024		2023
First	$	1.309	$	1.370
Second		1.319		1.569
Third		1.016		1.444
Fourth		1.117		1.265
Total distributions per unit	$	4.761	$	5.648

In the event of a loss, our operating agreement provides that losses will be allocated first to the holders of common units and then to the Series A Preferred Units holders until their respective capital accounts have been reduced to zero. If the capital accounts of the members cannot offset the entire loss, the balance will be allocated, pro rata, to the holders of common units in proportion to their respective ownership interest in our common equity units.

Equity Compensation Plans

None.

ITEM 6.

[RESERVED]

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ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion on our financial statements should be read in conjunction with the consolidated financial statements and notes thereto in this Report beginning at page F-1.

OVERVIEW

We generate our revenue through our lending portfolio and through fees generated from our investment and insurance products and services. While we generate most of our revenue through interest income, our strategic aim is to diversify our revenue sources so that non-interest income becomes a larger percentage of total income. Producing revenue from multiple sources may reduce risk to the Company in the event of a decrease in interest income. We also strive to improve operating efficiency by increasing the revenue generated for each dollar of expense incurred to run the business, which helps us improve our capital position. Increased capital helps mitigate risk in economic down cycles. In addition, we seek to grow our loan portfolio in order to grow our operating revenue.

To continue to achieve our goals, protect the investment made by our debt certificate holders, and maximize the value of our equity holders’ investments, we will continue to focus on:

●

expanding the distribution channels for the Company’s debt securities offerings with strategic partners that share the Company’s desire to enhance Christian stewardship through Biblically responsible investments;

●

growing non-interest income generated by our broker-dealer services and loan servicing and products;

●

investing in technology to enhance our customer experience while creating operating efficiencies;

●

growing our client base;

●

expanding our broker-dealer sales staff;

●

serving the needs of credit union and CUSO clients through revenue producing strategic partnerships;

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●

finding new strategic partnership opportunities with like-minded organizations that can help grow our client base and generate revenue;

●

expanding revenue through the sale of loan participation interests;

●

managing the size and cost structure of our business to match our operating environment and capital funding efforts;

●

strengthening our capital through growth in earnings;

●

growing the size of our balance sheet by originating profitable new ministry and commercial loans as we seek to increase revenue from our loan investments;

●

strengthening our loan portfolio through aggressive and proactive efforts to resolve problems in our non-performing assets;

●

expanding the sale of our investor debt certificates to diversify our funding sources; and

●

maintaining adequate liquidity levels.

Discussion and Analysis of Financial Condition and Results of Operations

The following discussion compares the results of operations for the twelve months ended December 31, 2024 and 2023, along with other financial information and statistical data we believe are important to understand our financial condition, cash flows and other changes in financial condition and results of operations. This analysis should be read in conjunction with the accompanying consolidated financial statements and notes thereto.

Summary of our December 31, 2024, Financial Results

For the year ended December 31, 2024, the Company had a net loss of $607 thousand. For this period, Company management has identified the following key trends and strategic objectives that have been reported in its financial statements:

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Improve Net Interest Income on Loan Investments During the years 2020 – 2024, our strategy of downsizing the Company’s balance sheet by paying down and eliminating our credit facility debt has resulted in lower interest income from our commercial loan portfolio (see chart below).

As we incrementally paid off our term debt facility, total assets declined, and our net interest income was subsequently reduced.

Company management anticipated that its debt reduction strategy would cause a short-term reduction in net interest income, not only due to volume but to rate as well, as the term debt facility was our lowest cost of funds. However, the Company believed that the long-term benefits of building capital, net equity, and eliminating debt at a discount far outweighed the costs of lower net interest income earned in 2023 and 2024. We began in 2023 to increase the amount of loan investments on our balance sheet, and, in 2024, both loan interest income and net interest income grew for the first time in six years. While our net loans receivable balance was lower at the end of 2024 than 2023, we sold several loan participations over the last half of 2024 that helped us pay off our high-interest rate lines of credit and generate other income. In 2025, the Company intends to continue to grow its loan investments. Company management expects that the yield on its portfolio will increase in the coming years as loans originated in 2020 and 2021 at 5% – 6% rates come due for their five-year rate resets that will push them into the 7% - 8% range. Company management also intends to focus on improving net interest income on its loan investments by adjusting, as needed, the interest rates it offers on its new

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loans as well as closely monitoring the rates it offers on its debt certificates. The Company anticipates that its patient management of the impaired assets in its loan portfolio will result in increased interest income. In March 2025, the Company received a $670 thousand payment from the borrower of an impaired loan. This payment satisfies accrued interest and fees that were previously written off and will be reflected in income during the first quarter of 2025.

Reducing the Company’s Operating Expenses As a result of implementing the Company’s debt reduction strategy, our net operating income was no longer able to cover our operating expenses, resulting in losses in 2023 and 2024. In response, we have pursued a strategy of reducing expenses to make our operations more efficient and more profitable. The Company’s operating expenses totaled $5.7 million in 2022. Through a number of cost-saving initiatives, including a change in loan servicing strategy, a transition to new office space, active management of office expenses, and changes in staffing, we were able to reduce operating expenses to $5.4 million in 2023 and $4.2 million in 2024. We expect to continue to reduce expenses in 2025 through a transition to a new core processing system and a new information technology partner, both of which will provide the level of service we need at lower cost. By implementing these significant reductions in our operating expenses, we believe we can focus on growing our loan investments, and concentrate on expanding our investor notes selling efforts and advisory business.

Improving Core Business Profitability From 2020 to 2022, the Company’s net income from operations primarily relied upon income generated through gains reported from principal paydowns made on our term debt facility at a discount. The Company’s intentional strategy of using available cash resources to incrementally reduce our term debt resulted in having less cash resources available to make loan investments. As noted above, we began to rebuild our loan portfolio in 2023, and our loan interest income has grown over the last two years due both to the increase in loans receivable and to an increase in the interest rates of existing adjustable-rate loans. Non-interest income in 2024 included $215 thousand related to our application for and expected receipt of an Employee Retention Credit (“ERC”) provided by the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act"). Non-interest income in 2023 included $1.7 million in charitable contributions to our wholly-owned subsidiary, Ministry Partners for Christ. After accounting for these non-recurring sources of other income, our non-interest income generated by our lending and broker-dealer services increased by $158 thousand over 2023, and we expect to grow those sources of revenue further in 2025.

Strategic Objectives. Now that the Company has paid off our term debt credit facility, we are focusing on improving the profitability of our core business

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operations through making profitable commercial loans and growing our non-interest generating sources of income from our faith-based investment advisory services. In 2025, the Company intends to focus on the following objectives:

(i)

Investing in and growing our commercial loan investments through loan originations, purchase of loan participation interests, and cooperative efforts with our strategic partners to increase the commercial loans we make to non-profit organizations and faith-based businesses;

(ii)

Continuing our efforts to reduce non-interest expenses;

(iii)

Increasing the sale of our debt certificates to finance the growth in the Company’s balance sheet;

(iv)

Effectively managing pressures on the Company’s net interest margin on its loan investments in response to an inverted yield curve in financial markets that results in higher short-term costs on our debt certificates while the Company makes longer term investments with the commercial loans it originates; and

(v)

Expanding the revenues earned by the investment advisory, broker-dealer, and insurance operations at Ministry Partners Securities, LLC.

On March 19, 2025, the Company received $670 thousand from the proceeds of the sale of 77.9 acres of investment property by a joint venture real estate project held by one of our borrowers. We hold a loan that was the subject of a plan of reorganization under a U.S. Bankruptcy proceeding. This $670 thousand payment will be treated as the recovery of late fees, costs and accrued interest, which had previously been written off due to their uncertain collectability. With the receipt of this payment, and implementation of our strategic objectives, we believe that the Company will be able to erase the 2024 net loss and report positive earnings for 2025.

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Two Year Comparison of Financial Condition as of December 31,:


					Comparison
	2024		2023		$ Difference		% Difference

	(dollars in thousands)
Assets:
Cash	$	9,014	$	10,854	$	(1,840)	(17%)
Restricted cash		1,757		1,757		—	—%
Certificates of deposit		1,304		1,279		25	2%
Loans receivable, net of allowance for loan losses of $1,156 and $1,501 as of December 31, 2024 and 2023, respectively		93,171		98,573		(5,402)	(5%)
Accrued interest receivable		447		432		15	3%
Investments in joint venture		873		871		2	0%
Other investments		1,082		1,052		30	3%
Property and equipment, net		84		56		28	50%
Foreclosed assets, net		301		301		—	—%
Servicing assets		177		98		79	81%
Other assets		1,040		1,374		(334)	(24%)
Total assets	$	109,250	$	116,647	$	(7,397)	(6%)
Liabilities and members’ equity
Liabilities:
Lines of credit	$	—	$	4,500	$	(4,500)	(100%)
Other secured borrowings		6		7		(1)	(14%)
Debt certificates payable, net of debt issuance costs of $88 and $52 as of December 31, 2024 and 2023, respectively		95,073		96,979		(1,906)	(2%)
Accrued interest payable		348		383		(35)	(9%)
Other liabilities		1,892		1,683		209	12%
Total liabilities		97,319		103,552		(6,233)	(6%)
Members' Equity:
Series A preferred units		11,715		11,715		—	—%
Class A common units		1,509		1,509		—	—%
Accumulated earnings		(1,293)		(129)		(1,164)	902%
Total members' equity		11,931		13,095		(1,164)	(9%)
Total liabilities and members' equity	$	109,250	$	116,647	$	(7,397)	(6%)

Total assets decreased by 6% due to the payoff of $4.5 million in lines of credit and $2 million in notes payable. The cash for debt payments was obtained through $8.4 million in loan sales throughout 2024.

Loan Portfolio

Our loan portfolio provides the majority of our revenue; however, it also presents the most risk to future earnings through both interest rate risk and credit risk. Additional information regarding risk to our loans is included in “Part I, Item 1A, Risk Factors”. Our portfolio consists mostly of loans made to evangelical churches and ministries with approximately 99.9% real estate secured loans.

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Loan Types


	Year Ended December 31, (dollars in thousands)
	2024				2023
	Amount		% of Portfolio		Amount		% of Portfolio
Non-profit commercial loans:
Real estate secured	$	83,724	88.5	%	$	87,517	87.2	%
Construction		188	0.2	%		7	0.0	%
Other secured		—	—	%		—	—	%
Unsecured		48	0.1	%		74	0.1	%
Total non-profit commercial loans:	$	83,960	88.7	%	$	87,598	87.3	%
For-profit commercial loans:
Real estate secured	$	10,678	11.3	%		12,783	12.7	%
Construction		—	—	%		—	—	%
Total for-profit commerical loans	$	10,678	11.3	%	$	12,783	12.7	%
Total loans	$	94,638	100.0	%	$	100,381	100.0	%

Maturities and Sensitivities of Loans to Changes in Interest Rates


	Dollar Amount of Loans Receivable Maturing (in thousands)
As of	Due 1 Yr or Less		Due 1yr to 5 Yrs	Due After 5 Yrs	Total
December 31, 2024	$	11,627	56,048	26,963	$	94,638

Included in the table above are 80 adjustable-rate loans totaling 54% of the total balance. Adjustable-rate loans reduce the interest rate risk compared to fixed rate loans with similar cash flow characteristics.

Nonaccrual, Past Due, Non-performing Modified Loans, and Foreclosed Assets

●

Non-accrual loans: loans on which management has discontinued interest accruals. Loans 90 days past due are placed on non-accrual status. In addition, management may place a loan on a non-accrual status at its discretion if other circumstances surrounding the loan and the borrower indicate it is prudent to do so.

●

Past due loans: loans 90 days or more past due and still accruing.

●

Non-performing modified loans: loans in which the Company has granted the borrower a concession due to financial distress. Concessions are usually a reduction of the interest rate or a change in the original repayment terms.

●

Loans where the borrowers have defaulted on contractual terms of their loan agreement: this could include loans where the borrower has failed to provide required financial information, has violated a covenant, or has otherwise failed to comply with the terms of the loan agreement.

●

Foreclosed assets: real properties for which we have taken title and possession upon the completion of foreclosure proceedings.

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We closely watch these non-performing assets on an ongoing basis. Management evaluates the potential risk of loss on these loans and foreclosed assets in one of three ways:

●

the present value of expected future cash flows discounted at the loan’s effective interest rate;

●

the obtainable market price; or

●

the fair value of the collateral if the loan is collateral-dependent.

The following table presents our non-performing assets:



Nonaccrual, Past Due, Non-performing Modified Loans, and Foreclosed Assets
($ in thousands)
	December 31,		December 31,		December 31,
	2024		2023		2024
	Total Recorded Balance		Total Recorded Balance		Interest Earned		Interest that Should have Been Earned*
Non-accrual loans**	$	11,520	$	11,384	$	769	$	941
Accruing loans which are contractually past due 90 days or more as to principal or interest payments		—		—		—		—
Loans not included above which are non-performing modified loans		5,408		5,408		298		298
Foreclosed Assets, net of valuation allowance		301		301		—		—
Total	$	17,229	$	17,093	$	1,067	$	1,239

*the gross interest income that would have been recorded in the period if the loans had been current in accordance with their original terms and had been outstanding throughout the period or since origination

** $6.1 million is included in total non-accrual loans as of December 31, 2024 related to a loan that has been put on non-accrual due to prior delinquency but is making regular principal and interest payments.

Allowance for Loan Losses

For information on our allowance for loan losses and how it is calculated please see the header “Allowance for Loan Losses” in Note 2 as well as “Allowance for Loan Losses” in Note 4 in the consolidated financial statements and notes thereto in this Report beginning at page F1.

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The following chart details our allowance for loan losses:


	Allowance for Loan Losses
	Twelve months ended
	December 31,
	2024			2023

	($ in thousands)
Balances:
Average total loans outstanding during period	$	97,957		$	90,477
Total non-performing loans outstanding at end of the period		16,928			16,792
Total loans outstanding at end of the period		94,638			100,381
Allowance for loan losses:
Balance at the beginning of period	$	1,501		$	1,551
Adjustment related to implementation of CECL model		—			112
Provision credit to expense		(126)			(142)
Charge-offs
Non-profit, Wholly-Owned First Amortizing		(219)			(20)
Total		(219)			(20)
Recoveries
Non-profit, Wholly-Owned First Amortizing		—			—
Total		—			—

Net loan charge-offs		(219)			(20)
Accretion of allowance related to restructured loans		—			—
Balance	$	1,156		$	1,501

Ratios:
Net loan (charge-offs) / recoveries to average total loans		(0.22)	%		(0.02)	%
Provision credit for loan losses to average total loans		(0.13)	%		(0.16)	%
Allowance for loan losses to non-performing loans at the end of the period		6.83	%		6.88	%
Allowance for loan losses to total loans at the end of the period		1.22	%		1.50	%
Net loan recoveries to credit for allowance for loan losses at the end of the period		—	%		—
Net loan (charge-off) / recoveries to credit for loan losses		173.81	%		14.08	%

See the header “Provision” further on in the Management’s Discussion and Analysis in the section titled “Results of Operations” for information on factors which influenced the amount of the allowance credited to operating expense.

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The following table shows the Company’s allocation of allowance for loan losses by loan categories as of December 31, 2024 (dollars in thousands):


			Percent of loans
			in each category
Loan Categories	Amount		to total loans
Non-profit commercial loans:
Real estate secured	$	1,119		88%
Construction		—		0%
Other secured		—		0%
Unsecured		1		1%
Total non-profit commercial loans:	$	1,120		89%
For-profit commercial loans:
Real estate secured		36		11%
Construction		—		0%
Total for-profit commercial loans	$	36		11%
Total loans	$	1,156		100%

At this time management is not able to approximate an anticipated amount of charge-offs in 2025.

Debt Certificates Payable

Our debt certificates payable (“debt certificates”) are debt certificates sold under both publicly registered and private placement security offerings. Over the last several years, we have expanded the number of investors in our debt certificates, and we have broadened the type of investors we serve by building relationships with other faith-based organizations which has allowed us to offer our debt certificates to these organizations and their clients. Concurrently, MP Securities and its staff of financial advisors have increased our customer base through marketing efforts made to individual investors.

Our 2021 Class A Offering expired December 31, 2023. We began selling our new offering, the 2024 Class A Debt Certificates, on February 6, 2024.

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The balances of our outstanding debt certificates are as follows (dollars in thousands):


		As of				As of
		December 31, 2024				December 31, 2023
SEC Registered Public Offerings	Offering Type	Amount		Weighted Average Interest Rate		Amount		Weighted Average Interest Rate
Class 1A Offering	Unsecured	$	5,979	3.91	%	$	12,555	4.19	%
2021 Class A Offering	Unsecured		33,336	4.75	%		69,421	4.95	%
2024 Class A Offering	Unsecured		31,247	4.95	%		—	—	%
Public offering total		$	70,562	4.77	%	$	81,976	4.83	%

Private Offerings
Subordinated Notes	Unsecured	$	24,599	5.15	%	$	15,055	4.76	%
Private offering total		$	24,599	5.15	%	$	15,055	4.76	%

Total debt certificates payable		$	95,161	4.87	%	$	97,031	4.82	%

Members’ Equity

During the year ended December 31, 2024, total members’ equity decreased by $1.2 million attributable to a loss of $607 thousand and dividend distributions of $557 thousand. We did not repurchase or sell any membership equity units during the year ended December 31, 2024.

Liquidity and Capital Resources

Holding adequate liquidity requires that sufficient resources be always available to meet our cash flow needs. We use cash to obtain new mortgage loans, repay term-debt, make interest payments to our note investors, and pay general operating expenses. Our primary sources of liquidity are:

●

cash;

●

sales of debt certificates;

●

cash flows from operations;

●

maturing loans;

●

payments of principal and interest on loans; and

●

loan sales.

Our management team regularly prepares cash flow forecasts that we rely upon to ensure that we have sufficient liquidity to conduct our business. While we believe that these expected cash inflows and outflows are reasonable, we can give no assurances that our

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forecasts or assumptions will prove to be correct. Management believes that we hold adequate sources of liquidity to meet our liquidity needs and have the means to generate more liquidity if necessary.

While our liquidity sources that include cash, reserves, and cash flows from operations are generally available on an immediate basis, our ability to sell mortgage loan assets and raise additional debt or equity capital is less certain and less immediate. Material liquidity events that would adversely affect our business include, but are not limited to, the following:

●

we become unable to continue offering our debt certificates in public and private offerings for any reason;

●

we incur sudden withdrawals by multiple investors in our debt certificates;

●

a substantial portion of our debt certificates that mature during the next twelve months is not renewed; or

●

we are unable to obtain capital from sales of our mortgage loan assets or other sources.

Withdrawal requests made by holders of high dollar securities can also adversely affect our liquidity. We believe that our available cash, cash flows from operations, net interest income, and other fee income will be sufficient to meet our cash needs. Should our liquidity needs exceed our available sources of liquidity, we believe we could sell a part of our mortgage-loan investments at par as well as sell debt certificates to raise more cash. However, we also must keep adequate collateral, consisting of loans receivable and cash, to secure our lines of credit. We have substantially reduced this risk in the last two years by retiring our term-debt as the Company now has more unencumbered loans available to sell.

Our Board of Managers approves our liquidity policy. The policy sets a minimum liquidity ratio and has a contingency protocol if our liquidity falls below the minimum. Our liquidity ratio was 12% at December 31, 2024, which is above the minimum set by our policy.

Liquidity Sources

In response to the economic uncertainty created from the COVID-19 pandemic, management began to generate liquidity by selling participation interests in its loans receivable during 2020 and throughout 2021. After selling fewer loans in 2022 and 2023, the Company began selling loan participations in 2024 in order to rely less on high interest rate lines of credit. During the period ended December 31, 2024, we generated $8.4 million in cash from the sale of loan participation interests.

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An additional liquidity tool we use in conjunction with our loan participation sales is a $5.0 million warehouse line of credit (“KCT LOC”) with Kane County Teachers Credit Union (“KCT”). This line of credit was established for the specific purpose of funding loan originations, and we intend to offer participation interests in these loans to repay the credit facility while generating servicing fee revenue. We are required to repay each advance within one hundred twenty (120) days after receiving the funds. The KCT LOC has a one-year maturity date ending on June 6, 2025. The KCT LOC will automatically renew for a one-year term unless either party furnishes written notice at least thirty (30) days prior to the termination date that it does not intend to renew the agreement. We borrowed $4.5 million on this facility and paid $193.2 thousand in interest expense during the year ended December 31, 2024. As of December 31, 2024, we had repaid all outstanding balances on the KCT LOC.

The Company has two other revolving lines of credit. The Company has a revolving $5.0 million short-term demand credit facility (“ACCU LOC”) with America’s Christian Credit Union. The ACCU LOC has a one-year term with a maturity date of September 30, 2025. The ACCU LOC will automatically renew for a one-year term unless either party furnishes written notice at least thirty (30) days prior to the termination date that it does not intend to renew the agreement. As of December 31, 2024, we had no outstanding balance due on this facility, although the line was fully drawn at one point during the year. $199.7 thousand in interest expense was incurred on the ACCU LOC for the year ended December 31, 2024. The Company does not have any restrictions on how the funds may be used for this facility.

We also have a $5.0 million short-term demand credit facility with KCT. The Company can use this operating line as needed and it has a one-year term with a maturity date of June 6, 2025. The KCT LOC will automatically renew for a one-year term unless either party furnishes written notice at least thirty (30) days prior to the termination date that it does not intend to renew the agreement. As of December 31, 2024, and at each month end during 2024, we had no outstanding balance on this operating line of credit.

Management believes, if necessary, we will be able to raise additional cash through loan and debt certificate sales to keep sufficient levels of cash available to meet our debt obligations to investors. Because the Company was successful in raising cash from loan repayments, sales of loan participations, and its use of short-term credit facilities, we were able to take advantage of the opportunity to pay down our term debt facility at a discount, as described above. Despite this paydown, the Company is still operating with cash levels above its Board-approved policy. Cash, restricted cash, and certificates of deposit were $12.1 million as of December 31, 2024.

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Debt Certificates

The sale of our debt certificates contributes significantly to funding our mortgage loan investments. Through sales of our publicly offered debt certificates and privately placed debt certificates, we expect to fund new loans. We also use the cash we receive from our debt certificates sales to fund general operating activities.

As of December 31, 2024, our investor debt certificates had future maturities during the following twelve-month periods ending December 31, (dollars in thousands):


2025	$	39,781
2026		25,649
2027		15,444
2028		4,526
2029		9,761
		95,161
Less: debt issuance costs		88
Debt certificates payable, net of debt issuance costs	$	95,073

Historically, we have been successful in generating reinvestments by our debt certificate holders when the securities they hold mature. The table below shows the renewal rates of our maturing securities over the last three years.


2024	75	%
2023	82	%
2022	63	%

Credit Facilities and Other Borrowings

The table below is a summary of the Company’s debt instruments as of December 31, 2024 (dollars in thousands):


Nature of Borrowing	Interest Rate	Interest Rate Type	Amount Outstanding		Monthly Payment		Maturity Date	Loan Collateral Pledged		Cash Pledged
KCT Warehouse LOC	9.000%	Variable	$	—	$	—	6/6/2025	$	8,263	$	—
KCT Operating LOC	9.000%	Variable		—		—	6/6/2025		4,874		1,250
ACCU LOC	8.250%	Variable		—		—	9/23/2025		6,972		—
ACCU Secured	Various	Fixed		6		—	Various		—		6

Note: Disclosed cash pledged and collateral balances will get pledged once and if the LOC is drawn on.

The ACCU secured borrowing is a loan participation sold with recourse that is classified as a secured borrowing.

Debt Covenants

Under our line of credit agreements and our debt certificate documents, we are bound to follow certain affirmative and negative covenants. Failure to follow our covenants could require all interest and principal to become due. As of December 31, 2024, we are in compliance with the covenants on our securities payable and lines of credit.

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●

For more information regarding our debt certificates payable, refer to “Note 11. Debt Certificates Payable of Part II, Item 8. of this Report.

●

For more information on our credit facilities, refer to “Note 10. Credit Facilities and Other Debt”, to Part II, Item 8. of this Report.

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Results of Operations:

For the year ended December 31, 2024

Net Interest Income and Net Interest Margin

Historically, our earnings have primarily depended upon our net interest income.

Net interest income is the difference between the interest income we receive from our loans and cash on deposit (“interest-earning assets”) and the interest paid on our debt certificates and term debt.

Net interest margin is net interest income expressed as a percentage of average total interest-earning assets.

The following table provides information, for average outstanding balances for each major category of interest earnings assets and interest-bearing liabilities, the interest income or interest expense, and the average yield or rate for the periods indicated:


	Average Balances and Rates/Yields
	For the Twelve Months Ended December 31,
	(Dollars in Thousands)
	2024						2023
	Average Balance		Interest Income/ Expense		Average Yield/ Rate		Average Balance		Interest Income/ Expense		Average Yield/ Rate
Assets:
Interest-earning accounts with other financial institutions	$	12,887	$	579	4.48	%	$	15,492	$	621	4.02	%
Interest-earning loans^[1][2]		96,773		6,700	6.90	%		91,536		5,800	6.35	%
Total interest-earning assets		109,660		7,279	6.62	%		107,028		6,421	6.02	%
Non-interest-earning assets		3,540		—	—	%		2,801		—	—	%
Total Assets	$	113,200	$	7,279	6.41	%	$	109,829	$	6,421	5.86	%

Liabilities:
Debt certificates payable gross of debt issuance costs	$	94,447	$	4,569	4.82	%	$	90,553	$	4,111	4.55	%
Other debt		4,369		393	8.97	%		3,016		246	8.18	%
Total interest-bearing liabilities	$	98,816	$	4,962	5.01	%	$	93,569	$	4,357	4.67	%
Debt issuance cost				75						128
Total interest-bearing liabilities net of debt issuance cost	$	98,816		5,037	5.08	%	$	93,569		4,485	4.81	%
Net interest income			$	2,242					$	1,936
Net interest margin					2.04	%					1.81	%

[1] Loans are net of deferred fees and before the allowance for loan losses. Non-accrual loans are considered non-interest earning assets for this analysis.

[2] Interest income on loans includes deferred fee amortization of $111 thousand and $231 thousand for the years ended years ended December 31, 2024 and 2023, respectively.

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Rate/Volume Analysis of Net Interest Income
	Twelve Months Ended
	December 31, 2024 vs. 2023
	Increase (Decrease) Due to Change in:
	Volume		Rate		Total

	(Dollars in Thousands)
Increase (Decrease) in Interest Income:
Interest-earning accounts with other financial institutions	$	(108)	$	66	$	(42)
Interest-earning loans		379		521		900
Total interest-earning assets		271		587		858
Increase (Decrease) in Interest Expense:
Debt certificates payable gross of debt issuance costs		421		37		458
Other debt		121		26		147
Debt issuance cost		—		(53)		(53)
Total interest-bearing liabilities		542		10		552
Change in net interest income	$	(271)	$	577	$	306

Net interest income increased 16% during the year ended December 31, 2024. This was due both to an increase in interest-earning assets over 2023, as well as a larger increase in the average yield earned by assets as compared to the average rate paid on debt certificates and other debt.

The yield on interest-earning accounts with other financial institutions increased as we closely managed our funds to take advantage of the high interest rate environment driven by high rates on Federal Reserve Board funds. Interest on our interest-earning loans increased by $900 thousand due to an increase in both the volume of average loans receivable and in the interest rates we receive on new and renewed loans. The volume variance is a result of increased lending activity as the Company funded $8.7 million in loans during the year. While some of these loans paid off or were sold in the later part of the year, they were outstanding for long enough to drive up the average balance for the year. The rate variance is due to new and renewed loans receiving a higher interest rate in the current rate environment. The weighted average rate on the loan portfolio increased 25 basis points from 6.53% to 6.88% during the year ended December 31, 2024.

Total interest expense increased mostly due to a rate variance on debt certificates payable. The rate variances were due to higher offering rates on new note sales as well as our lines of credit as U.S. Treasury rates were higher than in 2023 for most of 2024.

The Company’s net interest margin increased due to the changes described above. The Company intends to grow its loan portfolio in 2025 and beyond in order to increase net interest income.

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Provision and non-interest income and expense


	Twelve months ended
	December 31,				Comparison
	(dollars in thousands)
	2024		2023		$ Change		% Change
Net interest income	$	2,242	$	1,936	$	306	16%
Provision (credit) for loan losses		(126)		(142)		16	(11%)
Net interest income after provision (credit) for loan losses		2,368		2,078		290	14%
Total non-interest income		1,257		2,584		(1,327)	(51%)
Total non-interest expenses		4,212		5,399		(1,187)	(22%)
Income (loss) before provision for income taxes		(587)		(737)		150	(20%)
Provision for income taxes and state LLC fees		20		20		—	—%
Net income (loss)	$	(607)	$	(757)	$	150	(20%)

Provision

In 2024, the Company recorded a credit to provision for loan losses due to transfers from collectively reviewed loans to individually reviewed loans which were either fully covered by collateral or did not require additional provision for using a discounted cash flow analysis.

Non-interest income

Non-interest income was lower in 2024 mostly due to a non-recurring charitable contribution made to MPC, our not-for-profit foundation that makes charitable grants to Christian organizations. MPC received a grant of $1.7 million in 2023, but the funds are restricted and must be used for charitable purposes. As compared to 2023, non-interest income from other sources mostly increased. Broker-dealer fees and commissions increased by $92 thousand, gains on loan sales increased by $87 thousand, and the Company also recorded a $215 thousand Employee Retention Credit. The latter is non-recurring, but the Company anticipates continuing to supplement its interest income with increased revenue from lending activities and broker-dealer services.

Non-interest expenses

Non-interest expense was lower in 2024 due to lower salaries and benefits of $1.2 million. In 2023, we paid retirement benefits to our former Chief Executive Officer under a Supplemental Executive Retirement Plan. See Item II. “Executive and Board of Manager Compensation of the Report.”

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For the year ended December 31, 2023

Net Interest Income and Net Interest Margin

Historically, our earnings have primarily depended upon our net interest income.

Net interest margin is net interest income expressed as a percentage of average total interest-earning assets.


	Average Balances and Rates/Yields
	For the Twelve Months Ended December 31,
	(Dollars in Thousands)
	2023						2022
	Average Balance		Interest Income/ Expense		Average Yield/ Rate		Average Balance		Interest Income/ Expense		Average Yield/ Rate
Assets:
Interest-earning accounts with other financial institutions	$	15,492	$	621	4.02	%	$	15,312	$	129	0.84	%
Interest-earning loans^[1][2]		91,536		5,800	6.35	%		83,524		5,706	6.83	%
Total interest-earning assets		107,028		6,421	6.02	%		98,836		5,835	5.90	%
Non-interest-earning assets		2,801		—	—	%		7,817		—	—	%
Total Assets	$	109,829	$	6,421	5.86	%	$	106,653	$	5,835	5.47	%

Liabilities:
Debt certificates payable gross of debt issuance costs	$	90,553	$	4,111	4.55	%	$	76,111	$	2,882	3.79	%
Other debt		3,016		246	8.18	%		13,655		387	2.83	%
Total interest-bearing liabilities	$	93,569	$	4,357	4.67	%	$	89,766	$	3,269	3.64	%
Debt issuance cost				128						100
Total interest-bearing liabilities net of debt issuance cost	$	93,569		4,485	4.81	%	$	89,766		3,369	3.75	%
Net interest income			$	1,936					$	2,466
Net interest margin					1.81	%					2.50	%

[1] Loans are net of deferred fees and before the allowance for loan losses. Non-accrual loans are considered non-interest earning assets for this analysis.

[2] Interest income on loans includes deferred fee amortization of $73 thousand and $231 thousand for the years ended years ended December 31, 2023 and 2022, respectively.

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Rate/Volume Analysis of Net Interest Income
	Twelve Months Ended
	December 31, 2023 vs. 2022
	Increase (Decrease) Due to Change in:
	Volume		Rate		Total

	(Dollars in Thousands)
Increase (Decrease) in Interest Income:
Interest-earning accounts with other financial institutions	$	(1)	$	493	$	492
Interest-earning loans		511		(417)		94
Total interest-earning assets		510		76		586
Increase (Decrease) in Interest Expense:
Debt certificates payable gross of debt issuance costs		1,077		152		1,229
Other debt		(468)		327		(141)
Debt issuance cost		—		28		28
Total interest-bearing liabilities		609		507		1,116
Change in net interest income	$	(99)	$	(431)	$	(530)

Net interest income decreased 21% during the year ended December 31, 2023. This decrease in net interest income was primarily due to higher interest expense on debt certificates payable, due to the $17.9 million in net growth in the debt certificates payable portfolio. The increase in interest expense was partially offset by an increase in interest income on our interest-earning accounts with other financial institutions and to a lesser degree our interest-earning loans.

The increase in our income on interest-earning accounts with other financial institutions was due to higher overall short-term yields. The higher yields are due to the increase in rates on fed funds described earlier. Interest on our interest-earning loans increased by $94 thousand due to both a volume and a rate variance. The volume variance is due to some loans that were non-interest earning in 2022 becoming interest earning in 2023. In addition, the loan portfolio grew as described earlier. The rate variance is due to some non-accrual loans that are making partial instead of full interest payments therefore reducing overall yield. The weighted average rate on the loan portfolio increased 7 basis points from 6.46% to 6.53% during the year ended December 31, 2023.

Total interest expense increased mostly due to a volume variance on debt certificates payable. This variance was due to the increase in debt certificates payable as previously described. In addition, interest expense increased due to a rate variance on both debt certificates payable and other debt. The rate variances were due to higher offering rates on new note sales as well as our lines of credit as U.S. Treasury rates increased during the year.

The Company’s net interest margin decreased due to the changes described above. The Company intends to grow its loan portfolio in 2024 and beyond in order to increase net interest income.

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Provision and non-interest income and expense


	Twelve months ended
	December 31,				Comparison
	(dollars in thousands)
	2023		2022		$ Change		% Change
Net interest income	$	1,936	$	2,466	$	(530)	(21%)
Provision (credit) for loan losses		(142)		(296)		154	(52%)
Net interest income after provision (credit) for loan losses		2,078		2,762		(684)	(25%)
Total non-interest income		2,584		3,592		(1,008)	(28%)
Total non-interest expenses		5,399		5,707		(308)	(5%)
Income (loss) before provision for income taxes		(737)		647		(1,384)	(214%)
Provision for income taxes and state LLC fees		20		20		—	—%
Net income (loss)	$	(757)	$	627	$	(1,384)	(221%)

Provision

In 2023, the Company recorded a credit to provision for loan losses due to transfers from collectively reviewed loans to individually reviewed loans which were either fully covered by collateral or did not require additional provision for using a discounted cash flow analysis. In addition, we recorded a credit on our provision when a collateral dependent loan paid off where the cash received was higher than the book value.

Non-interest income

Non-interest income was lower in 2023 mostly due to a decrease in other income of $821 thousand. This was due to the Company not receiving a gain on debt extinguishment in 2023 while the Company recorded a $2.5 million gain on debt extinguishment for the year ended December 31, 2022. This was offset by $1.7 million in income from a charitable gift to our nonprofit foundation MPC as described earlier. We expect the gift to be non-recurring revenue and do not anticipate any revenue in 2024 from this source. In addition, our broker-dealer commissions and fees were down $187 thousand in 2023 due to lower sales of fixed and variable annuity products.

Non-interest expenses

Non-interest expense was lower in 2023 due to lower salaries and benefits of $372 thousand. This was due to a reduction in force at the beginning of 2023 related to the Company outsourcing its loan servicing function. The lower salaries and benefits were offset somewhat by $586 thousand in compensation related to the separation agreement of the Company’s CEO that was described earlier.

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Summary of Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with Generally Accepted Accounting Principles (“GAAP”) requires management to make estimates and assumptions that influence amounts reported in the financial statements. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses generated during the reporting period. Various elements of our accounting policies are inherently subject to estimation techniques, valuation assumptions, and other subjective assessments.

Management has identified certain accounting policies that rely on judgments, estimates, and assumptions and are critical to an understanding of our financial statements. These policies govern such areas as the allowance for credit losses and the fair value of financial instruments and foreclosed assets. Management believes the judgments, estimates, and assumptions used in the accounting policies governing these areas are appropriate based on the factual circumstances at the time they were made. However, given the sensitivity of the financial statements to these critical accounting policies, changes in management’s judgments, estimates, and assumptions could result in material differences in our results of operations or financial condition. Further, subsequent changes in economic or market conditions could have a significant impact on these estimates as well as on our financial condition and operating results in future periods.

The determination of the allowance for loan losses involves critical estimates made in accordance with GAAP. Further on in Management’s Discussion and Analysis, we provide additional details regarding the factors involved in determining the allowance, the nature of the uncertainty involved in the calculation, and the impact of the allowance on the Company’s financial position and results of operations.

ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

We are a “smaller reporting company” as defined by Regulation S-K and as such, are not providing the information contained in this item pursuant to Regulation S-K

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ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Included herewith are the following financial statements:

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		Page

Report of Independent Registered Public Accounting Firm (PCAOB ID: 261)		F-1

Financial Statements

Consolidated Balance Sheets		F-4
Consolidated Statements of Operations		F-5
Consolidated Statements of Equity		F-6
Consolidated Statements of Cash Flows		F-7
Notes to Consolidated Financial Statements		F-8 – F-63

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Report of Independent Registered Public Accounting Firm

To the Members

Ministry Partners Investment Company, LLC

Brea, California

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Ministry Partners Investment Company, LLC and its subsidiaries (the “Company”) as of December 31, 2024 and 2023, the related consolidated statements of operations, members’ equity, and cash flows for the years then ended, and the related notes to the consolidated financial statements (collectively, the financial statements). In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits ,we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

F-1

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Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Assessment of the Allowance for Credit Losses Related to the Loan Portfolio

As discussed in Note 1 and Note 4 to the consolidated financial statements, the Company’s allowance for credit losses on loans was $1.2 million as of December 31, 2024, a portion of which related to the allowance for credit losses (ACL) on loans evaluated on a collective basis (the “Collective ACL”), while the other portion related to loans evaluated individually.

The Company estimates the Collective ACL using a current expected credit losses methodology which is based on relevant information about historical losses, current conditions, and reasonable and supportable forecasts of economic conditions that affect the collectability of loan balances.

The Collective ACL is a product of multiplying the Company’s estimates of probability of default to the estimated amount of loss that the Company would incur in a default scenario. The Company uses historical information combined with macroeconomic variables to estimate the probability of default. The Company utilizes assumptions that incorporate a reasonable forecast of various macroeconomic variables over the remaining life of the assets. Adjustments are made to the Collective ACL to reflect certain qualitative factors that are not incorporated into the quantitative models and related estimate.

We identified the assessment of the December 31, 2024 ACL on the Company’s loans as a critical audit matter. A high degree of audit effort, and subjective and complex auditor judgment was involved in the assessment due to significant measurement uncertainty. Specifically, the assessment encompassed the evaluation of the December 31, 2024 Collective ACL methodology, including the significant assumptions used to estimate the probability of default. Such significant assumptions included portfolio segmentation, risk ratings, and macroeconomic variables. The assessment also included the evaluation of the qualitative factors by portfolio class. Further, the assessment required evaluation of a specific reserve for the loans evaluated individually. In addition, auditor judgment was required to evaluate the sufficiency of audit evidence obtained.

F-2

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The following are the primary procedures we performed to address this critical audit matter.

We evaluated the Company’s process to develop the December 2024 Collective ACL on the Company’s loans by testing certain sources of data, factors, and assumptions that the Company used, and considered the relevance and reliability of such data, factors, and assumptions. In addition, we:

●

Evaluated the Company’s collective ACL methodology for compliance with U.S. generally accepted accounting principles;

●

Evaluated the selection of the underlying macroeconomic variables by comparing them to the Company’s business environment and relevant industry practices;

●

Determined whether the loan portfolio is segmented by similar risk characteristics by comparing to the Company’s business environment;

●

Performed credit file reviews on a selection of loans to assess loan characteristics or risk ratings by evaluating the financial performance of the borrower, sources of repayment, and underlying collateral;

●

Evaluated the qualitative factors and the effect of those factors on the allowance for credit losses on the Company’s loans compared with relevant credit risk factors and consistency with credit trends;

●

Assessed the reasonableness of specific allowances on certain impaired loans;

●

Evaluated the accuracy and completeness of disclosures in the consolidated financial statements.

/s/ Hutchinson and Bloodgood LLP

We have served as the Company’s auditor since 2005.

Glendale, California

March 31, 2025

F-3

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Ministry Partners Investment Company, LLC and Subsidiaries

Consolidated Balance Sheets

As of December 31, 2024 and 2023

(dollars in thousands except unit data)


	2024		2023
Assets:
Cash and cash equivalents	$	9,014	$	10,854
Restricted cash		1,757		1,757
Certificates of deposit		1,304		1,279
Loans receivable, net of allowance for loan losses of $1,156 and $1,501 as of December 31, 2024 and 2023, respectively		93,171		98,573
Accrued interest receivable		447		432
Investments in joint venture		873		871
Other investments		1,082		1,052
Property and equipment, net		84		56
Foreclosed assets, net		301		301
Servicing assets		177		98
Other assets		1,040		1,374
Total assets	$	109,250	$	116,647
Liabilities and members’ equity
Liabilities:
Lines of credit	$	—	$	4,500
Other secured borrowings		6		7
Debt certificates payable, net of debt issuance costs of $88 and $52 as of December 31, 2024 and 2023, respectively		95,073		96,979
Accrued interest payable		348		383
Other liabilities		1,892		1,683
Total liabilities		97,319		103,552
Members' Equity:
Series A preferred units, 1,000,000 units authorized, 117,100 units issued and outstanding at December 31, 2024 and 2023 (liquidation preference of $100 per unit); See Note 14		11,715		11,715
Class A common units, 1,000,000 units authorized, 146,522 units issued and outstanding at December 31, 2024 and 2023; See Note 14		1,509		1,509
Accumulated deficit		(1,293)		(129)
Total members' equity		11,931		13,095
Total liabilities and members' equity	$	109,250	$	116,647

The accompanying notes are an integral part of these consolidated financial statements.

F-4

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Ministry Partners Investment Company, LLC and Subsidiaries

Consolidated Statements of Operations

For the years ended December 31, 2024 and 2023

(dollars in thousands)


	2024		2023
Interest income:
Interest on loans	$	6,700	$	5,800
Interest on interest-bearing accounts		579		621
Total interest income		7,279		6,421
Interest expense:
Other debt		393		246
Debt certificates		4,644		4,239
Total interest expense		5,037		4,485
Net interest income		2,242		1,936
Credit for loan losses		(126)		(142)
Net interest income after credit for loan losses		2,368		2,078
Non-interest income:
Broker-dealer commissions and fees		743		651
Other income		514		1,933
Total non-interest income		1,257		2,584
Non-interest expenses:
Salaries and benefits		1,975		3,132
Marketing and promotion		66		91
Office occupancy		124		191
Office operations and other expenses		1,600		1,628
Foreclosed assets, net		11		10
Legal and accounting		436		347
Total non-interest expenses		4,212		5,399
Loss before provision for income taxes and state LLC fees		(587)		(737)
Provision for income taxes and state LLC fees		20		20
Net loss	$	(607)	$	(757)

The accompanying notes are an integral part of these consolidated financial statements.

F-5

Table of Contents

Ministry Partners Investment Company, LLC and Subsidiaries

Consolidated Statements of Equity

For the years ended December 31, 2024 and 2023

(dollars in thousands)


	Series A Preferred Units			Class A Common Units
	Number of Units	Amount		Number of Units	Amount		Accumulated Deficit		Total

Balance, December 31, 2022	117,100	$	11,715	146,522	$	1,509	$	1,402	$	14,626
Adjustment related to implementation of CECL model	—		—	—		—		(113)		(113)
Net loss	—		—	—		—		(757)		(757)
Dividends on preferred units	—		—	—		—		(661)		(661)
Balance, December 31, 2023	117,100	$	11,715	146,522

MINISTRY PARTNERS INVESTMENT COMPANY, LLC 10-K