Ministry Partners Investment Company, LLC - 10-K

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.

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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:

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

the profitability of our operations; and

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 continues to focus 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, advisory fees, 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 and have transitioned to a technology platform that enhances our borrowers and investors' experience with our operations. To effectively implement this strategy, we will need to increase our investment in technology, streamline our loan origination and

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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.

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, and manage succession plans for our senior advisors, we could jeopardize our strategic goal of increasing non-interest income, thereby adversely affecting our net earnings and financial condition.

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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 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:

interest rates and credit spreads;

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

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

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

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

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

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, conflict in Iran and the Middle East, increased inflation, and global

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supply chain disruptions on our loan investments is still uncertain. Recent military conflict involving Iran, including recent hostilities between Iran and a coalition led by the United States and Israel, has created significant geopolitical uncertainty in the Middle East and globally. The situation remains fluid and could escalate further or broaden geographically, potentially resulting in additional military action, cyberattacks against U.S. or allied businesses, sanctions, trade restrictions, supply chain disruptions, or significant fluctuations in commodity prices and foreign exchange rates. Because the scope, duration, and outcome of the conflict remain uncertain, the ultimate impact on our business, financial condition, and results of operations cannot be predicted and could be material.

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 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.

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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. At times we have used borrowing facilities obtained from institutional lenders, but in recent years have 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 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

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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 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

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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:

unforeseen catastrophic events;

cyber-attacks;

human error;

changes in operational practices of our system vendors; or

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.

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

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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 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

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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 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:

changes in church leadership and church membership;

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

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

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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 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, wild fires, 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.

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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.

(in thousands)

December 31, 2025

Unpaid Balance of Loans

Percent of Total Loans

Number of Loans

Percent of Total Loans

California

Maryland

Illinois

December 31, 2024

Unpaid Balance of Loans

Percent of Total Loans

Number of Loans

Percent of Total Loans

California

Maryland

Illinois

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

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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 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, 2025, our allowance for loan losses totaled $1.1 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:

significant negative changes in the economy;

events affecting specific assets;

events affecting specific borrowers;

mismanaged construction;

loss of a senior pastor;

rising interest rates;

failure to sell properties or assets;

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

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

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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 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:

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

a decline in the local real estate market;

undiscovered defects on the property;

waste or neglect of the property;

a downturn in demographic and residential trends;

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

environmental hazards;

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

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 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.

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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.

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:

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;

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need for liquidity; and

the mix of the investor’s portfolio.

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 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 reduces 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 of borrowers, investors, and faith-based strategic partners;

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, expand our balance sheet, 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, 2025 and 2024, 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, 2025, Financial Results

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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Return to Profitability. After incurring losses in the previous two years, the Company returned to profitability in 2025. For the year ended December 31, 2025, the Company earned $30 thousand, as compared to a net loss of $607 thousand in 2024. With the successful implementation of expense reductions, investments in our technology platforms, and focus on reducing risk in our mortgage loan investments, the Company is focused on improving its net interest margin, growing its balance sheet and aligning with new faith-based investors in our debt securities.

Improve Net Interest Income on Loan Investments. During the period from 2020 through 2023, the Company pursued a strategy of reducing its balance sheet, including the repayment and elimination of borrowings under its credit facility. This strategy contributed to a decline in interest income from the Company’s commercial loan portfolio. Additionally, incremental repayments of the Company’s term debt facility during this period reduced total assets and contributed to lower net interest income.

For the year ended December 31, 2025, net interest income increased 27% as compared to the previous year. After adjusting for loan losses, net interest income increased 22% in 2025. In addition, the Company also received $895 thousand of interest payments from delinquent borrowers that reduced the principal balance of the loan rather than being reported as interest income. The primary driver behind this figure relates to a borrower that has a pattern of being late on its loan payments but consistently continues to meet its debt obligation. See "Non accrual, Past Due, Nonperforming Modified Loan and Foreclosed Assets table on page 48 of this Report."

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

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Although rising interest rates contributed to increases in net interest income in 2024 and 2025, the primary driver of the increase from the past two years was interest income recovered from a borrower whose loan had been previously modified. In March 2025, the Company received a $670 thousand payment 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. $648 thousand of this payment was treated as the recovery of accrued interest, which had previously been written off due to their uncertain collectability. The Company recognized an additional $147 thousand in other lending income that represented the recovery of fees and costs related to this loan.

Management anticipated that the Company’s debt reduction strategy would result in a short-term decline in net interest income, due both to a reduction in interest-earning assets and to the repayment of borrowings under the Company’s term debt facility, which represented the Company’s lowest cost source of funds. However, management believed that the long-term benefits of strengthening the Company’s capital position, increasing stockholders’ equity, and eliminating debt at a discount outweighed the near-term reduction in net interest income.

In 2026, the Company intends to continue to expand its loan investment portfolio. Management expects that the yield on the Company’s portfolio may increase in future periods as loans originated in 2021 and 2022 at interest rates of approximately 5% to 6% reach their five-year rate reset dates and adjust to rates currently estimated to be in the 7% to 8% range. Management also intends to seek to improve net interest income from its loan investments by adjusting, as appropriate, the interest rates offered on new loan originations and by closely monitoring the rates offered on the Company’s debt certificates.

In addition, the Company anticipates that continued management and resolution of impaired assets within its loan portfolio may contribute to increased interest income.

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Reducing the Company’s Operating Expenses. As a result of the Company’s debt reduction strategy and the related decline in interest-earning assets, net operating income was insufficient to cover operating expenses in 2023 and 2024, resulting in net losses during those periods. In response, the Company implemented a series of initiatives intended to reduce operating expenses and improve operating efficiency.

Operating expenses totaled approximately $5.7 million in 2022. Through various cost reduction measures, including changes to the Company’s loan servicing strategy, relocation to new office space, active management of office-related expenses, streamlining of information technology services, and adjustments to staffing levels, operating expenses were reduced to approximately $4.2 million in 2024 and $3.9 million in 2025.

Management believes that these reductions in operating expenses position the Company to focus on expanding its loan investment portfolio, increasing the issuance of investor notes, and growing its 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 2025 included $182 thousand in gains on the sale of foreclosed assets. After accounting for these non-recurring sources of other income, our non-interest income generated by our lending and broker-dealer services increased by $74 thousand over 2024, and we expect to grow those sources of revenue further in 2026.

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 operations through making profitable commercial loans and growing our non-interest generating sources of income from our faith-based investment advisory services. In 2026, the Company intends to focus on the following objectives:

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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;

Develop and launch one or more new investment products to serve as a cash management investment to be offered to faith-based organizations, ministries, institutions, and Christian businesses;

(iii)

Continuing our efforts to reduce non-interest expenses;

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

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

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

(vii)

With improving net interest margins on its loan investments, the elimination of the Company's REO property, completion of its core processing system, and its operating expense reduction program, the Company plans to restructure its investor notes program in 2026 to provide new incentives to attract interest from faith-based strategic partners and investors. By expanding investor note sales, the Company can once again increase its mortgage loan investments and total assets, and improve its core operating net income.

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

Comparison

$ Difference

% Difference

(dollars in thousands)

Assets:

Cash

Restricted cash

Certificates of deposit

Loans receivable, net of allowance for loan losses of $1,122 and $1,156 as of December 31, 2025 and 2024, respectively

Accrued interest receivable

Investments in joint venture

Other investments

Property and equipment, net

Foreclosed assets, net

Servicing assets

Other assets

Total assets

Liabilities and members’ equity

Liabilities:

Other secured borrowings

Debt certificates payable, net of debt issuance costs of $72 and $88 as of December 31, 2025 and 2024, respectively

Accrued interest payable

Other liabilities

Total liabilities

Members' Equity:

Series A preferred units

Class A common units

Accumulated earnings

Total members' equity

Total liabilities and members' equity

Total assets decreased by 1% due to the net payoff or sale of $2.3 million in loans receivable. Part of these funds were used to increase our liquidity and to invest in certificates of deposit. $635 thousand was used to pay for maturing debt certificates that were not renewed.

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 99.6% real estate secured loans.

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Loan Types

Year Ended December 31, (dollars in thousands)

Amount

Portfolio

Amount

Portfolio

Non-profit commercial loans:

Real estate secured

Construction

Unsecured

Total non-profit commercial loans:

For-profit commercial loans:

Real estate secured

Construction

Total for-profit commercial loans

Total loans

Maturities and Sensitivities of Loans to Changes in Interest Rates

Dollar Amount of Loans Receivable Maturing (in thousands)

Due 1 Yr or Less

Due 1yr to 5 Yrs

Due After 5 Yrs

Total

December 31, 2025

Included in the table above are 78 adjustable-rate loans totaling 56% 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. In most circumstances, 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,

Total Recorded Balance

Total Recorded Balance

Interest Earned

Interest that should have been Earned*

Non-accrual loans**

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

Foreclosed Assets, net of valuation allowance

Total

*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, 2025 related to a loan that has been put on non-accrual due to prior delinquency but is making regular principal and interest payments.

*** This balance is related to a borrower whose loan was in the process of being refinanced. It paid off in January 2026.

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,

($ in thousands)

Balances:

Average total loans outstanding during period

Total non-performing loans outstanding at end of the period

Total loans outstanding at end of the period

Allowance for loan losses:

Balance at the beginning of period

Provision credit to expense

Charge-offs

Non-profit, Wholly-Owned First Amortizing

Total

Recoveries

Non-profit, Wholly-Owned First Amortizing

Total

Net loan charge-offs

Accretion of allowance related to restructured loans

Balance

Ratios:

Net loan (charge-offs) / recoveries to average total loans

Provision credit for loan losses to average total loans

Allowance for loan losses to non-performing loans at the end of the period

Allowance for loan losses to total loans at the end of the period

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

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, 2025 (dollars in thousands):

Percent of loans

in each category

Loan Categories

Amount

to total loans

Non-profit commercial loans:

Real estate secured

Construction

Other secured

Unsecured

Total non-profit commercial loans:

For-profit commercial loans:

Real estate secured

Construction

Total for-profit commercial loans

Total loans

At this time management is not able to approximate an anticipated amount of charge-offs in 2026.

Debt Certificates Payable

Our debt certificates are 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. This offering will expire on December 31, 2026 and will need to be renewed for 2027.

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

December 31, 2025

December 31, 2024

SEC Registered Public Offerings

Offering Type

Amount

Weighted

Average

Interest

Rate

Amount

Weighted

Average

Interest

Rate

Class 1A Offering

Unsecured

2021 Class A Offering

Unsecured

2024 Class A Offering

Unsecured

Public offering total

Private Offerings

Subordinated Notes

Unsecured

Private offering total

Total debt certificates payable

Members’ Equity

During the year ended December 31, 2025, total members’ equity decreased by $437 thousand attributable to income of $30 thousand and dividend distributions of $467 thousand. We did not repurchase or sell any membership equity units during the year ended December 31, 2025.

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 14% at December 31, 2025, 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, 2025, we generated $1.1 million

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in cash from the sale of loan participation interests after generating $8.4 million during the period ended December 31, 2024.

The Company has one 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 November 28, 2026. 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, 2025, we had no outstanding balance due on this facility and did not draw on it at any point during the year. The Company does not have any restrictions on how the funds may be used for this facility.

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 $13.1 million as of December 31, 2025.

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, 2025, our investor debt certificates had future maturities during the following twelve-month periods ending December 31, (dollars in thousands):

Less: debt issuance costs

Debt certificates payable, net of debt issuance costs

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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.

Credit Facilities and Other Borrowings

The table below is a summary of the Company’s debt instruments as of December 31, 2025 (dollars in thousands):

Nature of

Borrowing

Interest

Rate

Interest Rate

Type

Amount

Outstanding

Monthly

Payment

Maturity

Date

Loan Collateral

Pledged

Cash

Pledged

ACCU LOC

Variable

ACCU Secured

Various

Fixed

Various

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, 2025, we are in compliance with the covenants on our securities payable and lines of credit.

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, 2025

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 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)

Average

Balance

Interest

Income/

Expense

Average

Yield/

Rate

Average

Balance

Interest

Income/

Expense

Average

Yield/

Rate

Assets:

Interest-earning accounts with other financial institutions

Interest-earning loans [1][2]

Total interest-earning assets

Non-interest-earning assets

Total Assets

Liabilities:

Debt certificates payable gross of debt issuance costs

Other debt

Total interest-bearing liabilities

Debt issuance cost

Total interest-bearing liabilities net of debt issuance cost

Net interest income

Net interest margin

[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 $30 thousand and $111 thousand for the years ended years ended December 31, 2025 and 2024, respectively.

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Rate/Volume Analysis of Net Interest Income

Twelve Months Ended

December 31, 2025 vs. 2024

Increase (Decrease) Due to Change in:

Volume

Rate

Total

(Dollars in Thousands)

Increase (Decrease) in Interest Income:

Interest-earning accounts with other financial institutions

Interest-earning loans

Total interest-earning assets

Increase (Decrease) in Interest Expense:

Debt certificates payable gross of debt issuance costs

Other debt

Debt issuance cost

Total interest-bearing liabilities

Change in net interest income

Net interest income increased 27% during the year ended December  31, 2025. This was due to a $670 thousand payment received on a loan during March 2025. $648 thousand of this payment was recognized as interest income that had previously been written off.

The yield on interest-earning accounts with other financial institutions decreased as rates offered by financial institutions declined during 2025 along with federal interest rates. Interest on our interest-earning loans increased by $387  thousand due to the one-time interest payment referenced above. While the weighted average rate of our loan portfolio increased from 6.88% to 6.97%, the increase in interest income from loans was offset by a decrease in average interest-earning loans of $4.9 million.

Total interest expense decreased primarily due to a decrease in the interest paid on other debt, as we were able to avoid borrowing on lines of credit for the entirety of 2025. Average rates and average balances on our debt certificates stayed relatively stable from the prior year.

The Company’s net interest margin increased due to the changes described above. The Company intends to grow its loan portfolio in 2026 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)

$ Change

% Change

Net interest income

Provision (credit) for loan losses

Net interest income after provision (credit) for loan losses

Non-interest income

Broker-dealer commissions and fees

Other lending income

Gain on debt extinguishment

Total non-interest income

Total non-interest expenses

Income (loss) before provision for income taxes

Provision for income taxes and state LLC fees

Net income (loss)

Provision

In 2025, the Company recorded a credit to provision for loan losses due to paydowns in the loan portfolio.

Non-interest income

Non-interest income was higher in 2025 due to the recognition of $182 thousand in gains on the sale of foreclosed assets. The Company sold its investment in a foreclosed asset in October of 2025. As compared to 2024, non-interest income from other sources varied. Broker-dealer fees and commissions increased by $13 thousand, gains on loan sales decreased by $85 thousand as the Company sold fewer loans, and the Company also recorded $147 thousand in fee income related to a borrower who made a $670 thousand payment from a sale of real property under a confirmed bankruptcy plan. The sale of the foreclosed asset and the fee income 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 2025 due to lower office operations expenses, as some of the measures the Company has taken in the prior two years to reduce technology costs has taken effect. In addition, consulting fees decreased by $70 thousand as we terminated our consulting agreement with our former Chief Executive Officer in the last half of 2024.

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For the year ended December 31, 2024

Net Interest Income and Net Interest Margin

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)

Average

Balance

Interest

Income/

Expense

Average

Yield/

Rate

Average

Balance

Interest

Income/

Expense

Average

Yield/

Rate

Assets:

Interest-earning accounts with other financial institutions

Interest-earning loans [1][2]

Total interest-earning assets

Non-interest-earning assets

Total Assets

Liabilities:

Debt certificates payable gross of debt issuance costs

Other debt

Total interest-bearing liabilities

Debt issuance cost

Total interest-bearing liabilities net of debt issuance cost

Net interest income

Net interest margin

[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 December 31, 2024 and 2023, respectively.

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

Interest-earning loans

Total interest-earning assets

Increase (Decrease) in Interest Expense:

Debt certificates payable gross of debt issuance costs

Other debt

Debt issuance cost

Total interest-bearing liabilities

Change in net interest income

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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.

Provision and non-interest income and expense

Twelve months ended

December 31,

Comparison

(dollars in thousands)

$ Change

% Change

Net interest income

Provision (credit) for loan losses

Net interest income after provision (credit) for loan losses

Total non-interest income

Total non-interest expenses

Income (loss) before provision for income taxes

Provision for income taxes and state LLC fees

Net income (loss)

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.

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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.”

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

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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.