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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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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, 2023

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

For the transition period from _____to_____

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Commission file number:  333-4028-LA

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MINISTRY PARTNERS INVESTMENT COMPANY, LLC

(Exact name of small business issuer in its charter)

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

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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 ☑.

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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 ☐.

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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 ☐.

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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.

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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. ☐

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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 ☑.

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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. ☐

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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). ☐

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

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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, 2023, was 146,522.

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MINISTRY PARTNERS INVESTMENT COMPANY, LLC

FORM 10-K

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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 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

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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:

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, 2023 and 2022, we have no secured investment debt certificates outstanding.

We organized MP Realty to provide loan brokerage and other real estate services to churches and ministries. MP Realty has conducted limited operations since its launch.

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

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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 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 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 we believe that the demand for ministry loans originated and serviced by niche lenders to churches and ministries will continue to exceed available lending and financing sources for this sector. We believe that 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, REITs, insurance companies, 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.

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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 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:

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

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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 showes the breakout of MP Securities’ assets under management of $216.4 million as of December 31, 2023.

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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.

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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, 2023, MP Securities was licensed to serve as an insurance broker in 15 states and offer investments in 23 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, 2023, 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 29 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.

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

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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.

The chart below illustrates the evolution of our financing strategy for investments and business operations:

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Sale of Loan Participations as a Funding Source

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

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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 its management team. A substantial number of its 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:

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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 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

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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 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.

Loan Brokerage Services

In 2009, we created a subsidiary, MP Realty, which provides loan brokerage and other real estate services to churches and ministries in connection with our mortgage financing activities. The California Bureau of Real Estate issued MP Realty Services, Inc. a license to operate as a corporate real estate broker on February 23, 2010. If we expand our loan brokerage activities to other states, we may be required to register with these states as a commercial mortgage broker if we are directly or indirectly marketing, negotiating or offering to make or negotiate a mortgage loan. We intend to monitor these regulatory requirements as necessary in the event MP Realty provides services to a borrower, lender, broker or agent outside the State of California.

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

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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.

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. Certain provisions that have not been implemented, however, could affect our business and include, but are not limited to the implementation of more stringent fiduciary standards for financial advisors and potential establishment of a new self-regulatory organization for investment advisors. 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:

MP Securities is subject to rules and regulations regarding:

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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.

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, fine, suspension, or expulsion of a broker-dealer, its officers, or employees.

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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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:

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 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

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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. Reg 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 Reg BI rule, the broker-dealer firm and investment adviser must provide the customer with a brief relationship summary known as Form CRS.

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 Reg 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 Reg 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 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 Reg 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.

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

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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 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. 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.

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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 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

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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.

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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:

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

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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 reduce 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.

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.

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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.

Our systems may experience an interruption or 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 and other electronic transmission and communication systems 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. We rely on third parties in processing our transactions. Any breakdown or failures of their systems or capacity constraints 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 of 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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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.

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:

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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 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

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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 supply a positive net 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 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.

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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 publicized 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. 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 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 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.

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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:

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

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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 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 two states will depend, to a substantial degree, on the real estate markets in those markets.

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(in thousands)

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.

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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, 2023, our allowance for loan loss totaled $1.5 million, or 1.50%, 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:

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.

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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 Operation section.

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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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. 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

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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:

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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.

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ITEM 1B.UNRESOLVED STAFF COMMENTS

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Not applicable.

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Corporate Offices

As of December 31, 2023, the Company conducted most of its operations from its main corporate office at 915 West Imperial Highway, Suite 120, Brea, California. However, on March 4, 2024, the Company moved its corporate office to 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; and Nampa, Idaho.

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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, 2023, 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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Not applicable.

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PART II

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

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Price Range of Common Units

There is no public market for our Class A Units and Series A Preferred Units. As of December 31, 2023, 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. The Company had a net loss in 2023, therefore no dividend was accrued. For the year ended December 31, 2022, $13 thousand in net profits were distributed to our Series A

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Preferred Units holders. This increased the amount of distributions declared on our Series A Preferred Units for the fourth quarters 2022 by $0.018 per unit.

The remaining balance of any profits will be allocated to all holders of our Class A Units based on their ownership percentage. For 2023, we made no distributions to the holders of our Class A Units.

During the years ended December 31, 2023 and 2022, we declared distributions on our Series A Preferred Units as follows:

SERIES A UNITS

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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.

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We are a “smaller reporting company” as defined by Regulation S-K issued by the SEC. As a result, we are not supplying the information contained in this item per Regulation S-K.

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

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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 the risk to the Company if we experience 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’ investment, we will continue to focus on:

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Impact of recent external events on our Business

The COVID-19 pandemic prompted adjustments to the operations of the individuals, businesses, churches, and the ministries we serve. Management, however, does not perceive any material adverse impact resulting from the pandemic on the Company’s financial position or its ability to conduct business. Despite this, the long-term effects of the pandemic remain uncertain for our borrowers, investors, and clients, leading to continuous monitoring by the Company.

Inflation became a concern for the Federal Reserve Board (“FRB”) beginning in 2021 as inflation outpaced the FRB’s target rate of 2%. In response, the FRB began increasing the fed funds rate in January 2022. Since that time, the fed funds rate has increased by 525 basis points, rising from 0.25% on January 1, 2022, to 5.50% as of December 31, 2023. In its press release for its December 13^th, 2023, meeting, the Federal Reserve noted, “inflation has eased over the past year but remains elevated”. Looking ahead, the FRB's median projection for the fed funds rate at the end of 2024 is 4.6%, showing that some committee members anticipate reducing the fed funds rate as inflation approaches the FRB’s long run inflation target rate of 2%.

In the first quarter of 2023, the Federal Deposit Insurance Corporation (“FDIC”) closed two banks and facilitated the buyout of another significant bank in the second quarter of 2023. Two more bank failures occurred in the second half of the year, but their total combined assets were under $250 million. Due to these and other factors, we closely

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monitor the impact of rising interest rates and their subsequent effects on the overall economy.

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, 2023 and 2022, 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, 2023, Financial Results

For the year ended December 31, 2023, the Company had a net loss of $757 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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As we incrementally paid off our term debt facility over the preceding three years (see Other Borrowings chart below), total assets declined, and our net interest income was subsequently reduced.

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Company management anticipated that its debt reduction strategy would cause a short-term reduction in net interest income but believes 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. We have begun to increase the amount of loan investments on our balance sheet, and we expect to see interest income on loans grow as well. Interest income on loans grew by $75 thousand in the second quarter compared to the first quarter of 2023. Interest income on loans grew an additional $113 thousand in the third quarter compared to the second quarter. Interest income then grew and additional $160 thousand in the fourth quarter compared to the third quarter of 2023. The increase in interest income was mostly due to a growth in net loans receivable of $13.5 million in 2023. In 2024, the Company intends to continue to grow its loan investments. 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 loans as well as closely monitoring the rates it offers on its debt certificates.

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The chart below shows the Company’s net income (loss) figures for the years 2019-2023.

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