| Loans Receivable and Allowance for Loan Losses |
Note 4. Loans Receivable and Allowance for Loan Losses The Company’s loan portfolio comprises two segments, Non-profit commercial loans to Christian churches and ministries, and for-profit commercial loans. See “Note 1 – Loan Portfolio Segments and Classes” to Part I “Financial Information” of this Report. The loans fall into eight classes: | ● | wholly owned amortizing loans for which the Company possesses the first collateral position; |
| ● | wholly owned amortizing loans for which the Company possesses security other than a first collateral position on real property; |
| ● | wholly owned amortizing loans that are unsecured; |
| ● | wholly owned lines of credit for which the Company possesses security other than a first collateral position on real property; |
| ● | wholly owned lines of credit that are unsecured; |
| ● | wholly owned construction loans |
| ● | participated amortizing loans purchased for which the Company possesses the first collateral position; and |
| ● | participated construction loans purchased. |
The Company primarily makes or purchases participations in loans that are made to Christian non-profit organizations and churches. The purpose of these loans is to purchase, construct, or improve facilities. Occasionally the company originates for-profit commercial loans to meet the Company’s revenue and yield goals, as well as to diversify the Company’s loan portfolio. Maturities on the loan portfolio extend through 2038. The loan portfolio had a weighted average rate of 6.97% and 6.88% as of December 31, 2025 and December 31, 2024, respectively. Loans receivable at December 31, 2025 and December 31, 2024, include $6 thousand in loan participations transferred under a recourse agreement. The table below is a summary of the Company’s mortgage loans owned (dollars in thousands): | | | | | | | | | December 31, | | December 31, | | | 2025 | | 2024 | Non-profit commercial loans: | | | | | | | Real estate secured | | $ | 83,651 | | $ | 83,912 | Construction | | | 385 | | | — | Unsecured | | | 325 | | | 48 | Total non-profit commercial loans: | | | 84,361 | | | 83,960 | For-profit commercial loans: | | | | | | | Real estate secured | | | 7,915 | | | 10,678 | Total loans | | | 92,276 | | | 94,638 | Deferred loan fees, net | | | (106) | | | (100) | Loan discount | | | (221) | | | (211) | Allowance for loan losses | | | (1,122) | | | (1,156) | Loans, net | | $ | 90,827 | | $ | 93,171 |
Allowance for Loan Losses Management believes it has properly calculated the allowance for loan losses using CECL methodology as of December 31, 2025. The following table shows the changes in the allowance for loan losses for the years ended years ended December 31, 2025 and 2024 (dollars in thousands): | | | | | | | | | | | | | | | | | | | | | December 31, | | | 2025 | | 2024 | Segment: | | Non-profit Commercial | | For-profit Commercial | | Total | | Non-profit Commercial | | For-profit Commercial | | Total | Balance, beginning of period | | $ | 1,119 | | $ | 37 | | $ | 1,156 | | $ | 1,471 | | $ | 30 | | $ | 1,501 | Provision (credit) for loan loss | | | (19) | | | (15) | | | (34) | | | (133) | | | 7 | | | (126) | Charge-offs | | | — | | | — | | | — | | | (219) | | | — | | | (219) | Recoveries | | | — | | | — | | | — | | | — | | | — | | | — | Balance, end of period | | $ | 1,100 | | $ | 22 | | $ | 1,122 | | $ | 1,119 | | $ | 37 | | $ | 1,156 |
The table below presents loans by portfolio segment and the related allowance for loan losses. In addition, the table segregates loans and the allowance for loan losses by impairment methodology (dollars in thousands): | | | | | | | | | Loans and Allowance
for Loan Losses (by segment) | | | As of | | | December 31, | | December 31, | | | 2025 | | 2024 | Non-profit Commercial Loans: | | | | | | | Individually evaluated for impairment | | $ | 14,965 | | $ | 14,855 | Collectively evaluated for impairment | | | 69,396 | | | 69,105 | Total Non-profit Commercial Loans | | | 84,361 | | | 83,960 | For-profit Commercial Loans: | | | | | | | Individually evaluated for impairment | | | — | | | — | Collectively evaluated for impairment | | | 7,915 | | | 10,678 | Total For-profit Commercial Loans | | | 7,915 | | | 10,678 | Total Balance | | $ | 92,276 | | $ | 94,638 | | | | | | | | Allowance for loan losses: | | | | | | | Non-profit Commercial Loans: | | | | | | | Individually evaluated for impairment | | $ | 589 | | $ | 463 | Collectively evaluated for impairment | | | 511 | | | 656 | Total Non-profit Commercial Loan Allowance | | | 1,100 | | | 1,119 | For-profit Commercial Loans: | | | | | | | Individually evaluated for impairment | | | — | | | — | Collectively evaluated for impairment | | | 22 | | | 37 | Total For-profit Commercial Loan Allowance | | | 22 | | | 37 | Balance | | $ | 1,122 | | $ | 1,156 |
The Company has established a loan grading system to assist management in their analysis and supervision of the loan portfolio. The following tables summarize the credit quality indicators by loan class (dollars in thousands): | | | | | | | | | | | | | | | | | | | | | | Credit Quality Indicators (by class) | As of December 31, 2025 | | | Pass | | Watch | | Special Mention | | Substandard | | Doubtful | | Loss | | Total | Non-profit Commercial Loans | | | | | | | | | | | | | | | | | | | | | | Wholly Owned First Amortizing | | $ | 48,590 | | $ | 16,525 | | $ | 5,408 | | $ | 8,248 | | $ | — | | $ | — | | $ | 78,771 | Wholly Owned Other Amortizing | | | 1,307 | | | — | | | — | | | 1,309 | | | — | | | — | | | 2,616 | Wholly Owned Unsecured Amortizing | | | 12 | | | 25 | | | — | | | — | | | — | | | — | | | 37 | Wholly Owned Unsecured LOC | | | 300 | | | — | | | — | | | — | | | — | | | — | | | 300 | Wholly Owned Construction | | | 385 | | | — | | | — | | | — | | | — | | | — | | | 385 | Participation First | | | 1,180 | | | — | | | — | | | — | | | — | | | — | | | 1,180 | Participation Construction | | | 1,072 | | | — | | | — | | | — | | | — | | | — | | | 1,072 | Total Non-profit Commercial Loans | | | 52,846 | | | 16,550 | | | 5,408 | | | 9,557 | | | — | | | — | | | 84,361 | For-profit Commercial Loans | | | | | | | | | | | | | | | | | | | | | | Wholly Owned First Amortizing | | | 4,164 | | | 807 | | | — | | | — | | | — | | | — | | | 4,971 | Participation First | | | 1,339 | | | 129 | | | — | | | — | | | — | | | — | | | 1,468 | Participation Construction | | | 1,476 | | | — | | | — | | | — | | | — | | | — | | | 1,476 | Total For-profit Commercial Loans | | | 6,979 | | | 936 | | | — | | | — | | | — | | | — | | | 7,915 | Total Loans | | $ | 59,825 | | $ | 17,486 | | $ | 5,408 | | $ | 9,557 | | $ | — | | $ | — | | $ | 92,276 |
| | | | | | | | | | | | | | | | | | | | | | Credit Quality Indicators (by class) | As of December 31, 2024 | | | Pass | | Watch | | Special Mention | | Substandard | | Doubtful | | Loss | | Total | Non-profit Commercial Loans | | | | | | | | | | | | | | | | | | | | | | Wholly Owned First Amortizing | | $ | 41,686 | | $ | 24,565 | | $ | 5,408 | | $ | 8,042 | | $ | — | | $ | — | | $ | 79,701 | Wholly Owned Other Amortizing | | | 1,357 | | | — | | | — | | | 1,405 | | | — | | | — | | | 2,762 | Wholly Owned Unsecured Amortizing | | | 19 | | | 27 | | | — | | | — | | | — | | | — | | | 46 | Wholly Owned Unsecured LOC | | | 22 | | | — | | | — | | | — | | | — | | | — | | | 22 | Wholly Owned Construction | | | 188 | | | — | | | — | | | — | | | — | | | — | | | 188 | Participation First | | | 1,241 | | | — | | | — | | | — | | | — | | | — | | | 1,241 | Total Non-profit Commercial Loans | | | 44,513 | | | 24,592 | | | 5,408 | | | 9,447 | | | — | | | — | | | 83,960 | For-profit Commercial Loans | | | | | | | | | | | | | | | | | | | | | | Wholly Owned First Amortizing | | | 6,741 | | | 816 | | | — | | | — | | | — | | | — | | | 7,557 | Participation First | | | 1,497 | | | 130 | | | — | | | — | | | — | | | — | | | 1,627 | Participation Construction | | | 1,494 | | | — | | | — | | | — | | | — | | | — | | | 1,494 | Total For-profit Commercial Loans | | | 9,732 | | | 946 | | | — | | | — | | | — | | | — | | | 10,678 | Total Loans | | $ | 54,245 | | $ | 25,538 | | $ | 5,408 | | $ | 9,447 | | $ | — | | $ | — | | $ | 94,638 |
The following table sets forth certain information with respect to the Company’s loan portfolio delinquencies by loan class and amount (dollars in thousands): | | | | | | | | | | | | | | | | | | | | | | Age Analysis of Past Due Loans (by class) | As of December 31, 2025 | | | 30-59 Days Past Due | | 60-89 Days Past Due | | Greater Than 90 Days | | Total Past
Due | | Current | | Total Loans | | Recorded
Investment 90
Days or more
and Accruing | Non-profit Commercial Loans | | | | | | | | | | | | | | | | | | | | | | Wholly Owned First Amortizing | | $ | 7,336 | | $ | — | | $ | 1,981 | | $ | 9,317 | | $ | 69,454 | | $ | 78,771 | | $ | — | Wholly Owned Other Amortizing | | | — | | | — | | | — | | | — | | | 2,616 | | | 2,616 | | | — | Wholly Owned Unsecured Amortizing | | | — | | | — | | | — | | | — | | | 37 | | | 37 | | | — | Wholly Owned Unsecured LOC | | | — | | | — | | | — | | | — | | | 300 | | | 300 | | | — | Wholly Owned Construction | | | 53 | | | — | | | — | | | 53 | | | 332 | | | 385 | | | — | Participation First | | | — | | | — | | | 59 | | | 59 | | | 1,121 | | | 1,180 | | | 59 | Participation Construction | | | — | | | — | | | — | | | — | | | 1,072 | | | 1,072 | | | — | Total Non-profit Commercial Loans | | | 7,389 | | | — | | | 2,040 | | | 9,429 | | | 74,932 | | | 84,361 | | | 59 | For-profit Commercial Loans | | | | | | | | | | | | | | | | | | | | | | Wholly Owned First Amortizing | | | — | | | — | | | — | | | — | | | 4,971 | | | 4,971 | | | — | Participation First | | | — | | | — | | | — | | | — | | | 1,468 | | | 1,468 | | | — | Participation Construction | | | — | | | — | | | — | | | — | | | 1,476 | | | 1,476 | | | — | Total For-profit Commercial Loans | | | — | | | — | | | — | | | — | | | 7,915 | | | 7,915 | | | — | Total Loans | | $ | 7,389 | | $ | — | | $ | 2,040 | | $ | 9,429 | | $ | 82,847 | | $ | 92,276 | | $ | — |
| | | | | | | | | | | | | | | | | | | | | | Age Analysis of Past Due Loans (by class) | As of December 31, 2024 | | | 30-59
Days
Past Due | | 60-89
Days Past Due | | Greater
Than 90
Days | | Total Past
Due | | Current | | Total Loans | | Recorded
Investment 90
Days or more
and Accruing | Non-profit Commercial Loans | | | | | | | | | | | | | | | | | | | | | | Wholly Owned First Amortizing | | $ | 6,745 | | $ | 1,215 | | $ | 910 | | $ | 8,870 | | $ | 70,831 | | $ | 79,701 | | $ | — | Wholly Owned Other Amortizing | | | — | | | — | | | — | | | — | | | 2,762 | | | 2,762 | | | — | Wholly Owned Unsecured Amortizing | | | — | | | — | | | — | | | — | | | 46 | | | 46 | | | — | Wholly Owned Unsecured LOC | | | — | | | — | | | — | | | — | | | 22 | | | 22 | | | — | Wholly Owned Construction | | | — | | | — | | | — | | | — | | | 188 | | | 188 | | | — | Participation First | | | — | | | — | | | — | | | — | | | 1,241 | | | 1,241 | | | — | Total Non-profit Commercial Loans | | | 6,745 | | | 1,215 | | | 910 | | | 8,870 | | | 75,090 | | | 83,960 | | | — | For-profit Commercial Loans | | | | | | | | | | | | | | | | | | | | | | Wholly Owned First Amortizing | | | — | | | — | | | — | | | — | | | 7,557 | | | 7,557 | | | — | Participation First | | | — | | | — | | | — | | | — | | | 1,627 | | | 1,627 | | | — | Participation Construction | | | — | | | — | | | — | | | — | | | 1,494 | | | 1,494 | | | — | Total For-profit Commercial Loans | | | — | | | — | | | — | | | — | | | 10,678 | | | 10,678 | | | — | Total Loans | | $ | 6,745 | | $ | 1,215 | | $ | 910 | | $ | 8,870 | | $ | 85,768 | | $ | 94,638 | | $ | — |
Impaired Loans The following tables are summaries of impaired loans by loan class as of and for the years ended years ended December 31, 2025 and 2024, respectively. The unpaid principal balance reflects the contractual principal outstanding on the loan. Included in the balance of impaired loans are loan modifications that performed according to contractual terms and that the Company has upgraded to pass or watch since the date of the modification. The recorded investment reflects the unpaid principal balance less any interest payments that management has recorded against principal and less discounts taken. No loans in the Company’s for-profit commercial loan segment were classified as impaired or non-accrual at December 31, 2025 or at December 31, 2024. The tables below represent the breakdown by class of the non-profit loan portfolio segment only (dollars in thousands): | | | | | | | | | For the years ended | Impaired Non-profit Commercial Loans (by class) | | December 31, | | December 31, | | | 2025 | | 2024 | Wholly Owned First Amortizing | | | | | | | Average recorded investment | | $ | 19,849 | | $ | 20,154 | Interest income recognized | | | 2,051 | | | 1,326 | Wholly Owned Other Amortizing | | | | | | | Average recorded investment | | | 1,357 | | | 703 | Interest income recognized | | | 97 | | | — | Total Impaired Loans | | | | | | | Average recorded investment | | $ | 21,206 | | $ | 20,857 | Interest income recognized | | | 2,148 | | | 1,326 |
| | | | | | | Impaired Non-profit Commercial Loans (by class) | | As of | | As of | | | December 31, | | December 31, | | | 2025 | | 2024 | Wholly Owned First Amortizing | | | | | | | Recorded investment with specific allowance | | $ | 7,569 | | $ | 7,364 | Recorded with no specific allowance | | | 11,987 | | | 12,777 | Total recorded investment | | $ | 19,556 | | $ | 20,141 | Unpaid principal balance | | $ | 20,021 | | $ | 20,675 | Wholly Owned Other Amortizing | | | | | | | Recorded investment with specific allowance | | $ | 1,309 | | $ | 1,405 | Recorded with no specific allowance | | | — | | | — | Total recorded investment | | $ | 1,309 | | $ | 1,405 | Unpaid principal balance | | $ | 1,685 | | $ | 1,685 | Total Impaired Loans | | | | | | | Recorded investment with specific allowance | | $ | 8,878 | | $ | 8,769 | Recorded with no specific allowance | | | 11,987 | | | 12,777 | Total recorded investment | | $ | 20,865 | | $ | 21,546 | Unpaid principal balance | | $ | 21,706 | | $ | 22,360 |
A summary of nonaccrual loans by loan class is as follows (dollars in thousands): | | | | | | | | | | | | | | Loans on Nonaccrual Status (by class) | | | December 31, 2025 | | December 31, 2024 | Non-profit Commercial Loans: | | | | | | | Wholly Owned First Amortizing | | $ | 9,242 | | $ | 10,114 | Wholly Owned Other Amortizing | | | 1,309 | | | 1,405 | Total | | $ | 10,551 | | $ | 11,519 |
The Company modified three loans during the year ended December 31, 2025. The Company modified six loans during the year ended December 31, 2024. A summary of loans the Company modified during the years ended December 31, 2025 and 2024 is as follows (dollars in thousands): | | | | | | | Loan Modifications (by class) | | | For the twelve months ended | | | December 31, 2025 | | December 31, 2024 | Non-profit Commercial Loans: | | | | | | | Wholly Owned First Amortizing | | | | | | | Number of Loans | | | 3 | | | 6 | Pre-Modification Outstanding Recorded Investment | | $ | 1,372 | | $ | 5,566 | Post-Modification Outstanding Recorded Investment | | | 1,372 | | | 5,566 | Recorded Investment At Period End | | | 1,371 | | | 5,311 | Total | | | | | | | Number of Loans | | | 3 | | | 6 | Pre-Modification Outstanding Recorded Investment | | $ | 1,372 | | $ | 5,566 | Post-Modification Outstanding Recorded Investment | | | 1,372 | | | 5,566 | Recorded Investment At Period End | | | 1,371 | | | 5,311 |
Of the three loans modified during the year ended December 31, 2025, all three were granted short-term extensions of their maturity dates and two of the three modifications changed the loan’s payment type to interest-only. Of the six loans modified during the year ended December 31, 2024, all six were granted short-term extensions of their maturity dates. Five of the six loans had modifications that changed their payment type to interest-only. The Company had four previously restructured loans that were past maturity as of December 31, 2025. One of these loans has been completely written off as of December 31, 2025. For the other loans, the Company has entered into a forbearance agreement with the borrower and is evaluating what actions it should undertake to protect its investment on the loan. The forbearance agreement includes reduced monthly payment amounts and additional reporting requirements. As of December 31, 2025, no additional funds were committed to be advanced in connection with modified loans.
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