UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2022

OR

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

For the period from _____ to _____

333-4028-LA

(Commission file No.)

MINISTRY PARTNERS INVESTMENT COMPANY, LLC

(Exact name of registrant as specified in its charter)

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

 915 West Imperial Highway, Brea, Suite 120, California, 92821

(Address of principal executive offices)

(714) 671-5720

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 þ  No ◻.

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

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

Large accelerated filer ◻	Accelerated filer ☐	Non-accelerated filer ◻
Smaller reporting company filer ☑	Emerging growth company ☐

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 revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻

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

At June 30, 2022, registrant had issued and outstanding 146,522 units of its Class A common units. The information contained in this Form 10-Q should be read in conjunction with the registrant’s Annual Report on Form 10-K for the year ended December 31, 2021.

MINISTRY PARTNERS INVESTMENT COMPANY, LLC

FORM 10-Q

TABLE OF CONTENTS

	PART I — FINANCIAL INFORMATION
Item 1:	Consolidated Financial Statements	F - 1
	Consolidated Balance Sheets	F - 1
	Consolidated Statements of Income	F - 2
	Consolidated Statements of Cash Flows	F - 3
	Notes to Consolidated Financial Statements	F - 4
Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3
Item 3:	Quantitative and Qualitative Disclosures About Market Risk	10
Item 4:	Controls and Procedures	10
	PART II —OTHER INFORMATION
Item 1:	Legal Proceedings	11
Item 1A:	Risk Factors	11
Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	11
Item 3:	Defaults Upon Senior Securities	11
Item 4:	Mine Safety Disclosures	11
Item 5:	Other Information	11
Item 6:	Exhibits	11
	SIGNATURES	12
Exhibit 31.1:	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15(d)-14(a)
Exhibit 31.2:	Certification of Principal Accounting Officer pursuant to Rule 13a-14(a) or Rule 15(d)-14(a)
Exhibit 32.1:	Certification pursuant to 18 U.S.C. §1350 as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 32.2:	Certification pursuant to 18 U.S.C. §1350 as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002

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PART I - FINANCIAL INFORMATION

Item 1: Financial Statements

Ministry Partners Investment Company, LLC and Subsidiaries

Consolidated Balance Sheets

June 30, 2022 and December 31, 2021

(Dollars in thousands Except Unit Data)

	June 30,		December 31,
	2022		2021
	(Unaudited)		(Audited)
Assets:
Cash and cash equivalents	$	11,485	$	28,080
Restricted cash		66		69
Loans receivable, net of allowance for loan losses of $1,702 and $1,638 as of June 30, 2022 and December 31, 2021, respectively		88,160		97,243
Accrued interest receivable		484		507
Investment in joint venture		882		882
Other investments		1,015		—
Property and equipment, net		152		172
Foreclosed assets, net		301		301
Servicing assets		128		170
Other assets		750		541
Total assets	$	103,423	$	127,965
Liabilities and members’ equity
Liabilities:
Lines of credit	$	2,000	$	2,000
Term-debt		10,459		32,749
Other secured borrowings		15		17
Investor notes payable, net of debt issuance costs of $72 and $88 as of June 30, 2022 and December 31, 2021, respectively		74,018		76,732
Accrued interest payable		227		252
Other liabilities		2,009		1,704
Total liabilities		88,728		113,454
Members' Equity:
Series A preferred units, 1,000,000 units authorized, 117,100 units issued and outstanding at June 30, 2022 and December 31, 2021 (liquidation preference of $100 per unit); See Note 13		11,715		11,715
Class A common units, 1,000,000 units authorized, 146,522 units issued and outstanding at June 30, 2022 and December 31, 2021; See Note 13		1,509		1,509
Accumulated earnings		1,471		1,287
Total members' equity		14,695		14,511
Total liabilities and members' equity	$	103,423	$	127,965

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

F-1

Ministry Partners Investment Company, LLC and Subsidiaries

Consolidated Statements of Operations (Unaudited)

For the three and six months ended June 30, 2022 and 2021

(Dollars in thousands)

	Three months ended				Six months ended
	June 30,				June 30,
	2022		2021		2022		2021
Interest income:
Interest on loans	$	1,394	$	1,753	$	2,915	$	3,621
Interest on interest-bearing accounts		11		11		15		25
Total interest income		1,405		1,764		2,930		3,646
Interest expense:
Investor notes payable		699		677		1,421		1,355
Other debt		112		256		251		545
Total interest expense		811		933		1,672		1,900
Net interest income		594		831		1,258		1,746
Provision (credit) for loan losses		24		112		(63)		104
Net interest income after provision (credit) for loan losses		570		719		1,321		1,642
Non-interest income:
Broker-dealer commissions and fees		217		206		516		502
Other income		59		73		94		130
Gain on debt extinguishment		300		—		1,800		2,398
Total non-interest income		576		279		2,410		3,030
Non-interest expenses:
Salaries and benefits		678		623		2,180		1,538
Marketing and promotion		21		9		114		220
Office occupancy		45		45		88		89
Office operations and other expenses		299		320		746		616
Foreclosed assets, net		4		—		9		21
Legal and accounting		65		151		199		283
Total non-interest expenses		1,112		1,148		3,336		2,767
Income (loss) before provision (credit) for income taxes		34		(150)		395		1,905
Provision for income taxes and state LLC fees		5		5		10		10
Net income (loss)	$	29	$	(155)	$	385	$	1,895

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

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Ministry Partners Investment Company, LLC and Subsidiaries

Consolidated Statements of Cash Flows (Unaudited)

For the six months ended June 30, 2022 and 2021

	Six months ended
	June 30,
	2022		2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	385	$	1,895
Adjustments to reconcile net income to net cash used by operating activities:
Depreciation		22		25
Amortization of deferred loan fees		(75)		(109)
Amortization of debt issuance costs		54		24
Provision (credit) for loan losses		(63)		104
Accretion of loan discount		(12)		(11)
Gain on sale of loans		(3)		(19)
Gain on extinguishment of debt		(1,800)		(2,398)
Gain on other investments		(15)		—
Changes in:
Accrued interest receivable		23		75
Other assets		(163)		172
Accrued interest payable		(25)		(89)
Other liabilities		375		171
Net cash used by operating activities		(1,297)		(160)
CASH FLOWS FROM INVESTING ACTIVITIES:
Loan purchases		(405)		(368)
Loan originations		(2,448)		(8,526)
Loan sales		1,216		9,595
Loan principal collections		10,869		7,976
Purchase of other investments		(1,000)		—
Redemption of certificates of deposit		—		761
Investment in joint venture		—		6
Purchase of property and equipment		(2)		—
Net cash provided by investing activities		8,230		9,444
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on term debt		(20,490)		(14,087)
Borrowings, net of repayments on lines of credit		—		1,825
Repayments on secured borrowings		(2)		—
Net change in investor notes payable		(2,730)		(4,243)
Debt issuance costs		(38)		(66)
Dividends paid on preferred units		(271)		(216)
Net cash used by financing activities		(23,531)		(16,787)
Net decrease in cash and restricted cash		(16,598)		(7,503)
Cash, cash equivalents, and restricted cash at beginning of period		28,149		21,973
Cash, cash equivalents, and restricted cash at end of period	$	11,551	$	14,470
Supplemental disclosures of cash flow information
Interest paid	$	1,697	$	1,989
Income taxes paid		20		20
Supplemental disclosures of non-cash transactions
Servicing assets recorded		3		28
Leased assets obtained in exchange of new operating lease liabilities		106		—
Lease liabilities recorded		101		—
Dividends declared to preferred unit holders		113		14

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

F-3

MINISTRY PARTNERS INVESTMENT COMPANY, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The accounting and financial reporting policies of MINISTRY PARTNERS INVESTMENT COMPANY, LLC (the “Company”) and its wholly-owned subsidiaries, Ministry Partners Funding, LLC, MP Realty Services, Inc., Ministry Partners Securities, LLC, and Ministry Partners for Christ, Inc. conform to accounting principles generally accepted in the United States and general financial industry practices. The accompanying interim consolidated financial statements have not been audited. A more detailed description of the Company’s accounting policies is included in its 2021 annual report filed on Form 10-K. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations, and cash flows at June 30, 2022 and for the three and six months ended June 30, 2022 and 2021 have been made.

Certain information and note disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. The results of operations for the periods ended June 30, 2022 and 2021 are not necessarily indicative of the results for the full year.

Note 1: Nature of Business and Summary of Significant Accounting Policies

Nature of Business

The Company was formed in California in 1991. The Company’s primary operations are financing commercial real property secured loans and providing investment advisory and insurance services and products for the benefit of evangelical churches, ministries, and individuals.

The Company’s wholly-owned subsidiaries are:

● Ministry Partners Funding, LLC, a Delaware limited liability company (“MPF”);

● MP Realty Services, Inc., a California corporation (“MP Realty”);

● Ministry Partners Securities, LLC, a Delaware limited liability company (“MP Securities”); and

● Ministry Partners for Christ, Inc., a not-for-profit Delaware corporation (“MPC”).

The Company formed MPF in 2007 and then deactivated the subsidiary on November 30, 2009. In December 2014, the Company reactivated MPF to enable it to serve as collateral agent for loans held as collateral for its Secured Investment Certificates.

The Company formed MP Realty in November 2009 and obtained a license to operate as a corporate real estate broker through the California Department of Real Estate on February 23, 2010. MP Realty has conducted limited operations to date.

The Company formed MP Securities on April 26, 2010 to provide investment and financial planning solutions for individuals, churches, charitable institutions, and faith-based organizations. MP Securities acts as the selling agent for the Company’s public and private placement notes.

The Company formed MPC on December 28, 2018 to be used exclusively for religious and charitable purposes within the meaning of Section 501(c)(3) of the U.S. Internal Revenue Code of 1986. MPC is a not-for-profit corporation formed and organized as a private foundation under Delaware law that makes charitable grants to Christian education, and provides accounting, consulting, and financial expertise to aid evangelical Christian ministries. On August 23, 2019, the

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Internal Revenue Service granted MPC tax-exempt status as a private foundation under Section 501(c)(3) of the Internal Revenue Code.

Principles of Consolidation

The consolidated financial statements include the accounts of Ministry Partners Investment Company, LLC and its wholly owned subsidiaries. Management eliminates all significant inter-company balances and transactions in consolidation.

Conversion to LLC

Effective as of December 31, 2008, the Company converted its form of organization from a corporation organized under California law to a limited liability company organized under the laws of the State of California. With the filing of Articles of Organization-Conversion with the California Secretary of State, the separate existence of Ministry Partners Investment Corporation ceased, and the entity continued by operation of law under the name Ministry Partners Investment Company, LLC.

Since the conversion became effective, a group of managers provides oversight of the Company’s affairs. The managers have full, exclusive, and complete discretion, power, and authority to oversee the management of Company affairs. As an LLC, the Company’s managers and members have entered into an Operating Agreement that governs the Company’s management structure and governance procedures.

Risks and Uncertainties

COVID-19, a global pandemic, has adversely impacted the broad economy, affecting most industries, including businesses, schools, hospitality- and travel-based employers, and has disrupted the supply and distribution networks that deliver products to the consuming public. The process of recovery from the pandemic by U.S. churches, ministries, and faith-based organizations that the Company serves could have a material financial impact on the Company. If declining in-person attendance at churches and faith-based organizations continues as churches and ministries adjust to the long-term effects of the pandemic, charitable gifts and contributions made to ministries and churches could be adversely affected.

In accordance with Financial Accounting Standards Board (FASB) and interagency regulatory guidance issued in March 2020, loans that were modified under the terms of our COVID-19 Deferral Assistance Program were not considered troubled debt restructurings to the extent that they met the terms of such guidance under Section 4013 of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The CARES Act guidance applies to modifications made between March 1, 2020 and the earlier of January 2, 2022 or sixty (60) days after the end of the COVID-19 national emergency, as stipulated by the Consolidated Appropriations Act signed into law on December 31, 2020. The Company has relied upon and applied this guidance to modifications it granted since the first quarter of 2020.

While it is not possible to know the full extent of the long-term impact of COVID-19, resulting measures to curtail its spread and recovery of the economy as the U.S. reopens and prepares for the variant strains of the pandemic, the Company is disclosing potentially material factors that could impact our business of which it is aware.

Cash, and Cash Equivalents

Cash equivalents include time deposits, certificates of deposit, and all highly liquid debt instruments with original maturities of three months or less. The Company had demand deposits and money market deposit accounts as of June 30, 2022 and December 31, 2021.

The National Credit Union Insurance Fund insures a portion of the Company’s cash held at credit unions, and the Federal Deposit Insurance Corporation insures a portion of cash held by the Company at banks. The Company holds cash deposits that may exceed insured limits. Management does not expect to incur losses in these cash accounts.

F-5

The Company maintains cash accounts with Royal Bank of Canada Dain Rauscher (“RBC Dain”) as part of its clearing agreement for its securities-related activities, and with the Central Registration Depository (“CRD”) for regulatory purposes in connections with its investment advisory and securities-related business. The Company also maintains cash in an account with America’s Christian Credit Union (“ACCU”) as collateral for its secured borrowings. The Company classifies these accounts as restricted cash on its balance sheet.

Certificates of Deposit

Certificates of deposit include investments in certificates of deposit held at financial institutions that carry original maturities of greater than three months. The Company had no certificates of deposit with original maturities of greater than three months at June 30, 2022 and December 31, 2021.

Use of Estimates

The Company’s presentation of consolidated financial statements that conform to United States Generally Accepted Accounting Principles (“U.S. GAAP”) requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates govern areas such as the allowance for credit losses, foreclosed assets valuation, and the fair value of financial instruments. Actual results could differ from these estimates.

Investments in Joint Venture

In 2016, the Company entered into a joint venture agreement to develop and sell property we acquired as part of a Deed in Lieu of Foreclosure agreement reached with one of our borrowers. The joint venture owns a property located in Santa Clarita, California.

The Company is accounting for its investment in joint venture under the equity method of accounting. Under this method, the Company records its proportionate share of the joint venture net income or loss in the Company’s statement of operations. The Company assesses its equity method investment for impairment whenever events or changes in circumstances indicate that the carrying amount of the investment may not be recoverable. Any difference between the carrying value of the equity method investment and its estimated fair value is recognized as an impairment change if the loss in value is deemed other than temporary. Management determined that investment in the joint venture was not impaired at June 30, 2022.

Other Investments

In June 2022, MP Securities purchased two ten-year fixed annuities from insurance companies. These annuities carry different features, including guaranteed fixed income components, variable income components, premium bonuses, and potential withdrawal charges. The Company carries these investments at cost and adjusts for guaranteed income when such income is realized. The principal balances of these annuities are guaranteed but are not insured; however, management does not anticipate losses.

Loans Receivable

The Company reports loans that management has the intent and ability to hold for the foreseeable future at their outstanding unpaid principal balance adjusted for an allowance for loan losses, deferred loan fees and costs, and loan discounts.

Interest Accrual on Loans Receivable

The Company accrues loan interest income daily. Management defers loan origination fees and costs generated in making a loan. The Company amortizes these fees and costs as an adjustment to the related loan yield using the interest method.

F-6

Loan discounts are interest accrued and unpaid which the Company added to loan principal balances when it restructured the loan. The Company does not accrete discounts to income on impaired loans. However, when management determines that a previously impaired loan is no longer impaired, the Company begins accreting loan discounts to interest income over the term of the restructured loan. For loans purchased from third parties, loan discounts also are the differences between the purchase price and the recorded principal balance of the loan. The Company accretes these discounts to interest income over the term of the loan using the interest method.

Management considers a loan impaired if it concludes that the collection of principal or interest according to the terms of the loan agreement is doubtful. The Company stops the accrual of interest when management determines the loan is impaired.

For loans that the Company places on nonaccrual status, management reverses all uncollected accrued interest against interest income. Management accounts for the interest on these loans on the cash basis or cost-recovery method until the loan qualifies for return to accrual status. It is not until all the principal and interest amounts contractually due are brought current and future payments are reasonably assured that the Company returns a loan to accrual status.

Allowance for Loan Losses

Management sets aside an allowance for loan losses by charging the provision for loan losses account on the consolidated statements of income. This charge decreases the Company’s earnings. Management charges off the part of loan balances it believes it will not collect against the allowance. The Company credits subsequent recoveries, if any, to the allowance.

Loan Portfolio Segments and Classes

Management separates the loan portfolio into portfolio segments for purposes of evaluating the allowance for loan losses. A portfolio segment is defined as the level at which the Company develops and documents a systematic method for determining its allowance for loan losses. The Company segments the loan portfolio based on loan types and the underlying risk factors present in each loan type. Management periodically reviews and revises such risk factors, as it considers appropriate.

F-7

The Company’s loan portfolio consists of one segment – church loans. Management has segregated the loan portfolio into the following portfolio classes:

Loan Class	Class Description
Wholly-Owned First Collateral Position	Wholly-owned loans and the retained portion of loans originated by the Company and sold for which the Company possesses a senior lien on the collateral underlying the loan.
Wholly-Owned Junior Collateral Position	Wholly-owned loans and the retained portion of loans originated by the Company and sold for which the Company possesses a lien on the underlying collateral that is superseded by another lien on the same collateral. This class also contains any loans that are not secured. These loans present higher credit risk than loans for which the Company possesses a senior lien due to the increased risk of loss should the loan default.
Participations First Collateral Position	Participated loans purchased from another financial entity for which the Company possesses a senior lien on the collateral underlying the loan. Loan participations purchased may present higher credit risk than wholly-owned loans because disposition and direction of actions regarding the management and collection of the loans must be coordinated and negotiated with the other participants, whose best interests regarding the loan may not align with those of the Company.
Participations Junior Collateral Position	Participated loans purchased from another financial entity for which the Company possesses a lien on the underlying collateral that is superseded by another lien on the same collateral. Loan participations in the junior collateral position loans have higher credit risk than wholly-owned loans and participated loans purchased where the Company possesses a senior lien on the collateral. The increased risk is the result of the factors presented above relating to both junior lien positions and participations.

Allowance for Loan Loss Evaluation

Management evaluates the allowance for loan losses on a regular basis. The Company establishes the allowance for loan losses based upon its periodic review of several factors management believes influences the collectability of the loans, including:

● the Company’s loss history;

● the characteristics and volume of the loan portfolio;

● adverse conditions that may affect the borrower’s ability to repay;

● the estimated value of any secured collateral; and

● the current economic conditions.

This evaluation is subjective, as it requires estimates that are subject to significant revision as more information becomes available.

The allowance consists of general and specific components. The general component covers non-classified loans. Management bases the general reserve on the Company’s loss history adjusted for qualitative factors. These qualitative factors are significant factors management considers likely to cause estimated credit losses associated with the Company’s existing portfolio to differ from its historical loss experience. Management adjusts these factors on an on-going basis, some of which include:

● changes in lending policies and procedures, including changes in underwriting standards and collection;

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● changes in national, regional, and local economic and industry conditions that affect the collectability of the portfolio, including the effects of the pandemic, recovery efforts, and long-term impact on our borrowers’ ministries from the pandemic;

● changes in the volume and severity of past due loans, the volume of nonaccrual loans, and the volume and severity of adversely classified loans;

● changes in the value of the collateral for collateral-dependent loans; and

● the effect of credit concentrations.

Loans that management has classified as impaired receive a specific reserve. For such loans, an allowance is established when the carrying value of that loan is higher than the amount management expects to collect. Management uses multiple approaches to determine the amount the Company expects to receive. These include the discounted cash flow method, using the loan’s underlying collateral value reduced by expected selling costs, or using the observable market price of the impaired loan.

Impairment Analysis

Impaired loans include non-accrual loans, loans 90 days or more past due and still accruing, and restructured loans. Non-accrual loans are loans on which management has discontinued interest accruals. Restructured loans are loans in which the Company has granted the borrower a concession due to financial distress. Concessions are usually a reduction of the interest rate or a change in the original repayment terms.

The Company monitors impaired loans on an ongoing basis as part of management’s loan review and work out process. All loans in the loan portfolio are subject to impairment analysis. The Company reviews its loan portfolio monthly by examining several data points. These include reviewing delinquency reports, any new information related to the financial condition of its borrowers, and any new appraisal or other collateral valuation. Through this process, the Company identifies potential impaired loans. Management generally deems a loan is impaired when current facts and circumstances indicate that it is probable that a borrower will be unable to make payments according to the loan agreement. If management has not already deemed a loan impaired, it will classify the loan as non-accrual when it becomes 90 days or more past due.

Management considers several factors when determining impairment status. These factors include the loan’s payment status, the value of any secured collateral, and the probability of collecting scheduled payments when due. Management generally does not classify loans that experience minor payment delays or shortfalls as impaired. Management determines the significance of payment delays or shortfalls on a case-by-case basis, taking into consideration all the circumstances surrounding the loan and the borrower. These circumstances include the length and reasons for the delay, the borrower’s payment history, and the amount of the shortfall in relation to the principal and interest owed.

Management measures impairment on a loan-by-loan basis using one of three methods:

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

● the obtainable market price; or

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

Troubled Debt Restructurings

A troubled debt restructuring is a loan for which the Company, for reasons related to a borrower’s financial difficulties, grants a concession to a borrower that the Company would not otherwise consider. A restructuring of a loan usually

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involves an interest rate modification, extension of the maturity date, payment reduction, or reduction of accrued interest owed on the loan on a contingent or absolute basis.

Management considers loans that it renews at below-market terms to be troubled debt restructurings if the below-market terms represent a concession due to the borrower’s troubled financial condition. The Company classifies troubled debt restructurings as impaired loans. For the loans that are not considered to be collateral-dependent, management measures troubled debt restructurings at the present value of estimated future cash flows using the loan’s effective rate at origination of the loan. The Company reports the change in the present value of cash flows related to the passage of time as interest income. If the loan is collateral-dependent, impairment is measured based on the fair value of the collateral.

In accordance with industry standards, the Company classifies a loan as impaired if management has modified it as part of a troubled debt restructuring. However, if a troubled debt restructuring meets certain performance conditions management may upgrade the loan to a non-classified loan rating (pass or watch) and begin accruing interest on the loan. Management classifies these loans as performing troubled debt restructurings. These loans continue to be included in total impaired loans but not necessarily in non-accrual or collateral-dependent loans.

Section 4013 of the CARES Act provides that a qualifying loan modification or extension is exempt by law from classification as a troubled debt restructuring pursuant to FASB ASC 340-10. On April 7, 2020, the Office of the Comptroller of the Currency and related financial agencies issued OCC Bulletin 2020-35, which provides further guidance regarding when a loan modification or extension is not subject to classification as a TDR pursuant to FASB ASC 340-10.

Under section 4013 of the CARES Act, financial institutions may elect not to categorize a loan modification as a troubled debt restructuring if it is

(1) related to COVID-19;

(2) executed on a loan that was not more than thirty (30) days past due as of December 31, 2019; and

(3) executed between March 31, 2020, and January 2, 2022

For all other loan modifications, federal agencies that regulate financial institutions have confirmed with FASB that short-term modifications made on a good faith basis in response to COVID-19 to borrowers who were current prior to relief being extended, would not be classified as a troubled debt restructuring. This treatment includes short-term modifications including payment deferrals, fee waivers, and extension of repayment terms. The Company has relied upon the CARES Act and guidance from banking regulators related to modifications granted since the first quarter of 2020.

Loan Charge-offs

Management charges off loans or portions thereof when it determines the loans or portions of the loans are uncollectible. The Company evaluates collectability periodically on all loans classified as “Loans of Lesser Quality.” Key factors management uses in assessing a loan’s collectability are the financial condition of the borrower, the value of any secured collateral, and the terms of any workout agreement between the Company and the borrower. In workout situations, the Company charges off the amount deemed uncollectible due to the terms of the workout, the inability of the borrower to make agreed upon payments, and the value of the collateral securing the loan.

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Credit Quality Indicators

The Company has established a loan grading system to assist its management in analyzing and monitoring the loan portfolio. The Company classifies loans it considers lesser quality as watch, special mention, substandard, doubtful, or loss assets. The loan grading system is as follows:

Pass:

The borrower has sufficient cash to fund debt services. The borrower may be able to obtain similar financing from other lenders with comparable terms. The risk of default is considered low.

Watch:

These loans exhibit potential or developing weaknesses that deserve extra attention from credit management personnel. If the developing weakness is not corrected or mitigated, there may be deterioration in the ability of the borrower to repay the debt in the future. Management must report loans graded Watch to executive management and the Board of Managers. Potential for loss under adverse circumstances is elevated, but not foreseeable. Watch loans are considered pass loans.

Special mention:

These credit facilities exhibit potential or actual weaknesses that present a higher potential for loss under adverse circumstances and deserve management’s close attention. If uncorrected, these weaknesses may result in deterioration of the repayment prospects for the loan at some future date.

Substandard:

Loans and other credit extensions bearing this grade are considered to be inadequately protected by the current net worth and debt service capacity of the borrower or of any pledged collateral. These obligations, even if apparently protected by collateral value, have well-defined weaknesses related to adverse financial, managerial, economic, ministry, or environmental conditions which have clearly jeopardized repayment of principal and interest as originally intended. Furthermore, there is the possibility that some future loss will be sustained if such weaknesses are not corrected.

Doubtful:

This classification consists of loans that display the properties of substandard loans with the added characteristic that the severity of the weaknesses makes collection or liquidation in full highly questionable or improbable based upon currently existing facts, conditions, and values. The probability of some loss is very high, but because of certain important and reasonably specific factors, the amount of loss cannot be exactly determined. Such pending factors could include merger or liquidation, additional capital injection, refinancing plans, or perfection of liens on additional collateral.

Loss:

Loans in this classification are considered uncollectible and cannot be justified as a viable asset. This classification does not mean the loan has absolutely no recovery value, but that it is neither practical nor desirable to defer writing off this loan even though partial recovery may be obtained in the future.

Revenue Recognition

The Company recognizes two primary types of revenue: interest income and non-interest income.

F-11

Interest Income

The Company’s principal source of revenue is interest income from loans, which is not within the scope of ASU 2014-09, Revenue from Contracts with Customers and all subsequent amendments to the ASU (collectively, "ASC 606"). Refer to the discussion in “Loans Receivable” above to understand the Company’s recognition of interest income.

Non-interest Income

Non-interest income includes revenue from various types of transactions and services provided to customers. Contracts with customers can include multiple services, which are accounted for as separate “performance obligations” if they are determined to be distinct. Our performance obligations to our customers are generally satisfied when we transfer the promised good or service to our customer, either at a point in time or over time. Revenue from a performance obligation transferred at a point in time is recognized at the time that the customer obtains control over the promised good or service. Revenue from our performance obligations satisfied over time are recognized in a manner that depicts our performance in transferring control of the good or service, which is generally measured based on time elapsed, as our customers simultaneously receive and consume the benefit of our services as they are provided.

Payment for the majority of our services is considered to be variable consideration, as the amount of revenues we expect to receive is subject to factors outside of our control, including market conditions. Variable consideration is only included in revenue when amounts are not subject to significant reversal, which is generally when uncertainty around the amount of revenue to be received is resolved.

Wealth advisory fees

Generally, management recognizes wealth advisory fees over time as the Company renders services to its clients. The Company receives these fees either based on a percentage of the market value of the assets under management, or as a fixed fee based on the services the Company provides to the client. The Company’s delivery of these services represents its related performance obligations. The Company typically collects the wealth advisory fees at the beginning of each quarter from the client’s account. Management recognizes these fees ratably over the related billing period as the Company fulfills its performance obligation. In addition, management recognizes any commissions or referral fees paid related to this revenue ratably over the related billing period as the Company fulfills its performance obligation.

Investment brokerage fees

Investment brokerage fees arise from the selling, distribution, and trade execution services. The Company’s execution of these services fulfills its related performance obligations.

The Company also offers sales and distribution services and earns commissions through the sale of annuity and mutual fund products. The Company acts as an agent in these transactions and recognizes revenue at a point in time when the customer executes a contract with a product carrier. The Company may also receive trailing commissions and 12b-1 fees related to mutual fund and annuity products. Management recognizes this revenue in the period when it is earned, estimating the revenue, if necessary, based on the balance of the investment and the commission rate on the product.

The Company earns and recognizes trade execution commissions on the trade date, which is when the Company fulfills its performance obligation. Payment for the trade execution is due on the settlement date.

Lending Fees

Lending fees represent charges earned for services we provide as part of the lending process, such as late charges, servicing fees, and documentation fees. The Company recognizes late charges as earned when they are paid. The Company recognizes revenue on other lending fees in the period in which the Company has performed the service.

F-12

Gains on sales of loans receivable

From time to time, the Company sells participation interests in loans receivable that it services. Upon completion of the loan sale, the Company recognizes a gain based on certain factors including the maturity date of the loan, the percentage of the loan sold and retained, and the servicing rate charged to the participant on the sold portion.

Gains on debt extinguishment

Gains on debt extinguishment arise from agreements reached with the Company’s lenders to reduce the principal amount on outstanding debt. The amount of the gain is determined by the difference between the cash paid and the amount of principal and interest that is relieved as stipulated by the agreement.

Gains/losses on sales of foreclosed assets

The Company records a gain or loss from the sale of foreclosed assets when control of the property transfers to the buyer, which generally occurs at the time of an executed deed. When the Company finances the sale of a foreclosed asset to the buyer, the Company assesses whether the buyer is committed to perform their obligation under the contract, whether collectability of the transaction price is probable, and the sufficiency of down payment, among other factors. Once these criteria are met, the foreclosed asset is derecognized and the gain or loss on sale is recorded upon the transfer of control of the property to the buyer. In determining the gain or loss on the sale, the Company adjusts the transaction price and related gain (loss) on sale if a significant financing component is present.

Other non-interest income

Other non-interest income includes fees earned based on service contracts the Company has entered into with credit unions. The Company recognizes the revenue monthly based on the terms of the contracts, which require monthly payments for services the Company performs. Other non-interest income also includes realized income and gains on other investments.

Foreclosed Assets

Management records assets acquired through foreclosure or other proceedings at fair market value less estimated costs of disposal. Management determines the fair value at the date of foreclosure, which establishes a new cost for the asset. After foreclosure, the Company carries the asset at the lower of cost or fair value, less estimated costs of disposal. Management evaluates these real estate assets regularly to ensure that the asset’s fair value supports the recorded amount. If necessary, management also ensures that valuation allowances reduce the carrying amount to fair value less estimated costs of disposal. Revenue and expense from the operation of the foreclosed assets and changes in the valuation allowance are included in net expenses from foreclosed assets. When the Company sells the foreclosed property, it recognizes a gain or loss on the sale equal to the difference between the net sales proceeds received and the carrying amount of the property.

Transfers of Financial Assets

Management accounts for transfers of financial assets as sales when the Company has surrendered control over the asset. Management deems the Company has surrendered control over transferred assets when:

● the assets have been isolated from the Company;

● the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred asset; and

● the Company does not maintain effective control over the transferred asset through an agreement to repurchase it before its maturity.

F-13

The Company, from time to time, sells participation interests in mortgage loans it has originated or acquired. In order to recognize the transfer of a portion of a financial asset as a sale, the transferred portion, and any portion that the transferor continues to hold must represent a participating interest. In addition, the transfer of the participating interest must meet the conditions for surrender of control. To qualify as a participating interest:

● each portion of a financial asset must represent a proportionate ownership interest in an entire financial asset;

● from the date of transfer, all cash flows received from the entire financial asset must be divided proportionately among the participating interest holders in an amount equal to their respective share of ownership;

● the transfer must be made on a non-recourse basis (other than standard representations and warranties made under the loan participation sale agreement);

● the transfer may not be subordinate to any other participating interest holder; and

● no party has the right to pledge or exchange the entire financial asset.

If the transaction does not meet either the participating interest or surrender of control criteria, management accounts for it as a secured borrowing arrangement.

Under some circumstances, when the Company sells a participation in a wholly-owned loan receivable that it services, it retains loan-servicing rights, and records a servicing asset that is initially measured at fair value. As quoted market prices are generally not available for these assets, the Company estimates fair value based on the present value of future expected cash flows associated with the loan receivable. The Company amortizes servicing assets over the life of the associated receivable using the interest method. Any gain or loss recognized on the sale of a loan receivable depends in part on both the previous carrying amount of the financial asset involved in the sale, allocated between the asset sold and the interest that continues to be held by the Company based on its relative fair value at the date of transfer, and the proceeds received.

Property and Equipment

The Company states its furniture, fixtures, equipment, and leasehold improvements at cost, less accumulated depreciation and amortization. Management computes depreciation on a straight-line basis over the estimated useful lives of the assets. The useful lives of the Company’s assets range from three to seven years.

Debt Issuance Costs

The Company’s debt consists of borrowings from financial institutions and obligations to investors incurred through the sale of investor notes. Management presents debt net of debt issuance costs and amortizes debt issuance costs into interest expense over the contractual terms of the debt using the straight-line method.

Employee Benefit Plan

The Company records contributions to the qualified employee retirement plan as compensation cost in the period incurred.

Leases

The Company recognizes right-of-use (“ROU”) assets and lease liabilities on the balance sheet for leases with lease terms longer than 12 months. The recognition, measurement and presentation of lease expenses and cash flows depend on the lease classification as a finance or operating lease.

F-14

We have operating leases for real estate and a vehicle. Our leases have remaining lease terms of two to three years. Our real estate lease agreements may include renewal or termination options for varying periods that are generally at our discretion. In our lease term, we only include those periods related to renewal options we are reasonably certain to exercise. However, we generally do not include these renewal options as we are not reasonably certain to renew at the lease commencement date. This determination is based on our consideration of certain economic, strategic, and other factors that we evaluate at lease commencement date and reevaluate throughout the lease term. Some leases also include options to terminate the leases and we only include those periods beyond the termination date if we are reasonably certain not to exercise the termination option.

Some leasing arrangements require variable payments that are dependent on usage or may vary for other reasons, such as payments for insurance and tax payments. The variable part of lease payments is not included in our ROU assets or lease liabilities. Rather, variable payments, other than those dependent upon an index or rate, are expensed when the obligation for those payments is incurred and are included in lease expenses recorded in selling and administrative expenses on the Consolidated Statements of Operations.

If any of our lease agreements have both lease and non-lease components, we treat those as a single lease component for all underlying asset classes. Accordingly, all expenses associated with a lease contract are accounted for as lease expenses.

Leases with a term of 12 months or less are not recognized on the balance sheet, but rather expensed on a straight-line basis over the lease term.

Income Taxes

The Company has elected to be treated as a partnership for income tax purposes. Therefore, the Company passes through its income and expenses to its members for tax reporting purposes.

Tesoro Hills, LLC, is a joint venture in which the Company has an investment. Tesoro Hills, according to its operating agreement, has elected to be treated as a partnership for income tax purposes.

The Company and MP Securities are subject to a California LLC fee.

The Company uses a recognition threshold and a measurement attribute for the consolidated financial statement recognition and measurement of a tax position taken in a tax return. The Company recognizes benefits from tax positions in the consolidated financial statements only when it is more likely than not that the tax position will be sustained upon examination by the appropriate taxing authority that would have full knowledge of all relevant information. A tax position that meets the more-likely-than-not recognition threshold is measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold are recognized in the first subsequent financial reporting period in which that threshold is met. Management derecognizes previously recognized tax positions that no longer meet the more-likely-than-not recognition threshold in the first subsequent financial reporting period in which that threshold is no longer met.

New accounting guidance

Accounting Standards Pending Adoption

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” ASU 2016-13 introduces an approach based on expected losses to estimate credit losses on certain types of financial instruments. ASU 2016-13 also modifies the impairment model for available-for-sale debt securities and provides for a simplified accounting model for purchased financial assets with credit deterioration since their origination. The guidance requires companies to apply the requirements in the year of adoption through cumulative adjustment with some aspects of the update requiring a prospective transition approach.

F-15

In October 2019, the FASB adopted a two-bucket approach to stagger the effective date for the credit losses standard for the fiscal years beginning after December 31, 2022 for certain entities, including certain Securities and Exchange Commission filers, public business entities, and private companies. As a smaller reporting company, the Company is eligible for the delay. The Company’s preliminary evaluation indicates the provisions of ASU No. 2016-13 are expected to affect the level of the allowance for loan losses on the Company’s consolidated financial statements. Management has gathered all necessary data and reviewed potential methods to calculate the expected credit losses. The Company will use a third-party software solution to assist with the adoption of the standard. Management is currently calculating sample expected loss computations and developing the allowance methodology and assumptions that the Company will use under the new standard.

In March 2022, the FASB issued ASU 2022-02, Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. This ASU eliminates the accounting guidance for troubled debt restructurings (TDRs) by creditors in Subtopic 310-40, Receivables - Troubled Debt Restructurings by Creditors, while adding disclosures for certain loan restructurings by creditors when a borrower is experiencing financial difficulty. This guidance requires an entity to determine whether the modification results in a new loan or a continuation of an existing loan. Additionally, the ASU requires disclosure of current period gross write-offs by year of origination for financing receivables. This ASU is effective for the Company for fiscal years beginning after December 15, 2022. The Company does not believe adoption of this ASU will have a material impact on its financial results and will add the required disclosures for gross charge-offs in its financial statements upon adoption of the new standard.

Note 2: Pledged Cash and Restricted Cash

Under the terms of its debt agreement, the Company has the ability to pledge cash as collateral for its borrowings. At June 30, 2022 and December 31, 2021, the Company had cash of $15 thousand and $17 thousand, respectively, pledged as collateral for its secured borrowings. See “Note 3: Related Party Transactions” for additional details. This is included in restricted cash in the table below.

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the statement of financial position to the amounts reported in the statements of cash flows (dollars in thousands):

	June 30,				December 31,
	2022		2021		2021
Cash and cash equivalents	$	11,485	$	14,419	$	28,080
Restricted cash		66		51		69
Total cash, cash equivalents, and restricted cash shown in the statement of cash flows	$	11,551	$	14,470	$	28,149

Amounts included in restricted cash comprise funds required to be set aside in the CRD account with Financial Industry Regulation Authority (“FINRA”), funds the Company has deposited with RBC Dain as clearing deposits, and cash maintained in an account with ACCU as collateral for the Company’s secured borrowings. The Company may only use the CRD funds for certain fees charged by FINRA. These fees are to maintain the membership status of the Company or are related to the licensing of registered and associated persons of the Company.

F-16

Note 3: Related Party Transactions

Transactions with Equity Owners

Transactions with Evangelical Christian Credit Union (“ECCU”)

The tables below summarize transactions the Company conducts with ECCU, the Company’s largest equity owner.

Related party balances pertaining to the assets of the Company (dollars in thousands):

	June 30,		December 31,
	2022		2021
Total funds held on deposit at ECCU	$	774	$	3,797
Loan participations purchased from and serviced by ECCU		69		242

Related party transactions of the Company (dollars in thousands):

	Three months ended				Six months ended
	June 30,				June 30,
	2022		2021		2022		2021
Interest earned on funds held with ECCU	$	—	$	—	$	—	$	1
Interest income earned on loans purchased from ECCU		1		4		3		8
Fees paid to ECCU from MP Securities Networking Agreement		2		1		4		1
Income from Successor Servicing Agreement with ECCU		—		2		—		4
Rent expense on lease agreement with ECCU		37		37		73		73

Loan participation interests purchased:

Management negotiated the pass-through interest rates on these loans on a loan-by-loan basis. Management believes these negotiated terms were equivalent to those that would prevail in an arm’s length transaction. The Company did not purchase any loans from ECCU during the six months ended June 30, 2022 and 2021.

Lease and Services Agreement:

The Company leases its corporate offices and purchases other facility-related services from ECCU pursuant to a written lease and services agreement. Management believes these terms are equivalent to those that prevail in arm’s length transactions.

MP Securities Networking Agreement with ECCU:

MP Securities has entered into a Networking Agreement with ECCU pursuant to which MP Securities agreed to offer investment and insurance products and services to ECCU’s members that:

(1) ECCU or its Board of Directors has approved;

(2) comply with applicable investor suitability standards required by federal and state securities laws and regulations;

(3) are offered in accordance with National Credit Union Administration (“NCUA”) rules and regulations; and

(4) comply with its membership agreement with FINRA.

F-17

The agreement provides that MP Securities will pay ECCU a percentage of total revenue received by MP Securities from transactions conducted for or on behalf of ECCU members. Either ECCU or MP Securities may terminate the Networking Agreement without cause upon thirty days prior written notice.

Successor Servicing Agreement with ECCU:

On October 5, 2016, the Company entered into a Successor Servicing Agreement with ECCU. This agreement obligates the Company to serve as the successor loan-servicing agent for certain mortgage loans designated by ECCU. The Company was to service these loans in the event ECCU requests that the Company assume its obligation to act as the servicing agent for those loans. The original Agreement terminated in October 2019 and converted to a month-to-month agreement. The agreement was terminated at the request of ECCU in January 2022.

Transactions with America’s Christian Credit Union (“ACCU”)

The Company has several related party agreements with ACCU, one of the Company’s equity owners. The following describes the nature and dollar amounts of the material related party transactions with ACCU.

Related party balances pertaining to the assets of the Company (dollars in thousands):

	June 30,		December 31,
	2022		2021
Total funds held on deposit at ACCU	$	3,308	$	4,083
Dollar amount of outstanding loan participations sold to ACCU and serviced by the Company		975		1,830
Amount owed on ACCU secured borrowings		15		17
Amount owed on ACCU line of credit		2,000		2,000
Loans pledged on ACCU line of credit		6,689		6,768

Related party transactions of the Company (dollars in thousands):

	Three months ended				Six months ended
	June 30,				June 30,
	2022		2021		2022		2021
Interest earned on funds held with ACCU	$	4	$	5	$	7	$	12
Loans sold to ACCU		—		—		—		1,000
Dollar amount of secured borrowings made from ACCU		1		—		7		—
Interest expense on ACCU borrowings		20		—		40		—
Income from broker services provided to ACCU by MPS		10		11		23		22
Fees paid based on MP Securities Networking Agreement with ACCU		12		24		52		42

Loan participation interests sold:

From time to time, the Company sells loan participation interests in loans it originates and services to ACCU. The Company negotiates pass-through interest rates on loan participation interests sold to ACCU on a loan-by-loan basis. Management believes these terms are equivalent to those that prevail in arm’s length transactions.

Effective August 9, 2021, the Company entered into a Master Loan Participation Purchase and Sale Agreement (“the Master LP Agreement”) with ACCU, one of its credit union owners. The Master LP Agreement is intended to facilitate the sale to ACCU of small participation interests in the Company’s originated loans. As a part of any transaction conducted under the Master LP Agreement, the borrower of the loan being sold would become a member of ACCU, thereby meeting the requirements of NCUA regulations that govern loan participation purchases by credit unions. This allows the Company to sell additional participations in the loan to other credit unions.

F-18

Sales made under the Master LP Agreement are done on a recourse basis, requiring the Company to repurchase the participation interest in the event of default by the borrower. Under a separate Deposit Control Agreement reached in conjunction with the Master LP Agreement, the Company deposited cash on a one-to-one basis as collateral to secure the participation interest sold to ACCU. This cash is considered restricted cash. The Company retains the ability to sell loan participation interests to ACCU outside of the Master LP Agreement.

As of June 30, 2022 and December 31, 2021, respectively, $15 thousand and $17 thousand had been sold and was outstanding under this agreement. These have been classified as secured borrowings on our balance sheet. At June 30, 2022 and December 31, 2021, the Company has deposited $15 thousand and $17 thousand, respectively, in an account at ACCU as collateral for these borrowings. These funds are considered restricted cash.

MP Securities Networking Agreement with ACCU:

MP Securities has entered into a Networking Agreement with ACCU pursuant to which MP Securities has agreed to offer investment and insurance products and services to ACCU’s members that:

(1) ACCU or its Board of Directors has approved;

(2) comply with applicable investor suitability standards required by federal and state securities laws and regulations;

(3) are offered in accordance with NCUA rules and regulations; and

(4) comply with its membership agreement with FINRA.

The agreement provides that MP Securities will pay ACCU a percentage of total revenue received by MP Securities from transactions conducted for or on behalf of ACCU members. Either ACCU or MP Securities may terminate the Networking Agreement without cause upon thirty days prior written notice.

Line of Credit:

On September 23, 2021, the Company entered into a Loan and Security Agreement with ACCU. The ACCU line of credit (“ACCU LOC”) is a $5.0 million short-term demand facility with a maturity date of September 23, 2022. See “Note 10: Credit Facilities and Other Debt” for additional terms and conditions of the ACCU LOC. Management believes these terms are equivalent to those that prevail in arm’s length transactions. As of June 30, 2022, there were $2.0 million in borrowings outstanding on the ACCU line of credit. There were no borrowings under ACCU LOC at December 31, 2021.

Transactions with Kane County Teachers Credit Union (“KCT”)

Our Board Chairperson, R. Michael Lee, serves as the Chief Executive Officer and President of KCT.

Related party balances pertaining to the assets of the Company (dollars in thousands):

	June 30,		December 31,
	2022		2021
Total funds held on deposit at KCT	$	1,250	$	1,018
Loans pledged on KCT line of credit		—		8,492
Outstanding loan participations sold to KCT and serviced by the Company		4,263		4,598

F-19

Related party transactions of the Company (dollars in thousands):

	Three months ended				Six months ended
	June 30,				June 30,
	2022		2021		2022		2021
Interest earned on funds held with KCT	$	—	$	6	$	—	$	11
Loans sold to KCT		56		1,072		56		1,072
Dollar amount of draws on KCT line of credit		2,000		1,825		—		3,825
Interest expense on KCT line of credit		—		31		15		31
Fees paid based on MP Securities Networking Agreement with KCT		3		2		44		6

Funds on deposit with KCT:

On January 13, 2020, the Company purchased $1.0 million of certificates of deposit from KCT. The certificates matured on October 13, 2021 and the funds were transferred to a savings account at KCT.

Line of credit:

On June 6, 2022, the Company terminated the existing $7.0 million Loan and Security Agreement with KCT Credit Union, an Illinois state chartered financial institution. It replaced this agreement with two short-term demand credit facilities, a $5.0 million warehouse line of credit (“KCT Warehouse LOC”) and a $5.0 million operating line of credit (“KCT Operating LOC”). See “Note 10: Credit Facilities and Other Debt” for additional terms and conditions of these credit facilities. Management believes these terms are equivalent to those that prevail in arm’s length transactions. As of June 30, 2022 and December 31, 2021 there was no outstanding balance on either of the lines of credit with KCT.

MP Securities Networking Agreement

MP Securities, the Company’s wholly-owned subsidiary, has entered into a Networking Agreement with KCT pursuant to which MP Securities agreed to offer investment and insurance products and services to KCT’s members that:

(1) KCT or its Board of Directors has approved;

(2) comply with applicable investor suitability standards required by federal and state securities laws and regulations;

(3) are offered in accordance with NCUA rules and regulations; and

(4) comply with its membership agreement with FINRA.

The agreement provides that MP Securities pay KCT a percentage of total revenue received by MP Securities from transactions conducted for or on behalf of KCT members. Either KCT or MP Securities may terminate the Networking Agreement without cause upon thirty days prior written notice.

Loan Participation Interests Sold

Occasionally the Company sells loan participation interests to KCT in the normal course of business. The Company retains the right to service these participation loans sold to KCT, and charges KCT a customary fee for servicing the loan. As of June 30, 2022, the Company services $4.3 million in loan participations that it has sold to KCT.

Transactions with Other Equity Owners

From time to time the Company will engage in transactions with other owners or related parties.

F-20

Related party balances pertaining to the assets of the Company (dollars in thousands):

	June 30,		December 31,
	2022		2021
Outstanding loan participations sold to UFCU and serviced by the Company	$	4,249	$	4,275
Outstanding loan participations sold to NFCU and serviced by the Company		4,933		4,991
Outstanding notes payable to officers and managers		1,161		261

Loan Participation Interests

The Company has a Loan Participation Agreement with UNIFY Financial Credit Union (“UFCU”), an owner of both the Company’s Class A Common Units and Series A Preferred Units. Under this agreement, the Company sold UFCU a $5.0 million loan participation interest in one of its mortgage loan interests on August 14, 2013. As part of this agreement, the Company retained the right to service the loan, and it charges UFCU a fee for servicing the loan. Management believes the terms of the agreement are equivalent to those that prevail in arm’s length transactions.

The Company has also entered into a Loan Participation Agreement with Navy Federal Credit Union (“NFCU”), an owner of both the Company’s Class A Common Units and Series A Preferred Units. Under this agreement, the Company sold NFCU a $5.0 million loan participation interest in one of its construction loans on March 20, 2020. As part of this agreement, the Company retained the right to service the loan, and it charges NFCU a fee for servicing the loan. Management believes the terms of the agreement are equivalent to those that prevail in arm’s length transactions for similar agreements entered into by other credit unions.

From time to time, the Company may purchase a loan participation interest from a related party. The Company and its related party will negotiate in good faith the terms and conditions of such a purchase and in accordance with the Company’s related party procedures and governance practices. Each party must approve such a purchase after full disclosure of the related party transaction and must include terms and conditions that would normally be included in arm’s length transactions conducted by independent parties.

Investor Notes Sold

From time to time, the Company’s Board and members of its executive management team have purchased investor notes from the Company or have purchased investment products through MP Securities. Investor notes payable owned by related parties totaled $1.2 million and $261 thousand at June 30, 2022 and 2021, respectively.

Transactions with Subsidiaries

The Company has entered into several agreements with its subsidiary, MP Securities. The Company eliminates the income and expense related to these agreements in the consolidated financial statements. MP Securities serves as the managing broker for the Company’s public and private placement note offerings. MP Securities receives compensation related to these broker dealer services ranging from 0.25% to 5.50% over the life of a note. The amount of the compensation depends on the length of the note and the terms of the offering under which MP Securities sold the note.

The Company also has entered into an Administrative Services Agreement with MP Securities. The Administrative Services Agreement provides services such as the use of office space, use of equipment, including computers and phones, and payroll and personnel services. The agreement stipulates that MP Securities will provide ministerial, compliance, marketing, operational, and investor relations-related services in relation to the Company’s investor note program. As stated above, the Company eliminates all intercompany transactions related to this agreement in its consolidated financial statements.

Related Party Transaction Policy

The Board has adopted a Related Party Transaction Policy to assist in evaluating transactions the Company may enter into with a related party. Under this policy, a majority of the members of the Company’s Board and majority of its

F-21

independent Board members must approve a material transaction that it enters into with a related party. As a result, all transactions that the Company undertakes with an affiliate or a related party are entered into on terms believed by management to be no less favorable than are available from unaffiliated third parties. In addition, a majority of the Company’s independent Board members must approve these transactions.

Note 4: Loans Receivable and Allowance for Loan Losses

The Company’s loan portfolio comprises one segment – church loans. See “Note 1 – Loan Portfolio Segments and Classes” to Part I “Financial Information” of this Report. The loans fall into four classes:

● wholly-owned loans for which the Company possesses the first collateral position;

● wholly-owned loans that are either unsecured or for which the Company possesses a junior collateral position;

● participated loans purchased for which the Company possesses the first collateral position; and

● participated loans purchased for which the Company possesses a junior collateral position.

The Company makes all of its loans to various evangelical churches and related organizations, primarily to purchase, construct, or improve facilities. Loan maturities extend through 2036. The loan portfolio had a weighted average interest rate of 6.16% and 6.21% as of June 30, 2022 and December 31, 2021, respectively.

The table below is a summary of the Company’s mortgage loans owned (dollars in thousands):

	June 30,		December 31,
	2022		2021
Loans to evangelical churches and related organizations:
Real estate secured	$	89,973	$	98,858
Other secured		225		425
Unsecured		110		122
Total loans		90,308		99,405
Deferred loan fees, net		(238)		(304)
Loan discount		(208)		(220)
Allowance for loan losses		(1,702)		(1,638)
Loans, net	$	88,160	$	97,243

Allowance for Loan Losses

Management believes it has properly calculated the allowance for loan losses as of June 30, 2022 and December 31, 2021. The following table shows the changes in the allowance for loan losses for the six months ended June 30, 2022 and the year ended December 31, 2021 (dollars in thousands):

	Six months ended		Year ended
	June 30, 2022		December 31, 2021
Balance, beginning of period	$	1,638	$	1,516
Provision (credit) for loan loss		(63)		122
Charge-offs		—		—
Recoveries		127		—
Balance, end of period	$	1,702	$	1,638

F-22

The table below presents loans by portfolio segment (church loans) 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
	June 30, 2022		December 31, 2021
Loans:
Individually evaluated for impairment	$	5,982	$	9,688
Collectively evaluated for impairment		84,326		89,717
Balance	$	90,308	$	99,405
Allowance for loan losses:
Individually evaluated for impairment	$	710	$	631
Collectively evaluated for impairment		992		1,007
Balance	$	1,702	$	1,638

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 June 30, 2022
	Wholly-Owned First		Wholly-Owned Junior		Participation First		Participation Junior		Total
Grade:
Pass	$	51,763	$	1,775	$	—	$	—	$	53,538
Watch		30,690		29		69		—		30,788
Special mention		—		—		—		—		—
Substandard		3,859		1,620		—		—		5,479
Doubtful		503		—		—		—		503
Loss		—		—		—		—		—
Total	$	86,815	$	3,424	$	69	$	—	$	90,308

Credit Quality Indicators (by class)
As of December 31, 2021
	Wholly-Owned First		Wholly-Owned Junior		Participation First		Participation Junior		Total
Grade:
Pass	$	67,580	$	2,007	$	172	$	—	$	69,759
Watch		19,858		30		70		—		19,958
Special mention		—		—		—		—		—
Substandard		7,535		1,650		—		—		9,185
Doubtful		503		—		—		—		503
Loss		—		—		—		—		—
Total	$	95,476	$	3,687	$	242	$	—	$	99,405

F-23

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 June 30, 2022
	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 Still Accruing
Church loans:
Wholly-Owned First	$	13,003	$	—	$	1,388	$	14,391	$	72,424	$	86,815	$	—
Wholly-Owned Junior		—		—		—		—		3,424		3,424		—
Participation First		—		—		—		—		69		69		—
Participation Junior		—		—		—		—		—		—		—
Total	$	13,003	$	—	$	1,388	$	14,391	$	75,917	$	90,308	$	—

Age Analysis of Past Due Loans (by class)
As of December 31, 2021
	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 Still Accruing
Church loans:
Wholly-Owned First	$	—	$	—	$	503	$	503	$	94,973	$	95,476	$	—
Wholly-Owned Junior		—		—		—		—		3,687		3,687		—
Participation First		—		—		—		—		242		242		—
Participation Junior		—		—		—		—		—		—		—
Total	$	—	$	—	$	503	$	503	$	98,902	$	99,405	$	—

F-24

Impaired Loans

The following tables are summaries of impaired loans by loan class. The unpaid principal balance reflects the contractual principal outstanding on the loan. Included in the balance of impaired loans are troubled debt restructurings that have been performing 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 (dollars in thousands):

	As of		As of
	June 30,		December 31,
Impaired Loans (by class)	2022		2021
Wholly-Owned First
Recorded Investment with allowance	$	1,361	$	1,371
Recorded with no Allowance		11,008		9,339
Total Recorded Investment	$	12,369	$	10,710
Unpaid Principal Balance	$	12,543	$	10,905
Wholly-Owned Junior
Recorded Investment with allowance	$	—	$	—
Recorded with no Allowance		1,620		1,650
Total Recorded Investment	$	1,620	$	1,650
Unpaid Principal Balance	$	1,685	$	1,685
Participation First
Recorded Investment with allowance	$	—	$	—
Recorded with no Allowance		—		—
Total Recorded Investment	$	—	$	—
Unpaid Principal Balance	$	—	$	—
Participation Junior
Recorded Investment with allowance	$	—	$	—
Recorded with no Allowance		—		—
Total Recorded Investment	$	—	$	—
Unpaid Principal Balance	$	—	$	—
Total Impaired Loans
Recorded Investment with allowance	$	1,361	$	1,371
Recorded with no Allowance		12,628		10,989
Total Recorded Investment	$	13,989	$	12,360
Unpaid Principal Balance	$	14,228	$	12,590

	For the three months ended				For the six months ended
	June 30,		June 30,		June 30,		June 30,
Impaired Loans (by class)	2022		2021		2022		2021
Wholly-Owned First
Average Recorded Investment	$	13,173	$	9,886	$	11,540	$	9,901
Interest Income Recognized		161		117		331		208
Wholly-Owned Junior
Average Recorded Investment		1,635		1,685		1,635		843
Interest Income Recognized		—		—		—		—
Participation First
Average Recorded Investment		—		—		—		—
Interest Income Recognized		—		—		—		—
Participation Junior
Average Recorded Investment		—		—		—		—
Interest Income Recognized		—		—		—		—
Total Impaired Loans
Average Recorded Investment	$	14,808	$	11,571	$	13,175	$	10,743
Interest Income Recognized		161		117		331		208

F-25

A summary of nonaccrual loans by loan class is as follows (dollars in thousands):

Loans on Nonaccrual Status (by class)
	as of
	June 30, 2022		December 31, 2021
Church loans:
Wholly-Owned First	$	4,362	$	6,162
Wholly-Owned Junior		1,620		1,650
Participation First		—		—
Participation Junior		—		—
Total	$	5,982	$	7,812

Beginning in April, 2020, the Company has taken measures to assist borrowers adversely affected by COVID-19 by deferring principal and/or interest payments. The concessions granted meet the qualifications under Section 4013 of the CARES Act, and, as a result, the Company has elected not to account for these modifications as troubled debt restructurings. The Company granted these concessions to 35 borrowers during the year ended December 31, 2020, representing an outstanding loan principal balance of $47.8 million. One of these loans was further restructured during the year ended December 31, 2021 as a troubled debt restructuring that did not qualify as a CARES Act deferral. The Company restructured one loan during the year ended December 31, 2021 that qualified as a CARES Act modification and was not accounted for as a troubled debt restructuring. This loan had an outstanding balance of $1.3 million at the time of the modification. The borrower resumed making contractual payment prior to December 31, 2021. As of December 31, 2021, no loans were under CARES Act deferrals. The Company did not restructure any loans that qualified as CARES Act modifications during the six months ended June 30, 2022.

The Company restructured two loans during the six months ended June 30, 2022 that did not qualify as CARES Act modifications. A summary of loans the Company restructured during the three- and six-month periods ended June 30, 2022 and 2021 is as follows (dollars in thousands):

F-26

Troubled Debt Restructurings (by class)
	For the three months ended				For the six months ended
	June 30, 2022		June 30, 2021		June 30, 2022		June 30, 2021
Church loans:
Wholly-Owned First
Number of Loans		1		1		2		1
Pre-Modification Outstanding Recorded Investment	$	1,196	$	1,685	$	2,192	$	1,685
Post-Modification Outstanding Recorded Investment		1,196		1,685		2,192		1,685
Recorded Investment At Period End		1,196		1,685		2,192		1,685
Wholly-Owned Junior
Number of Loans		—		—		—		—
Pre-Modification Outstanding Recorded Investment	$	—	$	—	$	—	$	—
Post-Modification Outstanding Recorded Investment		—		—		—		—
Recorded Investment At Period End		—		—		—		—
Participation First
Number of Loans		—		—		—		—
Pre-Modification Outstanding Recorded Investment	$	—	$	—	$	—	$	—
Post-Modification Outstanding Recorded Investment		—		—		—		—
Recorded Investment At Period End		—		—		—		—
Participation Junior
Number of Loans		—		—		—		—
Pre-Modification Outstanding Recorded Investment	$	—	$	—	$	—	$	—
Post-Modification Outstanding Recorded Investment		—		—		—		—
Recorded Investment At Period End		—		—		—		—
Total
Number of Loans		1		1		2		1
Pre-Modification Outstanding Recorded Investment	$	1,196	$	1,685	$	2,192	$	1,685
Post-Modification Outstanding Recorded Investment		1,196		1,685		2,192		1,685
Recorded Investment At Period End		1,196		1,685		2,192		1,685

The Company has two restructured loans that are past maturity as of June 30, 2022. The Company has entered into forbearance agreements with the borrowers and is evaluating what actions it should undertake to protect its investment on these loans. These forbearance agreements include reduced monthly payment amounts and additional reporting requirements. The loan that was restructured during the six months ended June 30, 2022 has performed according to the terms of the forbearance agreement.

For loans modified in a troubled debt restructuring, the Company monitors borrower performance according to the terms of the restructure to determine whether there are any early indicators for future default. Management regularly evaluates loans modified in a troubled debt restructuring for potential further impairment and will make adjustments to the risk ratings and specific reserves associated with troubled debt restructurings as deemed necessary.

As of June 30, 2022, the Company has made no commitments to advance additional funds in connection with loans modified as troubled debt restructurings.

Note 5: Investments

In December 2015, the Company finalized an agreement with Intertex Property Management, Inc., a California corporation, to enter into a joint venture to form Tesoro Hills, LLC (the “Valencia Hills Project”). Intertex is a managing member of the LLC, with authority to direct operations. The Company is a non-managing member with no authority beyond limited rights granted to the Company by the operating agreement. The Valencia Hills Project is a joint venture that will develop and market property formerly classified by the Company as a foreclosed asset. In January 2016, the Company transferred ownership in the foreclosed asset to the Valencia Hills Project. In addition, the Company reclassified the carrying value of the property from foreclosed assets to an investment in a joint venture. The

F-27

Company’s initial investment in the joint venture was $900 thousand and represented 100% of the ownership of the joint venture. Under the terms of the operating agreement, the members of the joint venture are entitled to receive their respective capital contributions until the balance is reduced to zero. After these payments are made, the Company is entitled to receive 30% of an profits generated by the operation of the joint venture or disposition of the property. The Company’s ownership percentage in the joint venture was 74% as of June 30, 2022 and December 31, 2021.

As of June 30, 2022 and December 31, 2021, the value of the Company’s investment in the joint venture was $882 thousand. Management’s impairment analysis of the investment as of June 30, 2022 has determined that the investment is not impaired.

Other Investments

In June 2022, the Company entered into two agreements whereby an insurance company guarantees a fixed rate of return in exchange for holding a deposit from the Company for the contracted period of ten years. The Company recognized $15 thousand in income on these investments during the six months ended June 30, 2022. Additional information related to these investments is as follows (dollars in thousands):

						Income for the three months ended				Income for the six months ended
Investment Type	Maturity Date	Original Cost		Net Carrying Amount		June 30, 2022		June 30, 2021		June 30, 2022		June 30, 2021
Fixed annuity	June 2032	$	1,000	$	1,015	$	15	$	—	$	15	$	—

Note 6: Revenue Recognition

The Company recognizes two primary types of revenue: interest income and non-interest income. The following tables reflect the Company’s non-interest income disaggregated by financial statement line item. Items outside of the scope of ASC 606 are noted as such (dollars in thousands):

	Three months ended				Six months ended
	June 30,				June 30,
	2022		2021		2022		2021
Non-interest income, in scope of ASC 606
Broker-dealer fees and commissions	$	217	$	206	$	516	$	502
Gains on loan sales		—		16		3		19
Other investment income		15		—		15		—
Other non-interest income		—		2		—		5
Non-interest income, out of scope, ASC 606
Lending fees		44		55		76		106
Gain on debt extinguishment		300		—		1,800		2,398
Total non-interest income	$	576	$	279	$	2,410	$	3,030

The following table separates revenue from contracts with customers into categories that are based on the nature, amount, timing, and uncertainty of revenue and cash flows associated with each product and distribution channel. Non-interest revenue earned by the Company’s broker-dealer subsidiary, MP Securities, comprises securities commissions, sale of investment company shares, insurance product revenue, and advisory fee income. Securities commission revenue represents the sale of over-the-counter stock, unit investment trusts, and variable annuities. The revenue earned from the sale of these products is recognized upon satisfaction of performance obligations, which occurs on the trade date and is considered transactional revenue. The Company also earns revenue from the management of invested assets, which is recognized monthly, as earned, based on the average asset value, and is referred to as assets under management revenue (“AUM”).

F-28

	For the three months ended				For the six months ended
(dollars in thousands)	June 30, 2022		June 30, 2021		June 30, 2022		June 30, 2021
Broker-dealer revenue
Securities commissions
Transactional	$	13	$	22	$	102	$	79
AUM		12		6		23		19
		25		28		125		98
Sale of investment company shares
Transactional		1		4		16		18
AUM		20		25		45		47
		21		29		61		65
Other insurance product revenue
Transactional		71		54		127		155
AUM		10		14		20		25
		81		68		147		180
Advisory fee income
Transactional		—		—		—		3
AUM		90		81		183		156
		90		81		183		159
Total broker-dealer revenue
Transactional		85		80		245		255
AUM		132		126		271		247
	$	217	$	206	$	516	$	502

Note 7: Loan Sales

A summary of loan participation sales and servicing assets are as follows (dollars in thousands):

	As of and for the
	Six months ended				Year ended
	June 30,				December 31,
	2022		2021		2021
Loan participation interests sold by the Company	$	1,216	$	9,595	$	14,053
Total participation interests sold and serviced by the Company		39,671		46,052		46,056
Servicing income		69		94		189
Servicing Assets
Balance, beginning of period	$	170	$	147	$	147
Additions:
Servicing obligations from sale of loan participations		3		28		81
Subtractions:
Amortization		(45)		(24)		(58)
Balance, end of period	$	128	$	151	$	170

ACCU Loan Participation Agreement

As detailed in “Note 3: Related Party Transactions,” effective August 9, 2021, the Company entered into a Master Loan Participation Purchase and Sale Agreement with ACCU. Sales made under the Master LP Agreement are done on a recourse basis, requiring the Company to repurchase the participation interest in the event of default by the borrower.

F-29

During the six months ended June 30, 2022, the Company sold two loan participations for $7 thousand to ACCU under the provisions of the Master LP Agreement. Due to the recourse provisions of the agreement, the $7 thousand participation sale is classified as a secured borrowing and is presented as part of other secured borrowings on the Company’s balance sheet.

Note 8: Foreclosed Assets

The Company’s investment in foreclosed assets consisted of one property that was valued at $301 thousand at June 30, 2022 and December 31, 2021. There was no allowance for losses on foreclosed assets at June 30, 2022 and December 31, 2021. The Company did not record any provision for losses on foreclosed assets during the six months ended June 30, 2022 and 2021.

During the year ended December 31, 2021, the Company sold a residential property it had acquired in a foreclosure action that had previously been completely written off. The Company realized a gain of $44 thousand on this sale.

Expenses applicable to foreclosed assets include the following (dollars in thousands):

	For the three months ended June 30,				For the six months ended June 30,
Foreclosed Asset Expenses	2022		2021		2022		2021
Provision for losses		—		—		—		—
Operating expenses		4		—		9		21
Total foreclosed asset expenses	$	4	$	—	$	9	$	21

Note 9: Premises and Equipment

The table below summarizes our premises and equipment (dollars in thousands):

	As of
	June 30,		December 31,
	2022		2021
Furniture and office equipment	$	524	$	522
Computer system		214		214
Leasehold improvements		43		43
Total premises and equipment		781		779
Less accumulated depreciation and amortization		(629)		(607)
Premises and equipment, net	$	152	$	172

	For the three months ended				For the six months ended
	June 30,		June 30,		June 30,		June 30,
	2022		2021		2022		2021
Depreciation and amortization expense	$	10	$	12	$	22	$	25

F-30

Note 10: Credit Facilities and Other Debt

Details of the Company’s debt facilities as of June 30, 2022 are as follows (dollars in thousands):

Nature of Borrowing	Interest Rate	Interest Rate Type	Amount Outstanding		Monthly Payment		Maturity Date	Amount of Loan Collateral Pledged		Amount of Cash Pledged
Term Loan	2.525%	Fixed	$	10,459	$	450	11/1/2026	$	18,806	$	—
KCT Warehouse LOC	5.250%	Variable		—		—	6/6/2023		5,490		—
KCT Operating LOC	5.250%	Variable		—		—	6/6/2023		4,790		—
ACCU LOC	4.000%	Variable		2,000		—	9/23/2022		6,689		—
ACCU Secured	Various	Fixed		15		—	Various		—		15

Term-Debt Credit Facility

The Company has a secured term-debt credit facility with OSK VII, LLC, an investment fund (“OSK”). The facility is non-revolving and does not include an option to renew or extend additional credit. Additionally, the facility does not contain a prepayment penalty. Under the terms of the credit facility, the Company must maintain a minimum collateralization ratio of at least 120%. If at any time the Company fails to maintain its required minimum collateralization ratio, it will be required to deliver cash or qualifying mortgage loans in an amount sufficient to meet its obligation to maintain a minimum collateralization ratio. The collateral securing the facility at June 30, 2022 and December 31, 2021 satisfied the 120% minimum ratio. As of June 30, 2022, the Company has only pledged qualifying mortgage loans as collateral on the credit facility. In addition, the credit facility includes a number of borrower covenants. The Company is in compliance with these covenants as of June 30, 2022 and December 31, 2021. On March 5, 2021, the Company made a $14.3 million principal prepayment on this facility and realized a $2.3 million gain on the extinguishment of debt as a result of this payment. On January 6, 2022, the Company made a $16.5 million principal prepayment on this facility and realized a $1.5 million gain on the extinguishment of debt as a result of this payment. The Company was in compliance with its covenants under the facility at the time of these payments. On June 29, 2022, the Company made a $3.3 million principal prepayment on this facility and realized a $300 thousand gain on the extinguishment of debt as a result of this payment. The Company was in compliance with its covenants under the facility at the time of these payments.

Future principal contractual payments of the Company’s term-debt during the twelve-month periods ending June 30, are as follows (dollars in thousands):

2023	$	5,191
2024		5,268
Total	$	10,459

Paycheck Protection Program Loan

On April 27, 2020, MP Securities applied for and received a Paycheck Protection Program loan (“PPP Loan”) granted under the CARES Act in the amount of $111 thousand. According to the terms of the program, as administered by the Small Business Association (“SBA”), payments on the loan were deferred and deferred interest was capitalized into the principal balance of the loan. In addition, qualifying amounts of the principal balance of the loan and deferred interest were eligible to be forgiven if MP Securities retained employees and maintained salary levels for its existing employees. On March 5, 2021, the SBA forgave all principal and accrued interest due on this loan.

F-31

KCT Lines of Credit

On September 30, 2020, Ministry Partners Investment Company, LLC, entered into a Loan and Security Agreement with KCT Credit Union, an Illinois state chartered financial institution. On June 6, 2022, the Company and KCT mutually agreed to terminate this facility and entered into two new facilities. The first facility, the KCT Warehouse LOC, is a $5.0 million short-term demand credit facility with a one-year maturity date ending on June 6, 2023. The KCT Warehouse LOC will automatically renew for another one-year term unless either party furnishes written notice at least 30 days prior to the termination date that it does not intend to renew the agreement. The Company has secured the KCT Warehouse LOC with certain of its mortgage loan investments.

The Company may draw funds on the KCT Warehouse LOC at any time until the line is fully drawn. Repayment of each advance is due 120 days after the advance is made or earlier in the event that a collateral loan becomes more than 60 days delinquent and the Company fails to cure such deficiency. The interest rate on the KCT Warehouse LOC is equal to the prime rate at the time of the draw plus 0.50%. At June 30, 2022 the interest rate on the KCT Warehouse LOC was 5.25%. To secure its obligations under the KCT Warehouse LOC, the Company has agreed to grant a priority first lien and security interest in certain of its mortgage loan investments and maintain a minimum collateralization ratio measured by taking outstanding balance of mortgage notes pledged under the facility as compared to the total amount of principal owed on the KCT Warehouse LOC. The minimum ratio must equal at least 120%. A total of $5.5 million in loans were pledged on this facility as of June 30, 2022. At June 30, 2022, there were no outstanding borrowings on the KCT Warehouse LOC.

In addition, on June 6, 2022, the Company entered into an Operating Line of Credit Loan and Security Agreement with the KCT, the KCT Operating LOC. The KCT Operating LOC is a $5.0 million short-term demand credit facility with a one-year maturity date ending on June 6, 2023. The KCT Operating LOC will automatically renew for another one-year term unless either party furnishes written notice at least 30 days prior to the termination date that it does not intend to renew the agreement. The Company must secure a minimum of 25% of the line with cash while the remaining portion of the KCT Operating LOC may be secured by certain of its mortgage loan investments.

The Company may draw funds on the KCT Operating LOC at any time until the line is fully drawn. Repayment by the termination date or earlier in the event that a collateral loan becomes more than 60 days delinquent and the Company fails to cure such deficiency. The interest rate on the KCT Warehouse LOC is equal to the prime rate at the time of the draw plus 0.50%. At June 30, 2022 the interest rate on the KCT Warehouse LOC was 5.25%. To secure its obligations under the KCT Operating LOC, the Company has agreed to grant a priority first lien and security interest in certain of its mortgage loan investments and maintain a minimum collateralization ratio measured by taking outstanding balance of mortgage notes pledged under the facility as compared to the total amount of principal owed less the secured cash on the KCT Operating LOC. The minimum ratio must equal at least 120%. A total of $4.8 million in loans were pledged on this facility as of June 30, 2022. At June 30, 2022, there were no outstanding borrowings on the KCT Operating LOC.

The KCT Operating LOC and the KCT Warehouse LOC both contain typical affirmative covenants for a credit facility of this nature, including requiring that the Company maintain the pledged collateral free of liens and encumbrances, timely pay the amounts due under the facility and provide KCT with current financial statements and monthly reports. The Company will also be required to comply with certain financial covenants including maintaining a net worth of at least $5.0 million dollars, ensuring that its net worth is equal to at least 5% of its total liabilities and that it will maintain minimum liquidity that equals or exceeds 120% of the outstanding amount owed under the KCT Operating LOC and the KCT Warehouse LOC at the end of each calendar month.

ACCU Line of Credit

On September 23, 2021, Ministry Partners Investment Company, LLC, entered into a Loan and Security Agreement with ACCU (“ACCU LOC”). The ACCU LOC is a revolving $5.0 million short-term demand credit facility with a one-year maturity date of September 23, 2022. The facility carried an outstanding balance of $2.0 million at June 30, 2022 and December 31, 2021. The interest rate on the facility is equal to the prime rate as published in the Wall Street Journal plus 0.75%. This rate will be adjusted on January 10th each year to account for the current prime rate but cannot be adjusted below 4.00%. The interest rate on the ACCU LOC was 4.00% on June 30, 2022. The ACCU LOC will automatically renew for one additional one-year term unless either party furnishes written notice at least thirty (30) days prior to the termination date that it does not intend to renew the agreement.

F-32

The Company may draw funds on the ACCU LOC at any time until the line is fully drawn. All outstanding principal and interest amounts are due on the maturity date. To secure its obligations under the ACCU LOC, the Company has agreed to grant a priority first lien and security interest in certain of its mortgage loan investments and maintain a minimum collateralization ratio measured by taking outstanding balance of mortgage notes pledged under the facility as compared to the total amount of principal owed on the ACCU LOC. The minimum ratio must equal at least 120%. The Company must also maintain minimum liquidity that equals or exceeds $10.0 million at all times during the term of the loan. The ACCU LOC contains typical affirmative covenants for a credit facility of this nature. The Company was in compliance with these covenants at June 30, 2022. A total of $6.7 million and $6.8 million in loans were pledged on this facility as of June 30, 2022 and December 31, 2021, respectively.

ACCU Secured Borrowings

As detailed in “Note 3: Related Party Transactions,” on August 9, 2021, the Company entered into a Master Loan Participation Purchase and Sale Agreement with ACCU. The participations sold under the Master LP Agreement are considered secured borrowings and are presented as such on the Company’s balance sheet. $15 thousand and $17 thousand in secured borrowings were outstanding under the Master LP Agreement as of June 30, 2022 and December 31, 2021. These borrowings have various contractual maturities ranging from 2028 to 2032.

Note 11: Investor Notes Payable

The table below provides information on the Company’s investor notes payable (dollars in thousands):

		As of				As of
		June 30, 2022				December 31, 2021
SEC Registered Public Offerings	Offering Type	Amount		Weighted Average Interest Rate		Amount		Weighted Average Interest Rate
Class 1 Offering	Unsecured	$	446	3.83	%	$	3,654	4.45	%
Class 1A Offering	Unsecured		22,894	4.03	%		27,116	4.11	%
2021 Class A Offering	Unsecured		38,561	3.30	%		34,524	3.20	%
Public Offering Total		$	61,901	3.57	%	$	65,294	3.65	%
Private Offerings	Offering Type
Subordinated Notes	Unsecured	$	12,189	4.50	%	$	11,526	4.47	%
Private Offering Total		$	12,189	4.50	%	$	11,526	4.47	%
Total Investor Notes Payable		$	74,090	3.73	%	$	76,820	3.77	%
Investor Notes Payable Totals by Security	Offering Type
Unsecured Total	Unsecured	$	74,090	3.73	%	$	76,820	3.77	%

Future maturities for the Company’s investor notes during the twelve-month periods ending June 30, are as follows (dollars in thousands):

2023	$	18,058
2024		15,416
2025		12,417
2026		16,618
2027		11,581
Total	$	74,090

Debt issuance costs related to the Company’s investor notes payable, net of amortization, were $72 thousand and $88 thousand at June 30, 2022 and December 31, 2021, respectively.

F-33

The notes are payable to investors who have purchased the securities. Notes pay interest at stated spreads over an index rate. At their option, the investor may reinvest the interest or have the interest paid to them. The Company may repurchase all or a portion of an outstanding note at any time at its sole discretion. In addition, the Company may permit an investor to redeem all or a portion of a note prior to maturity at its sole discretion.

SEC Registered Public Offerings

Class 1 Offering.

In January 2015, the Company registered its Class 1 Notes with the SEC. The Company discontinued the sale of its Class 1 Note Offering when it expired on December 31, 2017. The offering included two categories of notes, including a fixed interest note and a variable interest note. The Class 1 Notes contain restrictive covenants pertaining to paying dividends, making redemptions, acquiring, purchasing, or making certain payments, requiring the maintenance of minimum tangible net worth, limitations on the issuance of additional notes, and incurring of indebtedness. The Company is in compliance with these covenants as of June 30, 2022 and December 31, 2021. The Company issued the Class 1 Notes under a Trust Indenture entered into by and between the Company and U.S. Bank. The Class 1 Offering expired on December 31, 2017.

Class 1A Offering.

In February 2018, the Company launched its Class 1A Notes Offering. Pursuant to a Registration Statement declared effective on February 27, 2018, the Company registered $90 million of its Class 1A Notes in two series – fixed and variable notes. The Class 1A Notes are unsecured. The interest rate paid on the Fixed Series Notes is determined in reference to a Constant Maturity Treasury Index published by the U.S. Department of Treasury (“CMT Index”) in effect on the date that the note is issued plus a rate spread as described in the Company’s Class 1A Prospectus. The variable index in effect on the date the interest rate is set determines the interest rate paid on a Variable Series Note. The CMT Index refers to the Constant Maturity Treasury rates published by the U.S. Department of Treasury for actively traded Treasury securities. The variable index is equal to the 3-month LIBOR rate. The Company issued the Class 1A Notes under a Trust Indenture entered into by and between the Company and U.S. Bank. The Class 1A Offering expired on December 31, 2020.

2021 Class A Offering.

In January 2021, the Company launched its 2021 Class A Notes Offering. Pursuant to a Registration Statement declared effective on January 8, 2021, the Company registered $125 million of its 2021 Class A Notes in two series – fixed and variable notes. The 2021 Class A Notes are unsecured. Like the Class 1A Notes Offering, the interest rate paid on the Fixed Series Notes is determined in reference to a CMT Index published by the U.S. Department of Treasury in effect on the date that the note is issued plus a rate spread as described in the Company’s 2021 Class A Prospectus. The variable index in effect on the date the interest rate is set determines the interest rate paid on a Variable Series Note. The CMT Index refers to the Constant Maturity Treasury rates published by the U.S. Department of Treasury for actively traded Treasury securities. The variable index is equal to the 3-month LIBOR rate. The Company issued the 2021 Class A Notes under a Trust Indenture entered into by and between the Company and U.S. Bank.

Private Offerings

Series 1 Subordinated Capital Notes (“Subordinated Notes”).

In June 2018, the Company renewed the offer and sale of its Subordinated Notes initially launched in February 2013. The Company offers the notes pursuant to a limited private offering to qualified investors that meet the requirements of Rule 506 of Regulation D. The Company offers the Subordinated Notes with maturity terms from 12 to 60 months at an interest rate fixed on the date of issuance, as determined by the then current seven-day average rate reported by the U.S. Federal Reserve Board for interest rate swaps.

F-34

Under the Subordinated Notes offering, the Company is subject to certain covenants, including limitations on restricted payments, limitations on the amount of notes that it can sell, restrictions on mergers and acquisitions, and proper maintenance of books and records. The Company was in compliance with these covenants at June 30, 2022 and December 31, 2021.

Note 12: Commitments and Contingencies

Unfunded Commitments

The Company is a party to credit-related financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include un-advanced lines of credit and standby letters of credit. Such commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the balance sheet.

The contractual amount of these commitments represents the Company’s exposure to credit loss. The Company uses the same credit policies in making commitments as it does for on-balance-sheet instruments.

The table below shows the outstanding financial instruments whose contract amounts represent credit risk (dollars in thousands):

	Contract Amount at:
	June 30, 2022		December 31, 2021
Undisbursed loans	$	264	$	270

Undisbursed loans are commitments for possible future extensions of credit to existing customers. These loans are sometimes unsecured and the borrower may not necessarily draw upon the line the total amount of the commitment. Commitments to extend credit are generally at variable rates.

Operating Leases

The Company has a lease agreement for its offices in Brea, California and a vehicle used by executive management. The Company renewed its Brea office lease in January 2019 for an additional five-year term. The lease does not contain any additional options to renew. The Company has determined that both leases are operating leases. The Company used its incremental borrowing rates to determine the discount rates used in the asset calculations. The Company’s lease agreement for its Fresno office expired in March 2022. A three-year renewal agreement for the lease was signed in April 2022 beginning May 1, 2022 and terminating April 30, 2025. The agreement does not contain any options to renew. The lease payments associated with the renewal have been included in the future minimum lease payments table below.

The table below presents information regarding our existing operating leases (dollars in thousands):

	For the
	Three months ended						Six months ended						Year ended
	June 30,						June 30,						December 31,
	2022			2021			2022			2021			2021
Lease cost
Operating lease cost	$	42		$	44		$	87		$	87		$	174
Other information
Cash paid for operating leases		46			44			96			87			174
Right-of-use assets obtained in exchange for operating lease liabilities		84			—			106			—			—
Weighted average remaining lease term (in years)		1.91			2.17			1.91			2.17			1.96
Weighted-average discount rate		4.38	%		4.65	%		4.38	%		4.65	%		4.71	%

F-35

Future minimum lease payments and lease costs for the twelve months ending June 30, are as follows (dollars in thousands):

	Lease Payments		Lease Costs
2023	$	188	$	183
2024		113		110
2025		28		28
Total	$	329	$	321

Note 13: Preferred and Common Units under LLC Structure

Holders of the Series A Preferred Units are entitled to receive a quarterly cash dividend that is 25 basis points higher than the one-year LIBOR rate in effect on the last day of the calendar month for which the preferred return is approved. The UK Financial Conduct Authority announced on December 4, 2020 that the USD LIBOR for 1, 3, 6, and 12 months will no longer be published after June 30, 2023. The Company is currently reviewing and evaluating alternatives that may be used to replace the index. When an appropriate alternative index is determined the Series A Preferred Units Certificate may need to be amended to provide for use of the new index. In addition to the quarterly cash dividend, the Company has also agreed to set aside an annual amount equal to 10% of its net profits earned for any year, after subtracting from profits the quarterly Series A Preferred Unit dividends paid, for distribution to its Series A Preferred Unit holders.

The Series A Preferred Units have a liquidation preference of $100 per unit and have no voting rights. They are also subject to redemption in whole or in part at the Company’s election on December 31 of any year for an amount equal to the liquidation preference of each unit, plus any accrued and declared but unpaid quarterly dividends and preferred distributions on such units. The Series A Preferred Units have priority as to earnings and distributions over the Common Units. The resale of the Company’s Series A Preferred Units and Common Units are subject to the Company’s first right of refusal to purchase units proposed to be transferred. Upon the Company’s failure to pay quarterly dividends for four consecutive quarters, the holders of the Series A Preferred Units have the right to appoint two managers to the Company’s Board of Managers.

The Class A Common Units have voting rights, but have no liquidation preference or rights to dividends, unless declared.

Note 14: Retirement Plans

401(k)

All of the Company’s employees are eligible to participate in the Automated Data Processing, Inc. (“ADP”) 401(k) plan effective as of the date their employment commences. No minimum service is required and the minimum age is 21. Each employee may elect voluntary contributions not to exceed 86% of salary, subject to certain limits based on U.S. tax law. The plan has a matching program, which qualifies as a Safe Harbor 401(k) plan. As a Safe Harbor Section 401(k) plan, the Company matches each eligible employee’s contribution, dollar for dollar, up to 3% of the employee’s compensation, and 50% of the employee’s contribution that exceeds 3% of their compensation, up to a maximum contribution of 5% of the employee’s compensation. Company matching contributions for the six months ended June 30, 2022 and 2021 were $51 thousand and $40 thousand, respectively.

Profit Sharing

The profit-sharing plan is for all employees who, at the end of the calendar year, are at least 21 years old, still employed, and have at least 900 hours of service during the plan year. The Company’s Board of Managers determines the amount annually contributed on behalf of each qualified employee. The Company determines the amount by calculating it as a percentage of the eligible employee’s annual earnings. Plan forfeitures are used to reduce the Company’s annual contribution. The Company did not make or approve a profit-sharing contribution for the six months ended June 30, 2022 and 2021.

F-36

Supplemental Executive Retirement Plan

On March 30, 2022, the Company entered into a Supplemental Executive Retirement Plan (the “SERP”) with its President and Chief Executive Officer, Joseph W. Turner, Jr. The SERP is an unfunded non-qualified plan that is intended to provide Mr. Turner with a fixed benefit over a ten-year period after Mr. Turner incurs a separation from service with the Company. The SERP has been established as a supplemental retirement and death benefits arrangement that conforms with the provisions of Section 409(A) of the Internal Revenue Code. If Mr. Turner retires on or after his expected retirement date, he will be entitled to receive $60,000 per year over a ten-year period, payable in equal monthly installments commencing the first day of the month following his separation from service.

For purposes of the SERP, Mr. Turner’s accrued benefit is subject to a maximum sum of $600,000, with payments made annually in equal monthly installments over a ten-year period. The Company is liable for the entire amount of this benefit unless Mr. Turner incurs a separation of service prior to the vesting date in August 2024. The Company’s management has determined that such a separation is unlikely to occur prior to the vesting date and has accrued the entire benefit as of June 30, 2022.

Note 15: Fair Value Measurements

Fair Value Measurements Using Fair Value Hierarchy

The Company classifies measurements of fair value within a hierarchy based upon inputs that give the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:

● Level 1 inputs are quoted prices (unadjusted) for identical assets or liabilities in active markets.

● Level 2 inputs include:

o quoted prices for similar assets and liabilities in active markets,

o quoted prices for identical assets and liabilities in inactive markets,

o inputs that are observable for the asset or liability (such as interest rates, prepayment speeds, credit risks, etc.);

o or inputs that are derived principally from or corroborated by observable market data by correlation or by other means.

● Level 3 inputs are unobservable and reflect an entity’s own assumptions about the assumptions that market participants would use in pricing the assets or liabilities.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

F-37

Fair Value of Financial Instruments

The following tables show the carrying amounts and estimated fair values of the Company’s financial instruments (dollars in thousands):

			Fair Value Measurements at June 30, 2022 using
	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value
FINANCIAL ASSETS:
Cash and restricted cash	$	11,551	$	11,551	$	—	$	—	$	11,551
Loans, net		88,160		—		—		87,322		87,322
Investment in joint venture		882		—		—		882		882
Other investments		1,015						942		942
Accrued interest receivable		484		—		—		484		484
FINANCIAL LIABILITIES:
Lines of credit	$	2,000	$	—	$	—	$	2,000	$	2,000
Term-debt		10,459		—		—		9,413		9,413
Other secured borrowings		15		—		—		15		15
Investor notes payable		74,018		—		—		74,297		74,297
Other financial liabilities		360		—		—		360		360

			Fair Value Measurements at December 31, 2021 using
	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value
FINANCIAL ASSETS:
Cash	$	28,080	$	28,080	$	—	$	—	$	28,080
Loans, net		97,243		—		—		97,913		97,913
Investments in joint venture		882		—		—		882		882
Accrued interest receivable		507		—		—		507		507
FINANCIAL LIABILITIES:
Lines of credit	$	2,000	$	—	$	—	$	2,000	$	2,000
Term-debt		32,749		—		—		31,489		31,489
Other secured borrowings		17		—		—		18		18
Notes payable		76,732		—		—		76,871		76,871
Other financial liabilities		455		—		—		455		455

Management uses judgment in estimating the fair value of the Company’s financial instruments; however, there are inherent weaknesses in any estimation technique. Therefore, for substantially all financial instruments, the fair value estimates presented herein are not necessarily indicative of the amounts the Company could have realized in a sales transaction at June 30, 2022 and December 31, 2021.

The Company used the following methods and assumptions to estimate the fair value of financial instruments:

Cash – The carrying amounts reported in the balance sheets approximate fair value for cash.

F-38

Certificates of deposit – Management estimates fair value by using a present value discounted cash flow with a discount rate approximating the current market rate for similar assets. Management classifies certificates of deposits as Level 2 of the fair value hierarchy.

Loans – Management estimates fair value by discounting the future cash flows of the loans. The discount rate the Company uses is the current average rates at which it would make loans to borrowers with similar credit ratings and for the same remaining maturities.

Investments in joint venture – Management estimates fair value by analyzing the operations and marketability of the underlying investment to determine if the investment is other-than-temporarily impaired.

Other investments – Management estimates fair value by analyzing the cash flows of the investment as well as evaluating the risk of loss.

Investor Notes Payable – Management estimates the fair value of fixed maturity notes by discounting the future cash flows of the notes. The discount rate the Company uses is the rates currently offered for investor notes payable of similar remaining maturities. Company management estimates the discount rate by using market rates that reflect the interest rate risk inherent in the notes.

Lines of Credit, Term-debt, Other Secured Borrowings – Management estimates the fair value of borrowings from financial institutions discounting the future cash flows of the borrowings. The discount rate the Company uses is the current incremental borrowing rate for similar types of borrowing arrangements.

Off-Balance Sheet Instruments – Management determines the fair value of loan commitments on fees currently charged to enter into similar agreements, taking into account the remaining term of the agreements and the counterparties’ credit standing. The fair value of loan commitments is insignificant at June 30, 2022 and December 31, 2021.

Fair Value Measured on a Nonrecurring Basis

The Company measures certain assets at fair value on a nonrecurring basis. On these assets, the Company only makes fair value adjustments in certain circumstances (for example, when there is evidence of impairment). The following table presents the fair value of assets measured on a nonrecurring basis (dollars in thousands):

	Fair Value Measurements Using:
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets at June 30, 2022:
Collateral-dependent impaired loans (net of allowance and discount)	$	—	$	—	$	5,196	$	5,196
Investment in joint venture		—		—		882		882
Foreclosed assets (net of allowance)		—		—		301		301
Total	$	—	$	—	$	7,321	$	7,321
Assets at December 31, 2021:
Collateral-dependent impaired loans (net of allowance and discount)	$	—	$	—	$	8,981	$	8,981
Investments in joint venture		—		—		882		882
Foreclosed assets (net of allowance)		—		—		301		301
Total	$	—	$	—	$	10,164	$	10,164

F-39

Impaired Loans

The Company measures impaired loans at fair value on a nonrecurring basis. Once a loan is considered impaired, the fair value is measured using one of several methods, including collateral liquidation value, the market value of similar debt, or discounted cash flows. Most often management uses the fair value of the underlying real estate collateral to value impaired loans. Such fair values are obtained using independent appraisals, which the Company considers to be Level 3 inputs. The range of these discounts is shown in the table below.

Foreclosed Assets

The Company initially records real estate acquired through foreclosure or other proceedings (foreclosed assets) at fair value at the date of foreclosure less estimated costs of disposal, which establishes a new cost. After foreclosure, management periodically performs valuations on foreclosed assets. The Company carries foreclosed assets held for sale at the lower of cost or fair value, less estimated costs of disposal. The fair values of real properties initially are determined based on appraisals. In some cases, management adjusts the appraised values for various factors including age of the appraisal, age of comparable properties included in the appraisal, and known changes in the market or in the collateral. The Company makes subsequent valuations of the real properties based either on management estimates or on updated appraisals. If management makes significant adjustments to appraised values based on unobservable inputs, the Company categorizes foreclosed assets under Level 3. Otherwise, if management bases the foreclosed assets’ value on recent appraisals and the only adjustments made are for known contractual selling costs, the Company will categorize the foreclosed assets under Level 2.

The table below summarizes the valuation methodologies used to measure the fair value adjustments for Level 3 assets recorded at fair value on a nonrecurring basis (dollars in thousands):

June 30, 2022
Assets	Fair Value (in thousands)		Valuation Techniques	Unobservable Input	Range (Weighted Average)
Impaired Loans	$	5,196	Discounted appraised value	Selling cost / Estimated market decrease	21% - 81% (23%)
Investment in joint venture		882	Internal evaluations	Estimated future market value	0% (0%)
Foreclosed Assets		301	Internal evaluations	Selling cost	6% (6%)

December 31, 2021
Assets	Fair Value (in thousands)		Valuation Techniques	Unobservable Input	Range (Weighted Average)
Impaired loans	$	8,981	Discounted appraised value	Selling cost / Estimated market decrease	11% - 81% (21%)
Investments in joint venture		882	Internal evaluations	Estimated future market value	0% (0%)
Foreclosed assets		301	Internal evaluations	Selling cost	6% (6%)

Note 16: Income Taxes and State LLC Fees

MPIC is subject to a California gross receipts LLC fee of approximately $12,000 per year, and the state minimum franchise tax of $800 per year. MP Securities is subject to a California gross receipts LLC fee of approximately $6,000 and the state minimum franchise tax of $800 per year.

MP Realty incurred a tax loss for the years ended December 31, 2021 and 2020, and recorded a provision of $800 per year for the state minimum franchise tax. For the years ended December 31, 2021 and 2020, MP Realty has federal and state net operating loss carryforwards of approximately $431 thousand and $430 thousand, respectively, which begin to expire in 2031. Management assessed the realizability of the deferred tax asset and determined that a 100% valuation against the deferred tax asset was appropriate at June 30, 2022 and December 31, 2021.

F-40

Tax years ended December 31, 2018 through December 31, 2021 remain subject to examination by the Internal Revenue Service and the tax years ended December 31, 2017 through December 31, 2021 remain subject to examination by the California Franchise Tax Board and various other state jurisdictions.

Note 17: Segment Information

The Company’s reportable segments are strategic business units that offer different products and services. The Company manages the segments separately because each business requires different management, personnel proficiencies, and marketing strategies.

The Company has two reportable segments that represent the primary businesses reported in the consolidated financial statements: the finance company (the parent company), and the broker-dealer (MP Securities). The finance company segment uses funds from the sale of debt securities, income from operations, and the sale of loan participations to originate or purchase mortgage loans. The finance company also services loans. MP Securities generates fee income by selling debt securities and other investment and insurance products, as well as providing investment advisory and financial planning services.

The accounting policies applied to determine the segment information are the same as those described in the summary of significant accounting policies. Management accounts for intersegment revenues and expenses at amounts that assume the Company entered into the transaction with unrelated third parties at the current market prices at the time of the transaction. Management evaluates the performance of each segment based on net income or loss before provision for income taxes and LLC fees.

Financial information with respect to the reportable segments is as follows (dollars in thousands):

	Three months ended				Six months ended
	June 30, 2022		June 30, 2021		June 30, 2022		June 30, 2021
Revenue from external sources
Finance Company*	$	1,748	$	1,837	$	4,808	$	6,062
Broker-Dealer		233		206		532		614
Adjustments / Eliminations		—		—		—		—
Total	$	1,981	$	2,043	$	5,340	$	6,676
Revenue from internal sources
Finance Company	$	—	$	—	$	—	$	—
Broker-Dealer		209		238		494		499
Adjustments / Eliminations		(209)		(238)		(494)		(499)
Total	$	—	$	—	$	—	$	—
Total non-interest expense and provision for tax
Finance Company	$	802	$	834	$	2,448	$	2,089
Broker-Dealer		325		319		897		688
Other Segments		40		—		51		—
Adjustments / Eliminations		(50)		—		(50)		—
Total	$	1,117	$	1,153	$	3,346	$	2,777
Net profit (loss)
Finance Company	$	(166)	$	(353)	$	184	$	1,409
Broker-Dealer		118		125		130		424
Other Segments		(41)		—		(52)		—
Adjustments / Eliminations		118		73		123		62
Total	$	29	$	(155)	$	385	$	1,895

F-41

*Note: Finance Company revenue includes $300 thousand for the quarter ended June 30, 2022 and $1.8 million and $2.4 million for the six months ended June 30, 2022 and 2021, respectively.

	June 30,		December 31,
	2022		2021
	(Unaudited)		(Audited)
Total assets
Finance Company	$	98,831	$	123,753
Broker Dealer		4,273		3,946
Other Segments		361		559
Adjustments / Eliminations		(42)		(293)
Total	$	103,423	$	127,965

F-42

Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion compares the results of operations for the three- and six-month periods ended June 30, 2022 and 2021. It should be read in conjunction with our December 31, 2021 Annual Report on Form 10-K and the accompanying unaudited financial statements and Notes set forth in this report.

SAFE HARBOR CAUTIONARY STATEMENT

This Form 10-Q contains forward-looking statements regarding Ministry Partners Investment Company, LLC and our wholly-owned subsidiaries, MPF, MP Realty, MPC, and MP Securities, including, without limitation, statements regarding our expectations with respect to revenue, credit losses, levels of non-performing assets, expenses, earnings and other measures of financial performance. Statements that are not statements of historical facts may be deemed to be forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. The words “anticipate”, “believe”, “estimate”, “expect”, “plan”, “intend”, “should”, “seek”, “will”, and similar expressions are intended to identify these forward-looking statements but are not the exclusive means of identifying them. These forward-looking statements reflect the current views of our management.

These forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties that are subject to change based upon various factors (many of which are beyond our control). Such risks, uncertainties, and other factors that could cause our financial performance to differ materially from the expectations expressed in such forward-looking statements include, but are not limited to, the risks set forth in our Annual Report on Form 10-K for the year ended December 31, 2021.

As used in this quarterly report, the terms “we”, “us”, “our” or the “Company” means Ministry Partners Investment Company, LLC and our wholly-owned subsidiaries, MPF, MP Realty, MP Securities, and MPC.

OVERVIEW

As the effects of the worldwide pandemic begin to lessen in severity, indicators of economic activity have continued to strengthen with jobs, consumer spending, manufacturing, and other indicators rebounding from their weakest levels. However, rising prices have become a concern and the Russian invasion of Ukraine in February of this year is expected to create additional upward pressure on prices. As a result, the Federal Reserve Board (“FRB”) raised the fed funds rate up from 0.25% at the beginning of the year to 1.75% as of June 30, 2022. Additionally, the FRB’s median projection of the fed funds rate at the end of 2022 is 3.4%, indicating the committee expects to continue to increase rates as they attempt to curtail inflation. Due to these factors, we believe that economic uncertainty remains high and could negatively impact our borrowers and financial results.

For the six months ended June 30, 2022, the Company generated $385 thousand in net income. During this period the most significant factor in generating net income was $1.8 million in gain son debt extinguishment resulting from early paydowns of a credit facility. These gains were offset by $600 thousand in deferred compensation expense recorded to recognize the liability associated with the establishment of a SERP for the Company’s President and Chief Executive Officer. In addition, the Company accrued $203 thousand in discretionary bonuses for its employees in the first quarter of 2022. For the three months ended June 30, 2022, the Company generated $29 thousand in net income compared to a loss of $155 thousand for the three months ended June 30, 2021. The main cause was a $300 thousand gain on debt extinguishment for the quarter ended June 30, 2022 compared to the quarter ended June 30, 2021.

3

Financial Condition

Comparison of Financial Condition on June 30, 2022 and December 31, 2021

					Comparison
	2022		2021		$ Difference
	(Unaudited)		(Audited)
	(dollars in thousands)
Assets:
Cash	$	11,485	$	28,080	$	(16,595)	(59%)
Restricted cash		66		69		(3)	(4%)
Loans receivable, net of allowance for loan losses of $1,702 and $1,638 as of June 30, 2022 and December 31, 2021, respectively		88,160		97,243		(9,083)	(9%)
Accrued interest receivable		484		507		(23)	(5%)
Investment in joint venture		882		882		—	—%
Other investments		1,015		—		1,015	—%
Property and equipment, net		152		172		(20)	(12%)
Foreclosed assets, net		301		301		—	—%
Servicing assets		128		170		(42)	(25%)
Other assets		750		541		209	39%
Total assets	$	103,423	$	127,965	$	(24,542)	(19%)
Liabilities and members’ equity
Liabilities:
Lines of credit	$	2,000	$	2,000	$	—	100%
Term-debt		10,459		32,749		(22,290)	(68%)
Other secured borrowings		15		17		(2)	100%
Investor notes payable, net of debt issuance costs of $72 and $88 as of June 30, 2022 and December 31, 2021, respectively		74,018		76,732		(2,714)	(4%)
Accrued interest payable		227		252		(25)	(10%)
Other liabilities		2,009		1,704		305	18%
Total liabilities		88,728		113,454		(24,726)	(22%)
Members' Equity:
Series A preferred units		11,715		11,715		—	—%
Class A common units		1,509		1,509		—	—%
Accumulated equity (deficit)		1,471		1,287		184	14%
Total members' equity		14,695		14,511		184	1%
Total liabilities and members' equity	$	103,423	$	127,965	$	(24,542)	(19%)

On January 6, 2022, the Company negotiated a discounted partial paydown of principal of $16.0 million on our OSK term loan. This resulted in a gain on debt extinguishment of $1.5 million. We made another $3.3 million discounted paydown on the debt during the quarter ended June 30, 2022 resulting in a $300 thousand gain on debt extinguishment. The discounted paydowns were the primary cause of a 19% decrease in our total assets. We funded the debt payoff through existing cash we set aside in previous periods for this type of opportunity, as well as raising cash from our loans receivable portfolio in the form of collections and participation sales.

To maintain a liquid balance sheet, we intend to sell participation interests in a portion of our new loan originations as well as out of our existing loan portfolio. For the six months ended June 30, 2022, we purchased or originated $2.9 million in loans receivable and sold participation interests in loans receivable of $1.2 million during the same period. We also received $10.9 million in loan principal collections during the first six months of 2022, with $8.5 million received during the first quarter. These were mostly due to early loan payoffs from borrowers who refinanced elsewhere. Therefore, our loan portfolio provided $9.2 million in cash during the six months ended June 30, 2022.

Our investor notes payable consist of debt securities sold under publicly registered security offerings as well as notes sold in private placement offerings. For the six months ended June 30, 2022, net investor notes payable decreased

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$2.7 million. This decrease was primarily due to planned withdrawals or non-renewals from a few institutional clients, who, from time to time, choose to make withdrawals or decline to renew a note for cash management purposes. Over the last several years, we have expanded our investor note sale program by building relationships with other faith-based organizations whereby we can offer our various investor note products to these organizations and the ministries they serve. Concurrently, MP Securities continues to increase its retail customer base through client referrals and its networking agreements with key strategic partners.

For the six months ended June 30, 2022 we had net income of $385 thousand. Our total members’ equity increased 1% to $14.7 million for the six months ended June 30, 2022, which resulted in a capital to asset ratio of 14.2%.

Liquidity and Capital Resources

In response to the economic uncertainty created from the COVID-19 pandemic, management began to generate liquidity by selling participation interests in its loans receivable during 2020 and throughout 2021. In 2022, the Company intends to moderate this strategy based on its current and expected near term liquidity needs. During the period ended June 30, 2022, we generated $1.2 million in cash from the sale of loan participation interests. This strategy will allow the Company to scale up its origination and servicing capacity while keeping liquidity levels within its guidelines. An additional liquidity tool we use in conjunction with our loan participation sales is a $5.0 million warehouse line of credit (“KCT LOC”) with Kane County Teachers Credit Union (“KCT”), for the specific purpose of funding loan originations, and offering participation interests in these loans through a short-term credit facility. This facility allows us to warehouse loan originations until we sell participations in these loans. We must repay each advance within one hundred twenty (120) days after receiving the advance. As of March 31, 2022, we had no outstanding balance on the KCT LOC.

The Company also has two other revolving lines of credit. The Company has a revolving $5.0 million short-term demand credit facility (“ACCU LOC”) with America’s Christian Credit Union. The ACCU LOC has a one-year term with a maturity date of September 23, 2022. As of March 31, 2022, we had an outstanding balance of $2.0 million on this facility. The Company does not have any restrictions on how the funds may be used for this facility. We also have a $5 million short-term demand credit facility with KCT. This operating line can be used by the Company as needed and has a one-year term with a maturity date of June 6, 2023. As of June 30, 2022, we had no outstanding balance on this operating line of credit.

Management believes, if necessary, we will be able to raise additional cash through loan and investor note sales to keep sufficient levels of cash available to meet our debt obligations to investors. Because the Company was successful in raising cash from loan repayments, sales of loan participations, and its use of short-term credit facilities, we were able to take advantage of the opportunity to pay down our OSK debt facility at a discount, as described above. Despite this paydown, the Company is still operating with cash levels above its Board-approved policy. Cash, restricted cash, and certificates of deposit were $11.6 million as of June 30, 2022 and our liquidity ratio was 14%. Our liquidity policy, established by our Board of Managers, sets a minimum liquidity ratio and provides contingency protocols if our liquidity falls below the minimum. Our liquidity ratio was above the minimum set by our policy as of June 30, 2022.

Due to the discounted paydown of the term-debt the Company reported $1.8 million in gains on the extinguishment of debt for the six-month period ended June 30, 2022. In addition to producing income, the early paydown of the term-debt eliminated the balloon payment that was due in November 2026.

Debt Securities

Historically, we have been successful in generating reinvestments by our debt security holders when the notes they hold mature. Our note renewal rate remains stable and our advisory team continues to expand their clientele, which has also increased new note sales.

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The table below shows the renewal rates of our maturing notes over the last three years ended December 31:

2021	55%
2020	60%
2019	75%

The renewal rate for the quarter ended June 30, 2022 as compared to June 30, 2021 is as follows:

● Three-month period ended June 30, 2022: 49%

● Three-month period ended June 30, 2021: 66%

Credit Facilities and Other Borrowings

The table below is a summary of the Company’s $12.5 million in outstanding debt payable as of June 30, 2022 (dollars in thousands):

Nature of Borrowing	Interest Rate	Interest Rate Type	Amount Outstanding		Monthly Payment		Maturity Date	Amount of Loan Collateral Pledged		Amount of Cash Pledged
Term Loan	2.525%	Fixed	$	10,459	$	450	11/1/2026	$	18,806	$	—
KCT Warehouse LOC	5.250%	Variable		—		—	6/6/2023		5,490		—
KCT Operating LOC	5.250%	Variable		—		—	6/6/2023		4,790		—
ACCU LOC	4.000%	Variable		2,000		—	9/23/2022		6,689		—
ACCU Secured	Various	Fixed		15		—	Various		—		15

We cannot borrow additional funds on the OSK term loan; therefore, we will need to replace any principal paid on the facility through another source. To pay down our term loan, we intend to rely on the Company’s earnings, the debt securities we sell, net cash flow from our loans receivable portfolio, and the $10 million in revolving lines of credit. We can also utilize the KCT Warehouse LOC from which we can draw up to $5 million to facilitate warehousing new loan originations until we can sell loan participations in those loans. The ACCU secured borrowing is a loan participation sale that is classified as a secured borrowing and will pay down as the loan amortizes.

The following table shows the maturity schedule of our OSK term-debt as of June 30,, (dollars in thousands):

2023	$	5,191
2024		5,268
Total	$	10,459

Debt Covenants

Under our credit facility agreements and our investor note documents, we are obligated to comply with certain affirmative and negative covenants. Failure to comply with our covenants could require all interest and principal to become due. As of June 30, 2022, we are in compliance with our covenants on our investor notes payable, OSK credit facility, KCT Warehouse LOC, KCT Operating LOC, and ACCU LOC.

● For additional information regarding our investor notes payable, refer to “Note 11. Investor Notes Payable” to Part I “Financial Information” of this Report.

● For additional information on our credit facilities, refer to “Note 10. Credit Facilities” to Part I “Financial Information” of this Report.

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Results of Operations: June 30, 2022

The analysis below compares the Company’s results of operations for the three- and six-month periods ended June 30, 2022 and 2021.

Net Interest Income and Net Interest Margin

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

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

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

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

	Average Balances and Rates/Yields
	For the Three Months Ended June 30,
	(Dollars in Thousands)
	2022						2021
	Average Balance		Interest Income/ Expense		Average Yield/ Rate		Average Balance		Interest Income/ Expense		Average Yield/ Rate
Assets:
Interest-earning accounts with other financial institutions	$	16,511	$	11	0.27	%	$	16,480	$	11	0.27	%
Interest-earning loans [1]		83,150		1,394	6.72	%		105,609		1,753	6.66	%
Total interest-earning assets		99,661		1,405	5.65	%		122,089		1,764	5.80	%
Non-interest-earning assets		7,021		—	—	%		7,683		—	—	%
Total Assets		106,682		1,405	5.28	%		129,772		1,764	5.45	%
Liabilities:
Investor notes payable gross of debt issuance costs		73,687		679	3.70	%		74,477		665	3.58	%
Other debt		16,481		112	2.73	%		38,355		256	2.68	%
Total interest-bearing liabilities		90,168		791	3.52	%		112,832		921	3.27	%
Debt issuance cost				20						12
Total interest-bearing liabilities net of debt issuance cost	$	90,168		811	3.61	%	$	112,832		933	3.32	%
Net interest income			$	594					$	831
Net interest margin					2.39	%					2.73	%

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

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Rate/Volume Analysis of Net Interest Income
	Three Months Ended June 30, 2022 vs. 2021
	Increase (Decrease) Due to Change in
	Volume		Rate		Total
	(Dollars in Thousands)
Increase in Interest Income:
Interest-earning accounts with other financial institutions	$	—	$	—	$	—
Interest-earning loans		(376)		17		(359)
Total interest-earning assets		(376)		17		(359)
Increase (Decrease) in Interest Expense:
Investor notes payable gross of debt issuance costs		(7)		21		14
Other debt		(149)		5		(144)
Debt issuance cost		—		8		8
Total interest-bearing liabilities		(156)		34		(122)
Change in net interest income	$	(220)	$	(17)	$	(237)

	Average Balances and Rates/Yields
	For the Six Months Ended June 30,
	(Dollars in Thousands)
	2022							2021
	Average Balance		Interest Income/ Expense		Average Yield/ Rate			Average Balance		Interest Income/ Expense		Average Yield/ Rate
Assets:
Interest-earning accounts with other financial institutions	$	16,946	$	15		0.18	%	$	19,492	$	25		0.26	%
Interest-earning loans [1]		85,732		2,915		6.86	%		107,382		3,621		6.80	%
Total interest-earning assets		102,678		2,930		5.75	%		126,874		3,646		5.80	%
Non-interest-earning assets		7,963		—		—	%		7,591		—		—	%
Total Assets		110,641		2,930		5.34	%		134,465		3,646		5.47	%
Liabilities:
Investor notes payable gross of debt issuance costs		75,397		1,367		3.66	%		75,567		1,331		3.55	%
Other Debt		18,368		251		2.76	%		42,739		545		2.57	%
Total interest-bearing liabilities	$	93,765		1,618		3.48	%	$	118,306		1,876		3.20	%
Debt issuance cost				54							24
Total interest-bearing liabilities net of debt issuance cost	$	93,765		1,672		3.60	%	$	118,306		1,900		3.24	%
Net interest income			$	1,258						$	1,746
Net interest margin						2.47	%						2.78	%

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

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Rate/Volume Analysis of Net Interest Income
	Six Months Ended June 30, 2022 vs. 2021
	Increase (Decrease) Due to Change in
	Volume		Rate		Total
	(Dollars in Thousands)
Increase (Decrease) in Interest Income:
Interest-earning accounts with other financial institutions	$	(3)	$	(7)	$	(10)
Interest-earning loans		(738)		32		(706)
Total interest-earning assets		(741)		25		(716)
Increase (Decrease) in Interest Expense:
Investor notes payable gross of debt issuance costs		36		—		36
Other debt		(332)		38		(294)
Debt issuance cost		—		30		30
Total interest-bearing liabilities		(296)		68		(228)
Change in net interest income	$	(445)	$	(43)	$	(488)

Total interest income for the three months ended June 30, 2022, compared to the three months ended June 30, 2021 decreased mostly due to a volume variance on interest-earning loans. The volume variance on loans was due to loan participation sales and early payoffs on our loan portfolio. This was also the reason for the volume variance on interest-earning loans for the six months ended June 30, 2022, compared to the six months ended June 30, 2022. While the weighted average rate of our loan portfolio is 6.16%, our interest-bearing loans yielded 6.72% for the quarter ended June 30, 2022 due to the recognition of net deferred fees in interest income. When we sell loan participations and when loans pay off early, deferred fee amortization is accelerated, which causes higher interest income yields than the weighted average loan portfolio rate.

The decrease in interest income described above was offset somewhat by a decrease in interest expense due to a volume variance on other debt for the three and six months ended June 30, 2022. The volume variance was due to the debt paydowns as described above.

Overall net interest income decreased by $237 thousand for the three months ended June 30, 2022, compared to the three months ended June 30, 2021, due to a greater decrease in interest income due to volume variance on loans than the decrease in interest expense due to the volume variance on other debt. Net interest income decreased by $488 thousand for the six months ended June 30, 2022, compared to the six months ended June 30, 2021, for the same reason.

Provision and non-interest income and expense

	Three months ended							Six months ended
	June 30,				Comparison			June 30,				Comparison
	(in thousands)							(in thousands)
	2022		2021		$ Diff		% Diff	2022		2021		$ Diff		% Diff
Net interest income	$	594	$	831	$	(237)	(29%)	$	1,258	$	1,746	$	(488)	(28%)
Provision (credit) for loan losses		24		112		(88)	(79%)		(63)		104		(167)	(161%)
Net interest income after provision (credit) for loan losses		570		719		(149)	(21%)		1,321		1,642		(321)	(20%)
Total non-interest income		576		279		297	106%		2,410		3,030		(620)	(20%)
Total non-interest expenses		1,112		1,148		(36)	(3%)		3,336		2,767		569	21%
Income before provision for income taxes		34		(150)		184	(123%)		395		1,905		(1,510)	(79%)
Provision for income taxes and state LLC fees		5		5		—	—%		10		10		—	—%
Net income	$	29	$	(155)	$	184	(119%)	$	385	$	1,895	$	(1,510)	(80%)

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Net interest income after provision for loan losses decreased by $149 thousand for the quarter ended June 30, 2022, over the quarter ended June 30, 2021. This decrease was primarily due to the decrease in net interest income described above and offset somewhat as the provision for loan losses decreased by $88 thousand due to the lower average loan balance described above. The decrease in net interest income after provision (credit) for loan losses for the six months ended June 30, 2022 over the six months ended June 30, 2021 was also primarily due to lower average loan balances.

The increase in total non-interest income for the quarter ended June 30, 2022 compared to the quarter ended June 30, 2021, as shown in the table above, was due to income on debt extinguishment of $300 thousand recognized during the three-month period ended June 30, 2022. No gains on debt extinguishment were recognized during the three-month period ended June 30, 2021. The decrease in non-interest income for the six months ended June 30, 2022 compared to the six months ended June 30, 2021 was primarily the result of the gain on debt extinguishment of $1.8 million for the six-month period ended June 30, 2022 compared to $2.4 million for the six-month period ended June 30, 2021.

Total non-interest expense increased as shown in the table above for the six months ended June 30, 2022 compared to the six months ended June 30, 2021 was due to the establishment of the SERP with our President and Chief Executive Officer in the amount of $600 thousand. This is a non-recurring expense.

Item 3: Quantitative and Qualitative Disclosures about Market Risk

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Act of 1934 and are not required to provide the information under this item.

Item 4: Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, including our Chief Financial Officer, supervised and participated in an evaluation of our disclosure controls and procedures as of June 30, 2022. After evaluating the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a - 15(e) and 15d - 15(e)) as of the end of the period covered by this quarterly report, our Chief Financial Officer has concluded that as of the evaluation date, our disclosure controls and procedures were adequate and effective to ensure that material information relating to the Company would be made known to them by others within the Company, particularly during the period in which this quarterly report was being prepared.

Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information we are required to disclose in the reports filed under the Exchange Act is accumulated and communicated to our management, including the President and Principal Accounting Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Controls

The Company made no changes in internal controls during the three- and six-month periods ended June 30, 2022 and 2021.

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PART II - OTHER INFORMATION

Item 1: Legal Proceedings

Given the nature of our investments made in mortgage loans, we may from time to time have an interest in, or be involved in, litigation arising out of our loan portfolio. We consider litigation related to our loan portfolio to be routine to the conduct of our business. As of June 30, 2022, 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.

Item 1A. Risk Factors

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Act of 1934 and are not required to provide the information under this item.

Item 2: Unregistered Sales of Equity Securities and Use of Proceeds:

None

Item 3: Defaults upon Senior Securities:

None

Item 4: Mine Safety Disclosure:

None

Item 5: Other Information:

None

Item 6. Exhibits

Exhibit No.	Description of Exhibit
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15(d)-14(a) (**)
31.2	Certification of Principal Accounting Officer pursuant to Rule 13a-14(a) or Rule 15(d)-14(a) (**)
32.1	Certification of President and Chief Executive Officer pursuant to 18 U.S.C. §1350 as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (**)
32.2	Certification of Principal Accounting Officer pursuant to 18 U.S.C. §1350 as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (**)
101*	The following information from Ministry Partners Investment Company, LLC’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2021, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Statements of Income for the three and six-month periods ended June 30, 2022 and 2021; (ii) Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021; (iii) Consolidated Statements of Cash Flows for the six months ended June 30, 2022 and 2021; and (iv) Notes to Consolidated Financial Statements.

* Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability under those sections.

** Filed herewith

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Dated: August 11, 2022

	MINISTRY PARTNERS INVESTMENT COMPANY, LLC
(Registrant)	By:	/s/ Joseph W. Turner, Jr.
	Joseph W. Turner, Jr.,
	Chief Executive Officer

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