2018 BCLC Annual Report

The Gathering Place

August 17, 2018

Dear Friends:

The Broadway musical Hamilton is a historical story about Alexander Hamilton and his impact on the formation of our country told through the eyes of Aaron Burr. Although some of the music and dialogue of Hamilton are not ready for Wednesday night prayer service, the song “In the Room Where It Happens” focuses on the access to power that comes directly as a result of being present in the room.

As Christians, we know that Christ’s presence is the source of true power. We also know that gathering places for worship are successful if Christ is present and the site is easily accessible. Christ makes his promise to be present in Matthew 18:20, which states: “Where two or three have come together in my name, I am there among them.” Thus, when believers gather, the presence of Christ, the source of true power, is promised.

Scripture also describes how Christ made his gathering place convenient for and accessible to his followers by meeting them where they were. Luke 6:17 states: “Then Jesus came down with them and stood on a level place, along with many of his disciples and a large gathering of people from all over Judea, Jerusalem, and the seacoast...” Jesus’ presence was not restricted to Jerusalem, to the synagogue or to any other one place or room. It was and still is possible to be in the presence of Christ, the source of true power, in a multitude of places and in many kinds of rooms.

Over the years, the Baptist Church Loan Corporation (“BCLC”) has provided funds for many types of gathering places. Some of the more unconventional include: a Moose Lodge, horse race track, restaurant, furniture store warehouse, commercial office complex, country-western bar, Chevrolet dealership, KOA campground, rodeo arena, opera house, funeral home, movie theater, gas station, school, hotel, and a bank. Although unconventional, each of these gathering places became a “room where it happens” – a room that allows believers to gather in the presence of Christ to experience the power that only comes through Christ.

We are grateful for the many men and women who have volunteered their time and expertise to serve on the BCLC board of directors and for our lending partners who have provided the necessary loan funds to support our ministry.

Blessings,

Gerald R. James, Jr. President / CEO

For where two or three are gathered in my name, there I am among them.

- Matthew 18:20

Gathering.

Our Creator created us to commune, to relate, to encourage, to gather. A church is not a building. However, the body of Christ needs buildings – not as trophies, not to show how much they’ve accomplished, but rather as enablers to accomplish more. Whether small or large, traditional or contemporary, a church building provides a place for young and old to gather in His name. At BCLC Church Lending, we share your commitment. Now let us help create your next refuge, your next seeking place, your next battleground, your next home.

In His name.

Unlike banks and most common loan sources, we share your commitment to ministry. For more than 66 years, we’ve provided advice and affordable loans exclusively to churches like yours. Then, as money is paid back, we extend our service to other churches, expanding God’s Kingdom.

In your church.

Look to us to provide tools to create the gathering place you want for your congregation’s needs. These include fully amortizing loans for construction, property purchase, remodeling and refinancing – along with advantages ranging from rates at or below market to church-friendly terms and zero origination fees.

With our help.

Because we align ourselves with your mission, our advice is based on helping your church reach its goal, not maximizing the loan amount. So expect an honest financial review – to determine borrowing capacity and project feasibility – with your church’s health as our priority.

Ethiopian Evangelical Baptist Church

This astoundingly vibrant church knows about gathering places. It has grown to be the largest Ethiopian church in the United States – comprised of first and second generation Amharicspeaking Ethiopians.

Originally formed as a mission itself in 1983, the church has been mission oriented both here in the U.S. (starting Ethiopian churches in Irving and Allen, Texas) and in Ethiopia (supporting 72 indigenous pastors and building chapels there as congregations grow).

Years ago, BCLC helped the church with loans for its original land and building in Garland, but it outgrew these – and recently found a larger local church whose congregation was aging, waning and willing to relocate. With our help, Ethiopian Evangelical was able to make the purchase, growing from just under 35,000 square feet on 4.94 acres to more than 125,000 square feet on 9.09 acres!

“Communication, paperwork, decision-making and funding... unlike with other lenders, these are not complicated with BCLC. And there is a true relationship made. They remain your friends even after the project is over. Thank God for BCLC!” - Pastor Bedilu Yirga

GARLAND, TEXAS | Pastor Bedilu Yirga

The Mount Church

“The BCLC is a great resource! In over twenty years of ministry experience, I have never encountered a lending partner that understood with clarity our mission as an organization – and how this loan would help us achieve our real purpose. Our finance team could not believe the ease and speed of this organization. They worked diligently to get our loan closed in record-breaking time.“

The Mount is a remarkable place with a rich heritage: a gathering place for those truly looking “to glorify God as disciples making disciples through the gospel of Jesus Christ.”

While undergoing significant recent growth, the church took out loans to build two pivotal facilities –for worship and for children. However, this is also a strongly missional church, and in seeking funds to support its mission aims, church elders looked to BCLC for refinancing. This freed up resources that the church could use for more gospel ministry rather than loan maintenance.

- Executive Pastor Brad Sullard

KELLER, TEXAS | Pastor Brad Sullard

Church of the Rockies

RED LODGE, MONTANA | Pastor Lee Merck

As Baptist gathering places go, this one is surely unique. Originally a dairy barn – and the only round barn in Montana made of brick – the Historic Round Barn in Red Lodge has long been admired by people from hundreds of miles around. It sits on Highway 212, a road famous for turning into the famous Beartooth Highway at the edge of town and climbing to more than 11,000 feet in elevation. All of this combines to attract tourists to the locale. But more recently, the iconic building has been attracting worshipers and visitors to the Church of the Rockies.

Pastor Lee Merck describes the four-year-old church plant as “one church in multiple locations helping people know Christ, go with Christ, and grow in Christ.” And its congregation – averaging more than 100 in attendance – represents an amazingly diverse group, from long-time Montana residents to transplants from California, Texas, Idaho, Missouri and elsewhere. “On any given Sunday, the Church of the Rockies may have 15 different states represented,” says Pastor Lee.

Once settled into the huge round landmark building, however, the church appeared to have found its primary permanent home. It continues to grow and has become financially sound, as well, but it faced an owner-financed loan that was about to balloon with a large interest rate. That’s when BCLC came into the picture.

I got information about BCLC from the Southern Baptist Convention in St. Louis, Missouri. Their rep made a trip to Montana, spent time with me and looked over the property. The refinancing they provided gave us much better conditions – including a better interest rate and lower monthly payments. So it enabled us to move forward with the official purchase and expansion of the church facilities.

- Pastor Lee Merck

Today, the Church of the Rockies stands as one of the most distinctive church facilities in the Montana Southern Baptist Convention – and the most far-flung example (so far!) of BCLC’s expanding range of service.

In 1952, we established BCLC as a way to make affordable loans that could help churches grow. And grow they did – both in physical presence in their communities, through building expansion and new construction, as well as financially through flexibility to balance facility maintenance and renovation costs with funds committed to missions.

Our original charter allowed us to make loans throughout the United States, but we focused our efforts primarily on one state, Texas. And for our first 60 years, this was plenty to keep us busy. We gathered churches onto our service rolls from 524 Texas cities. But we wanted to do more – and by 2012, God moved us to change our own mission. He also gave us the opportunity to expand rapidly into 11 other states, mostly in the southeast U.S. And we didn’t stop there. Today, our family of churches has expanded into 39 states, stretching from coast to coast and as far north as Washington, Montana and Maine.

Ministry Financial Strength

Financial Stability

BCLC’s strong capital foundation comes from over 65 years of applying conservative financial principles to the ministry of church finance. BCLC has 6 times more Equity Capital to Assets compared to the national average of banks its size.*

Operational Efficiency

The exceptional efficiency of our staff – plus proper management of our assets – has given BCLC more than quadruple the assets per employee compared to the national average of banks.*

ASSETS PER EMPLOYEE (MILLIONS)

A Kingdom Investment

50% of banks’ earnings are paid to shareholders as cash dividends, while 100% of BCLC’s earnings are reinvested in the permanent fund to help finance churches’ Kingdom building efforts.*

*Based on 6/30/2017 FDIC Performance Ratios (Banks $100 million - $1 billion total assets) and BCLC 6/30/2018 Audited Financial Statements. BCLC 6/30/2018 audit performed by Clifton, Larson, Allen LLP. Copies of audited financial statements available upon request.

Management’s Discussion Of Financial Activities

Fiscal Year Ended June 30, 2018 As Compared To Fiscal Year Ended June 30, 2017

During fiscal year ended June 30, 2018, interest revenues increased 21%, or $1,143,597, over fiscal year ended June 30, 2017. Church mortgage loans had a net increase of approximately 25% for the same period. The weighted average return on church mortgage loans outstanding increased slightly, from 3.79% at fiscal year ended 2017 to 4.27% at fiscal year ended 2018.

BCLC’s net interest margin improved from 2.78% at fiscal year ended June 30, 2017 to 2.86% at fiscal year ended June 30, 2018. During fiscal year ended June 30, 2018, yield on mortgage loans continued to improve, due to increases in short-term interest rates within the market. While the cost of funding mortgage loans increased during fiscal year ended June 30, 2018, BCLC’s balance sheet was well-positioned for the increase in yield on mortgage loans to exceed the increase in funding mortgage loans, resulting in an improved net interest margin.

During fiscal year ended June 30, 2018, BCLC restructured its bank debt to fund the 25% net increase in mortgage loans. At fiscal year ended June 30, 2018, BCLC had $67,227,320 in outstanding bank debt, compared to $37,725,874 at fiscal year ended June 30, 2017. The increase in bank debt resulted in an increase in interest expense of $705,090 for fiscal year ended June 30, 2018.

BCLC acquired and originated 130 church mortgage loans, in the amount of $62,342,422 during fiscal year ended 2018, compared to 36 church mortgage loans, in the amount of $28,355,630, during fiscal year ended 2017. The average dollar amount of each new church mortgage loan closed during fiscal year ended 2018 decreased from $787,656 to $479,557 per loan. Total church mortgage loans outstanding increased from $137,964,684 at fiscal year ended June 30, 2017, to $172,558,308 at fiscal year ended June 30, 2018. BCLC’s credit quality remained strong during fiscal year ended 2018, with past due loans to total loans at .39%.

Operating expenses increased for fiscal year ended June 30, 2018 by $292,929, or 17%, when compared to fiscal year ended June 30, 2017. Costs associated with expanding into new markets, increased ministry development efforts, and the hiring of one additional full-time employee contributed to most of the increase in operating expenses for fiscal year ended June 30, 2018.

At fiscal year ended June 30, 2018, net earnings increased approximately 6% to $2,452,246, compared to $2,316,969 at fiscal year ended June 30, 2017. The increase in net interest income of $438,507 during fiscal year ended June 30, 2018 exceeded the increase in operating expenses for the same period, resulting in an overall increase in net assets.

Fiscal Year Ended June 30, 2017 As Compared To Fiscal Year Ended June 30, 2016

During fiscal year ended June 30, 2017, interest revenues decreased $129,218, or approximately 2%, over fiscal year ended June 30, 2016. Church mortgage loans had a net decrease of approximately 8% for the same period. The weighted average return on church mortgage loans outstanding increased slightly, from 3.71% at fiscal year ended 2016 to 3.79% at fiscal year ended 2017.

BCLC’s net interest margin improved from 2.69% at fiscal year ended June 30, 2016 to 2.78% at fiscal year ended June 30, 2017. During fiscal year ended June 30, 2017, yield on mortgage loans improved slightly, due to increases in short-term interest rates within the market. In addition, BCLC’s cost of funding mortgage loans improved slightly, primarily due to an 8% decrease in interest expense.

BCLC used excess cash collected from mortgage principal payments to pay-down outstanding bank debt during fiscal year ended June 30, 2017. The reduction in interest expense during fiscal year ended June 30, 2017 was due to the 19% reduction in bank debt, from $46.7 million at fiscal year ended June 30, 2016 to $37.7 million at fiscal year ended June 30, 2017.

BCLC closed 36 new church mortgage loans, in the amount of $28,355,630 during fiscal year ended 2017, compared to 46 new church mortgage loans, in the amount of $24,546,395, during fiscal year ended 2016. The average dollar amount of each new church mortgage loan closed during fiscal year ended 2017 increased from $553,617 to $787,656 per loan. Total church mortgage loans outstanding decreased from $149,776,903 at fiscal year ended June 30, 2016, to $137,964,684 at fiscal year ended June 30, 2017. BCLC collected $27.3 million of principal payments from loans during fiscal year ended 2017, compared to $20.8 million during fiscal year ended 2016, which contributed to the decrease in outstanding loan balances at fiscal year ended June 30, 2017. In addition, BCLC’s ability to collect regular monthly payments on loans remained strong during fiscal year ended 2017, with past due loans to total loans at .10%.

Operating expenses increased for fiscal year ended June 30, 2017 by $77,541, or 4.6%, when compared to fiscal year ended June 30, 2016. Most of the increase in operating expense was related to board-approved salaries and a strategic decision to allocate more resources to ministry development. Offsetting a portion of the overall increases in operating expenses was an actuarial gain, attributable to the calculation of the post-retirement benefit liability.

At fiscal year ended June 30, 2017, net assets increased approximately 2%, or $2,316,969, compared to $2,409,748 at fiscal year ended June 30, 2016. Despite having an improved net interest margin during fiscal year ended June 30, 2016, BCLC’s decreased loan volume led to lower levels of interest revenue. The lower levels of interest revenue, coupled with a 5% increase in operating expenses, contributed to the slightly lower increase in net assets during fiscal year ended June 30, 2017, compared to fiscal year ended June 30, 2016.

Our Mission.

BCLC exists to assist churches in their efforts to spread the gospel by providing affordable real estate related loans.

In fulfilling this mission, our priorities are to:

• Focus on the long-term spiritual and financial health of each church we consult.

• Provide our churches with straightforward terms, rate options, and underwriting guidelines.

• Serve as many churches as feasible, regardless of their size, longevity, or ethnicity.

Board of Directors

Todd Nordeen BCLC, Chairman of the Board Plano, Texas

Patrick Crump

San Antonio, Texas

Jared Green Tyler, Texas

Ryan Hefton

Dallas, Texas

Geunmoo Lee

Richardson, Texas

Bryan Rogers Richardson, Texas

Corporate Leadership

Gerald James, Jr. President/CEO

Landon Yeager Senior Vice President

Dennis Tucker BCLC, Vice Chairman Waco, Texas

Gary Miller

Waco, Texas

Krystal Mims

Plano, Texas

Scott Robinson

Dallas, Texas

Evan Harris

Abilene, Texas

Russell Shelton

Orlando, Florida

Bob Gage Senior Vice President

Chris Emery Vice President

Dr.

Gathering Place

Any location where people are able to congregate, whether public (such as city streets, town squares, and parks) or private (such as churches, coffee shops, stadiums, and theaters).