2019 BCLC Annual Report

August 9, 2019

Dear Friends,

In the great Exodus, Moses led the Israelites out of Egypt, across the Red Sea, and into the wilderness. During their encampment at Mount Sinai, God gave Moses the Ten Commandments and specific instructions on how to build a portable tabernacle. The purpose of Moses’ Tabernacle was to provide a meeting place for God and His people during their forty-year period of wandering.

The two main currencies mentioned in the Bible are talents and shekels. The most expensive materials used in the construction of Moses’ Tabernacle were gold, silver, and bronze. The combined weight of these precious metals, as detailed in Exodus 38, totaled 900 talents and 1,905 shekels. In today’s precious metal market, the value of the gold, silver, and bronze used for Moses’ Tabernacle would be approximately $47 million.

Scripture indicates that meeting places are important and can be a costly expense of ministry. At the Baptist Church Loan Corporation (“BCLC”), we use our talents and shekels to support churches with wisdom, knowledge and affordable church loans to provide meeting places for God’s people. As you review our 2019 Annual Report, you will see how God continues to bless our ministry with a strong equity position, excellent cash flow and good paying churches.

Thank you to the many men and women who have volunteered their time to serve on BCLC’s Board of Directors and to our lending partners who have provided the necessary loan funds to support our ministry.

Blessings,

Gerald R. James, Jr. President / CEO

“The mind of man plans his way, but the Lord directs his steps.”

Proverbs 16:9

talent noun

tal•ent | /’talənt/

a former weight and unit of currency, used especially by the ancient Romans and Greeks.

The Talents Of Ministry.

The American Heritage Dictionary defines the word talent three ways: a superior ability, a unit of measurement, and a currency. The Lord sometimes blesses his churches with men and women who have talents, or special abilities, that can be used in ministry. People with God-given talents are always a vital part of any ministry.

Ability, Measurement, Money

In the Old Testament, talents were used as a measuring amount to help determine the value or cost the items to be purchased or sold. In today’s world, churches use scripture and God’s will as talents to measure their Kingdom building efforts.

In Matthew 25, Jesus tells a story about a master who gave talents to three of his servants according to their abilities. Churches that make good financial decisions put themselves in position to receive talents, such as donations or loan funds, for the purchase or building of church facilities.

The Talents To Build A Tabernacle.

Some projects are worth their weight in Gold.

Places built for the faithful to gather and worship God definitely qualify.

How do we know? Because in Exodus, God tells Moses exactly what materials to use in constructing the tabernacle. And when it comes to precious metals – gold, silver and bronze – He even specifies their weight, measured in talents and shekels. The instructions are so explicit that we can even calculate what it would cost today to replicate that portable sanctuary.

The main building or fellowship hall or parking lot you want to build for your church may not require such rich materials. Still, these projects have great value to your congregation and to the mission you want to accomplish in advancing God’s Kingdom. Costs are something you’ll want to monitor closely, as well.

Count on BCLC to help. We have the financial strength you should look for in a lender. We have deep understanding of the special needs and challenges often faced by churches. And for over 67 years, we’ve provided advice, affordable loans and other resources, exclusively for church projects of every size.

HOW MUCH WOULD IT COST TO BUILD MOSES’ TABERNACLE TODAY?

In biblical times, the shekel (c. 4/10 of an ounce) and the talent (c. 75.5 lb.) were the most common standards used to designate both weight and monetary value. In giving Moses instructions for building the tabernacle, God provides specifications for most materials, including exact weights for three precious metals. This allows us to calculate what it would cost today!

natural aptitude or skill.

One Church

Established in 2011 as a church plant, they rapidly outgrew the rented space they’d started in. By the next year, literally within months, they were confronted with the need for a new location. Their prayers were answered quickly, as well. They had an opportunity to buy a local bank building and two acres of land in Elk City. They contacted BCLC and it was immediately obvious that this was going to be a true relationship…not a lender who’d just say, “Here’s the money. Keep up payments and we’ll see you later.”

Instead, Gerald himself came up, viewed the property, saw its potential and prayed with church leaders about the path to take. “That made a deep impression on us,” says pastor Brannan Duncan. “We pursued the purchase, prepared the facility, and Easter 2013 was our very first day in the new building.”

The facility turned out to be a blessing in many ways, not all of them obvious at the outset. Its large spaces allowed flexible use for both general meetings and Bible lessons. The huge vault, a major part of the original bank, inspired the name of the youth program – “Vault Student Ministries” – and the vault itself became an occasional storm shelter for church members and neighbors when tornadoes threaten. What’s more, the original loan was paid off within two years!

Elk City, Oklahoma

Pastor Brannan Duncan

However, the church continued to grow – especially the Kid Ministry – and the church needed to grow to meet the new need. That, combined with a longtime goal of a stand-alone sanctuary, brought the church back to BCLC. The purpose: a loan for an 8,000 square foot Kid Ministry building and funds to expand the sanctuary.

Once again, BCLC made the process as painless as possible. “Let’s just say that we’re One Church… and we have one church lender. We’re very happy about that.”

And the new facilities? They’re due to open just in time for the start of the school year.

One Church has done two major projects with BCLC.

“Let’s just say that we’re One Church…and we have one church lender. We’re very happy about that.”

Spring Baptist Church

Sometimes it’s a challenge to get church members excited about finishing up projects that were started long ago. But it’s essential – especially to avoid the “creep” of additional costs.

That’s what Spring Baptist Church was facing not long ago. A fundraising effort called Vision 2020 had begun several years earlier, and a few major projects remained. At the same time, the church was dealing with a growing congregation and the subsequent growth of demand on its facilities and services. This included assorted projects to address preschool and children’s safety and security issues, as well as general facility expansion.

The church had dealt with various local banks over the years, but when they interfaced with BCLC at the Southern Baptist Convention in summer of 2018, they realized that they had found a lender that understood their situation intimately.

By creating a new Beyond 2020 initiative, and by working with BCLC to obtain interim financing, they were able to refresh the fundraising effort, show the congregation substantial progress in getting existing projects done during 2019, and motivate additional pledges that were badly needed. Senior pastor Dr. Mark Estep issued a brochure that spelled out in detail what this large church wanted to accomplish. As he put it, “Just like any family, the more members you have, the more room you need.”

Essentially, a group of projects – both old and new – costing $3 million helped yield pledges for that amount over 3 years. Meanwhile, the recent work helped validate the promise of real progress by the church administrators. And BCLC was proud to have a part in this effort.

“Just like any family, the more members you have, the more room you need.”

Spring, TX Pastor Dr. Mark Estep

Porter Memorial Baptist Church

Lexington, KY Pastor Nick Sandefur

Memorial Baptist Church in Lexington, Kentucky.

Porter Memorial has served Lexington for the past 110 years. It had relocated 40 years ago, and when pastor Nick Sandefur arrived a couple of years back, he discovered a few challenges. Church attendance had dropped from 1800+ decades before to less than half that, and both the church’s facilities and its approach to community needed attention. In studying the situation with church leaders, it was decided to stay in place, renovate and reinvest…in many ways.

They were fully up to the task. They successfully faced the needs of an intergenerational church, embraced the international influence of their area, and have already seen worship numbers grow over 30% as a result! To accommodate expected further growth (projections between 2200 and 2800!), they developed plans for a 7-phase renovation and expansion of church facilities.

And that’s where BCLC finally entered the picture. Through a mutual acquaintance at the Southern Baptist Convention, the pastor learned of our work and was impressed when Gerald visited in person. The intent: save Porter Memorial money by refinancing both Phase 1 construction costs and the mortgage on an investment property that the church hopes to sell to fund the other six phases of renovation.

“We loved the low rates, of course,” notes Pastor Sandefur. “But we especially like what we saw in BCLC itself…how it kept overhead low and how its income was reinvested in helping other churches. It feels good that even the money we repay gets used to build the Kingdom.”

The freshened entryways, new HVAC equipment and other aspects of Phase 1 are already welcoming worshipers at Porter Memorial. It’s all part of a projected 140,000 square feet of new and renovated space being prepared for the church’s expanding congregation.

“But we especially like what we saw in BCLC itself…how it kept overhead low and how its income was reinvested in helping other churches. It feels good that even the money we repay gets used to build the Kingdom.”

2019 Financial Highlights

At BCLC, our prudent use of talents and shekels helps to support churches – with wisdom, knowledge and affordable church loans – and provide meeting places for God’s people.

Strong Equity Position

BCLC has 65+ years of accumulated capital, totaling over $109 million. Result: our ministry can provide the lowest overall cost of borrowing to churches and manage market uncertainty.

Excellent Cash Flow and Low Overhead

BCLC keeps overhead low. Result: we can reinvest income back into the permanent fund to help more churches.

Efficiency Ratio

Good Paying Churches

We believe in providing churches with an honest picture of how much they can afford to borrow. Result: for the past four years, the percentage of churches struggling to make regular monthly payments to BCLC has been very close to zero!

Management’s Discussion Of Financial Activities

Fiscal Year Ended June 30, 2019 As Compared To Fiscal Year Ended June 30, 2018 Fiscal Year Ended June 30, 2018 As Compared To Fiscal Year Ended June 30, 2017

During fiscal year ended June 30, 2019, interest revenues increased 17%, or $1,116,820, over fiscal year ended June 30, 2018. Church mortgage loans had a slight increase of approximately 1% for the same period. The weighted average return on church mortgage loans outstanding increased slightly, from 4.27% at fiscal year ended 2018 to 4.59% at fiscal year ended 2019.

BCLC’s net interest margin improved from 2.86% at fiscal year ended June 30, 2018 to 2.95% at fiscal year ended June 30, 2019. During fiscal year ended June 30, 2019, yield on mortgage loans continued to improve, due to increases in short-term interest rates within the market.

At fiscal year ended June 30, 2019, BCLC had $63,824,495 in outstanding bank debt, compared to $67,227,320 at fiscal year ended June 30, 2018, or a 5% reduction. In addition to reducing outstanding bank debt, BCLC restructured approximately 35% of its outstanding debt to minimize interest rate risk, which also contributed to an improved net interest margin.

BCLC closed 36 church mortgage loans, in the amount of $20,808,115, during fiscal year ended 2019, compared to 38 church mortgage loans, in the amount of $21,951,199, during fiscal year ended 2018; BCLC also purchased 92 loans in the amount of $40,391,223 during fiscal year ended 2018. The average dollar amount of each new church mortgage loan originated and closed during fiscal year ended 2019 increased from $577,663 to $595,604 per loan. Total church mortgage loans outstanding increased from $172,558,308 at fiscal year ended June 30, 2018, to $173,745,236, at fiscal year ended June 30, 2019. Past due loans to total loans at June 30, 2019 were 0.00% compared to 0.39% at June 30, 2018.

Operating expenses increased for fiscal year ended June 30, 2019 by $69,627, or 3%, when compared to fiscal year ended June 30, 2018. The increase in operating expenses was due primarily to BCLC’s continued focus on ministry development efforts.

At fiscal year ended June 30, 2019, net earnings increased approximately 25% to $3,060,446, compared to $2,452,248 at fiscal year ended June 30, 2018. The increase in net interest income and a modest increase in operating expenses were the primary contributors to the overall increases in net earnings for fiscal year ended June 30, 2019.

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 closed 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 .09%.

Operating expenses increased for fiscal year ended June 30, 2018 by $292,931, or 17%, when compared to fiscal year ended June 30, 2017. Costs associated with expanding into new markets, increased ministry development efforts, and the addition of one 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 $2,452,248, compared to $2,316,970 at fiscal year ended June 30, 2017. The increase in net interest income of $428,207 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.

Our Mission. Our Leadership.

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

Dr. Dennis Tucker BCLC, Chairman of the Board Waco, Texas

Bryan Rogers

Richardson, TX

Lynne Meers

Dallas, Texas

Russell Shelton

Orlando, FL

Ralph Ramsey Denton, Texas

Gary Miller BCLC, Vice Chairman Waco, Texas

Todd Nordeen

Dallas, Texas

Jared Green

Tyler, Texas

Geunmoo Lee

Richardson, Texas

Corporate

Officers

Gerald James, Jr. President/CEO

Michael Mason

Dallas, Texas

Krystal Mims

Plano, Texas

Scott Robinson

Dallas, Texas

Bob Gage Senior Vice President

Landon

Yeager Senior Vice President