================================================
U.S. Securities and Exchange Commission
Washington, D.C. 20549
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FORM 10-QSB
[x] QUARTERLY REPORT UNDER SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1995
OR
[ ] TRANSITION REPORT UNDER SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
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Commission File No. 0-8117
CHURCH LOANS & INVESTMENTS TRUST
State of Organization IRS Employer Identification
--------------------- ---------------------------
Texas No. 75-6030254
5305 I-40 West
Amarillo, Texas 79106
Registrant's telephone number: 806-358-3666
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Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [ X ] No [ _ ]
As of June 30, 1995, 7,007,402 shares of the Registrant's shares of
beneficial interest were outstanding.
Transitional Small Business Disclosure Format (check one)
Yes [ _ ] No [ X ]
<PAGE>
CHURCH LOANS & INVESTMENTS TRUST
INDEX
Page
----
Part I.
Item 1: Financial Information:
Condensed Balance Sheets at June 30, 1995
and March 31, 1995 ....................... 1
Condensed Statements of Income for the
three-month periods ended June 30, 1995
and 1994 ................................. 2
Condensed Statements of Cash Flows
for the three-month periods ended
June 30, 1995 and 1994 .................. 3
Notes to Condensed Financial Statements ..... 4
Item 2: Management's Discussion and Analysis or
Plan of Operation .......................... 6
Part II. Other Information ............................... 7
Signatures ................................... 8
<PAGE>
CHURCH LOANS & INVESTMENTS TRUST
(A Real Estate Investment Trust)
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets (Unaudited)
June 30, 1995 and March 31, 1995
Assets June 30, 1995 March 31, 1995
------ ------------- --------------
Cash and cash equivalents ........................ $ 248,111 $ 366,977
Receivables:
Mortgage loans and church bonds:
Earning .................................... 22,018,468 25,676,746
Nonearning ................................. 3,365,726 3,405,793
Interim construction loans ................... 11,239,732 10,148,958
Less: Allowance for possible credit losses ... (661,165) (645,049)
------------ ------------
35,962,761 38,586,448
Accrued interest receivable .................. 396,956 339,633
Notes receivable ............................. 564,856 481,878
Other receivables ............................ 1,390 2,576
------------ ------------
Total receivables .............. 36,925,963 39,410,535
Property and equipment, net of accumulated
depreciation of $417,625 and $413,707
at June 30, 1995 and March 31, 1995,
respectively ................................. 240,717 244,635
Property held for investment ..................... 83,714 83,714
Unamortized debt expense, net and other assets ... 57,572 65,400
------------ ------------
$ 37,556,077 $ 40,171,261
============ ============
Liabilities and Shareholders' Equity
------------------------------------
Liabilities:
Notes payable and line of credit:
Related party .............................. $ 520,275 $ 706,577
Other ...................................... 9,044,765 11,032,781
------------ ------------
9,565,040 11,739,358
Secured savings certificates:
Related party .............................. 565,375 665,375
Other ...................................... 5,679,856 6,118,356
------------ ------------
6,245,231 6,783,731
Accrued interest payable ..................... 166,270 94,423
Federal income taxes payable ................. 2,237 5,010
Other ........................................ 259,892 314,771
------------ ------------
16,238,670 18,937,293
Shareholders' equity:
Shares of beneficial interest, no par value;
authorized shares unlimited, 7,007,402
shares issued and outstanding ............... 20,623,866 20,623,866
Undistributed net income ..................... 693,541 610,102
------------ ------------
Total shareholders' equity ..... 21,317,407 21,233,968
------------ ------------
$ 37,556,077 $ 40,171,261
============ ============
See accompanying notes to the condensed financial statements.
- 1-
<PAGE>
CHURCH LOANS & INVESTMENTS TRUST
(A Real Estate Investment Trust)
Condensed Statements of Income (Unaudited)
Three-month periods ended June 30, 1995 and 1994
Three-month
periods ended June 30,
1995 1994
---------- -----------
Interest income and fees:
Interest and fees on mortgage loans,
church bonds and interim construction
loans ......................................... $1,173,753 $1,089,112
Interest on temporary investments ............... 9,732 3,128
---------- ----------
Total interest income and fees ..... 1,183,485 1,092,240
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Debt expense:
Interest ........................................ 330,648 294,821
Amortization of:
Registration costs ............................ -- 5,450
Commissions paid to brokers ................... 11,996 14,752
Total debt expense ................. 342,644 315,023
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Net interest income ................ 840,841 777,217
Provision for possible credit losses ................. 17,500 7,500
---------- ----------
Net interest income less
provision for possible credit
losses ............................ 823,341 769,717
Other income ......................................... 2,808 2,869
Other operating expenses:
General and administrative ...................... 171,854 139,549
Board of Trust Managers' fees ................... 10,263 9,134
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Total other operating expenses ..... 182,117 148,683
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Net income ........................................... $ 644,032 $ 623,903
========== ==========
Weighted average number of shares outstanding ........ 7,007,402 7,007,402
========== ==========
Net income per share ................................. $ .09 .09
========== ==========
Dividends per share .................................. $ .08 .09
========== ==========
See accompanying notes to condensed financial statements.
- 2 -
<PAGE>
CHURCH LOANS & INVESTMENTS TRUST
(A Real Estate Investment Trust)
Condensed Statements of Cash Flows (Unaudited)
Three-month periods ended June 30, 1995 and 1994
Three-month
periods ended June 30,
1995 1994
---------- -----------
Cash Flows from Operating Activities:
Net income .................................... $ 644,032 $ 623,903
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation .............................. 3,918 3,918
Amortization of debt expense .............. 11,996 20,202
Amortization of loan discounts ............ (77,811) (119,091)
Provision for possible credit losses ...... 17,500 7,500
Changes in:
Accrued interest receivable ............. (57,323) (23,556)
Accrued interest payable ................ 71,847 47,391
Federal income taxes payable ............ (2,773) (5,799)
Other liabilities ....................... (54,879) 163,605
Other, net .............................. 3,208 4,214
----------- -----------
Net cash provided by
operating activities ............ 559,715 722,287
----------- -----------
Cash Flows from Investing Activities:
Investment in mortgage and interim
construction loans and church bonds ......... (2,192,137) (6,344,000)
Payments received on mortgage and
interim construction loans and
church bonds ................................ 4,877,520 3,142,360
Investments in notes receivable ............... (163,611) (18,946)
Payments received on notes receivable ......... 80,633 71,310
----------- -----------
Net cash provided (used)
by investing activities ........ 2,602,405 (3,149,276)
----------- -----------
Cash Flows from Financing Activities:
Sale of secured savings certificates .......... -- 4,240,951
Borrowings on notes payable ................... 2,663,939 5,324,226
Principal payments on:
Secured savings certificates ................ (538,500) (2,146,200)
Notes payable ............................... (4,838,257) (3,324,144)
Registration costs of secured savings
certificates ................................ (7,575) (5,450)
Commissions paid to broker on issuance
of secured savings certificates ............. -- (63,037)
Cash dividends ................................ (560,593) (630,667)
Net cash provided (used)
by financing activities ........ (3,280,986) 3,395,679
----------- -----------
Increase (decrease) in
cash and cash equivalents ...... (118,866) 968,690
Cash and cash equivalents at beginning of period ... 366,977 429,431
----------- -----------
Cash and cash equivalents at end of period ......... $ 248,111 $ 1,398,121
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest ...... $ 258,801 $ 247,430
=========== ===========
See accompanying notes to condensed financial statements.
- 3 -
<PAGE>
CHURCH LOANS & INVESTMENTS TRUST
(A Real Estate Investment Trust)
Notes to Condensed Financial Statements (Unaudited)
(1) General
See Note 1 of Notes to Financial Statements in the Trust's Annual Report
on Form 10-KSB405 for a summary of the Trust's significant accounting
policies.
The unaudited condensed financial statements included herein were
prepared from the books of the Trust in accordance with generally
accepted accounting principles and reflect all adjustments (consisting of
normal recurring accruals) which are, in the opinion of management,
necessary to a fair statement of the results of operations and financial
position for the interim periods. Such financial statements generally
conform to the presentation reflected in the Trust's Annual Report to
Shareholders. The current interim period reported herein is included in
the fiscal year subject to independent audit at the end of that year and
is not necessarily an indication of the expected results for the fiscal
year.
(2) Weighted Average Interest Rates
Weighted average interest rates and net interest rate margins at June 30,
1995, and March 31, 1995, were as follows:
Mortgage loan and Total Net interest
church bond portfolio indebtedness rate margin
--------------------- ------------ ------------
June 30, 1995 .................... 10.94 8.02 2.92
March 31, 1995 ................... 11.27 7.95 3.32
(3) Contractual Maturities
Scheduled principal payments on mortgage loans, church bonds and interim
loans and indebtedness (including secured savings certificates and notes
payable) outstanding at June 30, 1995, for the five twelve-month periods
subsequent to June 30, 1995, follow:
Twelve-month period Mortgage loans, church bonds
ending June 30, and interim loans Indebtedness
--------------- ----------------- ------------
1996 $16,660,097 11,873,894
1997 2,306,693 3,661,377
1998 2,118,060 275,000
1999 1,850,375 --
2000 1,373,228 --
=========== ===========
(4) Mortgage Loans, Church Bonds and Interim Construction Loans
Mortgage loans, church bonds and interim construction loans on which the
accrual of interest had been discontinued amounted to $3,365,726 and
$3,405,793 at June 30, 1995 and March 31, 1995, respectively. If interest
on these mortgage loans, church bonds and interim construction loans had
been accrued as earned, interest and fees on loans in the accompanying
condensed statements of income would have been increased by approximately
$92,276 and $43,608 for the three-month periods ended June 30, 1995 and
1994, respectively.
- 4 -
<PAGE>
CHURCH LOANS & INVESTMENTS TRUST
(A Real Estate Investment Trust)
Notes to Condensed Financial Statements (Unaudited)
Nonearning assets include one interim construction loan which had a
principal balance of $1,520,977 at June 30, 1995. The loan became
delinquent during the latter part of 1994 and was placed on nonaccrual
status and all accrued interest was written-off. The loan is
collateralized by a church building and management believes that the
potential loss, if any, is adequately provided in the allowance for
possible credit losses at June 30, 1995. Management initiated proceedings
to foreclose the collateral securing such loan and during July 1995, a
temporary forbearance agreement and financial control agreement was
reached in which, among other things, the borrower has agreed to pay the
Trust $5,000 per week. If the terms are not complied with, the Trust will
continue with foreclosure proceedings.
(5) Secured Savings Certificates
Secured Savings Certificates (Certificates) are issued in amounts of
$1,000 or more and have single maturity dates from 30 days to 10 years
from date of issue. With respect to an individual certificate, interest
rate and frequency of payment of interest (either monthly, quarterly,
semiannually, annually or at maturity) are fixed at the time of issuance
of the Certificate. Effective July 18, 1994, the Trust decided not to
register and was not able to sell additional Certificates after that
date. However, during April 1995, the Board of Trust Managers decided to
register $20,000,000 of Certificates on Form SB-2. As of August 14, 1995,
such registration was not yet effective.
Certificates are secured under the terms of an indenture that requires,
among other things, the pledge of mortgage notes receivable with total
unpaid principal amounts not less than 125% (100% for Certificates sold
in 1995) of the aggregate principal amount of Certificates outstanding.
Due to the fluctuations in the amount of sales of Certificates as well as
in the repayment of notes pledged to secure the Certificates, the Trust
has on occasion failed to maintain the required ratio of pledged notes to
outstanding Certificates for a short period of time until the deficiency
could be corrected. The indenture trustee has been aware of these
temporary technical defaults and has not declared a default under the
Indenture. At June 30, 1995, the Trust was in compliance with the
requirement.
- 5 -
<PAGE>
CHURCH LOANS & INVESTMENTS TRUST
(A Real Estate Investment Trust)
Item 2. Management's Discussion and Analysis or Plan of Operation
Results of Operations - Three-Month Period Ended June 30, 1995 as Compared to
the Three-Month Period Ended June 30, 1994:
Revenues
The Trust's revenues are derived from interest income earned on mortgage loans
as well as, to a lesser degree, interest earned on church bonds and short-term
investments. The increase in the Trust's revenues of $91,245 for the three-month
period ended June 30, 1995, as compared to the corresponding period in 1994 is
primarily due to an increase in the amount of income recognized from the early
pay-off of certain loans and an increase in the average rate of return of the
mortgage loan and church bond portfolio from 10.02% at June 30, 1994, to 11.27%
at June 30, 1995. The increase was partially offset by a decrease in the average
total amount of mortgage loans, church bonds, and interim construction loans
outstanding during the period ended June 30, 1995.
Interest Expense
The most significant expense item is interest expense which comprised the
majority of total operating expense for each of the three-month periods ended
June 30, 1995 and 1994. The increase of $35,827 in interest expense resulted
from an increase in the weighted average interest rate on all indebtedness from
6.88% at June 30, 1994, to 7.95% at June 30, 1995. This increase was partially
offset by a decrease in the average total amount of indebtedness outstanding
during the three-month period ended June 30, 1995.
Nonearning Assets
Nonearning assets include one interim construction loan which had a principal
balance of $1,520,977 at June 30, 1995. The loan became delinquent during the
latter part of 1994 and was placed on nonaccrual status and all accrued interest
was written-off. The loan is collateralized by a church building and management
believes that the potential loss, if any, is adequately provided in the
allowance for possible credit losses at June 30, 1995. Management initiated
proceedings to foreclose the collateral security such loan and during July 1995,
a temporary forbearance agreement and financial control agreement was reach in
which, among other things, the borrower has agreed to pay the Trust $5,000 per
week. If the terms are not complied with, the Trust will continue with
foreclosure proceedings.
Liquidity
Due to the cost of registration and of sales of Secured Savings Certificates
(Certificates), the cost of these funds are normally higher than the cost of
borrowing from bank sources or master notes. Therefore, the Trust decided not to
register additional Certificates and the Trust is not able to sell these
Certificates after July 18, 1994, and, therefore, did not have available this
source of funds to meet its liquidity needs. However, during April 1995, the
Board of Trust Managers decided to register on Form SB-2 $20,000,000 of
Certificates. As of August 14, 1995, such registration was not yet effective.
- 6 -
<PAGE>
CHURCH LOANS & INVESTMENTS TRUST
(A Real Estate Investment Trust)
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits: None.
(b) Reports on Form 8-K: The Trust filed a Form 8-K and Form 8-K/A on June
14, 1995 and June 28, 1995, respectively, to report a change in
accountants.
- 7 -
<PAGE>
CHURCH LOANS & INVESTMENTS TRUST
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CHURCH LOANS & INVESTMENTS TRUST
DATE: _____________________________ BY:_____________________________
B.R. McMorries,
Chairman of the Board of
Trust Managers
DATE: _____________________________ BY:_____________________________
Kelly Archer
Chief Financial Officer
- 8 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
=======================================================================
This schedule contains summary financial information extracted from the
company's financial statements as of and for the three months ended
June 30, 1995 and is qualified in its entirety by reference to such
financial statements.
=======================================================================
</LEGEND>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 248,111
<SECURITIES> 0
<RECEIVABLES> 37,587,128
<ALLOWANCES> 661,165
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 658,342
<DEPRECIATION> 417,625
<TOTAL-ASSETS> 37,556,077
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 20,623,866
0
0
<OTHER-SE> 693,541
<TOTAL-LIABILITY-AND-EQUITY> 37,556,077
<SALES> 1,186,293
<TOTAL-REVENUES> 1,186,293
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 194,113
<LOSS-PROVISION> 17,500
<INTEREST-EXPENSE> 330,648
<INCOME-PRETAX> 644,032
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 644,032
<EPS-PRIMARY> .09
<EPS-DILUTED> .09
</TABLE>
