SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[ ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended __________________
[ X ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from September 30, 1996 to December 31, 1996
Commission file number: 333-4028LA
MINISTRY PARTNERS INVESTMENT CORPORATION
(exact name of small business issuer as specified in charter)
California 33-0489154
(State or other jurisdiction
of incorporation (I.R.S. Employer Identification Number)
or organization)
1150 N. Magnolia Ave., Suite 290, Anaheim, California 92801
(Address of principal executive offices)
(714) 226-3619
(Issuer'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 X NO
At December 31, 1996, registrant had issued and outstanding 100,000 shares
of its no par value common stock, all of which were held by Evangelical
Christian Credit Union. No market exists for the Common Stock. Registrant
estimates the aggregate market value of such shares to be not greater than
$1,000,000.
Transitional Small Business Disclosure Format (check one):
YES NO X
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
The attached Balance Sheets as of December 31, 1996 and 1995, Statement
of Operations for the three months ended December 31, 1996 and 1995,
and Statements of Cash Flows for the three months ended December 31, 1996
and 1995 of Registrant (the "Company") have been prepared by the Company
without an audit. 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
December 31, 1996 and 1995 and for the three months ended December 31, 1996
and 1995 have been made.
Certain information and footnote 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 December 31, 1996 and 1995 are not necessarily indicative
of the results for the full year.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The financial information included herein should be read in conjunction
with the Financial Statements, including the Notes thereto.
Results of Operations
Three Months Ended December 31, 1996 vs.Three Months Ended December 31, 1995
During the three months ended December 31, 1996, the Company incurred
a net gain of $11,192 as compared to a net loss of $(2,649) for the same
three months ended December 31, 1995, an increase in net income of 322%.
This increase is attributable to organizational income other than net
interest income. Interest income, net, for the period, decreased to $33,154,
a decrease of 16% over $39,598 for the three months ended December 31, 1995.
This decrease is attributable primarily to a reduction in the Company's
Mortgage Loan investments during a lengthy registration process with the
Securities and Exchange Commission (SEC) in which maturing investor funds
could not be reinvested, nor new sales transacted. For the same reason,
the Company's cost of funds (i.e., interest expense) during this period
decreased $22,722 (or 31%); i.e., $50,004 for the three month period ending
December 31, 1996 as compared to $72,726 for the three months ended
December 31, 1995. At December 31, 1996, the company had outstanding debt
securities (Notes Payable) of $2,157,653, down from $3,354,309 at
December 31, 1995, a decrease of 36%.
The Company's general and administrative expenses for the three months
ended December 31, 1996 decreased to $41,788 from $43,263 for the same
period ending December 31, 1995, a decrease of 3%. This reduction is
attributable to a decrease of $1,557 (64%) in marketing and promotion
expenses over the same period in 1995, in connection with the temporary
suspension of sales during SEC registration as mentioned above.
Liquidity and Capital Resources
Three Months Ended December 31, 1996 vs.Three Months Ended December 31, 1995
Net decrease in cash during the three months ending December 31, 1996
was $(2,463), compared to a net increase of $45,943 for the three months
ended December 31, 1995, a change of $48,406. Net cash used by operating
activities totaled $(10,940) for the three months ended December 31, 1996,
an increase of $15,078, or 364%, from $4,138 provided by operating activities
during the three months ended December 31, 1995. This difference is
attributable primarily to a reduction in income from Notes Receivable
during the three month period ending December 31, 1996 as compared to
the same period in 1995.
Net cash provided by investing activities totaled $162,360 during the
three months ended December 31, 1996, compared to $(652,554) used during
the three months ended December 31, 1995, an increase of $814,914 or 225%.
This difference is attributable to an increase in Notes Receivable
purchased during the three month period ending December 31, 1996 as compared
to the same period in 1995.
Net cash used by financing activities totaled $(153,883) for this three
month period in 1996, an increase of $848,242 or 551%, from $694,359 provided
by financing activities during the three month period ending December 31,
1995. This difference is attributable to an increase in the Company's
repayment of debt securities outstanding (Notes Payable) during the three
month period ending December 31, 1996 as compared to the same period in 1995.
At December 31, 1996, the Company's cash, which includes cash reserves
and cash available for investment in the Mortgage Loans, was $160,403, down
from $196,433 at December 31, 1995, a decrease of 18%.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
As of the date of this Report, there is no material litigation, threatened
or pending, against the Company. The Company's management is not aware of
any disagreements, disputes or other matters which may lead to the filing
of legal proceedings involving the Company.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-k
None
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: February 14, 1997 MINISTRY PARTNERS INVESTMENT CORPORATION
(Registrant)
By: /s/ John C. Garmo
John C. Garmo, President
By: /s/ Brian Scharkey
Brian Scharkey, Principal Accounting Officer
MINISTRY PARTNERS INVESTMENT CORPORATION
Financial Statements
For the quarters ended December 31, 1996 and 1995
CONTENTS
Page
Financial Statements
Balance sheets 2
Statements of operations and retained earnings 3
Statements of cash flows 4
Notes to financial statements 5 - 8
MINISTRY PARTNERS INVESTMENT CORPORATION
BALANCE SHEETS
December 31
1996 1995
ASSETS
Cash - ECCU $ 160,403 $ 196,433
Notes receivable 3,337,581 4,956,689
Interest receivable 34,932 24,133
Prepaid offering expense 45,172 29,582
Prepaid expenses- other 15,728 11,877
Prepaid income taxes 780 4,181
Organization and start up costs, net 2,585 18,093
$ 3,597,181 $ 5,240,988
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities
Accounts payable $ 22 $ 7,674
Income taxes payable - -
Accrued expenses 76,369
Accrued expenses - ECCU 9,731 9,979
Line of credit - ECCU 417,904 783,567
Notes payable 2,157,653 3,354,309
Total liabilities 2,585,310 4,231,898
Stockholder's equity
Common stock, 10,000,000 shares authorized
100,000 shares issued and outstanding,
no par value 1,000,000 1,000,000
Retained earnings 11,871 9,090
1,011,871 1,009,090
$ 3,597,181 $ 5,240,988
The accompanying notes are an integral part of these financial statements
MINISTRY PARTNERS INVESTMENT CORPORATION
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
Three months ended December 31,
1996 1995
Income
Loan interest $ 83,15 $ 112,324
Cost of funds - interest expense
Line of credit - ECCU 8,471 9,489
Notes payable 41,533 63,237
50,004 72,726
Interest income, net 33,154 39,598
Expenses
Salary and benefits 24,270 24,351
Marketing and promotion 874 2,431
Office operations 7,991 8,840
Legal expenses 3,976 3,764
Amortization 3,877 3,877
Income Tax Expense 800 -
Loan servicing - ECCU - -
41,788 43,263
Other income
Interest income - ECCU 1,826 1,560
Organizational income 18,000 -
19,826 1,560
(Loss) income before provision
for income taxes 11,192 (2,105)
Provision for income taxes 0 544
Net (loss) income 11,192 (2,649)
Retained earnings, beginning 11,739 11,739
Retained earnings, ending $ 11,739 $ 9,090
Earnings per share on common shares $ .11 $ (.03)
The accompanying notes are an integral part of these financial statements
MINISTRY PARTNERS INVESTMENT CORPORATION
STATEMENTS OF CASH FLOWS
Three months ended December 31,
1996 1995
Cash flows from operating activities
Income - notes receivable $ 73,821 $ 111,747
Interest received - ECCU 1,826 1,560
Organizational income 18,000 -
Cash paid to suppliers, vendors and ECCU (54,583) (43,791)
Interest paid - borrowers and ECCU (50,004) (65,378)
Income taxes paid ( - )
Net cash provided by operating activities (10,940) 4,138
Cash flows from investing activities
Notes receivable purchased 3,337,581 (658,495)
Collections on notes receivable (3,183,279) 7,164
Prepaid offering expenses 8,058 (1,223)
Net cash used by investing activities 162,360 (652,554)
Cash flows from financing activities
Line of credit - ECCU, net (74,804) 445,033
Notes payable, borrowings 2,157,652 304,017
Notes payable, repayments (2,236,731) (54,691)
Common stock purchased - ECCU - -
Net cash provided by financing activities (153,883) 694,359
Net increase/<Decrease> in cash (2,463) 45,943
Cash at beginning of period 162,866 150,490
Cash at end of period $ 160,403 $ 196,433
Reconciliation of net income to cash
provided by operating activities
Net (loss) income $ 11,192 $ (2,649)
Adjustments to reconcile net income to net
cash provided by operating activities-
Amortization 3,877 3,877
(Increase) in interest receivable (9,337) (577)
(Increase) in prepaid expenses (15,728) (8,086)
Increase/(Decrease) in payables and
accrued expenses (944) 11,573
Net cash provided by operating activities $ (10,940) $ 4,138
The accompanying notes are an integral part of these financial statements
MINISTRY PARTNERS INVESTMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
1. Summary of Significant accounting policies
Nature of Business
Ministry Partners Investment Corporation (MPIC) was incorporated in
California in 1991 and is a wholly-owned subsidiary of Evangelical
Christian Credit Union (ECCU). The Company provides funds for real
property secured loans for the benefit of Evangelical churches and
church organizations through funding provided by members of and
persons associated with such churches and organizations. The
Company's offices, as well as those of its loan origination source,
ECCU, are located in the state of California and substantially all of
the business and operations of the Company are currently conducted in
California and its mortgage loan investments are concentrated in
California.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities as
of the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Prepaid offering expense
Prepaid offering expense is related to a proposed public offering of
unsecured notes. It is being amortized over a three year period.
Organization and start up costs
Organization and start up costs have been capitalized and are being
amortized, using the straight-line method over a five-year period.
Notes Receivable
Interest income on notes receivable is recognized over the term of
the note and is generally computed using the simple interest method.
2. Related party transactions
MPIC maintains all of its funds at the parent, ECCU. Total funds
held with ECCU were $160,403 and $196,433 at December 31, 1996 and
1995, respectively. Interest earned on these funds were $1,826 and
$1,560 for the three months ended December 31, 1996 and 1995,
respectively.
MPIC utilized physical facilities and other services of ECCU. A
charge of $4,130 - 1996 and $7,118 - 1995 was made for these services
which is included in Office Operations. The method used to arrive at
the periodic charge is based on the fair market value of services
provided. Management asserts that such method is reasonable.
Notes payable are substantially to members of ECCU.
3. Notes receivable
In March 1992, MPIC purchased a pool of first trust deed seasoned
loans from ECCU for the then outstanding balance. Loan maturities
extend through 2001, although the majority were due in 1995 and 1996.
Interest rates range from 7.025% to 11.50%, yielding an average of
9.138%. The loans were made to churches in Southern Calfiornia and
are the collateral for certain notes payable. This pool of first
trust deed notes was retired in early 1996.
During 1995 and 1996, MPIC participated in church loans made by ECCU.
Interest is at variable rates of interest; ranging from 8.50% to 10.25%.
ECCU services these loans, charging a service fee.
No allowance for doubtful accounts has been established for the notes
receivable. The Company has no experience of loan loss and, as of
December 31, 1996 and 1995, none of the loans are impaired.
Management believes all of the notes are adequately secured and fully
collectible.
4. Organization and start up costs
Organization and start up costs at December 31, 1996 and 1995 are
stated as follows:
1996 1995
Organization
Cost $ 63,292 $ 63,292
Accumulated amortization 62,777 48,803
515 14,489
Start up
Cost 15,438 15,438
Accumulated amortization 13,368 11,834
2,070 3,604
$ 2,585 $ 18,093
5. Line of credit - ECCU
MPIC has an unsecured $2,100,000 line of credit with ECCU, of which
$492,708 and $783,567 was borrowed at December 31, 1996 and 1995,
respectively. Interest at December 31, 1996 and 1995 was 5.902% and
5.550%, respectively, and varies according to ECCU's cost of funds.
6. Notes payable
MPIC has unsecured notes payable at December 31, 1996, as follows:
Total Interest Rate
Private Placement $ 993,200 6.10 - 8.55
CA Public Offering 1,141,394 6.32 - 8.66
National Offering 23,033 6.41 - 6.91
$ 2,157,653
Future maturities at December 31 are as follows:
1996 1995
1996 $ - $ 2,700,731
1997 1,356,913 187,351
1998 156,768 90,000
1999 164,000 75,000
2000 388,674 301,227
2001 91,298
$ 2,157,653 $ 3,354,309
7. Public offering
In August 1994, MPIC received approval from the Department of
Corporations of the State of California to offer $6,000,000 in
unsecured notes payable, of which only $3,000,000 may be outstanding
at any one time. At December 31, 1996 and 1995, $1,141,394 and
$1,040,425, respectively, were outstanding.
8. National Offering
In October 1996, MPIC received approval from the Securities and
Exchange Commission to offer $5,000,000 in unsecured notes payable
nation wide. This offering is currently available in Colorado and
pending in Arizona, California, Oregon, and Washington. At December
31, 1996 and 1995, $23,033 and $ 0 , respectively, were outstanding.
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<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-END> DEC-31-1996 DEC-31-1995
<CASH> $160,403 $196,433
<SECURITIES> 0 0
<RECEIVABLES> $3,372,513 $4,980,822
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> $259,600 $284,299
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<DEPRECIATION> 0 0
<TOTAL-ASSETS> $3,597,181 $5,240,988
<CURRENT-LIABILITIES> $427,657 $877,589
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0 0
0 0
<COMMON> $1,000,000 $1,000,000
<OTHER-SE> $11,871 $9,090
<TOTAL-LIABILITY-AND-EQUITY> $3,597,181 $5,240,988
<SALES> 0 0
<TOTAL-REVENUES> $102,984 $113,884
<CGS> 0 0
<TOTAL-COSTS> $40,988 $43,263
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> $50,004 $72,726
<INCOME-PRETAX> $11,992 ($2,105)
<INCOME-TAX> $800 $544
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<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> $11,192 ($2,649)
<EPS-PRIMARY> $.11 ($.03)
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