<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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 (I.R.S. Employer Identification
incorporation or organization) Number)
1150 N. Magnolia Ave., 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 September 30, 1997, 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
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
The attached Balance Sheets as of September 30, 1997 and 1996, Statements
of Operations for the nine months ended September 30, 1997 and 1996,
and Statements of Cash Flows for the nine months ended September 30, 1997
and 1996 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 September 30,
1997 and 1996 and for the nine months ended September 30, 1997 and 1996
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 September 30, 1997 and 1996 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
Nine Months Ended September 30, 1997 vs. Nine Months Ended September 30, 1996
During the nine months ended September 30, 1997, the Company incurred a
net loss of $(42,895) as compared to a net loss of $(8,347) for the same nine
months ended September 30, 1996, a decrease in net income of $(34,548). This
change is attributable primarily to increases in marketing, legal and
accounting expenses as a new offering was prepared and presented to the
public. Interest income, net, for the period, was $122,152, an increase of
1% from $121,050 for the nine months ended September 30, 1996. The Company's
cost of funds (i.e., interest expense) during this period increased $20,908
(or 9.7%), to $235,730 for the nine months ended September 30, 1997 as
compared to $214,822 for nine months ended September 30, 1996. This increase
is attributable to an increase in the sale of debt securities (Notes Payable).
At September 30, 1997, the company had outstanding debt securities of
$6,573,441, up from $2,236,731 at September 30, 1996, an increase of 194%.
The Company's general and administrative expenses for the nine months
ended September 30, 1997 increased to $165,046 from $129,783 for the same
period ending September 30, 1996, an increase of 27%. This is attributable
to an increase of $22,084 in legal and accounting expenses associated with
SEC registration, over the same period in 1996, and an increase of $20,740 in
marketing and promotion expenses as the new offering was presented to the
public.
Liquidity and Capital Resources
Nine Months Ended September 30, 1997 vs. Nine Months Ended September 30, 1996
Net decrease in cash during the nine months ended September 30, 1997 was
$(91,201), compared to a net decrease of $(33,566) for the nine months ended
September 30, 1996, a decrease of $57,635. Net cash used by operating
activities totaled $(27,624) for the nine months ended September 30, 1997, a
decrease of $55,611 from $(83,235) used by operating activities during the
nine months ended September 30, 1996. This difference is attributable
primarily to a reduction in interest paid during the nine months ended
September 30, 1997 as compared to the same period in 1996.
Net cash used by investing activities totaled $(4,271,834) during the
nine months ended September 30, 1997, compared to $1,458,106 provided during
the nine months ended September 30, 1996, a difference of $(5,729,940). This
difference is primarily attributable to an increase in Notes Receivable
purchased during the nine months ended September 30, 1997 as compared to the
same period in 1996.
Net cash provided by financing activities totaled $4,208,257 for this
nine month period in 1997, an increase of $5,616,694 from $(1,408,437) used
by financing activities during the nine months ended September 30, 1996.
This difference is primarily attributable to an increase in the Company's
sale of outstanding debt securities (Notes Payable) during the nine months
ended September 30, 1997 as compared to the same period in 1996.
At September 30, 1997, the Company's cash, which includes cash reserves
and cash available for investment in mortgage loans, was $69,202, down from
$162,867 at September 30, 1996, a decrease of $93,665 (57.5%).
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: November 10, 1997 MINISTRY PARTNERS INVESTMENT CORPORATION
(Registrant)
By: /s/ John C. Garmo
John C. Garmo, President
By: /s/ Brian Scharkey
Brian Scharkey,
Principal Accounting Officer
BALANCE SHEETS
UNAUDITED
September 30,
1997 1996
Assets
Current Assets
Cash $ 69,202 $ 162,867
Notes Receivable 1,235,992 805,924
Interest Receivable 41,791 25,595
Prepaid Expense 47,761 53,230
Prepaid Income Tax 761 780
Total Current Assets 1,395,507 $1,048,396
Other Assets
Notes Receivable $6,378,853 2,685,959
Organization & Start Up Cost, net 0 6,462
Total Other Assets $6,378,853 $2,692,421
Total Assets $7,774,360 $3,740,816
Liabilities and Stockholder's Equity
Current Liabilities
Accounts Payable $ 17,365 $ 10,697
Line of Credit-ECCU 210,373 492,708
Notes Payable-current portion 5,031,597 1,364,182
Total Current Liabilities $5,259,334 $1,867,587
Long-term Liabilities
Notes Payable $6,573,441 $2,236,731
Less current portion (5,031,597) (1,364,182)
Total Long-term Liabilities $1,541,844 $ 872,549
Stockholder's Equity $1,000,000 $1,000,000
Common Stock, 10,000,000 shares
authorized, 100,000 shares issued
& outstanding, no par value
Retained Earnings (26,818) 680
Total Stockholder's Equity $ 973,182 $1,000,680
Total Liabilities & Stockholder's Equity $7,774,360 $3,740,816
The accompanying notes are an integral part of these financial statements<PAGE>
MINISTRY PARTNERS INVESTMENT CORPORATION
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
Nine months ended September 30,
1997 1996
Interest Income
Notes Receivable $ 334,808 $ 329,052
Interest-bearing Accounts-ECCU 7,822 6,821
Organizational Income 13,750 0
Other Income 1,501 0
Total Interest Income 357,882 335,873
Interest Expense-Cost of Funds
Line of Credit-ECCU 19,865 25,954
Notes Payable 215,865 188,868
Total Interest Expense 235,730 214,822
Net Interest Income 122,152 121,050
Operating Expenses
Salaries and Benefits 84,605 81,400
Marketing and Promotion 26,259 5,519
Office Operations 16,527 20,741
Legal & Accounting Expenses 32,576 10,492
Amortization 2,585 11,631
Income Tax Expense 2,494 0
Total Operating Expenses 165,046 129,783
(Loss)Income before provision
for income taxes (42,895) (8,733)
Provision for Income Taxes 0 (385)
Net (Gain/Loss) Income $(42,895) $ (8,347)
The accompanying notes are an integral part of these financial statements<PAGE>
MINISTRY PARTNERS INVESTMENT CORPORATION
STATEMENTS OF CASH FLOWS
Nine months ended September 30,
1997 1996
Cash flows from operating activities:
Income - Notes Receivable 327,949 327,529
Interest received - ECCU 7,822 6,821
Organizational income 13,750 0
Cash paid to suppliers, vendors and ECCU (142,916) (126,454)
Interest paid - borrowers and ECCU (235,730) (291,191)
Income taxes paid 0 0
Other Income 1,501 0
Net Cash Used by Operating Activities (27,624) (83,235)
Cash flows from investing activities:
Notes Receivable purchased (3,860,014) (158,510)
Collections on Notes Receivable (417,250) 1,623,316
Prepaid Offering Expense (5,430) (6,700)
Net cash used by investing activities (4,271,834) 1,458,106
Cash flows from financing activities:
Line of Credit --ECCU, net (207,531) (290,859)
Notes Payable, borrowings 4,235,617 0
Notes Payable, repayments 180,171 (1,117,578)
Common Stock purchased--ECCU 0 0
Net cash provided by financing activities 4,208,257 (1,408,437)
Net increase/decrease in Cash (91,201) (33,566)
Cash at beginning of period 160,403 196,433
Cash at end of period 69,202 162,867
Reconciliation of net income to cash
provided by operating activities
Net Loss (42,895) (8,347)
Adjustments to reconcile net income to
net cash provided by operating activities-
Amortization 2,585 11,631
Prior period adjustment 4,205 0
Decrease/Increase in interest receivable (6,859) (1,463)
Decrease in prepaid expenses 7,708 (5,132)
Decrease in prepaid income taxes 19 3,401
Increase in accounts payable & accrued 7,612 (83,325)
expenses
Net cash used by operating activities (27,624) (83,235)
The accompanying notes are an integral part of these financial statements<PAGE>
MINISTRY PARTNERS INVESTMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997 AND 1996
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. <PAGE>
2. Related party transactions
MPIC maintains all of its funds at the parent, ECCU. Total funds held with
ECCU were $69,202 and $162,867 at September 30, 1997 and 1996, respectively.
Interest earned on these funds were $7,822 and $6,821 for the nine months
ended September 30, 1997 and 1996, respectively.
MPIC utilized physical facilities and other services of ECCU. A charge of
$9,237 - 1997 and $8,136 - 1996 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 9.138%. The loans were made to
churches in Southern California and are the collateral for certain notes
payable. This pool of first trust deed notes was retired in early 1996.
During 1996 and 1997, MPIC participated in church loans made by ECCU.
Interest is at variable rates of interest; ranging from 8.25% to 11.25%.
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 September
30, 1997 and 1996, 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 September 30, 1997 and 1996 are stated
as follows:
1997 1996
Start up
Cost $ 63,292 $ 63,292
Accumulated amortization 63,292 58,117
-0- 5,175
Organization
Cost 15,438 15,438
Accumulated amortization 15,438 14,151
-0- 1,287
-0- $ 6,462
5. Line of credit - ECCU
MPIC has an unsecured $2,100,000 line of credit with ECCU, of which
$ 210,373 and $ 492,708 was borrowed at September 30, 1997 and 1996,
respectively. Interest at September 30, 1997 and 1996 was 6.097% and 6.057%,
respectively, and varies according to ECCU's cost of funds.
6. Notes payable
MPIC has unsecured notes payable at September 30, 1997, as follows:
Total Interest Rate
Private Placement $ 408,661 6.36 - 8.55
CA Public Offering 521,192 6.81 - 8.66
National Offering 4,237,224 5.14 - 7.86
Special Offering 1,406,364 6.38 - 7.47
$6,573,441
Future maturities at September 30 are as follows:
1997 1996
1996 $ - $ 267,143
1997 1,644,407 1,095,874
1998 3,205,382 200,670
1999 758,578 197,829
2000 468,702 323,368
2001 96,655 151,847
2002 176,181 -
$ 6,349,905 $ 2,236,731
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 September
30, 1997 and 1996, $521,192 and 1,199,734 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 California, Colorado, and Oregon. It is
pending in Arizona and Washington. At September 30, 1997 and 1996,
$4,237,224 and $ 0 , respectively, were outstanding.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996
<PERIOD-END> SEP-30-1997 SEP-30-1996
<CASH> $69,202 $162,867
<SECURITIES> $0 $0
<RECEIVABLES> $7,656,636 $3,517,478
<ALLOWANCES> $0 $0
<INVENTORY> $0 $0
<CURRENT-ASSETS> $1,395,507 $1,048,396
<PP&E> $0 $0
<DEPRECIATION> $0 $0
<TOTAL-ASSETS> $7,774,360 $3,740,816
<CURRENT-LIABILITIES> $5,259,334 $1,867,587
<BONDS> $0 $0
$0 $0
$0 $0
<COMMON> $1,000,000 $1,000,000
<OTHER-SE> ($26,818) $680
<TOTAL-LIABILITY-AND-EQUITY> $7,774,360 $3,740,816
<SALES> $0 $0
<TOTAL-REVENUES> $357,882 $335,873
<CGS> $0 $0
<TOTAL-COSTS> $400,776 $344,605
<OTHER-EXPENSES> $0 $0
<LOSS-PROVISION> $0 $0
<INTEREST-EXPENSE> $235,730 $214,822
<INCOME-PRETAX> ($42,895) ($8,733)
<INCOME-TAX> $0 ($385)
<INCOME-CONTINUING> $0 $0
<DISCONTINUED> $0 $0
<EXTRAORDINARY> $0 $0
<CHANGES> $0 $0
<NET-INCOME> ($42,895) ($8,347)
<EPS-PRIMARY> ($0.43) ($0.08)
<EPS-DILUTED> ($0.43) ($0.08)
</TABLE>
