<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 June 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., 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 June 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 June 30, 1997 and 1996, Statement
of Operations for the three months ended June 30, 1997 and 1996,
and Statements of Cash Flows for the three months ended June 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 June 30, 1997 and 1996 and
for the three months ended June 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 June 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
Six Months Ended June 30, 1997 vs. Six Months Ended June 30, 1996
During the six months ended June 30, 1997, the Company incurred a net
loss of $(43,517) as compared to a net loss of $(5,616) for the same six
months ended June 30, 1996, a decrease in net income of $(37,901). Interest
income, net, for the period, was $62,764, a decrease of 23% from $81,841 for
the six months ended June 30, 1996. These decreases are 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 $27,407 (or 18%), $125,245
for the six month period ending June 30, 1997 as compared to $152,652 for
the six months ended June 30, 1996. At June 30, 1997, the company had
outstanding debt securities (Notes Payable) of $4,434,652, up from
$3,724,723 at June 30, 1996, an increase of 19%.
The Company's general and administrative expenses for the six months
ended June 30, 1997 increased to $104,127 from $87,842 for the same period
ending June 30, 1996, an increase of 19%. This is attributable to an
increase of $18,793 in legal and accounting expenses associated with SEC
registration, over the same period in 1996.
Liquidity and Capital Resources
Six Months Ended June 30, 1997 vs. Six Months Ended June 30, 1996
Net decrease in cash during the six months ending June 30, 1997 was
$(69,465), compared to a net decrease of $(12,847) for the six months ended
June 30, 1996, a decrease of $56,618 as $3,585,522 in Notes Receivable were
purchased. Net cash used by operating activities totaled $(5,083) for the
six months ended June 30, 1997, a decrease of $73,587 from $(78,670) used by
operating activities during the six months ended June 30, 1996. This
difference is attributable primarily to a reduction in interest paid during
the six month period ending June 30, 1997 as compared to the same period in
1996.
Net cash used by investing activities totaled $(2,994,661) during the
six months ended June 30, 1997, compared to $167,334 provided during the six
months ended June 30, 1996, a difference of $(3,161,995). This difference
is primarily attributable to an increase in Notes Receivable purchased
during the six month period ending June 30, 1997 as compared to the same
period in 1996.
Net cash provided by financing activities totaled $2,930,279 for this
six month period in 1997, an increase of $3,031,790 from $(101,511) used by
financing activities during the six month period ending June 30, 1996. This
difference is primarily attributable to an increase in the Company's
outstanding debt securities (Notes Payable) during the six month period
ending June 30, 1997 as compared to the same period in 1996.
At June 30, 1997, the Company's cash, which includes cash reserves and
cash available for investment in the Mortgage Loans, was $90,938, down from
$183,586 at June 30, 1996, a decrease of $92,648 (50%).
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: August 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
BALANCE SHEETS
UNAUDITED
June 30,
1997 1996
Assets
Current Assets
Cash $ 90,939 $ 183,586
Notes Receivable 714,508 64,677
Interest Receivable 16,916 27,527
Prepaid Expense 54,723 43,167
Prepaid Income Tax 761 780
Total Current Assets 877,846 $319,739
Other Assets
Notes Receivable $5,620,261 4,719,348
Organization & Start Up Cost, net 0 10,339
Total Other Assets $5,620,261 $4,729,687
Total Assets $6,497,347 $5,049,425
Liabilities and Stockholder's Equity
Current Liabilities
Accounts Payable $ 19,712 $ 9,647
Line of Credit-ECCU 1,071,184 311,642
Notes Payable-current portion 3,450,074 2,789,025
Total Current Liabilities $4,540,209 $3,110,314
Long-term Liabilities
Notes Payable $4,434,652 3,724,723
Less current portion (3,450,074) (2,789,026)
Total Long-term Liabilities $ 984,579 $ 935,698
Stockholder's Equity
Common Stock, 10,000,000 shares
authorized, 100,000 shares issued &
outstanding, no par value $1,000,000 $1,000,000
Retained Earnings (27,441) 3,412
Total Stockholder's Equity $ 972,559 $1,003,412
Total Liabilities & Stockholder's Equity $6,497,347 $5,049,425
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
Six months ended June 30,
1997 1996
Interest Income
Notes Receivable $ 166,787 230,421
Interest-bearing Accounts-ECCU 5,971 4,073
Organizational Income 13,750 0
Other Income 1,501 0
Total Interest Income 188,009 234,493
Interest Expense-Cost of Funds
Line of Credit-ECCU 4,279 20,504
Notes Payable 120,966 132,148
Total Interest Expense 125,245 152,652
Net Interest Income 62,764 81,841
Operating Expenses
Salaries and Benefits 53,631 53,794
Marketing and Promotion 9,864 4,144
Office Operations 11,244 14,140
Legal Expenses 26,803 8,010
Amortization 2,585 7,754
Total Operating Expenses 104,127 87,842
(Loss)Income before provision for Income Taxes (41,363) (6,001)
Provision for Income Taxes 2,154 (385)
Net (Gain/Loss) Income $(43,517) $(5,616)
STATEMENTS OF CASH FLOWS
Six months ended June 30,
1997 1996
Cash flows from operating activities:
Income - Notes Receivable 184,803 227,026
Interest received - ECCU 5,971 4,073
Organizational income 13,750 0
Cash paid to suppliers, vendors & ECCU (85,863) (80,748)
Interest paid - borrowers and ECCU (125,245) (229,021)
Other Income 1,501 0
Net cash used by operating activities (5,083) (78,670)
Cash flows from investing activities:
Notes Receivable purchased (3,585,522) (1,247,516)
Collections on Notes Receivable 588,334 1,420,180
Prepaid Offering Expenses 2,527 (5,330)
Net cash used by investing activities (2,994,661) 167,334
Cash flows from financing activities:
Line of Credit -- ECCU, net 653,280 (471,925)
Notes Payable, borrowings 2,482,252 1,075,571
Notes Payable, repayments (205,253) (705,157)
Common Stock purchased--ECCU 0 0
Net cash provided by financing activities 2,930,279 (101,511)
Net decrease in Cash (69,465) (12,847)
Cash at beginning of period 160,403 196,433
Cash at end of period 90,939 183,586
Reconciliation of net income to cash
provided by operating activities
Net Loss (43,517) (5,615)
Adjustments to reconcile net income to
net cash provided by operating activities -
Amortization 2,585 7,754
Prior period adjustment 4,205 0
Decrease in interest receivable 18,016 (3,395)
Decrease in prepaid expenses 3,650 3,560
Decrease in prepaid income taxes 19 3,401
Increase in accounts payable & accrued expenses 9,959 (84,375)
Net cash used by operating activities (5,083) (78,670)
MINISTRY PARTNERS INVESTMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
JUNE 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.
2. Related party transactions
MPIC maintains all of its funds at the parent, ECCU. Total funds held
with ECCU were $90,939 and $183,586 at June 30, 1997 and 1996,
respectively. Interest earned on these funds were $5,971 and $4,073 for
the six months ended June 30, 1997 and 1996, respectively.
MPIC utilized physical facilities and other services of ECCU. A charge of
$5,998 - 1997 and $5,430 - 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 June
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 June 30, 1997 and 1996 are stated as
follows:
1997 1996
Start up
Cost $ 63,292 $ 63,292
Accumulated amortization 63,292 52,907
-0- 11,385
Organization
Cost 15,438 15,438
Accumulated amortization 15,438 12,607
-0- 2,831
-0- $ 14,216
5. Line of credit - ECCU
MPIC has an unsecured $2,100,000 line of credit with ECCU, of which
$1,071,184 and $311,642 was borrowed at June 30, 1997 and 1996,
respectively. Interest at June 30, 1997 and 1996 was 6.100% and 6.048%,
respectively, and varies according to ECCU's cost of funds.
6. Notes payable
MPIC has unsecured notes payable at June 30, 1997, as follows:
Total Interest Rate
Private Placement $ 457,218 6.10 - 8.55
CA Public Offering 513,257 6.81 - 8.66
National Offering 2,259,433 5.65 - 7.86
Special Offering 1,204,744 5.15 - 7.47
$ 4,434,652
Future maturities at June 30 are as follows:
1997 1996
1996 $ - $ 1,720,228
1997 2,209,849 1,211,030
1998 1,327,534 169,832
1999 338,143 156,100
2000 398,986 379,677
2001 94,816 87,857
2002 65,324 -
$ 4,434,652 $ 3,724,724
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 June 30, 1997 and 1996, $513,257 and 1,394,189
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
June 30, 1997 and 1996, $2,259,433 and $ 0 , respectively, were
outstanding.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996
<PERIOD-END> JUN-30-1997 JUN-30-1996
<CASH> $90,939 $262,469
<SECURITIES> $0 $0
<RECEIVABLES> $6,334,769 $5,268,492
<ALLOWANCES> $0 $0
<INVENTORY> $0 $0
<CURRENT-ASSETS> $877,085 $292,763
<PP&E> $0 $0
<DEPRECIATION> $0 $0
<TOTAL-ASSETS> $6,497,347 $5,578,763
<CURRENT-LIABILITIES> $4,540,209 $918,789
<BONDS> $0 $0
$0 $0
$0 $0
<COMMON> $1,000,000 $1,000,000
<OTHER-SE> ($27,441) $7,536
<TOTAL-LIABILITY-AND-EQUITY> $6,497,347 $5,578,763
<SALES> $0 $0
<TOTAL-REVENUES> $188,009 $121,270
<CGS> $0 $0
<TOTAL-COSTS> $125,245 $76,428
<OTHER-EXPENSES> $104,127 $46,060
<LOSS-PROVISION> $0 $0
<INTEREST-EXPENSE> $125,245 $76,428
<INCOME-PRETAX> ($41,363) ($1,218)
<INCOME-TAX> $2,154 $274
<INCOME-CONTINUING> ($43,517) ($1,492)
<DISCONTINUED> $0 $0
<EXTRAORDINARY> $0 $0
<CHANGES> $0 $0
<NET-INCOME> ($43,517) ($1,492)
<EPS-PRIMARY> $0.44 $0.06
<EPS-DILUTED> $0.44 $0.06
</TABLE>
