<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, 1998
[ ] 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) 229-3619
(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, 1998, 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, 1998 and 1997, Statement
of Operations for the six months ended June 30, 1998 and 1997,
and Statements of Cash Flows for the six months ended June 30, 1998
and 1997 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, 1998 and 1997 and for the six months ended June 30, 1998
and 1997 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, 1998 and 1997 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, 1998 vs. Six Months Ended June 30, 1997
During the six months ended June 30, 1998, the Company incurred
a net gain of $38,149 as compared to a net loss of $(43,517) for the
same six months ended June 30, 1997, an increase in net income of
$81,666. Interest income, net, for the period increased to $157,805, an
increase of $95,041 (or 151%) from $62,764 for the six months ended June 30,
1997. These increases are attributable primarily to an increase in the
Company's Mortgage Loan investments. The Company's cost of funds (i.e.,
interest expense) during this period increased $184,325 (or 147%); i.e.,
$309,570 for the six month period ending June 30, 1998 as compared to
$125,245 for the six months ended June 30, 1997. This increase is
attributable to an increase in Notes Payable. At June 30,1998, the company
had outstanding debt securities (Notes Payable) of $10,084,973, up
from $4,434,653 at June 30, 1997, an increase of 127%.
The Company's general and administrative expenses for the six
months ended June 30, 1998 increased to $107,813 from $104,127 for the
same period ending June 30, 1997, an increase of 4%. This is attributable
to the addition of one part-time employee during this period in 1998.
<PAGE>
Liquidity and Capital Resources
Six Months Ended June 30, 1998 vs. Six Months Ended June 30, 1997
Net increase in cash during the six months ending June 30, 1998
was $452,124, compared to a net decrease of $(69,465) for the six months
ended June 30, 1997, a difference of $521,589. Net cash provided by
operating activities totaled $37,889 for the six months ended June 30, 1998,
an increase of $42,972 over $(5,083) used by operating activities during the
six months ended June 30, 1997. This difference is attributable primarily to
an increase in net interest income from Notes Receivable during the six month
period ending June 30, 1998 as compared to the same period in 1997.
Net cash used by investing activities totaled $(886,868) during the
six months ended June 30, 1998, compared to $(2,994,661) used during the six
months ended June 30, 1997, a decrease of $(2,107,793) or 70%. This
difference is primarily attributable to a decrease in Notes Receivable
purchased during the six month period ending June 30, 1998 as compared to the
same period in 1997.
Net cash provided by financing activities totaled $1,301,104 for this
six month period in 1998, a decrease of $1,629,175, or 56%, from
$2,930,279 provided by financing activities during the six month period
ending June 30, 1997. This difference is primarily attributable to the
repayment of a line of credit during the six month period ending June 30, 1998
as compared to borrowings from that line of credit during the same period
in 1997.
At June 30, 1998, the Company's cash, which includes cash reserves
and cash available for investment in the Mortgage Loans, was $572,110,
up from $90,938 at June 30, 1997, an increase of $481,172.
<PAGE>
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: July 30, 1998 MINISTRY PARTNERS INVESTMENT CORPORATION
(Registrant)
By: /s/ John C. Garmo
John C. Garmo, President
By: /s/ Brian Scharkey
Brian Scharkey,
Principal Accounting Officer
<PAGE>
BALANCE SHEETS
UNAUDITED
June 30,
1998 1997
Assets
Current Assets
Cash $ 572,110 $ 90,939
Loans Receivable 2,859 0
Notes Receivable 1,166,686 714,508
Interest Receivable 60,905 16,916
Prepaid offering expense 10,845 9,797
Prepaid Expense 25,638 44,926
Organization and start up cost, net 0 0
Prepaid Income Tax 0 0
Total Current Assets 1,839,043 877,086
Other Assets
Loans Receivable 64,796 0
Notes Receivable 9,256,200 5,620,261
Furniture, Fixtures & Equipment (net) 2,816 0
Organization & Start Up Cost, net 0 0
Total Other Assets 9,323,812 5,620,261
Total Assets $11,162,855 $6,497,347
Liabilities and Stockholder's Equity
Current Liabilities
Accounts Payable $ 11,397 $ 19,712
Salaries Payable 5,222 0
Income Taxes Payable 8,969 (761)
Line of Credit-ECCU 0 1,071,184
Notes Payable-current portion 8,144,127 3,450,074
Total Current Liabilities 8,169,715 4,540,209
Long-term Liabilities
Notes Payable 10,084,973 4,434,653
Less current portion (8,144,127) (3,450,074)
Total Long-term Liabilities 1,940,846 984,579
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 52,294 (27,441)
Total Stockholder's Equity 1,052,294 972,559
Total Liabilities & Stockholder's Equity $11,162,855 $6,497,347
<PAGE>
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
Six months ended June 30,
1998 1997
Interest Income
Notes Receivable $ 464,604 $ 166,787
Interest-bearing Accounts-ECCU 2,772 5,971
Organizational Income 0 13,750
Other Income 0 1,501
Total Interest Income 467,376 188,009
Interest Expense-Cost of Funds
Line of Credit-ECCU 20,812 4,279
Notes Payable 288,758 120,966
Total Interest Expense 309,570 125,245
Net Interest Income 157,805 62,764
Operating Expenses
Salaries and Benefits 63,541 53,631
Marketing and Promotion 9,299 9,864
Office Operations 9,243 11,244
Legal Expenses 25,731 26,803
Amortization 0 2,585
Total Operating Expenses 107,814 104,127
Income (Loss) before provision
for Income Taxes 49,992 (41,363)
Provision for Income Taxes 11,844 2,154
Net Income (Loss) $ 38,148 $ (43,517)
<PAGE>
STATEMENTS OF CASH FLOWS
Six months ended June 30,
1998 1997
Cash flows from operating activities:
Income - loans & notes receivable $ 445,470 $ 184,803
Interest received - ECCU 2,772 5,971
Organizational income 0 13,750
Cash paid to suppliers, vendors & ECCU (100,783) (85,863)
Interest paid - borrowers and ECCU (309,570) (125,245)
Other income 0 1,501
Net cash provided (used) by
operating activities 37,889 (5,083)
Cash flows from investing activities:
Loans/notes receivable purchased (1,702,749) (3,585,522)
Collections on notes receivable 813,008 588,334
Prepaid offering expenses 5,689 2,527
Purchases of furniture & equipment (2,816) 0
Net cash used by investing activities (886,868) (2,994,661)
Cash flows from financing activities:
Line of credit -- ECCU, net (980,000) 653,280
Notes payable, borrowings 3,368,541 2,482,252
Notes payable, repayments (1,087,437) (205,253)
Common stock purchased -- ECCU 0 0
Net cash provided by financing
activities 1,301,104 2,930,279
Net increase/decrease in Cash 452,124 (69,465)
Cash at beginning of period 119,986 160,403
Cash at end of period 572,110 90,939
Reconciliation of net income to cash
provided by operating activities
Net income (loss) 38,148 (43,517)
Adjustments to reconcile net income to net
cash provided (used) by operating activities -
Amortization 0 2,585
Prior period adjustment (3,695) 4,205
Decrease/increase in interest receivable (19,134) 18,016
Decrease in prepaid expenses 9,431 3,650
Decrease in prepaid income taxes 0 19
Decrease in accounts receivable 4,000 0
Increase in accounts payable & accrued
expenses 9,139 9,959
Net cash provided (used) by
operating activities 37,889 (5,083)
The accompanying notes are an integral part of these financial statements
<PAGE>
MINISTRY PARTNERS INVESTMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998 AND 1997
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 $572,110 and $90,939 at June 30, 1998 and 1997,
respectively. Interest earned on these funds were $2,772 and $5,971 for
the six months ended June 30, 1998 and 1997, respectively.
MPIC utilized physical facilities and other services of ECCU. A charge of
$2,840 - 1998 and $5,998 - 1997 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 1997 and 1998, MPIC participated in church loans made by ECCU.
Interest is at variable rates of interest; ranging from 8.25% to 11.75%.
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, 1998 and 1997, 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, 1998 and 1997 are stated as
follows:
1998 1997
Start up
Cost $ 63,292 $ 63,292
Accumulated amortization 63,292 63,292
-0- -0-
Organization
Cost 15,438 15,438
Accumulated amortization 15,438 15,438
-0- -0-
-0- $ -0-
5. Line of credit - ECCU
MPIC has an unsecured $2,100,000 line of credit with ECCU, of which
$ -0- and $1,071,184 was borrowed at June 30, 1998 and 1997,
respectively. Interest at June 30, 1998 and 1997 was 6.186% and 6.100%,
respectively, and varies according to ECCU's cost of funds.
6. Notes payable
MPIC has unsecured notes payable at June 30, 1998, as follows:
Total Interest Rate
Private Placement $ 332,172 6.36 - 8.55
CA Public Offering 443,435 6.90 - 8.66
National Offering 2,846,117 5.02 - 7.36
Special Offering 4,449,838 5.02 - 7.00
National A-1 Offering 2,013,410 5.52 - 6.58
$10,084,972
Future maturities at June 30 are as follows:
1998 1997
1997 -0- 2,209,849
1998 5,109,360 1,327,534
1999 3,788,750 338,143
2000 661,740 398,986
2001 101,320 94,816
2002 274,451 65,324
2003 149,352 -0-
$10,084,972 $ 4,434,652
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, 1998 and 1997, $443,435 and 513,257 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. At June 30, 1998 and 1997, $2,846,117 and $ 2,259,433,
respectively, were outstanding.
In December 1997, MPIC received approval from the Securities and Exchange
Commission to offer $15,000,000 in unsecured notes payable nation wide.
This offering is currently available in California, Colorado and Oregon.
At June 30, 1998 and 1997, $ 2,013,410 And $ -0-, respectively, were
outstanding.
<TABLE> <S> <C>
<ARTICLE> 5
<C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-END> JUN-30-1998 JUN-30-1997
<CASH> $572,110 $90,939
<SECURITIES> $0 $0
<RECEIVABLES> $10,551,446 $6,351,685
<ALLOWANCES> $0 $0
<INVENTORY> $0 $0
<CURRENT-ASSETS> $1,839,043 $877,086
<PP&E> $2,816 $0
<DEPRECIATION> $0 $0
<TOTAL-ASSETS> $11,162,855 $6,497,347
<CURRENT-LIABILITIES> $8,169,715 $4,540,209
<BONDS> $0 $0
$0 $0
$0 $0
<COMMON> $1,000,000 $1,000,000
<OTHER-SE> $52,294 ($27,441)
<TOTAL-LIABILITY-AND-EQUITY>$11,162,855 $6,497,347
<SALES> $0 $0
<TOTAL-REVENUES> $467,375 $188,009
<CGS> $0 $0
<TOTAL-COSTS> $417,383 $229,372
<OTHER-EXPENSES> $0 $0
<LOSS-PROVISION> $0 $0
<INTEREST-EXPENSE> $309,570 $125,245
<INCOME-PRETAX> $49,992 ($41,363)
<INCOME-TAX> $11,843 $2,154
<INCOME-CONTINUING> $0 $0
<DISCONTINUED> $0 $0
<EXTRAORDINARY> $0 $0
<CHANGES> $0 $0
<NET-INCOME> $38,149 ($43,517)
<EPS-PRIMARY> $0.38 ($0.44)
<EPS-DILUTED> $0.38 ($0.44)
</TABLE>
