<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 March 31, 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) 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 March 31, 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 March 31, 1998 and 1997, Statement
of Operations for the three months ended March 31, 1998 and 1997,
and Statements of Cash Flows for the three months ended March 31, 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
March 31, 1998 and 1997 and for the three months ended March 31, 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 March 31, 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
Three Months Ended March 31, 1998 vs. Three Months Ended March 31, 1997
During the three months ended March 31, 1998, the Company incurred
a net gain of $11,438 as compared to a net loss of $(33,754) for the
same three months ended March 31, 1997, an increase in net income of
$45,192. Interest income, net, for the period increased to $74,861, an
increase of $53,931 (or 158%) from $20,930 for the three months ended March
31, 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 $97,744 (or 186%); i.e.,
$150,432 for the three month period ending March 31, 1998 as compared to
$52,688 for the three months ended March 31, 1997. This increase is
attributable to an increase in Notes Payable. At March 31,1998, the company
had outstanding debt securities (Notes Payable) of $8,635,978, up
from $3,447,728 at March 31, 1997, an increase of 150%.
The Company's general and administrative expenses for the three
months ended March 31, 1998 increased to $61,264 from $57,473 for the
same period ending March 31, 1997, an increase of 7%. This is attributable
to increases in such expenses as marketing and accounting over the same
period in 1997.
<PAGE>
Liquidity and Capital Resources
Three Months Ended March 31, 1998 vs. Three Months Ended March 31, 1997
Net decrease in cash during the three months ending March 31, 1998
was $(40,153), compared to a net increase of $180,064 for the three months
ended March 31, 1997, a difference of $220,217. Net cash provided by
operating activities totaled $709 for the three months ended March
31, 1998, an increase of $9,175 over $(8,466) used by operating
activities during the three months ended March 31, 1997. This
difference is attributable primarily to an increase in income from Notes
Receivable during the three month period ending March 31, 1998 as
compared to the same period in 1997.
Net cash used by investing activities totaled $(989,882) during the
three months ended March 31, 1998, compared to $(683,641) used during
the three months ended March 31, 1997, an increase of $(306,241) or
45%. This difference is attributable to an increase in Notes Receivable
purchased and a decrease in Notes Receivable collected during the three month
period ending March 31, 1998 as compared to the same period in 1997.
Net cash provided by financing activities totaled $949,021 for this
three month period in 1998, an increase of $76,850, or 9%, from
$872,171 provided by financing activities during the three month period
ending March 31, 1997. This difference is attributable to an increase in
the Company's outstanding debt securities (Notes Payable) during the
three month period ending March 31, 1997 as compared to the same period
in 1996.
At March 31, 1998, the Company's cash, which includes cash reserves
and cash available for investment in the Mortgage Loans, was $79,833,
down from $340,467 at March 31, 1996, a decrease of $260,634.
<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: May 12, 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>
MINISTRY PARTNERS INVESTMENT CORPORATION
Financial Statements
For the quarters ended March 31, 1998 and 1997
BALANCE SHEETS
March 31,
1998 1997
ASSETS:
Cash - ECCU $ 79,834 $ 340,467
Loan receivable 69,931 0
Notes receivable 10,522,180 4,015,891
Interest receivable 59,346 23,641
Prepaid offering expense 10,845 9,797
Prepaid expenses 31,461 50,503
Furniture, Fixtures & Equipment (net) 3,066 0
Organization and start up cost, net 0 0
Total assets 10,776,663 4,440,299
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Accounts payable 0 0
Salaries payable 2,739 0
Accrued expenses - ECCU 11,940 10,249
Line of credit - ECCU 1,096,914 0
Notes payable 8,635,978 8,447,728
Income taxes payable 3,508 0
Total liabilities 9,751,079 3,457,977
Equity:
Common stock, 100,000 shares, no par value 1,000,000 1,000,000
Retained earnings 25,584 (17,678)
Total equity 1,025,584 982,322
Total liabilities and equity 10,776,663 4,440,299
The accompanying notes are an integral part of these financial
statements
<PAGE>
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
Three months ended March 31,
1998 1997
Income:
Loan interest $ 225,293 $ 73,618
Cost of funds - interest expense:
Line of credit 11,937 4,076
Notes payable 138,495 48,612
Total COF 150,432 52,688
Interest income, net 74,861 20,930
Expenses:
Salary and benefits 32,852 28,767
Marketing and promotion 5,598 2,481
Office operations 4,640 17,967
Legal and accounting 18,174 4,893
Amortization 0 2,585
Loan servicing-ECCU 0 0
Total expenses 61,264 57,473
Other income:
Interest 1,164 2,789
Organizational income 0 0
Total other income 1,164 2,789
(Loss) / Income before taxes 14,761 (33,754)
Provision for taxes 3,323 780
Net (loss) income 11,438 (33,754)
Retained earnings, beginning 14,146 16,076
Retained earnings, ending 25,584 (17,678)
Earnings per share .11 (0.34)
The accompanying notes are an integral part of these financial
statements
<PAGE>
STATEMENTS OF CASH FLOWS
Three months ended March 31,
1998 1997
Cash flows from operating activities:
Income - notes receivable $ 225,293 $ 84,909
Interest received - ECCU 1,164 2,789
Organizational income 0 0
Cash paid to suppliers, vendors & ECCU (57,740) (43,476)
Interest paid - borrowers and ECCU (150,433) (52,688)
Net cash provided (used) by operating
activities 709 (8,466)
Cash flows from investing activities:
Notes receivable purchased (1,400,214) (1,259,379)
Collections on notes receivable 408,903 581,069
Prepaid offering expenses 4,495 (5,331)
Purchases of furniture & equipment (3,066) 0
Net cash used by investing activities (989,882) (683,641)
Cash flows from financing activities:
Line of Credit--ECCU, net 116,913 (417,904)
Notes Payable, borrowings 1,868,278 1,510,393
Notes Payable, repayments (1,036,170) (220,393)
Common Stock purchased--ECCU 0 0
Net cash provided by financing activities 949,021 872,171
Net increase (decrease) in Cash (40,153) 180,064
Cash at beginning of period 119,986 160,403
Cash at end of period 79,833 340,467
Reconciliation of net income to cash
provided by operating activities
Net income/(loss) 11,438 (33,754)
Adjustments to reconcile net income to
net cash provided by operating activities
Amortization 0 2,585
Prior period adjustment (3,695) 4,205
Decrease (increase) in interest receivable (17,575) 11,291
Decrease in prepaid expenses 4,802 5,931
Decrease in prepaid income taxes 0 780
Decrease in accounts receivable 4,000 0
Increase in accounts payable and
accrued expenses 1,739 496
Net cash provided (used) by operating activities 709 (8,466)
<PAGE>
MINISTRY PARTNERS INVESTMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 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.
<PAGE>
2. Related party transactions
MPIC maintains all of its funds at the parent, ECCU. Total funds
held with ECCU were $79,834 and $340,467 at March 31, 1998 and
1997, respectively. Interest earned on these funds were $1,164 and
$2,789 for the three months ended March 31, 1998 and 1997,
respectively.
MPIC utilized physical facilities and other services of ECCU. A
charge of $1,389 - 1998 and $2,984 - 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 of
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 8.00% to
11.375%. 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
March 31, 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 March 31, 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-
<PAGE>
5. Line of credit - ECCU
MPIC has an unsecured $2,100,000 line of credit with ECCU, of which
$ 1,096,914 and $ -0- was borrowed at March 31, 1998 and 1997,
respectively. Interest at March 31, 1998 and 1997 was 6.246% and
6.085%, respectively, and varies according to ECCU's cost of funds.
6. Notes payable
MPIC has unsecured notes payable at March 31, 1998, as follows:
Total Interest Rate
Private Placement $ 339,594 6.32 - 8.55
CA Public Offering 441,383 6.90 - 8.66
National Offering 4,120,267 5.01 - 7.45
Special Offering 3,734,732 5.01 - 7.86
$ 8,635,976
Future maturities at March 31 are as follows:
1998 1997
1997 -0- 2,030,155
1998 5,113,168 711,411
1999 2,432,429 218,377
2000 614,617 374,754
2001 100,147 93,031
2002 252,909 -0-
2003 122,706 -0-
$ 8,635,976 $ 3,447,728
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 March 31, 1998 and 1997,
$441,384 and $691,814, 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 has been completely sold. At March 31,
1998 and 1997, $3,617,470 and $971,541, 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 March 31, 1998 and 1997,
$502,797 and $ -0-, respectively, were outstanding.
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-END> MAR-31-1998 MAR-31-1997
<CASH> $79,834 $340,467
<SECURITIES> $0 $0
<RECEIVABLES> $10,581,526 $4,039,532
<ALLOWANCES> $0 $0
<INVENTORY> $0 $0
<CURRENT ASSETS> $611,295 $1,275,744
<PP&E> $0 $0
<DEPRECIATION> ($166) $0
<TOTAL-ASSETS> $10,776,663 $4,440,299
<CURRENT-LIABILITIES> $7,533,428 $2,647,991
<BONDS> $0 $0
$0 $0
$0 $0
<COMMON> $1,000,000 $1,000,000
<OTHER-SE> $25,584 ($17,678)
<TOTAL-LIABILITY-AND-EQUITY>$10,776,663 $4,440,299
<SALES> $0 $0
<TOTAL-REVENUES> $226,457 $76,407
<CGS> $0 $0
<TOTAL-COSTS> $211,696 $110,161
<OTHER-EXPENSES> $0 $0
<LOSS-PROVISION> $0 $0
<INTEREST-EXPENSE> $150,432 $52,688
<INCOME-PRETAX> $14,761 ($33,754)
<INCOME-TAX> $3,323 $780
<INCOME-CONTINUING> $0 $0
<DISCONTINUED> $0 $0
<EXTRAORDINARY> $0 $0
<CHANGES> $0 $0
<NET-INCOME> $11,438 ($33,754)
<EPS-PRIMARY> $0.11 ($0.34)
<EPS-DILUTED> $0.11 ($0.34)
</TABLE>
