<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, 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 September 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 September 30, 1998 and 1997, Statement
of Operations for the nine months ended September 30, 1998 and 1997,
and Statements of Cash Flows for the nine months ended September 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
September 30, 1998 and 1997 and for the nine months ended September 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 September 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
Nine Months Ended September 30, 1998 vs. Nine Months Ended September 30, 1997
During the nine months ended September 30, 1998, the Company incurred
a net gain of $49,174 as compared to a net loss of $(42,895) for the
same nine months ended September 30, 1997, an increase in net income of
$92,069. Interest income, net, for the period increased to $245,912, an
increase of $123,760 (or 101%) from $122,152 for the nine months ended
September 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 $239,439 (or 102%);
i.e.,$475,169 for the nine month period ending September 30, 1998 as compared
to $235,730 for the nine months ended September 30, 1997. This increase is
attributable to an increase in Notes Payable. At September 30,1998, the
company had outstanding debt securities (Notes Payable) of $10,849,694, up
from $6,573,441 at September 30, 1997, an increase of 65%.
The Company's general and administrative expenses for the nine
months ended September 30, 1998 increased to $176,257 from $165,046 for the
same period ending September 30, 1997, an increase of 7%. This is
attributable to the addition of two staff during this period in 1998.
<PAGE>
Liquidity and Capital Resources
Nine Months Ended September 30, 1998 vs. Nine Months Ended September 30, 1997
Net increase in cash during the nine months ending September 30, 1998
was $298,540, compared to a net decrease of $(91,201) for the nine months
ended September 30, 1997, a difference of $389,741. Net cash provided by
operating activities totaled $54,183 for the nine months ended September 30,
1998, an increase of $81,807 over $(27,624) used by operating activities
during the nine months ended September 30, 1997. This difference is
attributable primarily to an increase in net interest income from Notes
Receivable during the nine month period ending September 30, 1998 as compared
to the same period in 1997.
Net cash used by investing activities totaled $(1,821,468) during the
nine months ended September 30, 1998, compared to $(4,271,834) used during the
nine months ended September 30, 1997, a decrease of $(2,450,366) or 57%.
This difference is primarily attributable to a decrease in Notes Receivable
purchased during the nine month period ending September 30, 1998 as compared
to the same period in 1997.
Net cash provided by financing activities totaled $2,065,824 for this
nine month period in 1998, a decrease of $2,142,433, or 51%, from
$4,208,257 provided by financing activities during the nine month period
ending September 30, 1997. This difference is primarily attributable to
repayments on a line of credit and on Notes Payable during the nine month
period ending September 30, 1998 as compared to borrowings from that line of
credit during the same period in 1997.
At September 30, 1998, the Company's cash, which includes cash reserves
and cash available for investment in the Mortgage Loans, was $418,526,
up from $69,202 at September 30, 1997, an increase of $349,324.
<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: November 13, 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
September 30,
1998 1997
Assets
Current Assets
Cash $ 418,526 $ 69,202
Loans Receivable 3,299 0
Notes Receivable 527,690 1,235,992
Interest Receivable 67,596 41,791
Prepaid offering expense 28,342 0
Prepaid Expense 3,216 47,761
Organization and start up cost, net 0 0
Prepaid Income Tax 0 761
Total Current Assets 1,048,669 1,395,507
Other Assets
Loans Receivable 62,129 0
Notes Receivable 10,834,619 6,378,853
Furniture, Fixtures & Equipment (net) 4,398 0
Organization & Start Up Cost, net 0 0
Total Other Assets 10,901,146 6,378,853
Total Assets $11,949,816 $7,774,360
Liabilities and Stockholder's Equity
Current Liabilities
Accounts Payable $ 17,630 $ 17,365
Salaries Payable 4,122 0
Income Taxes Payable 15,050 0
Line of Credit-ECCU 0 210,373
Notes Payable-current portion 9,244,521 5,031,597
Total Current Liabilities 9,281,322 5,259,334
Long-term Liabilities
Notes Payable 10,849,694 6,573,441
Less current portion (9,244,521) (5,031,597)
Total Long-term Liabilities 1,605,174 1,541,844
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 63,320 (26,818)
Total Stockholder's Equity 1,063,320 973,182
Total Liabilities & Stockholder's Equity $11,949,816 $7,774,360
<PAGE>
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
Nine months ended September 30,
1998 1997
Interest Income
Notes and Loans Receivable $ 713,637 $ 334,808
Interest-bearing Accounts-ECCU 7,444 7,822
Organizational Income 0 13,750
Other Income 0 1,501
Total Interest Income 721,081 357,882
Interest Expense-Cost of Funds
Line of Credit-ECCU 21,235 19,865
Notes Payable 453,934 215,865
Total Interest Expense 475,169 235,730
Net Interest Income 245,912 122,152
Operating Expenses
Salaries and Benefits 97,859 84,605
Marketing and Promotion 20,467 26,259
Office Operations 23,702 16,527
Legal Expenses 34,229 32,576
Amortization 0 2,585
Total Operating Expenses 176,257 162,552
Income (Loss) before provision
for Income Taxes 69,656 (40,401)
Provision for Income Taxes 20,482 2,494
Net Income (Loss) $ 49,174 $ (42,895)
<PAGE>
STATEMENTS OF CASH FLOWS
Nine months ended September 30,
1998 1997
Cash flows from operating activities:
Income - loans & notes receivable $ 687,812 $ 327,949
Interest received - ECCU 7,444 7,822
Organizational income 0 13,750
Cash paid to suppliers, vendors & ECCU (165,903) (142,916)
Interest paid - borrowers and ECCU (475,169) (235,730)
Other income 0 1,501
Net cash provided (used) by
operating activities 54,183 (27,624)
Cash flows from investing activities:
Loans/notes receivable purchased (3,141,114) (7,445,536)
Collections on notes receivable 1,314,177 3,168,272
Prepaid offering expenses 9,868 (5,430)
Purchases of furniture & equipment (4,398) 0
Net cash used by investing activities (1,821,468) (4,271,834)
Cash flows from financing activities:
Line of credit -- ECCU, net (980,000) 207,531
Notes payable, borrowings 4,761,293 6,717,869
Notes payable, repayments (1,715,469) (2,302,081)
Common stock purchased -- ECCU 0 0
Net cash provided by financing
activities 2,065,824 4,208,257
Net increase/decrease in Cash 298,540 (91,201)
Cash at beginning of period 119,986 160,403
Cash at end of period 418,526 69,202
Reconciliation of net income to cash
provided by operating activities
Net income (loss) 49,173 (42,895)
Adjustments to reconcile net income to net
cash provided (used) by operating activities -
Amortization 0 2,585
Prior period adjustment (3,696) 4,205
Decrease/increase in interest receivable (25,825) (6,895)
Decrease in prepaid expenses 10,177 7,709
Decrease in prepaid income taxes 0 19
Decrease in accounts receivable 4,000 0
Increase in accounts payable & accrued
expenses 20,354 7,612
Net cash provided (used) by
operating activities 54,183 (27,624)
The accompanying notes are an integral part of these financial statements
<PAGE>
MINISTRY PARTNERS INVESTMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
September 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 $418,526 and $69,202 at September 30, 1998 and 1997,
respectively. Interest earned on these funds were $7,444 and $7,822 for
the nine months ended September 30, 1998 and 1997, respectively.
MPIC utilized physical facilities and other services of ECCU. A charge of
$4,192 - 1998 and $9,237 - 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 were 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 11.75%.
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
September 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 September 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 $210,373 was borrowed at September 30, 1998 and 1997,
respectively. Interest at September 30, 1998 and 1997 was 7.500% and
6.097%, respectively, and varies according to ECCU's cost of funds.
6. Notes payable
MPIC has unsecured notes payable at September 30, 1998, as follows:
Total Interest Rate
Private Placement $ 261,049 6.36 - 8.55
CA Public Offering 367,775 6.90 - 8.66
National Offering 2,151,848 5.03 - 7.36
Special Offering 5,169,051 5.03 - 7.00
National A-1 Offering 2,544,966 5.03 - 6.55
Offshore Offering 10,000 6.12
$10,504,689
Future maturities at September 30 are as follows:
1998 1997
1997 -0- 1,644,407
1998 4,157,785 3,205,382
1999 5,198,816 758,578
2000 656,087 468,702
2001 85,933 96,655
2002 260,017 176,181
2003 146,051 -0-
$10,504,689 $ 6,349,905
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, 1998 and 1997, $367,775 and 521,192 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 September 30, 1998 and 1997, $2,151,848 and $ 4,237,244,
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 September 30, 1998 and 1997, $ 2,544,966 And $ -0-, respectively, were
outstanding.
<TABLE> <S> <C>
<ARTICLE> 5
<C> <C>
<PERIOD-TYPE> 9-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-END> SEP-30-1998 SEP-30-1997
<CASH> $418,526 $90,939
<SECURITIES> $0 $0
<RECEIVABLES> $11,495,333 $7,656,636
<ALLOWANCES> $0 $0
<INVENTORY> $0 $0
<CURRENT-ASSETS> $1,048,669 $1,395,507
<PP&E> $4,398 $0
<DEPRECIATION> $0 $0
<TOTAL-ASSETS> $11,949,816 $7,774,360
<CURRENT-LIABILITIES> $9,281,322 $5,259,334
<BONDS> $0 $0
$0 $0
$0 $0
<COMMON> $1,000,000 $1,000,000
<OTHER-SE> $63,320 ($26,818)
<TOTAL-LIABILITY-AND-EQUITY>$11,949,816 $7,774,360
<SALES> $0 $0
<TOTAL-REVENUES> $721,081 $357,882
<CGS> $0 $0
<TOTAL-COSTS> $651,426 $400,776
<OTHER-EXPENSES> $0 $0
<LOSS-PROVISION> $0 $0
<INTEREST-EXPENSE> $475,169 $235,730
<INCOME-PRETAX> $69,656 ($42,895)
<INCOME-TAX> $20,482 $0
<INCOME-CONTINUING> $0 $0
<DISCONTINUED> $0 $0
<EXTRAORDINARY> $0 $0
<CHANGES> $0 $0
<NET-INCOME> $49,174 (8,347)
<EPS-PRIMARY> $0.49 ($0.08)
<EPS-DILUTED> $0.49 ($0.08)
</TABLE>
