<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[ X ] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 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
(Name of small business issuer in its 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)(Zip code)
(714) 226-3619
(Issuer's telephone number)
Securities registered under Section 12(b) of the Exchange Act:
Title of each class:
Name of each exchange on which registered:
Securities registered under Section 12(g) of the Exchange Act:
Title of each class:
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act 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
Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. [x]
Issuer's revenues for its most recent fiscal year: $578,147
State the aggregate market value of the voting and non-voting common equity
held by non-affiliates computed by reference to the price at which the common
equity was sold, or the average bid and asked price of such common equity, as
of a specified date within the past 60 days: None.
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
At December 31, 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.
DOCUMENTS INCORPORATED BY REFERENCE
If the following documents are incorporated by reference, briefly describe
them and identify the part of the Form 10-KSB (e.g., Part I, Part II, etc.)
Into which the document is incorporated: (1) any annual report to security
holders; (2) any proxy or information statement; and (e) any prospectus filed
pursuant to Rule 424(b) or of the Securities Act of 1033 ("Securities Act").
The list documents should be clearly described for identification purposes
(e.g., annual report to security holders for fiscal year ended December 24,
1990).
Transitional Small Business Disclosure Format (check one):
YES NO X
<PAGE>
PART I
Item 1. Description of Business
The Company
The Company, Ministry Partners Investment Corporation, is a California
corporation, formed in October, 1991, for the sole purpose of investing in
or purchasing existing loans to qualified church organizations. The
Company was formed by and is currently the wholly-owned subsidiary of ECCU.
See "BUSINESS OF THE COMPANY - ECCU and Its Relationship to the Company."
The Company is a taxable organization under both federal and California
state law. ECCU is a mutual benefit corporation and is presently exempt
from federal but not California state income tax.
The Company was organized for the purpose (mission) of providing 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. In accordance with its
mission, the Company operates with a view towards providing the highest
practical yields to its investors in relation to the yields it realizes on
its Mortgage Loan investments and its operating, general and administrative
costs. As the Company's sole shareholder, ECCU has not, and does not intend
in the future to cause the Company to operate with a view towards
maximizing profit. The Company's primary goal will be to continue to
provide funds for secured loans to Evangelical churches and church
organizations on a cost effective basis both for the Company and such
borrowers.
The Company is one of the few institutions or agencies within the
western United States organized to assist local evangelical Christian
church congregations and organizations to provide financing for the
acquisition, development and/or renovation of churches or church-related
properties. Historically, through the sale of its debt
securities to persons affiliated with evangelical Christian churches
and organizations, the Company has given these persons the opportunity
to jointly and indirectly provide their organizations with such
financing, something they may not have been able to accomplish
individually. To date, the Company has suffered no defaults under any
of its mortgage loans nor has the Company defaulted on or been
delinquent in the payment of any interest or principal on the notes it
has sold to investors.
To date, the Company's investments have been financed by ECCU's
investment in the Company's common stock and through the sale of its
collateralized and uncollateralized notes. The Company's Mortgage
Loan Investments have been facilitated through a warehouse credit line
from ECCU. This credit line financing is currently in the amount of
$2,100,000. This credit line, which the Company intends to maintain
indefinitely, is subject to ECCU's standard commercial loan
requirements, including blanket liens on the Company's assets. ECCU
has agreed to subordinate this loan to the payment of its Class A and Class
A-1 Notes. There is no assurance that ECCU will be able to continue to
provide this credit line to the Company in the future.
The Company currently employs two full-time persons. ECCU provides the
Company with certain services for which ECCU charges the Company on a current
basis.
<PAGE>
Reports
The Company has filed with the Commission a Registration Statement on
Form SB-2 (including all amendments thereto, the "Registration Statement"),
with respect to its Class A-1 notes. For further information about the
Company and its Securities, reference is made to the Registration Statement
and the exhibits thereto, which may be examined without charge at the public
reference facilities maintained by the Commission at Room 1204, Judiciary
Plaza, 450 Fifth Street NW, Washington, DC 20549, and copies of which may be
obtained from the Commission upon payment of the prescribed fees. The
Registration Statement may also be obtained from the Commission's website
maintained at http://www.sec.gov.
Since December 31, 1996 and continuing after the date of this
report, the Company will be required to file such reports with the
Securities and Exchange Commission (the "Commission") as it may be required
to file pursuant to the Exchange Act by reason of Section 15(d) thereof.
The Company is not otherwise subject to the information requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith does not otherwise file reports, proxy statements and
other information with the Commission. Any reports, proxy statements and
other information filed by the Company in accordance with the Exchange
Act can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1204, Judiciary Plaza, 450 Fifth
Street NW, Washington, DC 20549 and Suite 1400, 5670 Wilshire Boulevard,
11th Floor, Los Angeles, California 90036. Copies of such material can be
obtained at prescribed rates from the public reference section of the
Commission at 450 Fifth Street NW, Washington, DC 20549. Copies of such
reports, proxy statements and other information concerning the company may
also be obtained from the Commission's website at http://www.sec.gov.
Item 2. Description of Property
The Company's business offices are located at 1150 N. Magnolia
Avenue, Anaheim, California 92801. The Company's telephone number is
800-753-6742.
The Company currently rents its offices (approximately 1,000 square feet)
from ECCU on a month-to-month basis. ECCU provides the Company with certain
services and the use of certain of its facilities for which ECCU charges
the Company on a current basis. Presently, the amounts ECCU charges
the Company in this regard are generally less than the market rate for
similar services and facilities charged by unrelated persons. There is
no assurance that ECCU will continue this practice in the future
Item 3. 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 4. Submission of Matters to a Vote of Security Holders
None.
<PAGE>
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
The Company has 100,000 shares of its common stock outstanding, all of
which shares are owned by Evangelical Christian Credit Union, 1150 N.
Magnolia Avenue, Anaheim, California 92801. These shares are not traded
publicly. None of the Company's officers or directors beneficially owns
any of these shares. The Company does not have outstanding any options,
warrants or convertible securities. No other rights to purchase securities
of the Company have been issued.
Item 6. Management's Discussion and Analysis of Operations
The financial information included herein should be read in conjunction
with the Financial Statements, including the Notes thereto.
The Company's plan of business consists of the offer and sale of debt
obligations to investors on a continuous basis to provide funds for the
Company's mortgage loan investments. Management believes that its strategy
for maintaining liquidity will enable it to timely service and retire the
Notes regardless of the maturity mix of the Notes outstanding.
Management intends to continue the Company's current liquidity plan
which relies primarily on funds from operations, cash reserves and borrowings
under the ECCU Credit Line to pay interest and principal on its debt
securities on a timely basis. Historically, these sources have provided
sufficient funds for the Company's timely payment of debt security obligations
and it has not been required or attempted to obtain funds from the sale or
hypothecation of its Mortgage Loan investments. Historically, the Company has
experienced significant rates of reinvestment or renewal by its debt security
investors upon maturity of their investments. Thus, these sources may not
continue to provide sufficient liquidity in the event the Company does not
experience comparable reinvestment rates on the Notes. Even so, management
believes that the Company can realize sufficient funds from its ECCU Credit
Line and/or the sale or hypothecation of its Mortgage Loan investments, should
additional funds be necessary to repay the Company's debt securities as they
mature. Management bases this belief on the size and quality of the Company's
Mortgage Loan investments, the availability of purchasers of those assets on a
timely basis and a historic price (at or near par) paid for secured loans
comparable to the Company's Mortgage Loan investments.
Management does not believe that its ability to achieve sufficient
margins between interest revenues and interest expenses will be adversely
impacted by fluctuating interest rates or inflation. This is because of the
Company's ability to adjust the interest rates offered to investors on its
debt securities to reflect increases or decreases on interest rates achievable
on the Company's Mortgage Loan investments. In addition, the Company's
Mortgage Loan investments in general bear variable interest rates and reflect
changes in interest rate fluctuations due to inflation or otherwise. Thus, as
fluctuations affect yields on the Company's Mortgage Loan investments, it is
able to adjust the cost of new funds from the sale of its debt securities
accordingly.
Results of Operations
Twelve Months Ended December 31, 1997 vs. Twelve Months Ended December 31,
1996
During the twelve months ended December 31, 1997, the Company incurred a
net gain of $2,322 as compared to a net gain of $2,845 for the same twelve
months ended December 31, 1996, a decrease in net income of $(523). Interest
income, net, for the period, was $167,643, an increase of 7% from $156,031 for
the twelve months ended December 31, 1996. The Company's cost of funds (i.e.,
interest expense) during this period increased $92,928 (or 35%)to $357,754
for the twelve month period ending December 31, 1997 as compared to $264,826
for the twelve months ended December 31, 1996. This is attributable to
significant growth in the Company's debt securities portfolio. At December
31, 1997, the company had outstanding debt securities (Notes Payable) of
$7,803,870, up from $2,157,652 at December 31, 1996, an increase of 262%.
The Company's operating expenses for the twelve months ended December 31,
1997 increased to $212,217 from $170,771 for the same period ending December
31, 1996, an increase of 24%. This is attributable primarily to increases in
marketing, legal and accounting expenses associated with SEC registration,
over the same period in 1996.
Liquidity and Capital Resources
Twelve Months Ended December 31, 1997 vs. Twelve Months Ended December 31,1996
Net increase in cash during the twelve months ended December 31, 1997 was
$38,008, compared to a net decrease of $(115,814) for the twelve months ended
December 31, 1996. This gain of $153,822 was due primarily to an increase in
interest received on Notes Receivable, as $11,725,575 in Notes Receivable were
purchased in 1997 compared to $1,559,963 in 1996. Net cash provided by
operating activities totaled $14,487 for the twelve months ended December 31,
1997, an increase of $112,089 from $(97,602) used by operating activities
during the twelve months ended December 31, 1996. This difference is
attributable primarily to an increase in interest received during the twelve
months ended December 31, 1997 as compared to the same period in 1996.
Net cash used by investing activities totaled $(6,184,793) during the
twelve months ended December 31, 1997, compared to $1,544,108 provided during
the twelve months ended December 31, 1996, a difference of $(7,728,901). This
difference is primarily attributable to an increase in Notes Receivable
purchased during the twelve months ended December 31, 1997 as compared to the
same period in 1996.
Net cash provided by financing activities totaled $6,208,314 for this
twelve month period in 1997, an increase of $7,770,634 from $(1,562,320) used
by financing activities during the twelve months ended December 31, 1996.
This difference is primarily attributable to an increase in the Company's
outstanding debt securities (Notes Payable) during the twelve months ended
December 31, 1997 as compared to the same period in 1996.
At December 31, 1997, the Company's cash, which includes cash reserves
and cash available for investment in the Mortgage Loans, was $119,985, up from
$81,977 at December 31, 1996, an increase of $38,008 (46%).
Financial Statements for the Years Ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
BALANCE SHEETS
December 31,
1997 audited 1996 unaudited
Assets
<S> <C> <C>
Current Assets
Cash $ 119,985 $ 81,977
Certificate of Deposit 0 78,426
Accounts Receivable 4,000 0
Notes Receivable 418,958 829,630
Loans Receivable 1,811 0
Interest Receivable 41,771 34,932
Prepaid Expense 51,602 60,900
Prepaid Income Tax 0 780
Total Current Assets $ 638,127 $ 1,086,646
Other Assets
Notes Receivable 9,108,815 2,507,951
Loans Receivable 71,216 0
Organization & Start Up Cost, net 0 2,585
Total Other Assets $ 9,180,031 $ 2,510,536
Total Assets $ 9,818,158 $ 3,597,181
<CAPTION>
Liabilities and Stockholder's Equity
<S> <C> <C>
Current Liabilities
Accounts Payable $ 16,253 $ 9,753
Line of Credit-ECCU 980,000 417,904
State Income Taxes Payable 3,694 0
Notes Payable--current portion 5,792,705 1,358,301
Total Current Liabilities $ 6,792,652 $ 1,785,958
Long-term Liabilities
Notes Payable $ 7,803,870 $ 2,157,652
Less current portion (5,792,705) (1,358,301)
Total Long-term Liabilities $ 2,011,165 $ 799,351
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 14,341 11,871
Total Stockholder's Equity $ 1,014,341 $ 1,011,872
Total Liabilities & Stockholder's Equity $ 9,818,158 $ 3,597,181
<CAPTION>
The accompanying notes are an integral part of these financial statements
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
December 31,
1997 audited 1996 unaudited
<S> <C> <C>
Interest Income
Notes and loans receivable $ 512,411 $ 412,211
Interest-bearing Accounts-ECCU 12,986 8,646
Total Interest Income 525,397 420,857
Interest Expense
Line of Credit-ECCU 21,948 34,424
Notes Payable 335,806 230,402
Total Interest Expense 357,754 264,826
Net Interest Income 167,643 156,031
Other Income
Point fee income 52,750 18,000
Operating Expenses
Salaries and Benefits 113,268 105,670
Marketing and Promotion 34,556 6,393
Office occupancy 12,585 11,446
Office Operations 10,089 17,285
Legal and Accounting Expenses 39,133 14,469
Amortization 2,585 15,508
Total Operating Expenses 212,217 170,771
(Loss)Income before provision
for income taxes 8,176 3,259
Provision for Income Taxes 5,854 415
Net Income $ 2,322 $ 2,845
<CAPTION>
The accompanying notes are an integral part of these financial statements.
STATEMENTS OF CASH FLOWS
December 31,
1997 audited 1996 unaudited
<S> <C> <C>
Cash flows from operating activities:
Interest received notes & loans receivable $ 505,572 401,410
Interest received interest bearing accounts 12,986 5,221
Point fee income received 48,750 18,000
Cash paid to suppliers, vendors and ECCU (191,553) (181,037)
Interest paid - investors and ECCU (357,754) (341,196)
Income taxes paid (3,514) 0
Net Cash (used for)/ provided by
Operating Activities 14,487 (97,602)
Cash flows from investing activities:
Principal payments received on
notes receivable $ 5,535,383 $ 3,179,071
Purchase of notes receivable (11,725,575) (1,559,963)
Principal payments received on
loans receivable 1,973 0
Loans made (75,000) 0
(Purchase)/proceeds from
certificate of deposit 78,426 (75,000)
Net cash (used for)/provided by
investing activities (6,184,793) 1,544,108
Cash flows from financing activities:
Advances made on line of credit - ECCU 3,606,675 1,668,000
Principal payments made on line of credit (3,044,579) (2,033,663)
Proceeds from borrowings on notes payable 10,546,826 2,157,652
Principal payments made on notes payable (4,900,608) (3,354,309)
Net cash (used for)/provided by
financing activities 6,208,314 (1,562,320)
Net increase/(decrease) in Cash 38,008 (115,814)
Cash at beginning of period 81,977 197,791
Cash at end of period 119,985 81,977
Reconciliation of net income to cash
provided by operating activities
Net Gain 2,322 2,845
Adjustments to reconcile net income
to net cash provided by
operating activities-
Amortization 2,585 15,508
Increase in interest receivable (6,839) (14,226)
(Increase) Decrease in prepaid expenses 11,579 (20,860)
Decrease in prepaid income taxes 0 3,400
Increase in income taxes payable 2,340 0
Increase in accounts receivable (4,000) 0
(Decrease)Increase in accounts payable &
accrued expenses 6,500 (84,269)
Net cash (used for)/provided by
operating activities 14,487 (97,602)
</TABLE>
The accompanying notes are an integral part of these financial statements.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 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 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 at December 31, 1997 were $119,985 and at December 31, 1996 were
$81,977. Interest earned on these funds for the years ended December 31. 1997
were $12,986 and at December 31, 1996 were $8,646.
MPIC, as part of its investment strategy, purchases an interest in loans
offered for sale by ECCU. In consideration, ECCU has entered into an
agreement with MPIC to share net fee income on loans purchased. MPIC
purchased loans totaling $11,725,575 from ECCU and received $52,750 of fee
income from ECCU on selected loans purchased during the year ended
December 31. 1997. MPIC recognized interest income on notes receivable from
ECCU of $512,411 during the year ended December 31, 1997 and $412,211 during
the year ended December 31, 1996.
MPIC pays support charges for management services and rent to ECCU on a
month-to-month basis. A charge of $12,585 - 1997 and $11,446 - 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 believes that such method is reasonable.
Notes payable are substantially to members of ECCU.
3. Notes receivable
The notes receivable are backed by loan participation agreements
secured by loans originated by ECCU to various churches and related
organizations to finance facilities. Loan maturities extend through 2010,
although the majority are due in 2000 and 2002. The notes earn interest at
rates between 8% and 11.275%, with a weighted average yield of 9.203%.
No allowance for doubtful accounts has been established for the notes
receivable. The Company has no experience of loan loss and, as of December
31, 1997 and 1996, none of the loans are impaired. Management believes all of
the notes are adequately secured and fully collectible.
4. Line of credit - ECCU
MPIC has an unsecured $2,100,000 line of credit with ECCU, of which $
980,000 and $ 417,904 was borrowed at December 31, 1997 and 1996,
respectively. Interest at December 31, 1997 and 1996 was 6.175% and 5.902%,
respectively, and varies according to ECCU's cost of funds.
5. Notes payable
MPIC has unsecured notes payable at December 31, 1997, as follows:
Total Interest Rate
Private Placement $ 381,030 6.36 - 8.55
CA Public Offering 478,643 6.81 - 8 .66
National Offering 3,673,929 5.14 - 7.70
Special Offering 3,270,268 5.64 - 7.86
$ 7,803,870
Future maturities at December 31 are as follows:
1997 1996
1997 $ - $ 1,121,656
1998 5,689,477 234,552
1999 1,306,032 156,855
2000 478,047 164,001
2001 98,531 480,588
2002 231,783 -
$ 7,803,870 $ 2,157,652
6. 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
December 31, 1997 and 1996, $478,643 and 1,141,394 respectively, were
outstanding.
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
December 31, 1997 and 1996, $3,673,929 and $ 23,033, 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 has not been made effective on December 31, 1997 and
sales for the new offering have not begun.
Item 7. Financial Statements
The following Balance Sheets, Statements of Operations and Statements of Cash
Flows for the twelve months ended December 31, 1997, the three months ended
December 31, 1996 and the twelve months ended September 30, 1996 of Registrant
(the "Company") are audited statements for the periods reported. The
financial statements for 1997 are included at the end of this Form 10-KSB on
pages F-1 through F-7.
<PAGE>
<TABLE>
<CAPTION>
BALANCE SHEETS
Year Ended Three Months Ended Year Ended
December 31, December 31, September 30,
1997 1996 1996
-------------------------------------------------
<S> <C> <C> <C>
ASSETS
Current Assets
Cash $ 119,985 $ 81,977 $ 85,583
Certificates of deposit 0 78,426 77,284
Notes receivable 418,958 829,630 831,537
Loans receivable 1,811 0 0
Interest receivable 41,771 34,932 25,594
Accounts receivable 4,000 0 0
Prepaid expenses 51,602 63,181 54,010
Total Current Assets 638,127 1,088,146 1,074,008
Other Assets
Notes receivable 9,108,815 2,507,951 2,660,346
Loans receivable 71,216 0 0
Organizational &
start-up costs, net 0 2,585 6,462
Total Other Assets 9,180,031 2,510,536 2,666,808
Total Assets 9,818,158 3,598,682 3,740,816
LIABILITIES AND
STOCKHOLDER'S EQUITY
Current Liabilities
Accounts payable $ 16,253 9,753 10,697
Line of credit 980,000 417,904 492,708
Notes payable -
current portion 5,792,705 1,358,301 1,363,017
Income taxes payable 3,694 1,354 0
Total Current Liabilities 6,792,652 1,787,312 1,866,422
Long-term Liabilities
Notes payable 7,803,870 2,157,652 2,236,731
Less current portion (5,792,705) (1,358,301) (1,363,017)
Total Long-term Liabilities 2,011,165 799,351 873,714
Stockholder's Equity
Common stock, 10,000,000
shares authorized,
100,000 shares issued &
outstanding, no par value 1,000,000 1,000,000 1,000,000
Retained earnings 14,341 12,019 680
Total Stockholder's Equity 1,014,341 1,012,019 1,000,680
Total Liabilities and
Stockholder's Equity $ 9,818,158 $ 3,598,682 $ 3,740,816
<PAGE>
<CAPTION>
STATEMENTS OF INCOME AND RETAINED EARNINGS
Year Ended Three Months Ended Year Ended
December 31, December 31, September 30,
1997 1996 1996
-------------------------------------------------
<S> <C> <C> <C>
INTEREST INCOME
Notes receivable and
loans receivable $ 512,411 $ 83,158 $ 437,168
Interest-bearing accounts 12,986 1,826 8,380
Total Interest Income 525,397 84,984 445,548
INTEREST EXPENSE
Line of credit 21,948 8,471 35,443
Notes payable 335,806 41,533 252,167
Total Interest Expense 357,754 50,004 287,610
NET INTEREST INCOME 167,643 34,980 157,938
OTHER INCOME
Point fee income 52,750 18,000 0
Other 0 1,501 0
Total Other Income 52,750 19,501 0
OPERATING EXPENSES
Salaries and
benefits reimbursed 113,268 24,270 105,751
Marketing and promotion 34,557 874 7,950
Office occupancy 12,585 0 0
Office operations 10,089 7,911 24,873
Legal and accounting 39,133 4,056 18,320
Amortization 2,585 3,877 15,508
Total Operating Expenses 212,217 40,988 172,402
INCOME BEFORE PROVISION
FOR INCOME TAXES 8,176 13,493 (14,464)
Provision for Income Taxes 5,854 2,154 800
NET INCOME 2,322 11,339 (15,264)
RETAINED EARNINGS, BEGINNING 12,019 680 15,944
RETAINED EARNINGS, ENDING $ 14,341 $ 12,019 $ 680
<PAGE>
<CAPTION>
STATEMENTS OF CASH FLOWS
Year Ended Three Months Ended Year Ended
December 31, December 31, September 30,
1997 1996 1996
-------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES
Interest received on notes
receivable and
loans receivable $ 505,572 $ 73,820 $ 439,335
Interest received on
interest-bearing accounts 12,986 1,826 8,380
Point fee income received 48,750 18,000 0
Cash paid to suppliers,
vendors and parent (191,553) (45,725) (177,304)
Interest paid to investors
and parent (357,754) (50,004) (356,631)
Income taxes paid (3,514) (800) (800)
Net cash provided (used)
by Operating Activities 14,487 (2,883) (87,020)
CASH FLOWS FROM
INVESTING ACTIVITIES
Principal payments received
on notes receivable 5,535,383 319,921 2,231,583
Purchase of notes receivable (11,725,575) (165,619) (1,418,108)
Purchase of certificate
of deposit 0 (1,142) (77,284)
Principal payments received
on loans receivable 1,973 0 0
Loans made (75,000) 0 0
Proceeds from maturities
of certificate of deposit 78,426 0 0
Net cash provided (used) by
Investing Activities (6,184,793) 153,160 736,191
CASH FLOWS FROM
FINANCING ACTIVITIES
Advances made on
line of credit 3,606,675 289,000 2,037,495
Principal payments made on
line of credit (3,044,579) (363,805) (1,883,321)
Proceeds from borrowings
on notes payable 10,546,826 259,052 1,555,234
Principal payments made
on notes payable (4,900,608) (338,130) (2,423,486)
Net cash provided (used) by
Financing Activities 6,208,314 (153,883) (714,078)
Net increase in cash 38,008 (3,606) (64,907)
Cash at beginning of year 81,977 85,583 150,490
Cash at end of year $ 119,985 $ 81,977 $ 85,583
Reconciliation of net
gain (loss) to cash
provided (used) by
operating activities:
Net gain (loss) 2,322 11,339 (15,264)
Adjustments to reconcile
net gain (loss) to net
cash provided (used) by
operating activities:
Amortization 2,585 3,877 15,508
(Increase) Decrease in
interest receivable (6,839) (9,338) 2,167
(Increase) in accounts
receivable (4,000) 0 0
(Increase) Decrease in
prepaid expenses 11,579 (9,171) (17,679)
Increase (Decrease)
in accounts payable
and accrued expenses 6,500 (944) (71,752)
Increase in
income taxes payable 2,340 1,354 0
Net Cash Provided (Used)
by Operating Activities $ 14,487 $ (2,883) $ (87,020)
</TABLE>
Item 8. Changes In and disagreements With Accountants on Accounting and
Financial Disclosure
None
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance With Section 16(a) of the Exchange Act
Set forth below are the Directors and Executive officers of the Company.
Name Position Held
Mark G. Holbrook Chairman of the Board
John C. Garmo President
Mark A. Johnson Chief Financial Officer, Treasurer, Director
Van C. Elliott* Director
Arthur G. Black Director
Wallace G. Norling* Director
Scott T. Vandeventer Director
* Denotes Independent Director
The following is a summary of the business experience of the
officers and directors of the Company during the past five years.
MARK G. HOLBROOK, age 47, has served as chairman of the Company since
its inception. Mr. Holbrook also serves as president and chief executive
officer of ECCU. Mr. Holbrook serves as Board Chairman of Christian
Management Association.
JOHN C. (SKIP) GARMO, age 50, has served as president of the Company
since December, 1994. As president, Dr. Garmo is responsible for the
management of the Company's day-to-day operations subject to the
supervision of the Company's Board of Directors. Prior to joining the
Company, Dr. Garmo served as vice president of MAF Foundation, a private
foundation specializing in charitable gift-planning. He is active in
various professional organizations and serves on several not-for-profit
boards.
MARK A. JOHNSON, age 40, has served as chief financial officer,
treasurer, and a director of the Company since its inception. Mr. Johnson
also serves as executive vice president of ECCU, a position he has held
since June, 1993. Mr. Johnson is also owner of Mailboxes Surprises since
its inception in January 1994.
VAN C. ELLIOTT, age 60, has served as director of the Company since
1994. He has served as director for ECCU since 1990. Mr. Elliott served
as associate director of the Conservative Baptist Association of Southern
California from 1980 to 1994 where he was responsible for the general
administrative oversight of the association's activities. Since that time,
he has been self-employed as a consultant, and is Vice President of
Business Services for Dynamic Church Planting International. Mr. Elliott is
a member of the Institute of Certified Financial Planners, Christian Estate
Planners of California, Christian Management Association, and holds the
professional designation of Certified Financial Planner.
ARTHUR G. BLACK, age 59, was elected to the Company's board
of directors in 1994. Mr. Black is currently a ministry development officer
at ECCU. Mr. Black was previously executive vice president of Truth For
Life (1994-1996), a nationally-syndicated radio Bible teaching ministry. He
served as director of U.S. broadcasting for Insight For Living from 1993 to
1994. He is a General Partner for Rancho Sierra Acres, Christian Investors,
P/L Properties and Ocean View Investors.
WALLACE G. NORLING, age 72, has served as a director of the Company
since its inception. Dr. Norling serves as Superintendent Emeritus of
the southwest district of the Evangelical Free Church.
SCOTT T. VANDEVENTER, age 41, has served as a director of the Company
since 1992. Mr. Vandeventer has been employed by ECCU since 1988 and is
currently executive vice president and chief operating officer of ECCU.
Mr. Vandeventer is also currently associated with NYE Partners, a business
consulting firm whose clients may include firms doing business with the
Company and/or ECCU.
Item 10. Executive Compensation
Except for Mr. Garmo, none of the Company's officers or directors
currently receives compensation from the Company. Each, however, is
entitled to be reimbursed for expenses incurred in performing duties on
behalf of the Company.
The following table sets forth certain information regarding
compensation paid by the Company for services rendered to the Company
during its fiscal year ended December 31, 1997, its transitional year ended
December 31, 1996 and its fiscal years ended September 30, 1996, 1995 and
1994 by its Chief Executive Officer and President. None of the Company's
executive officers (the named Executive Officers) had a total salary, plus
bonus, exceeding $100,000 during this period.
Summary Compensation Table
Annual Compensation Long-Term Compensation
Securities
Name and Fiscal Year Restricted Underlying
Principal Position Ended Salary(s)(1) Stock Awards Options
Mark G. Holbrook, 12-31-97 (2) -0- -0-
Chairman, Chief 12-31-96 (2) -0- -0-
Executive Officer 9-30-96 (2) -0- -0-
9-30-95 (2) -0- -0-
John C. Garmo, 12-31-97 $62,575 -0- -0-
President 12-31-96 $14,815 -0- -0-
9-30-96 59,500 -0- -0-
9-30-95 55,000 -0- -0-
(1) No bonuses were paid to any executive officers during the periods
stated.
(2) Mr. Holbrook is a full-time employee of ECCU. Since
December 1, 1994, the commencement date of Mr. Garmo's employment
by the Company, Mr. Holbrook has expended, on the average,
approximately 2% of his time as an officer and director of the
Company. The Company reimburses ECCU for that portion of Mr.
Holbrook's time devoted to service to the Company as an officer
(but not director). Mr. Holbrook currently devotes less than 1%
of his time as an officer of the Company.
Option/Warrant Grants in Current Fiscal Year. No options, warrants or
other rights to purchase securities of the Company have been issued.
Item 11. Security Ownership of Certain Beneficial Owners and Management
The Company has 100,000 shares of its common stock outstanding, all of
which shares are owned by Evangelical Christian Credit Union. These shares
are not traded publicly. None of the Company's officers or directors
beneficially owns any of these shares. The Company does not have outstanding
any options, warrants or convertible securities. No other rights to purchase
securities of the Company have been issued.
Item 12. Certain Relationships and Related Transactions
None
<PAGE>
Item 13. Exhibits and Reports on Form 8-K
Exhibits.
3.1 Articles of Incorporation of Registrant.(1)
3.2 Bylaws of Registrant.(1)
4.1 Form of Class A-1 Note.(2)
4.2 Form of Class A-1 Loan and Standby Trust Agreement.(2)
4.3 ECCU Class A-1 Note Subordination Agreement.(2)
5.1 Opinion of Rushall & McGeever.(2)
10.1 ECCU Loan Agreement and Note.(1)
23.1 Consent of Rushall & McGeever (included in Exhibit 5.1 hereto).(1)
23.2 Consent of Turner, Warren, Hwang & Conrad (2)
23.3 Consent of Turner, Warren, Hwang & Conrad (2)
24.1 Powers of Attorney (included on page II-4 of Registration
Statement).(2)
27 Financial Data Schedule (included)
____________________
(1) Incorporated by reference from Registration Statement on Form SB-2
filed on April 24, 1996 as amended.
(2) Incorporated by reference from Registration Statement on Form SB-2
filed on November 19, 1997 as amended.
Reports on Form 8-K: None
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Dated: March 27, 1998 MINISTRY PARTNERS INVESTMENT CORPORATION
(Registrant)
By: /s/ John C. Garmo
John C. Garmo, President
By: /s/ Brian Scharkey
Brian Scharkey,
Principal Accounting Officer
MINISTRY PARTNERS INVESTMENT
CORPORATION
FINANCIAL STATEMENTS
DECEMBER 31, 1997
TURNER, WARREN, HWANG & CONRAD
ACCOUNTANCY CORPORATION
TABLE OF CONTENTS
Page
Independent Auditor's Report F-1
Balance Sheet F-2
Statement of Income and Retained Earnings F-3
Statement of Cash Flows F-4
Notes to Financial Statements F-5
<PAGE>
TURNER, WARREN, HWANG & CONRAD
ACCOUNTANCY CORPORATION
100 NORTH FIRST STREET, SUITE 202
BURBANK, CALIFORNIA 91502
GARY W. TURNER , CPA
JUDITH M. WARREN , CPA
WALTER Y. HWANG, CPA
DAVID A. CONRAD, CPA
(818) 955-9537
(562) 435-2826
FAX (818) 955-8416
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Ministry Partners Investment Corporation
Anaheim, California
We have audited the accompanying balance sheet of Ministry Partners
Investment Corporation as of December 31, 1997, and the related
statements of income and retained earnings and cash flows for the
year then ended. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Ministry
Partners Investment Corporation as of December 31, 1997, and the
results of its operations and its cash flows for the year then ended
in conformity with generally accepted accounting principles.
The above-mentioned financial statements have been prepared from the
separate records maintained by Ministry Partners Investment
Corporation and may not necessarily be indicative of the results of
its operations and its cash flows if the Company (a wholly owned
subsidiary of Evangelical Christian Credit Union) had been operated
as an unaffiliated company. Portions of certain income and expenses
represent allocations made from the parent company.
TURNER, WARREN, HWANG & CONRAD
ACCOUNTANCY CORPORATION
Burbank, California
February 6, 1998
F-1
<PAGE>
MINISTRY PARTNERS INVESTMENT CORPORATION
BALANCE SHEET
DECEMBER 31, 1997
ASSETS
Current Assets
Cash $ 119,985
Notes receivable 418,958
Loans receivable 1,811
Interest receivable 41,771
Accounts receivable 4,000
Prepaid expenses 51,602
Total Current Assets $ 638,127
Other Assets
Notes receivable 9,108,815
Loans receivable 71,216
Total Other Assets 9,180,031
Total Assets $ 9,818,158
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities
Accounts payable $ 16,253
Line of credit 980,000
Notes payable - current portion 5,792,705
Income taxes payable 3,694
Total Current Liabilities $ 6,792,652
Long-term Liabilities
Notes payable 7,803,870
Less current portion (5,792,705)
Total Long-term Liabilities 2,011,165
Stockholder's Equity
Common stock, 10,000,000 shares authorized,
100,000 shares issued and outstanding, no
par value 1,000,000
Retained earnings 14,341
Total Stockholder's Equity 1,014,341
Total Liabilities and Stockholder's Equity $ 9,818,158
F-2
<PAGE>
MINISTRY PARTNERS INVESTMENT CORPORATION
STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE YEAR END DECEMBER 31, 1997
INTEREST INCOME
Notes receivable and loans receivable $ 512,411
Interest-bearing accounts 12,986
Total Interest Income $ 525,397
INTEREST EXPENSE
Line of credit 21,948
Notes payable 335,806
Total Interest Expense 357,754
NET INTEREST INCOME 167,643
OTHER INCOME
Point fee income 52,750
Total Other Income 52,750
OPERATING EXPENSES
Salaries and benefits reimbursed 113,268
Marketing and promotion 34,557
Office occupancy 12,585
Office operations 10,089
Legal and accounting 39,133
Amortization 2,585
Total Operating Expenses 212,217
INCOME BEFORE PROVISION FOR INCOME TAXES 8,176
Provision for Income Taxes 5,854
NET INCOME 2,322
RETAINED EARNINGS, BEGINNING 12,019
RETAINED EARNINGS, ENDING $ 14,341
F-3
<PAGE>
MINISTRY PARTNERS INVESTMENT CORPORATION
STATEMENT OF CASH FLOWS
FOR THE YEAR END DECEMBER 31, 1997
CASH FLOWS FROM OPERATING ACTIVITIES
Interest received on notes receivable and
loans receivable $ 505,572
Interest received on interest-bearing accounts 12,986
Point fee income received 48,750
Cash paid to suppliers, vendors and parent (191,553)
Interest paid to investors and parent (357,754)
Income taxes paid (3,514)
Net Cash Provided by Operating Activities 14,487
CASH FLOWS FROM INVESTING ACTIVITIES
Principal payments received on notes receivable 5,535,383
Purchase of notes receivable (11,725,575)
Principal payments received on loans receivable 1,973
Loans made (75,000)
Proceeds from maturities of certificate of deposit 78,426
Net Cash Used by Investing Activities (6,184,793)
CASH FLOWS FROM FINANCING ACTIVITIES
Advances made on line of credit 3,606,675
Principal payments made on line of credit (3,044,579)
Proceeds from borrowings on notes payable 10,546,826
Principal payments made on notes payable (4,900,608)
Net Cash Provided by Financing Activities 6,208,314
Net increase in cash 38,008
Cash at beginning of year 81,977
Cash at end of year $ 119,985
Reconciliation of net income to net cash used by
operating activities:
Net income $ 2,322
Adjustments to reconcile net income to
net cash used by operating activities:
Amortization 2,585
Increase in interest receivable (6,839)
Increase in accounts receivable (4,000)
Decrease in prepaid expenses 11,579
Increase in accounts payable and accrued expenses 6,500
Increase in income taxes payable 2,340
Net Cash Provided by Operating Activities $ 14,487
F-4
MINISTRY PARTNERS INVESTMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business: Ministry Partners Investment Corporation 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.
Notes Receivable: Interest income on notes receivable is recognized
over the term of the note and is generally computed using the simple
interest method.
Prepaid Offering Expense: Prepaid public offering is related to a
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.
NOTE 2 - RELATED PARTY TRANSACTIONS
The Company maintains all its funds at the parent, ECCU. Total funds
held with ECCU at December 31, 1997 were $119,985. Interest earned
on these funds for the year ended December 31, 1997 was $12,986.
The Company, as part of its investment strategy, purchases an
interest in loans offered for sale by ECCU. In consideration, ECCU
has entered into an agreement with the Company to share net fee
income on loans purchased. The Company purchased loans totaling
$11,725,575 from ECCU and received $52,750 of fee income from ECCU
on selected loans purchased during the year ended December 31, 1997.
The Company recognized interest income on notes receivable from ECCU
of $512,411 during the year ended December 31, 1997.
The Company pays support charges for management services and rent to
ECCU on a month-to-month basis. A charge of $30,074 was made for
these services for the year ended December 31, 1997. The method used
to arrive at the periodic charge is based on the fair market value of
services provided. Management believes that such method is
reasonable.
F-5
The Company reimburses ECCU for salaries and benefits of employees.
The amount reimbursed for the year ended December 31, 1997 was
$113,268. There was $11,739 due to ECCU at December 31, 1997.
NOTE 3 - NOTES RECEIVABLE
The notes receivable are backed by loan participation agreements
secured by loans originated by ECCU to various churches and related
organizations to finance facilities. Loan maturities extend through
2010, although the majority are due in 2000 to 2002. The notes earn
interest at rates between 8% and 11.375%, with a weighted average
yield of 9.203%.
No allowance for uncollectible accounts has been established for the
notes receivable. The Company has no experience of loan loss and, as
of December 31, 1997, none of the loans are impaired. Management
believes all of the notes are adequately secured and fully
collectible.
NOTE 4 - LINE OF CREDIT
The Company has an unsecured $2,100,000 line of credit with ECCU that
expires March 31, 1998. There was $980,000 outstanding as of
December 31, 1997. Interest at December 31, 1997 was 6.175%, and
varies according to ECCU's cost of funds. Interest of $21,948 was
paid to ECCU during the year ended December 31, 1997.
NOTE 6 - NOTES PAYABLE
The Company has unsecured notes payable at December 31, 1997, as
follows:
Amount Interest Rate
Private Placement Notes $ 381,030 6.36% - 8.55%
Public Offering Notes 478,643 6.81% - 8.66%
National Offering Notes 3,421,729 5.14% - 7.70%
Special Offering Notes 3,522,468 5.64% - 7.86%
$ 7,803,870
Notes payable are substantially to members of ECCU.
The following are maturities of notes payable for each of the next five years:
Year Ending December 31,
1998 $ 5,689,391
1999 1,309,605
2000 474,563
2001 98,530
2002 231,781
$ 7,803,870
F-6<PAGE>
NOTE 6 - PUBLIC OFFERING
In August 1994, the Company 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. There was $478,643 outstanding at December 31,1997.
This offering has been discontinued.
The Company filed a registration statement with the U.S. Securities
and Exchange Commission and received approval in October 1996 to offer
$5,000,000 in unsecured promissory notes to the public. There was
$3,421,729 outstanding at December 31, 1997.
The Company filed a registration statement with the U. S. Securities
and Exchange Commission and received approval in December 1997 to
offer $15,000,000 in unsecured promissory notes to the public. As of
December 31, 1997 none of that issue was outstanding.
NOTE 7 - INCOME TAXES
Federal income and state franchise taxes for the year ended December 31, 1997
are as follows:
Federal income taxes $ 3,660
State franchise taxes 2,194
Tax expense $ 5,854
NOTE 8 - CONCENTRATION OF CREDIT RISK
At December 31, 1997, the Company had cash at ECCU which is not federally
insured. The aggregate uninsured amount was $105,045.
F-7
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996
<PERIOD-END> DEC-31-1997 DEC-31-1996
<CASH> $119,985 $81,977
<SECURITIES> $0 $0
<RECEIVABLES> $9,646,571 $3,372,513
<ALLOWANCES> $0 $0
<INVENTORY> $0 $0
<CURRENT-ASSETS> $638,127 $1,086,646
<PP&E> $0 $0
<DEPRECIATION> $0 $0
<TOTAL-ASSETS> $9,818,159 $3,597,181
<CURRENT-LIABILITIES> $6,792,652 $1,785,958
<BONDS> $0 $0
$0 $0
$0 $0
<COMMON> $1,000,000 $1,000,000
<OTHER-SE> $14,341 $11,871
<TOTAL-LIABILITY-AND-EQUITY> $9,818,158 $3,597,181
<SALES> $0 $0
<TOTAL-REVENUES> $578,147 $438,857
<CGS> $0 $0
<TOTAL-COSTS> $569,971 $435,597
<OTHER-EXPENSES> $0 $0
<LOSS-PROVISION> $0 $0
<INTEREST-EXPENSE> $357,754 $264,826
<INCOME-PRETAX> $8,176 $3,259
<INCOME-TAX> $5,854 $415
<INCOME-CONTINUING> $0 $0
<DISCONTINUED> $0 $0
<EXTRAORDINARY> $0 $0
<CHANGES> $0 $0
<NET-INCOME> $2,322 $2,845
<EPS-PRIMARY> $0.02 $0.03
<EPS-DILUTED> $0.02 $0.03
</TABLE>
