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, 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
(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: $1,004,731
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, 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.
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
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 three full-time persons. ECCU provides the
Company with certain services for which ECCU charges the Company on a current
basis.
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 600 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 at the market rate for similar services
and facilities charged by unrelated persons.
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.
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, 1998 vs. Twelve Months Ended December 31,
1997
During the twelve months ended December 31, 1998, the Company incurred a
net gain of $30,258 as compared to a net gain of $2,322 for the same twelve
months ended December 31, 1997, a increase in net income of $27,936. Interest
income, net, for the period, was $339,485, an increase of 103% from $167,643
for the twelve months ended December 31, 1997. The Company's cost of funds
(i.e., interest expense) during this period increased $307,492 (or 86%)to
$665,246 for the twelve month period ending December 31, 1998 as compared to
$357,754 for the twelve months ended December 31, 1997. This is attributable
to significant growth in the Company's debt securities portfolio. At December
31, 1998, the company had outstanding debt securities (Notes Payable) of
$12,456,227, up from $7,803,870 at December 31, 1997, an increase of 60%.
The Company's operating expenses for the twelve months ended December 31,
1998 increased to $275,701 from $212,217 for the same period ending December
31, 1997, an increase of 30%. This is attributable primarily to increases in
office operating expenses associated with services provided by ECCU which were
subsidized in 1997.
The Company is addressing the Year 2000 issue with its parent company,
Evangelical Christian Credit Union, who is the data processing provider for
the Company. The Company is tracking its Year 2000 preparation in a database
that includes software, hardware devices, vendors and interfaces. Most
critical time-sensitive systems were compliant by the end of 1998. Some
remaining systems are being retired in 1999 as the Company installs new
systems to better serve its investors. Although new systems may be
characterized as Year 2000 compliant by their vendors, the Company will not
list them as compliant until they have been installed and tested. All
installed systems will be compliant by mid-year 1999.
Because of the nature of their operations, the Company does not believe the
ability of Mortgage Loan recipients (primarily churches) to maintain payment
schedules will be materially impacted by the Year 2000 issue. However, the
failure of several Mortgage Loan recipients to meet such payment schedules as
a result of the Year 2000 issue could have a material adverse effect on the
Company's results of operation or financial position. Though the Company does
not expect the Year 2000 issue to have a material adverse effect on its result
of operation or financial condition, there can be no assurances of that
position.
Contingency plans include alternative vendors, alternative procedures and a
business recovery plan which is tested annually. The business recovery plan
is designed for catastrophic events such as earthquakes or major fires, and
has application also to the Year 2000 issue. Remediation costs associated
with Year 2000 have been minimal for the Company. It believes remediation
costs will continue to be nominal through completion of Year 2000 compliance
in mid-1999.
Liquidity and Capital Resources
Twelve Months Ended December 31, 1998 vs. Twelve Months Ended December 31,1997
Net increase in cash during the twelve months ended December 31, 1998 was
$147,668, compared to a net increase of $38,008 for the twelve months ended
December 31, 1997. This gain of $109,660 was due primarily to an increase in
interest received on Notes Receivable. Net cash provided by operating
activities totaled $48,424 for the twelve months ended December 31, 1998; an
increase of $33,937 from $14,487 provided by operating activities during the
twelve months ended December 31, 1997. This difference is attributable
primarily to an increase in interest received during the twelve months ended
December 31, 1998 as compared to the same period in 1997.
Net cash used by investing activities totaled $(3,573,111) during the
twelve months ended December 31, 1998, compared to $(6,184,793) used during
the twelve months ended December 31, 1997, a difference of $2,611,682. This
difference is primarily attributable to a decrease in Notes Receivable
purchased during the twelve months ended December 31, 1998 as compared to the
same period in 1997.
Net cash provided by financing activities totaled $3,672,355 for this
twelve-month period in 1998, a decrease of ($2,535,959) from $6,208,314
provided by financing activities during the twelve months ended December 31,
1997. This difference is primarily attributable to a decrease in net cash
provided by the Line of Credit and a decrease in net proceeds from borrowings
on Notes Payable as compared to the same period in 1997.
At December 31, 1998, the Company's cash, which includes cash reserves and
cash available for investment in the Mortgage Loans, was $267,653, up from
$119,985 at December 31, 1997, an increase of $147,668 (123%).
Item 7. Financial Statements
The Balance Sheets, Statement of Operations and Statements of Cash
Flows for the twelve months ended December 31, 1998 and 1997 of Registrant
(the "Company") are included following the Independent Auditor's Report below.
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
Joseph I. Scott* 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 48, 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 51, 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 41, 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 Mailbox Surprises since its inception in
January 1994.
VAN C. ELLIOTT, age 61, 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. 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 is a Certified Financial Planner.
ARTHUR G. BLACK, age 60, was elected to the Company's board of directors in
1994. Mr. Black is currently Director of Ministry Services at Ambassador
Advertising Agency. He was previously a ministry development officer at ECCU.
Mr. Black was 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 73, 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 42, 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.
JOSEPH I. SCOTT, age 62, was elected to the Company's board of directors
in 1998. Mr. Scott joined Dean Witter (now Stanley Morgan Dean Witter)
in February 1966 as an Account Executive. He has spent his entire career
with the same firm. In the 1970's he earned the Certified Financial
Planner designation. He served from 1990 to 1995 on the finance committee of
Far East Broadcasting Company.
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, 1998, its fiscal year ended December 31, 1997, its
transitional year ended December 31, 1996 and its fiscal year ended September
30, 1996 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, 12-31-98 (2) -0- -0-
Chairman, Chief 12-31-97 (2) -0- -0-
Executive Officer 12-31-96 (2) -0- -0-
9-30-96 (2) -0- -0-
John C. Garmo, 12-31-98 $71,820 -0- -0-
President 12-31-97 62,575 -0- -0-
12-31-96 14,815 -0- -0-
9-30-96 59,500 -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
Item 13. Exhibits and Reports on Form 8-K
Exhibits:
27 Financial Data Schedule (included)
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 31, 1999 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, 1998 AND 1997
TURNER, WARREN, HWANG & CONRAD
ACCOUNTANCY CORPORATION
TABLE OF CONTENTS
Page
Independent Auditor's Report 1
Balance Sheets 2
Statements of Income and Retained Earnings 3
Statements of Cash Flows 4
Notes to Financial Statements 6
TURNER, WARREN, HWANG & CONRAD
ACCOUNTANCY CORPORATION
100 NORTH FIRST STREET, SUITE 202
BURBANK, CALIFORNIA 91502
GARY W. TURNER, CPA
JUDITH M. WARREN
WALTER Y. HWANG, CPA
DAVID A. CONRAD
(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 sheets of Ministry Partners
Investment Corporation as of December 31, 1998 and 1997, and the related
statements of income and retained earnings and cash flows for the years 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 audits.
We conducted our audits 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 audits provide 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, 1998 and 1997, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
TURNER, WARREN, HWANG & CONRAD
ACCOUNTANCY CORPORATION
Burbank, California
February 3, 1999
Financial Statements for the Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
BALANCE SHEETS
DECEMBER 31,
1998 audited 1997 audited
ASSETS
<S> <C> <C>
Current Assets
Cash $ 267,653 $ 119,985
Notes receivable, net of allowance for losses 344,434 418,958
Loans receivable 3,590 1,811
Interest receivable 82,781 41,771
Accounts receivable 1,155 4,000
Prepaid expenses 24,372 51,602
Total Current Assets $ 723,985 $ 638,127
Other Assets
Notes receivable 12,751,758 9,108,815
Loans receivable 58,960 71,216
Property and equipment, net 3,987 -
Total Other Assets 12,814,705 9,180,031
Total Assets $ 13,538,690 $ 9,818,158
<CAPTION>
LIABILITIES AND STOCKHOLDER'S EQUITY
<S> <C> <C>
Current Liabilities
Accounts payable $ 20,715 $ 16,253
Line of credit - 980,000
Notes payable - current portion 10,877,010 5,792,705
Income taxes payable 17,149 3,694
Total Current Liabilities 10,914,874 6,792,652
Long-term Liabilities
Notes payable 12,456,227 7,803,870
Less current portion (10,877,010) (5,792,705)
Total Long-term Liabilities 1,579,217 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 1,000,000
Retained earnings 44,599 14,341
Total Stockholder's Equity 1,044,599 1,014,341
Total Liabilities and Stockholder's Equity $ 13,538,690 $ 9,818,158
<CAPTION>
The Accompanying notes are an integral part of these financial statements
STATEMENTS OF INCOME AND RETAINED EARNINGS
DECEMBER 31,
1998 audited 1997 audited
<S> <C> <C>
INTEREST INCOME
Notes receivable and loans receivable $ 986,717 $ 512,411
Interest-bearing accounts 18,014 12,986
Total Interest Income 1,004,731 525,397
INTEREST EXPENSE
Line of credit 21,235 21,948
Notes payable 644,011 335,806
Total Interest Expense 665,246 357,754
NET INTEREST INCOME 339,485 167,643
PROVISION FOR NOTES RECEIVABLE LOSSES 10,000 -
NET INTEREST INCOME AFTER PROVISION FOR
NOTE RECEIVABLE LOSSES 329,485 167,643
OTHER INCOME
Point fee income - 52,750
Total Other Income - 52,750
OPERATING EXPENSES
Salaries and benefits reimbursed 126,497 113,268
Marketing and promotion 36,655 34,557
Office occupancy 10,921 12,585
Office operations 61,132 10,089
Legal and accounting 40,496 39,133
Amortization - 2,585
Total Operating Expenses 275,701 212,217
INCOME BEFORE PROVISION FOR INCOME TAXES 53,784 8,176
Provision for Income Taxes 23,526 5,854
NET INCOME 30,258 2,322
<CAPTION>
The Accompanying notes are an integral part of these financial statements
STATEMENTS OF CASH FLOWS
DECEMBER 31,
1998 audited 1997 audited
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 30,258 $ 2,322
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,184 2,585
Provision for notes receivable 10,000 -
Increase in accrued interest receivable (41,010) (6,839)
Decrease in prepaid expense 27,230 11,579
Decrease (increase) in accounts receivable 2,845 (4,000)
Increase in accounts payable 4,462 6,500
Increase in income taxes payable 13,455 2,340
Net Cash Provided by Operating Activities 48,424 14,487
CASH FLOWS FROM INVESTING ACTIVITIES
New loans made - (75,000)
Principal payments received on loans receivable 10,477 1,973
Purchase of notes receivable (5,459,964) (11,725,575)
Principal payments received on notes receivable 1,881,547 5,535,383
Proceeds from maturities of certificate of deposit - 78,426
Purchase of property and equipment (5,171) -
Net Cash Used by Investing Activities (3,573,111) (6,184,793)
CASH FLOWS FROM FINANCING ACTIVITIES
Advances made on line of credit 1,672,384 3,606,675
Amounts paid on line of credit (2,652,384) (3,044,579)
Principal payments made on notes payable (1,735,252) (4,046,880)
Proceeds from borrowings on notes payable 6,387,607 9,693,098
Net Cash Provided by Financing Activities 3,672,355 6,208,314
Net increase in cash and cash equivalents 147,668 38,008
Cash and cash equivalents at beginning of year 119,985 81,977
Cash and cash equivalents at end of year $ 267,653 $ 119,985
</TABLE>
The Accompanying notes are an integral part of these financial statements
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 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. The allowance for
notes receivable losses is increased by charges to income and decreased by
charge offs (net of recoveries).
Property and Equipment:
Furniture, fixtures, and equipment are stated at cost, less accumulated
depreciation. Depreciation is computed on a straight-line basis over the
estimated useful lives of the assets, which range from three to five years.
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.
Reclassification:
Certain account reclassifications have been made to the financial statements
of the prior year in order to conform to classification used in the current
year.
NOTE 2 - RELATED PARTY TRANSACTIONS
The Company maintains all its funds at the parent, ECCU. Total funds held
with ECCU at December 31, 1998 and 1997 were $267,653 and $119,985,
respectively. Interest earned on these funds for the years ended December 31,
1998 and 1997 were $18,014 and $12,986, respectively.
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 $5,459,964 and $11,725,575 from ECCU and
received $-0- and $52,750 of fee income from ECCU on selected loans purchased
during the years ended December 31, 1998 and 1997, respectively. The Company
recognized interest income on notes receivable from ECCU of $986,717 and
$512,411 during the years ended December 31, 1998 and 1997, respectively.
The Company pays support charges for management services and rent to ECCU on
a month-to-month basis. A charge of $35,575 and $30,074 was made for these
services for the years ended December 31, 1998 and 1997, respectively. 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.
The Company reimburses ECCU for salaries and benefits of employees. The
amount reimbursed for the years ended December 31, 1998 and 1997 was $126,497
and $113,268, respectively. There was $18,082 and $11,739 due to ECCU at
December 31, 1998 and 1997, respectively.
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 11.750%, with a weighted average yield of 8.855%.
The allowance for notes receivable losses of $10,000 has been established
during 1998. The Company has no experience of loan loss and, as of December
31, 1998, none of the loans are impaired. Management believes all of the
notes are adequately secured and the allowance is adequately maintained.
NOTE 4 - LINE OF CREDIT
The Company has an unsecured $2,100,000 line of credit with ECCU that
expires March 31, 1999. There were none outstanding as of December 31, 1998.
Interest at December 31, 1998 was 7.50%, and varies according to ECCU's cost
of funds. Interest of $21,235 and $21,948 was paid to ECCU during the years
ended December 31, 1998 and 1997, respectively.
NOTE 5 - NOTES PAYABLE
The Company has unsecured notes payable at December 31, 1998, as follows:
Total Interest Rate
Private Placement Notes $ 331,377 6.36% - 8.55%
Public Offering Notes 386,878 6.90% - 8.66%
National Offering Notes 5,997,823 4.81% - 7.36%
Special Offering Notes 5,729,972 5.31% - 7.00%
Offshore Notes 10,177 6.12%
$ 12,456,227
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 1997
1998 $ - $ 5,689,477
1999 10,877,010 1,306,032
2000 864,736 478,047
2001 149,111 98,531
2002 284,984 231,783
2003 280,386 -
$ 12,456,227 $ 7,803,870
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
were $386,878 and $478,643 outstanding at December 31, 1998 and 1997,
respectively. 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 were $1,920,261 and
$3,421,729 outstanding at December 31, 1998 and 1997, respectively.
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. There was $4,077,563
outstanding as of December 31, 1998.
NOTE 7 - INCOME TAXES
Federal income and state franchise taxes for the years ended December 31,
1998 and 1997 are as follows:
1998 1997
Federal income taxes $ 14,537 $ 3,660
State franchise taxes 8,989 2,194
$ 23,526 $ 5,854
NOTE 8 - CONCENTRATION OF CREDIT RISK
At December 31, 1998 and 1997, the Company had cash at ECCU which is not
federally insured. The aggregate uninsured amount was $123,387 and $105,045,
respectively.
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<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-END> DEC-31-1998 DEC-31-1997
<CASH> $267,653 $119,985
<SECURITIES> $0 $0
<RECEIVABLES> $13,242,678 $9,646,571
<ALLOWANCES> $10,000 $0
<INVENTORY> $0 $0
<CURRENT-ASSETS> $723,985 $638,127
<PP&E> $5,171 $0
<DEPRECIATION> $1,184 $0
<TOTAL-ASSETS> $13,538,690 $9,818,159
<CURRENT-LIABILITIES> $10,914,874 $6,792,652
<BONDS> $0 $0
$0 $0
$0 $0
<COMMON> $1,000,000 $1,000,000
<OTHER-SE> $44,599 $14,341
<TOTAL-LIABILITY-AND-EQUITY> $13,538,690 $9,818,158
<SALES> $0 $0
<TOTAL-REVENUES> $1,004,731 $578,147
<CGS> $0 $0
<TOTAL-COSTS> $940,947 $569,971
<OTHER-EXPENSES> $0 $0
<LOSS-PROVISION> $10,000 $0
<INTEREST-EXPENSE> $665,246 $357,754
<INCOME-PRETAX> $53,784 $8,176
<INCOME-TAX> $23,526 $5,854
<INCOME-CONTINUING> $0 $0
<DISCONTINUED> $0 $0
<EXTRAORDINARY> $0 $0
<CHANGES> $0 $0
<NET-INCOME> $30,258 $2,322
<EPS-PRIMARY> $0.30 $0.02
<EPS-DILUTED> $0.30 $0.02
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