<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
[ ] 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 March 31, 1999, registrant had issued and outstanding 100,000 shares
of its no par value common stock, all of which were held by Evangelical
Christian Credit Union. No market exists for the Common Stock.
Registrant estimates the aggregate market value of such shares to be not
greater than $1,000,000.
Transitional Small Business Disclosure Format (check one):
YES NO X
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
The attached Balance Sheets as of March 31, 1999 and 1998, Statement
of Operations for the three months ended March 31, 1999 and 1998,
and Statements of Cash Flows for the three months ended March 31, 1999
and 1998 of Registrant (the "Company") have been prepared by the Company
without an audit. In the opinion of management, all adjustments (which
include only normal recurring adjustments) necessary to present fairly
the financial position, results of operations and cash flows at
March 31, 1999 and 1998 and for the three months ended March 31, 1999
and 1998 have been made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. The results of
operations for the periods ended March 31, 1999 and 1998 are not
necessarily indicative of the results for the full year.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
The financial information included herein should be read in conjunction
with the Financial Statements, including the Notes thereto.
Results of Operations
Three Months Ended March 31, 1999 vs. Three Months Ended March 31, 1998
During the three months ended March 31, 1999, the Company incurred
a net gain of $15,206 as compared to a net gain of $11,438 for the
same three months ended March 31, 1998, an increase in net income of
$3,768. Net interest income after provision for note receivable losses
increased to $103,933, an increase of $27,908 (or 37%) from $76,025 for
the three months ended March 31, 1998. These increases are attributable
primarily to an increase in interest income from the Company's Mortgage
Loan investments. The Company's cost of funds (i.e., interest expense)
during this period increased $39,907 (or 27%); i.e.,$190,339 for the
three month period ending March 31, 1999 as compared to $150,432 for
the three months ended March 31, 1998. This increase is attributable
to an increase in Notes Payable. At March 31,1999, the company had
outstanding debt securities (Notes Payable) of $13,011,592, up
from $8,635,978 at March 31, 1998, an increase of 51%.
The Company's operating expenses for the three months ended March
31, 1999 increased to $81,393 from $61,264 for the same period ending
March 31, 1998, an increase of 33%. This is attributable primarily to
increases in such office operating expenses as marketing, management and
accounting services provided for the company over the same period in 1998.
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.
<PAGE>
Liquidity and Capital Resources
Three Months Ended March 31, 1999 vs. Three Months Ended March 31, 1998
Net increase in cash during the three months ending March 31, 1999
was $540,017, compared to a net decrease of $(40,151) for the three months
ended March 31, 1998, an increase of $580,168. Net cash provided by
operating activities totaled $12,256 for the three months ended March
31, 1999, an increase of $6,887 over $5,369 provided by operating
activities during the three months ended March 31, 1998. This
difference is attributable primarily to an increase in income from Notes
Receivable during the three month period ending March 31, 1999 as
compared to the same period in 1998.
Net cash used by investing activities totaled $(27,604) during the
three months ended March 31, 1999, compared to $(994,541) used during
the three months ended March 31, 1998, a decrease of $966,937 or
97%. This difference is attributable to a decrease in Notes Receivable
purchased and a decrease in Notes Receivable collected during the three month
period ending March 31, 1999 as compared to the same period in 1998.
Net cash provided by financing activities totaled $555,365 for this
three month period in 1999, a decrease of $(393,656), or (41%), from
$949,021 provided by financing activities during the three month period
ending March 31, 1998. This difference is attributable to a decrease in
the Company's outstanding debt securities (Notes Payable) and a decrease
in funds provided by the Line of Credit during the three month period
ending March 31, 1998 as compared to the same period in 1998.
At March 31, 1999, the Company's cash, which includes cash reserves
and cash available for investment in the Mortgage Loans, was $807,670,
up from $79,834 at March 31, 1998, a increase of $727,836.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
As of the date of this Report, there is no material litigation,
threatened or pending, against the Company. The Company's management is
not aware of any disagreements, disputes or other matters which may lead
to the filing of legal proceedings involving the Company.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-k
None
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
Dated: May 12, 1999 MINISTRY PARTNERS INVESTMENT CORPORATION
(Registrant)
By: /s/ John C. Garmo
John C. Garmo, President
By: /s/ Brian Scharkey
Brian Scharkey,
Principal Accounting Officer
<PAGE>
MINISTRY PARTNERS INVESTMENT CORPORATION
Financial Statements
For the quarters ended March 31, 1999 and 1998
BALANCE SHEETS
March 31,
1999 1998
ASSETS:
Cash - ECCU $807,670 $79,834
Loan receivable 58,925 69,931
Notes receivable 13,135,739 10,522,180
Allowance for loan loss (11,000) -
Interest receivable 85,578 59,346
Prepaid offering expense 15,794 31,461
Prepaid expenses 4,483 10,845
Furniture, fixtures & equipment (net) 5,163 3,066
Total assets $14,102,352 $10,776,663
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Accounts payable 0 0
Salaries payable 4,150 2,739
Accrued expenses - ECCU 19,471 11,940
Line of credit - ECCU 0 1,096,914
Notes payable 13,011,592 8,635,978
Income taxes payable 4,753 3,508
Total liabilities 13,039,966 9,751,079
Equity:
Common stock, 100,000 shares, no par value 1,000,000 1,000,000
Retained earnings 62,386 25,584
Total equity 1,062,386 1,025,584
Total liabilities and equity $14,102,352 $10,776,663
The accompanying notes are an integral part of these financial
statements
<PAGE>
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
Three months ended March 31,
1999 1998
Income:
Interest income
Note receivable and loans receivable $291,209 $225,293
Interest-bearing accounts 4,063 1,164
Total Interest Income $295,272 $226,457
Interest expense:
Line of credit 379 11,937
Notes payable 189,960 138,495
Total interest Expense 190,339 150,432
Net interest income 104,933 76,025
Provision for notes receivable losses 1000 0
Net interest income after provision
for notes receivable losses 103,933 76,025
Operating expenses:
Salary and benefits 37,058 32,852
Marketing and promotion 7,160 5,598
Office operations 21,169 4,640
Legal and accounting 16,006 18,174
Total operating expenses 81,393 61,264
Income / (loss) before taxes 22,540 14,761
Provision for taxes 7,335 3,323
Net income (loss) 15,206 11,438
Retained earnings, beginning 47,180 14,146
Retained earnings, ending 62,386 25,584
Earnings per share 0.15 0.11
The accompanying notes are an integral part of these financial
statements
<PAGE>
STATEMENTS OF CASH FLOWS
Three months ended March 31,
1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $15,206 $11,438
Adjustments to reconcile net income
to net cash provided by operation activities
Depreciation and amortization 505 166
Provision for notes receivable 1,000 -
Increase in accrued interest receivable (2,797) (17,575)
Decrease in prepaid expense 4,095 9,297
Decrease in accounts receivable 1,155 4,000
Increase in acct payable 2,906 (1,575)
Decrease in income taxes payable (12,396) 3,313
Prior year adjustment 2,582 (3,695)
Net cash provided by operating activities $12,256 $5,369
CASH FLOWS FROM INVESTING ACTIVITIES
Principal payments received on loans receivable 3,625 3,097
Purchase of notes receivable (109,393) (1,400,214)
Principal payments received on notes receivable 79,846 405,808
Purchase of property and equipment (1,681) (3,232)
Net cash used by investing activities ($27,604) $(994,541)
CASH FLOWS FROM FINANCING ACTIVITIES
Advances made on the LOC 291,000 1,213,383
Amounts paid on the LOC (291,000) (1,096,470)
Principal payments made on notes payable (1,056,257) (1,036,170)
Proceeds from borrowings on notes payable 1,611,622 1,868,278
Net cash provided by financing activities $555,365 $949,021
Net increase in cash and cash equivalents $540,017 $(40,151)
Cash and cash equivalents at beginning $267,653 $119,985
Cash and cash equivalents at end $807,670 $79,834
<PAGE>
MINISTRY PARTNERS INVESTMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999 AND 1998
1. Summary of Significant accounting policies
Nature of Business
Ministry Partners Investment Corporation (MPIC) was incorporated in
California in 1991 and is a wholly-owned subsidiary of Evangelical
Christian Credit Union (ECCU). The Company provides funds for real
property secured loans for the benefit of Evangelical churches and
church organizations through funding provided by members of and
persons associated with such churches and organizations. The
Company's offices, as well as those of its loan origination source,
ECCU, are located in the state of California and substantially all of
the business and operations of the Company are currently conducted in
California and its mortgage loan investments are concentrated in
California.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities as
of the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Prepaid offering expense
Prepaid offering expense is related to a proposed public offering of
unsecured notes. It is being amortized over a three year period.
Organization and start up costs
Organization and start up costs have been capitalized and are being
amortized, using the straight-line method over a five-year period.
Notes Receivable
Interest income on notes receivable is recognized over the term of
the note and is generally computed using the simple interest method.
<PAGE>
2. Related party transactions
MPIC maintains all of its funds at the parent, ECCU. Total funds
held with ECCU were $807,670 and $79,834 at March 31, 1999 and
1998, respectively. Interest earned on these funds were $4,063 and
$1,164 for the three months ended March 31, 1999 and 1998,
respectively.
MPIC utilized physical facilities and other services of ECCU. A
charge of $2,456 - 1999 and $1,389 - 1998 was made for these services
which is included in Office Operations. The method used to arrive at
the periodic charge is based on the fair market value of services
provided. Management asserts that such method is reasonable.
Notes payable are substantially to members of ECCU.
3. Notes receivable
In March 1992, MPIC purchased a pool of first trust deed seasoned
loans from ECCU for the then outstanding balance. Loan maturities
extend through 2001, although the majority were due in 1995 and 1996.
Interest rates range from 7.025% to 11.50%, yielding an average of
9.138%. The loans were made to churches in Southern California and
are the collateral for certain notes payable. This pool of first
trust deed notes was retired in early 1996.
During 1997, 1998 and 1999, MPIC participated in church loans made by ECCU.
Interest is at variable rates of interest; ranging from 8.00% to
11.625%. ECCU services these loans, charging a service fee.
An allowance for doubtful accounts has been established for notes
receivable of $11,000 as of March 31, 1999. At March 31, 1998 no
allowance for doubtful accounts had been established. The Company has
no experience of loan loss and, as of March 31, 1999 and 1998, none of
the loans are impaired. Management believes all of the notes are
adequately secured and fully collectible.
4. Organization and start up costs
Organization and start up costs at March 31, 1999 and 1998 are
stated as follows:
1999 1998
Start up
Cost $ 63,292 $ 63,292
Accumulated amortization 63,292 63,292
-0- -0-
Organization
Cost 15,438 15,438
Accumulated amortization 15,438 15,438
-0- -0-
-0- -0-
<PAGE>
5. Line of credit - ECCU
MPIC has an unsecured $2,100,000 line of credit with ECCU, of which
$ -0- and $1,096,914 was borrowed at March 31, 1999 and 1998,
respectively. Interest at March 31, 1999 and 1998 was 7.750% and
6.246%, respectively, and varies according to ECCU's cost of funds.
6. Notes payable
MPIC has unsecured notes payable at March 31, 1999, as follows:
Total Interest Rate
Private Placement $ 295,853 6.36 - 8.55
CA Public Offering 391,942 6.90 - 8.66
National Offering 1,481,433 4.79 - 7.29
Special Offering 5,554,618 5.29 - 7.00
National A-1 Offering 5,247,454 4.79 - 6.54
International Offering 40,291 5.27 - 6.12
$ 13,011,592
Future maturities at March 31 are as follows:
1999 1998
1998 -0- 5,113,168
1999 9,944,802 2,432,429
2000 2,192,437 614,617
2001 249,117 100,147
2002 290,188 252,909
2003 285,048 122,706
2004 50,000 -0-
$ 13,011,592 $ 8,635,976
7. Public offering
In August 1994, MPIC received approval from the Department of
Corporations of the State of California to offer $6,000,000 in
unsecured notes payable, of which only $3,000,000 may be
outstanding at any one time. At March 31, 1999 and 1998,
$391,942 and $441,384, respectively, were outstanding.
8. National Offering
In October 1996, MPIC received approval from the Securities and
Exchange Commission to offer $5,000,000 in unsecured notes payable
nation wide. This offering has been completely sold. At March 31,
1999 and 1998, $1,481,433 and $3,617,470, respectively, were
outstanding.
In December 1997, MPIC received approval from the Securities and
Exchange Commission to offer $15,000,000 in unsecured notes
payable nation wide. This offering is currently available in
California, Colorado and Oregon. At March 31, 1999 and 1998,
$5,247,500 and $ 502,797, respectively, were outstanding.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-END> MAR-31-1999 MAR-31-1998
<CASH> $807,670 $79,834
<SECURITIES> $0 $0
<RECEIVABLES> $13,280,242 $10,651,457
<ALLOWANCES> $(11,000) $0
<INVENTORY> $0 $0
<CURRENT-ASSETS> $2,210,692 $611,295
<PP&E> $0 $0
<DEPRECIATION> ($1,689) ($166)
<TOTAL-ASSETS> $14,102,352 $10,776,663
<CURRENT-LIABILITIES> $11,403,836 $7,533,428
<BONDS> $0 $0
$0 $0
$0 $0
<COMMON> $1,000,000 $1,000,000
<OTHER-SE> $62,386 $25,584
<TOTAL-LIABILITY-AND-EQUITY>$14,102,352 $10,776,663
<SALES> $0 $0
<TOTAL-REVENUES> $295,272 $226,457
<CGS> $0 $0
<TOTAL-COSTS> $271,732 $211,696
<OTHER-EXPENSES> $0 $0
<LOSS-PROVISION> $0 $0
<INTEREST-EXPENSE> $190,339 $150,432
<INCOME-PRETAX> $22,540 $14,761
<INCOME-TAX> $7,335 $3,323
<INCOME-CONTINUING> $0 $0
<DISCONTINUED> $0 $0
<EXTRAORDINARY> $0 $0
<CHANGES> $0 $0
<NET-INCOME> $15,206 $11,438
<EPS-PRIMARY> $0.15 $0.11
<EPS-DILUTED> $0.15 $0.11
</TABLE>
