<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 June 30, 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) 226-3619
(Issuer's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
YES X NO
At June 30, 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 June 30, 1999 and 1998, Statement
of Operations for the six months ended June 30, 1999 and 1998,
and Statements of Cash Flows for the six months ended June 30, 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
June 30, 1999 and 1998 and for the six months ended June 30, 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 June 30, 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
Six Months Ended June 30, 1999 vs. Six Months Ended June 30, 1998
During the six months ended June 30, 1999, the Company incurred
a net gain of $30,701 as compared to a net gain of $38,148 for the
same six months ended June 30, 1998, a decrease in net income of
($7,447). Net interest income after provision for note receivable losses
increased to $207,377, an increase of $49,572 (or 31%) from $157,805 for
the six months ended June 30, 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 $89,025 (or 28%); i.e., $398,595 for the
six month period ending June 30, 1999 as compared to $309,570 for
the six months ended June 30, 1998. This increase is attributable
to an increase in Notes Payable. At June 30,1999, the company had
outstanding debt securities (Notes Payable) of $13,109,988, up
from $10,084,973 at June 30, 1998, an increase of 30%.
The Company's operating expenses for the six months ended June
30, 1999 increased to $157,382 from $107,814 for the same period ending
June 30, 1998, an increase of 46%. 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 1999.
All remaining critical systems were retired prior to June 1, 1999 as the
Company installed new systems to better serve its investors. All new systems
were tested and verified as Year 2000 compliant before their installation,
which also occurred prior to June 1, 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 were nominal for the Company through completion of Year 2000
compliance in mid-year 1999, and are expected to be nominal for the remainder
of 1999 and 2000.
<PAGE>
Liquidity and Capital Resources
Six Months Ended June 30, 1999 vs. Six Months Ended June 30, 1998
Net increase in cash during the six months ending June 30, 1999
was $223,357, compared to a net increase of $452,125 for the six months
ended June 30, 1998, a decrease of ($228,768). Net cash provided by
operating activities totaled $39,875 for the six months ended June
30, 1999, a decrease of ($4,118) over $43,993 provided by operating
activities during the six months ended June 30, 1998. This difference 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.
Net cash used by investing activities totaled ($1,320,279) during the
six months ended June 30, 1999, compared to ($892,972) used during
the six months ended June 30, 1998, an increase of $427,307 or
48%. This difference is attributable to an increase in Notes Receivable
purchased and a decrease in Notes Receivable collected during the six month
period ending June 30, 1999 as compared to the same period in 1998.
Net cash provided by financing activities totaled $1,503,761 for this
six month period in 1999, an increase of $202,657, or 16%, from
$1,301,104 provided by financing activities during the six month period
ending June 30, 1998. This difference is attributable to an increase in
principal payments made on Notes Payable and a net increase in funds
provided by the Line of Credit during the six month period ending
June 30, 1999 as compared to the same period in 1998.
At June 30, 1999, the Company's cash, which includes cash reserves
and cash available for investment in the Mortgage Loans, was $491,010,
down from $572,110 at June 30, 1998, a decrease of ($81,100).
<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: JULY 30, 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 June 30, 1999 and 1998
BALANCE SHEETS
June 30,
1999 1998
ASSETS:
Cash - ECCU $491,010 $572,110
Loan receivable 55,141 67,655
Notes receivable 14,428,001 10,422,886
Allowance for loan loss (14,000) -
Interest receivable 92,086 60,905
Prepaid offering expense 10,969 25,638
Prepaid expenses 4,724 10,845
Furniture, fixtures & equipment (net) 8,653 2,816
Total assets $15,076,583 $11,162,855
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Accounts payable 4,140 0
Salaries payable 6,081 5,222
Accrued expenses - ECCU 22,994 11,397
Line of credit - ECCU 850,000 0
Notes payable 13,109,988 10,084,973
Income taxes payable 5,302 8,969
Total liabilities 13,998,506 10,110,561
Equity:
Common stock, 100,000 shares, no par value 1,000,000 1,000,000
Retained earnings 78,077 52,294
Total equity 1,078,077 1,052,294
Total liabilities and equity $15,076,583 $11,162,855
The accompanying notes are an integral part of these financial
statements
<PAGE>
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
Six months ended June 30,
1999 1998
Income:
Interest income
Note receivable and loans receivable $603,284 $464,604
Interest-bearing accounts 6,688 2,772
Total Interest Income $609,972 $467,376
Interest expense:
Line of credit 5,278 20,812
Notes payable 393,317 288,758
Total interest Expense 398,595 309,570
Net interest income 211,377 157,805
Provision for notes receivable losses 4,000 0
Net interest income after provision
for notes receivable losses 207,377 157,805
Operating expenses:
Salary and benefits 77,179 63,541
Marketing and promotion 13,845 9,299
Office operations 42,562 9,243
Legal and accounting 23,296 25,731
Ministry Support 500 0
Total operating expenses 157,382 107,814
Income / (loss) before taxes 49,995 49,992
Provision for taxes 19,294 11,844
Net income (loss) 30,701 38,148
Retained earnings, beginning 47,376 14,146
Retained earnings, ending 78,077 52,294
Earnings per share 0.31 0.38
The accompanying notes are an integral part of these financial
statements
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STATEMENTS OF CASH FLOWS
Six months ended June 30,
1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $30,701 $38,148
Adjustments to reconcile net income
to net cash provided by operation activities
Depreciation and amortization 1,213 416
Provision for notes receivable 4,000 -
Increase in accrued interest receivable (9,305) (19,134)
Decrease in prepaid expense 8,679 15,120
Decrease in accounts receivable 1,155 4,000
Increase in acct payable 12,500 366
Increase (Decrease) in income taxes payable (11,847) 8,722
Prior year adjustment 2,778 (3,695)
Net cash provided by operating activities $39,875 $43,993
CASH FLOWS FROM INVESTING ACTIVITIES
Principal payments received on loans receivable 7,408 5,372
Purchase of notes receivable (1,956,960) (1,702,749)
Principal payments received on notes receivable 635,151 807,636
Purchase of property and equipment (5,879) (3,232)
Net cash used by investing activities ($1,320,279) $(892,972)
CASH FLOWS FROM FINANCING ACTIVITIES
Advances made on the LOC 1,551,000 1,265,384
Amounts paid on the LOC (701,000) (2,245,384)
Principal payments made on notes payable (2,669,087) (1,087,437)
Proceeds from borrowings on notes payable 3,322,848 3,368,541
Net cash provided by financing activities $1,503,761 $1,301,104
Net increase in cash and cash equivalents $223,357 $452,125
ash and cash equivalents at beginning $267,653 $119,985
Cash and cash equivalents at end $491,010 $572,110
<PAGE>
MINISTRY PARTNERS INVESTMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 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 $491,010 and $572,110 at June 30, 1999 and
1998, respectively. Interest earned on these funds were $6,688 and
$2,772 for the six months ended June 30, 1999 and 1998,
respectively.
MPIC utilized physical facilities and other services of ECCU. A
charge of $5,247 - 1999 and $2,840 - 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 7.500% to
11.000%. ECCU services these loans, charging a service fee.
An allowance for doubtful accounts has been established for notes
receivable of $14,000 as of June 30, 1999. At June 30, 1998 no
allowance for doubtful accounts had been established. The Company has
no experience of loan loss and, as of June 30, 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 June 30, 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-
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5. Line of credit - ECCU
MPIC has an unsecured $2,100,000 line of credit with ECCU, of which
$ 850,000 and $-0- was borrowed at June 30, 1999 and 1998,
respectively. Interest at June 30, 1999 and 1998 was 7.750% and
6.186%, respectively, and varies according to ECCU's cost of funds.
6. Notes payable
MPIC has unsecured notes payable at June 30, 1999, as follows:
Total Interest Rate
Private Placement $ 195,631 7.70 - 8.55
CA Public Offering 349,333 6.90 - 8.66
National Offering 1,427,222 4.78 - 7.29
Special Offering 5,306,130 4.78 - 7.00
National A-1 Offering 5,744,875 4.78 - 6.51
International Offering 86,796 5.27 - 6.12
$ 13,109,988
Future maturities at June 30 are as follows:
1999 1998
1998 -0- 5,109,360
1999 8,583,944 3,788,750
2000 3,529,030 661,740
2001 328,917 101,320
2002 267,729 274,451
2003 289,839 149,352
2004 110,530 -0-
$ 13,109,988 $ 10,084,972
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 June 30, 1999 and 1998,
$349,333 and $443,435, 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 June 30,
1999 and 1998, $1,427,222 and $2,846,117, 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 June 30, 1999 and 1998,
$5,744,875 and $ 2,013,410, respectively, were outstanding.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-END> JUN-30-1999 JUN-30-1998
<CASH> $491,010 $572,110
<SECURITIES> $0 $0
<RECEIVABLES> $14,483,142 $10,551,446
<ALLOWANCES> $(14,000) $0
<INVENTORY> $0 $0
<CURRENT-ASSETS> $2,221,369 $1,839,043
<PP&E> $11,050 $3,232
<DEPRECIATION> ($2,397) ($416)
<TOTAL-ASSETS> $15,076,583 $11,162,855
<CURRENT-LIABILITIES> $12,504,936 $8,169,715
<BONDS> $0 $0
$0 $0
$0 $0
<COMMON> $1,000,000 $1,000,000
<OTHER-SE> $78,077 $52,294
<TOTAL-LIABILITY-AND-EQUITY>$15,076,583 $11,162,855
<SALES> $0 $0
<TOTAL-REVENUES> $609,972 $467,375
<CGS> $0 $0
<TOTAL-COSTS> $559,977 $417,383
<OTHER-EXPENSES> $0 $0
<LOSS-PROVISION> $4,000 $0
<INTEREST-EXPENSE> $398,595 $309,570
<INCOME-PRETAX> $49,995 $49,992
<INCOME-TAX> $19,294 $11,843
<INCOME-CONTINUING> $0 $0
<DISCONTINUED> $0 $0
<EXTRAORDINARY> $0 $0
<CHANGES> $0 $0
<NET-INCOME> $30,701 $38,149
<EPS-BASIC> $0.31 $0.38
<EPS-DILUTED> $0.31 $0.38
</TABLE>
