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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, 2000
[ ] 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, 2000, 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
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
The attached Balance Sheets as of June 30, 2000 and 1999, Statement
of Operations for the six months ended June 30, 2000 and 1999,
and Statements of Cash Flows for the six months ended June 30, 2000
and 1999 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, 2000 and 1999 and for the six months ended June 30, 2000
and 1999 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, 2000 and 1999 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, 2000 vs. Six Months Ended June 30, 1999
During the six months ended June 30, 2000, the Company incurred
a net gain of $1,429 as compared to a net gain of $30,701 for the
same six months ended June 30, 1999, a decrease in net income of
$29,272. This decrease is attributable primarily to an increase in Salaries
& Benefits and Marketing & Promotions. Salaries increased due to a
nonrecurring recruiting fee associated with the acquisition of a new president.
Net interest income after provision for note receivable losses decreased to
$196,617, a decrease of $10,760 (or 5%) from $207,377 for the six months ended
June 30, 1999. This decreases is attributable primarily to a decrease in the
Company's net interest margin. The Company's cost of funds (i.e., interest
expense) during this period increased $125,836 (or 32%); i.e., $524,431 for the
six month period ending June 30, 2000 as compared to $398,595 for the six
months ended June 30, 1999. This increase is attributable to an increase in
Notes Payable. At June 30,2000, the company had outstanding debt securities
(Notes Payable) of $16,811,121, up from 13,109,988 at June 30, 1999, an increase
of 28%.
The Company's operating expenses for the six months ended June
30, 2000 increased to $196,757 from $157,382 for the same period ending
June 30, 1999, an increase of 25%. This is attributable primarily to
increases in Salaries & Benefits and Marketing & Promotions for the company
over the same period in 1999.
The Company did not experience any material adverse effects on its results
of operation or financial conditions as a result of year 2000 issues.
Remediation costs associated with Year 2000 were minimal for the Company. It
believes remediation costs will continue to be nominal through completion of
Year 2000.
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Liquidity and Capital Resources
Six Months Ended June 30, 2000 vs. Six Months Ended June 30, 1999
Net decrease in cash during the six months ending June 30, 2000
was $146,534, compared to a net increase of $223,357 for the six months
ended June 30, 1999, a decrease of $369,891. Net cash used by operating
activities totaled $17,596 for the six months ended June 30, 2000, a decrease in
cash used of $57,471 over $39,875 provided by operating activities during the
six months ended June 30, 1999. This is attributable primarily to increases
in Salaries & Benefits and Marketing & Promotions (due to the search cost for a
president and marketing mailings, respectively) for the company over the same
period in 1999.
Net cash used by investing activities totaled $1,501,706 during the
six months ended June 30, 2000, compared to $1,320,279 used during the six
months ended June 30, 1999, an increase of $181,427 or 14% in net cash used.
This difference is attributable to a greater increase in Notes Receivable
purchased than the increase in Notes Receivable collected during the six month
period ending June 30, 2000 as compared to the same period in 1999.
Net cash provided by financing activities totaled $1,372,768 for this
six month period in 2000, a decrease of $130,993, or 9%, from
$1,503,761 provided by financing activities during the six month period
ending June 30, 1999. This difference is primarily attributable to a decrease
in funds provided by the Line of Credit during the six month period ending
June 30, 2000 as compared to the same period in 1999.
At June 30, 2000, the Company's cash, which includes cash reserves
and cash available for investment in the Mortgage Loans, was $49,239,
down from $491,010 at June 30, 1998, a decrease of $441,771.
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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, 2000 MINISTRY PARTNERS INVESTMENT CORPORATION
(Registrant)
By: /s/ Stephen A. Ballas
Stephen A. Ballas,
President
By: /s/ Brian Scharkey
Brian Scharkey,
Principal Accounting Officer
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MINISTRY PARTNERS INVESTMENT CORPORATION
Financial Statements
For the quarters ended June 30, 2000 and 1999
BALANCE SHEETS
June 30,
2000 1999
ASSETS:
Cash - ECCU $49,239 $491,010
Loan receivable 39,218 55,140
Notes receivable 17,791,160 14,428,001
Allowance for loan loss (25,000) (14,000)
Interest receivable 103,640 92,086
Prepaid offering expense 11,992 10,969
Prepaid expenses 16,169 4,724
Furniture, fixtures & equipment (net) 5,290 8,653
Total assets $17,991,708 $15,076,583
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Accounts payable 6,750 4,140
Salaries payable 2,642 6,082
Accrued expenses - ECCU 26,846 22,994
Line of credit - ECCU 65,000 850,000
Notes payable 16,811,121 13,109,988
Income taxes payable - 5,302
Total liabilities 16,912,360 13,998,506
Equity:
Common stock, 100,000 shares, no par value 1,000,000 1,000,000
Retained earnings 79,348 78,077
Total equity 1,079,348 1,078,077
Total liabilities and equity $17,991,708 $15,076,583
The accompanying notes are an integral part of these financial
statements
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STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
Six months ended June 30,
2000 1999
Income:
Interest income
Note receivable and loans receivable $696,271 $603,284
Interest-bearing accounts 29,777 6,688
Total Interest Income $726,048 $609,972
Interest expense:
Line of credit 68 5,278
Notes payable 524,363 393,317
Total interest Expense 524,431 398,595
Net interest income 201,617 211,377
Provision for notes receivable losses 5,000 4,000
Net interest income after provision
for notes receivable losses 196,617 207,377
Operating expenses:
Salary and benefits 93,842 77,179
Marketing and promotion 22,291 13,845
Office operations 48,636 42,562
Legal and accounting 20,987 23,296
Ministry Support 6,000 500
Total operating expenses 191,756 157,382
Income / (loss) before taxes 4,861 49,995
Provision for taxes 3,432 19,294
Net income (loss) 1,429 30,701
Retained earnings, beginning 77,919 47,376
Retained earnings, ending 79,348 78,077
Earnings per share 0.01 0.31
The accompanying notes are an integral part of these financial
statements
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STATEMENTS OF CASH FLOWS
Six months ended June 30,
2000 1999
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $1,429 $30,701
Adjustments to reconcile net income
to net cash provided by operation activities
Depreciation and amortization 1,682 1,213
Provision for notes receivable 5,000 4,000
Prior year adjustment - 2,778
Increase in accrued interest receivable (21,651) (9,305)
(Increase)/Decrease in prepaid expense (1,581) 8,679
Decrease in accounts receivable - 1,155
Increase in acct payable 5,332 12,500
(Decrease) in income taxes payable (7,806) (11,846)
Net cash (used) provided by operating activities ($17,595) $39,875
CASH FLOWS FROM INVESTING ACTIVITIES
Principal payments received on loans receivable 8,260 7,408
Purchase of notes receivable (16,233,823) (1,956,960)
Principal payments received on NR 14,723,856 635,152
Purchase of property and equipment - (5,879)
Net cash used by investing activities ($1,501,707) ($1,320,279)
CASH FLOWS FROM FINANCING ACTIVITIES
Advances made on the LOC 65,000 1,551,000
Amounts paid on the LOC - (701,000)
Principal payments made on notes payable (3,840,577) (2,669,087)
Proceeds from borrowings on notes payable 5,148,345 3,322,848
Net cash provided by financing activities $1,372,768 $1,503,761
Net (decrease) increase in cash/cash equivalents($146,534) $223,357
Cash and cash equivalents at beginning $195,773 $267,653
Cash and cash equivalents at end $49,239 $491,010
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Income taxes of $24,526 were paid during the six-month period ended
June 30, 2000.
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MINISTRY PARTNERS INVESTMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000 AND 1999
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.
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2. Related party transactions
MPIC maintains all of its funds at the parent, ECCU. Total funds
held with ECCU were $49,239 and $491,010 at June 30, 2000 and
1999, respectively. Interest earned on these funds were $29,777 and
$6,688 for the six months ended June 30, 2000 and 1999,
respectively.
MPIC utilized physical facilities and other services of ECCU. A
charge of $4,955 - 2000 and $5,247 - 1999 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, 1999 and 2000, MPIC participated in church loans
made by ECCU. Interest is at variable rates of interest; ranging from
7.250% to 11.250%, yielding an average of 8.206%. ECCU services these
loans, charging a service fee.
An allowance for doubtful accounts has been established for notes
receivable of $25,000 as of June 30, 2000. At June 30, 1999 the
allowance for doubtful accounts was $14,000. The Company has no experience
of loan loss and, as of June 30, 2000 and 1999, 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, 2000 and 1999 are
stated as follows:
2000 1999
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
$ 65,000 and $ 850,000 was borrowed at June 30, 2000 and 1999,
respectively. Interest at June 30, 2000 and 1999 was 9.000% and
7.750%, respectively, and varies according to ECCU's cost of funds.
6. Notes payable
MPIC has unsecured notes payable at June 30, 2000, as follows:
Total Interest Rate
Private Placement $ 134,243 7.70 - 8.30
CA Public Offering 288,727 6.90 - 8.00
National Offering 670,333 5.38 - 7.21
Special Offering 8,229,326 5.38 - 7.06
National A-1 Offering 7,348,407 5.34 - 7.50
International Offering 140,086 5.46 - 6.69
$ 16,811,122
Future maturities at June 30 are as follows:
2000 1999
1999 -0- 8,583,944
2000 11,131,730 3,529,030
2001 4,245,855 328,917
2002 697,580 267,729
2003 308,356 289,838
2004 144,911 110,530
2005 282,690 -0-
$ 16,811,122 $ 13,109,988
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, 2000 and 1999,
$288,727 and $349,333, 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,
2000 and 1999, $670,333 and $1,427,222, respectively, were
outstanding.
In December 1997, MPIC received approval from the Securities and
Exchange Commission to offer $25,000,000 of Class A1 unsecured notes
payable nation wide. In December 1997, MPIC registered $15,000,000
of the National A1 notes. By November 29, 1999 $12,064,110 of the
$15,000,000 had been sold. MPIC deregistered the remaining $2,935,890
on November 29, 1999. On November 30,1999, MPIC registered another
$12,500,000 of the National A1 offering. This offering is currently
available in California, Colorado and Oregon. At June 30, 2000 and
1999,$ 7,348,407 and $ 5,744,875, respectively, were outstanding in
total National A1 notes.
