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, 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
(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: $1,230,262
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, 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.
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 1933 ("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 believes that it can continue to achieve profitable
margins between interest revenues and interest expenses irrespective of
fluctuating interest rates or inflation based on the adjustment of interest
rates the Company pays to its Note investors to reflect increases or decreases,
in the blended index rate (as defined in the prospectus). In addition, a
significant percentage of the Company's Mortgage Loan investments have
variable interest rates and reflect interest rate fluctuations due to inflation
or other factors over the term of the investment.
Results of Operations
Twelve Months Ended December 31, 1999 vs. Twelve Months Ended December 31,
1998
During the twelve months ended December 31, 1999, the Company incurred a
net gain of $33,320 as compared to a net gain of $30,258 for the same twelve
months ended December 31, 1998, a increase in net income of $3,062. Interest
income, net, for the period, was $407,964, an increase of 20% from $339,485
for the twelve months ended December 31, 1998. The Company's cost of funds
(i.e., interest expense) during this period increased $157,053 (or 24%)to
$822,298 for the twelve month period ending December 31, 1999 as compared to
$665,246 for the twelve months ended December 31, 1998. This is attributable
to significant growth in the Company's debt securities portfolio. At December
31, 1999, the company had outstanding debt securities (Notes Payable) of
$15,503,354, up from $12,456,227 at December 31, 1998, an increase of 24%.
The Company's operating expenses for the twelve months ended December 31,
1999 increased to $333,278 from $275,701 for the same period ending December
31, 1998, an increase of 21%. This is attributable primarily to increases in
Marketing and promotion, the addition of Ministry support (charitable
Contributions), and increases in Salaries and Benefits due to the addition of an
additional full time staff person 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.
Liquidity and Capital Resources
Twelve Months Ended December 31, 1999 vs. Twelve Months Ended December 31,1998
Net decrease in cash during the twelve months ended December 31, 1999 was
$(71,880), compared to a net increase of $147,668 for the twelve months ended
December 31, 1998. This decrease of $(219,548) was due primarily to a decrease
in net cash provided by Notes Payable. Net cash provided by operating
Activities totaled $46,801 for the twelve months ended December 31, 1999; a
decrease of $1,623 from $48,424 provided by operating activities during the
twelve months ended December 31, 1998.
Net cash used by investing activities totaled $(3,165,808) during the
twelve months ended December 31, 1999, compared to $(3,573,111) used during
the twelve months ended December 31, 1998, a decrease in cash used of
$407,303. This difference is primarily attributable to a decrease in net cash
used by Notes Receivable during the twelve months ended December 31, 1999 as
compared to the same period in 1998
Net cash provided by financing activities totaled $3,047,127 for this
twelve-month period in 1999, a decrease of $625,228 from $3,672,355
provided by financing activities during the twelve months ended December 31,
1998. This difference is primarily attributable a decrease in net cash
provided by borrowings on Notes Payable as compared to the same period in 1998.
At December 31, 1999, the Company's cash, which includes cash reserves and
cash available for investment in the Mortgage Loans, was $195,773, down from
$267,653 at December 31, 1998, a decrease of $71,880 (27)%.
Item 7. Financial Statements
The Balance Sheets, Statement of Operations and Statements of Cash
Flows for the twelve months ended December 31, 1999 and 1998 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, Chief Executive Officer
John C. Garmo President
Mark A. Johnson Vice Chairman of the Board, Chief Financial
Officer, Treasurer, Director
Van C. Elliott* Director
Arthur G. Black* Director
Wallace G. Norling* Director
Scott T. Vandeventer Director
* Denotes Independent Director
The following is a summary of the business experience of the officers and
directors of the Company during the past five years.
MARK G. HOLBROOK, age 50, has served as chairman of the Company since
its inception. Mr. Holbrook also serves as president and chief executive
officer of ECCU. Mr. Holbrook served as Board Chairman of Christian
Management Association until the end of his term in February 99.
JOHN C. (SKIP) GARMO, age 53, 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 43, has served as vice chairman, 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 63, has served as director of the Company since
its inception. 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. Mr. Elliott is a member of the Christian Estate Planners of
California, Christian Management Association, and is a Certified Financial
Planner.
ARTHUR G. BLACK, age 62, 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 75, 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 44, has served as a director of the Company
since 1992. Mr. Vandeventer has been employed by ECCU since 1988 and is
currently executive vice president and chief operating officer of ECCU.
Mr. Vandeventer is also currently associated with NYE Partners, a business
consulting firm whose clients may include firms doing business with the
Company and/or ECCU.
Item 10. Executive Compensation
Except for Mr. Garmo, none of the Company's officers or directors currently
receives compensation from the Company. Each, however, is entitled to be
reimbursed for expenses incurred in performing duties on behalf of the
Company.
The following table sets forth certain information regarding compensation
paid by the Company for services rendered to the Company during its fiscal
year ended December 31, 1999, its fiscal year ended December 31, 1998 and its
fiscal year ended December 31, 1997 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, 12-31-99 (2) -0- -0-
Chairman, Chief 12-31-98 (2) -0- -0-
Executive Officer 12-31-97 (2) -0- -0-
John C. Garmo, 12-31-99 $73,601 -0- -0-
President 12-31-98 68,543 -0- -0-
12-31-97 58,664 -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, 1999 AND 1998
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
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Ministry Partners Investment Corporation
We have audited the accompanying balance sheets of Ministry Partners Investment
Corporation as of December 31, 1999 and 1998, 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, 1999 and 1998, and the results of its operations
and its cash flows for the years then ended in conformity with generally
accepted accounting principles.
/s/ TURNER, WARREN, HWANG & CONRAD
TURNER, WARREN, HWANG & CONRAD
ACCOUNTANCY CORPORATION
February 22, 2000
MINISTRY PARTNERS INVESTMENT CORPORATION
BALANCE SHEETS
DECEMBER 31
1999 1998
ASSETS
Current Assets
Cash $ 195,773 $ 267,653
Notes receivable, net of allowance for losses 2,935,590 344,434
Loans receivable 5,226 3,590
Interest receivable 81,989 82,781
Accounts receivable - 1,155
Prepaid expenses 26,580 24,372
--------- -------
Total Current Assets 3,245,158 723,985
--------- -------
Other Assets
Notes receivable 13,325,603 12,751,758
Loans receivable 42,252 58,960
Property and equipment, net 6,972 3,987
---------- ----------
Total Other Assets 13,374,827 12,814,705
---------- ----------
Total Assets $ 16,619,985 $ 13,538,690
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities
Accounts payable $ 30,906 $ 20,715
Notes payable - current portion 13,692,987 10,877,010
Income taxes payable 7,806 17,149
---------- ----------
Total Current Liabilities 13,731,699 10,914,874
---------- ----------
Long-term Liabilities
Notes payable 15,503,354 12,456,227
Less current portion (13,692,987) (10,877,010)
---------- ----------
Total Long-term Liabilities 1,810,367 1,579,217
---------- ----------
Commitments and contingent liabilities - -
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 77,919 44,599
--------- ---------
Total Stockholder's Equity 1,077,919 1,044,599
--------- ---------
Total Liabilities and Stockholder's Equity $ 16,619,985 $ 13,538,690
========== ==========
The accompanying notes are an integral part of these financial statements.
Page 2
MINISTRY PARTNERS INVESTMENT CORPORATION
STATEMENTS OF INCOME AND RETAINED EARNINGS
FOR THE YEARS END DECEMBER 31
1999 1998
INTEREST INCOME
Notes receivable and loans receivable $ 1,192,734 $ 986,717
Interest-bearing accounts 37,528 18,014
--------- ---------
Total Interest Income 1,230,262 1,004,731
========= =========
INTEREST EXPENSE
Line of credit 8,227 21,235
Notes payable 814,071 644,011
------- -------
Total Interest Expense 822,298 665,246
======= =======
NET INTEREST INCOME 407,964 339,485
------- -------
PROVISION FOR NOTES RECEIVABLE LOSSES 10,000 10,000
------- -------
NET INTEREST INCOME AFTER PROVISION FOR
NOTE RECEIVABLE LOSSES 397,964 329,485
------- -------
OPERATING EXPENSES
Salaries and benefits 154,563 126,497
Marketing and promotion 48,434 36,655
Office occupancy 11,337 10,921
Office operations 72,175 61,132
Legal and accounting 36,669 40,496
Ministry support 10,100 -
------- -------
Total Operating Expenses 333,278 275,701
------- -------
INCOME BEFORE PROVISION FOR INCOME TAXES 64,686 53,784
Provision for Income Taxes 31,366 23,526
------- -------
NET INCOME 33,320 30,258
RETAINED EARNINGS, BEGINNING 44,599 14,341
------- -------
RETAINED EARNINGS, ENDING $ 77,919 $ 44,599
======= =======
The accompanying notes are an integral part of these financial statements.
Page 3
MINISTRY PARTNERS INVESTMENT CORPORATION
STATEMENTS OF CASH FLOWS
FOR THE YEARS END DECEMBER 31
1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 33,320 $ 30,258
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 2,894 1,184
Provision for notes receivable 10,000 10,000
Decrease (increase) in accrued interest receivable 792 (41,010)
(Increase) decrease in prepaid expense (2,208) 27,230
Decrease in accounts receivable 1,155 2,845
Increase in accounts payable 10,191 4,462
(Decrease) increase in income taxes payable (9,343) 13,455
------ ------
Net Cash Provided by Operating Activities 46,801 48,424
====== ======
CASH FLOWS FROM INVESTING ACTIVITIES
Principal payments received on loans receivable 15,072 10,477
Purchase of notes receivable (11,993,852) (5,459,964)
Principal payments received on notes receivable 8,818,851 1,881,547
Purchase of property and equipment (5,879) (5,171)
--------- ---------
Net Cash Used by Investing Activities (3,165,808) (3,573,111)
========= =========
CASH FLOWS FROM FINANCING ACTIVITIES
Advances made on line of credit 2,466,000 1,672,384
Amounts paid on line of credit (2,466,000) (2,652,384)
Principal payments made on notes payable (5,501,174) (1,735,252)
Proceeds from borrowings on notes payable 8,548,301 6,387,607
--------- ---------
Net Cash Provided by Financing Activities 3,047,127 3,672,355
========= =========
Net increase in cash and cash equivalents (71,880) 147,668
Cash and cash equivalents at beginning of year 267,653 119,985
------- -------
Cash and cash equivalents at end of year $ 195,773 $ 267,653
======= =======
The accompanying notes are an integral part of these financial statements.
Page 4
MINISTRY PARTNERS INVESTMENT CORPORATION
STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS END DECEMBER 31
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
1999 1998
Interest paid $ 822,298 $ 665,246
Income taxes paid 40,709 6,377
The accompanying notes are an integral part of these financial statements.
Page 5
MINISTRY PARTNERS INVESTMENT CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
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.
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, 1999 and 1998 were $195,773 and $267,653, respectively.
Interest earned on these funds for the years ended December 31, 1999 and 1998
were $37,528 and $18,014, respectively.
Page 6
NOTE 2 - RELATED PARTY TRANSACTIONS (CONTINUED)
The Company, as part of its investment strategy, purchases an interest in loans
offered for sale by ECCU. In consideration, ECCU has entered into an agreement
with the Company to share net fee income on loans purchased. The Company
purchased loans totaling $11,993,852 and $5,459,964 from ECCU and received no
fee income from ECCU during the years ended
December 31, 1999 and 1998, respectively. The Company recognized interest
income on notes receivable from ECCU of $1,187,596 and $986,717 during the years
ended December 31, 1999 and 1998, respectively.
The Company pays support charges for management services and rent to ECCU on a
month-to- month basis. Charges of $48,600 and $35,575 were made for these
services for the years ended December 31, 1999 and 1998, 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 amounts
reimbursed for the years ended December 31, 1999 and 1998 were $154,563 and
$126,497, respectively. Reimbursements of $29,503 and $18,082 were due to ECCU
at December 31, 1999 and 1998, 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 2005. The notes earn
interest at rates between 7.25% and 11.00%, with a weighted average yield of
8.24%.
The Company maintains allowance for notes receivable losses of $20,000.
The Company has no experience of loan loss and, as of December 31, 1999, 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, 2000. There were no outstanding borrowings as of December 31, 1999.
Interest at December 31, 1999 was 8.25%, and varies according to ECCU's cost of
funds. Interest of $8,227 and $21,235 was paid to ECCU during the years ended
December 31, 1999 and 1998, respectively.
Page 7
NOTE 5 - NOTES PAYABLE
The Company has unsecured notes payable at December 31, 1999, as follows:
Amount Interest Rate
Private Placement Notes $ 203,860 7.70% - 8.55%
Public Offering Notes - California 356,940 6.90% - 8.66%
Public Offering Notes - National 7,270,376 4.95% - 7.21%
Special Offering Notes 7,543,111 4.95% - 6.48%
Offshore Notes 129,067 5.27% - 5.81%
----------
$ 15,503,354
==========
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
2000 $ 13,692,987
2001 937,701
2002 393,292
2003 298,956
2004 180,418
----------
$ 15,503,354
==========
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. Notes
totaling $124,874 and $386,878 were outstanding at December 31, 1999 and 1998,
respectively. This offering has been discontinued.
The Company filed a registration statement with the U.S. Securities and Exchange
Commission (SEC) and received approval in October 1996 to offer $5,000,000 in
unsecured promissory notes to the public. Notes totaling $744,828 and
$1,920,261 were outstanding at December 31, 1999 and 1998, respectively.
Page 8
NOTE 6 - PUBLIC OFFERING (CONTINUED)
The Company filed a registration statement with the SEC and received approval in
December 1997 to offer $15,000,000 in unsecured promissory notes to the public.
Notes totaling $5,386,462 and $4,077,563 were outstanding as of December 31,
1999 and 1998, respectively.
The Company filed a registration statement with the SEC and received approval in
December 1999 to offer $12,500,000 unsecured notes to the public. Notes
totaling $1,139,088 were outstanding as of December 31, 1999.
NOTE 7 - INCOME TAXES
Federal income and state franchise taxes for the years ended December 31, 1999
and 1998 are as follows:
1999 1998
Federal income taxes $ 20,002 $ 14,537
State franchise taxes 11,364 8,989
------ ------
$ 31,366 $ 23,526
====== ======
NOTE 8 - CONCENTRATION OF CREDIT RISK
At December 31, 1999 and 1998, the Company had cash at ECCU which was not
federally insured. The aggregate uninsured amounts were $82,954 and $123,387,
respectively.
Page 9
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-END> DEC-31-1999 DEC-31-1998
<CASH> $195,773 $267,653
<SECURITIES> $0 $0
<RECEIVABLES> $16,410,660 $13,252,678
<ALLOWANCES> $20,000 $10,000
<INVENTORY> $0 $0
<CURRENT-ASSETS> $3,245,158 $723,985
<PP&E> $11,050 $5,171
<DEPRECIATION> $4,078 $1,184
<TOTAL-ASSETS> $16,619,985 $13,538,690
<CURRENT-LIABILITIES> $13,731,699 $10,914,874
<BONDS> $0 $0
$0 $0
$0 $0
<COMMON> $1,000,000 $1,000,000
<OTHER-SE> $77,919 $44,599
<TOTAL-LIABILITY-AND-EQUITY> $16,619,985 $13,538,690
<SALES> $0 $0
<TOTAL-REVENUES> $1,230,262 $1,004,731
<CGS> $0 $0
<TOTAL-COSTS> $1,155,576 $940,947
<OTHER-EXPENSES> $0 $0
<LOSS-PROVISION> $10,000 $10,000
<INTEREST-EXPENSE> $822,298 $665,246
<INCOME-PRETAX> $64,686 $53,784
<INCOME-TAX> $31,366 $23,526
<INCOME-CONTINUING> $0 $0
<DISCONTINUED> $0 $0
<EXTRAORDINARY> $0 $0
<CHANGES> $0 $0
<NET-INCOME> $33,320 $30,258
<EPS-BASIC> $0.33 $0.30
<EPS-DILUTED> $0.33 $0.30
</TABLE>
