10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2012

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the period from _____ to _____

333-4028la

(Commission file No.)

MINISTRY PARTNERS INVESTMENT COMPANY, LLC

(Exact name of registrant as specified in its charter)

CALIFORNIA (State or other jurisdiction of incorporation or organization 26-3959348  (I.R.S. employer identification no.)

 915 West Imperial Highway, Brea, Suite 120, California, 92821

(Address of principal executive offices)

(714) 671-5720

(Registrant'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 þ  No o.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  þ  No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company filer.  See the definitions of  “accelerated filer, “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (check one):

 Large accelerated filer o  Accelerated filer o  Non-accelerated filer o Smaller reporting company filer þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o  No þ.

At September 30, 2012, registrant had issued and outstanding 146,522 units of its Class A common units.  The information contained in this Form 10-Q should be read in conjunction with the registrant’s Annual Report on Form 10-K for the year ended December 31, 2011.

MINISTRY PARTNERS INVESTMENT COMPANY, LLC

FORM 10-Q

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION
Item 1.  Consolidated Financial Statements	F-1
Consolidated Balance Sheets  (unaudited) at September 30, 2012 and December 31, 2011 (audited)	F-1
Consolidated Statements of Operations (unaudited) for the three and nine months ended September 30, 2012 and 2011	F-2
Consolidated Statements of Cash Flows (unaudited) for the nine months ended September 30, 2012 and 2011	F-3
Notes to Consolidated Financial Statements	F-5
Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations	3
Item 3. Quantitative and Qualitative Disclosures About Market Risk	16
Item 4.  Controls and Procedures	17
PART II — OTHER INFORMATION
Item 1.  Legal Proceedings	17
Item 1A.  Risk Factors	17
Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds	17
Item 3.  Defaults Upon Senior Securities	17
Item 4.  Mine Safety Disclosures	17
Item 5.  Other Information	17
Item 6.  Exhibits	18
SIGNATURES	18
Exhibit 31.1 — Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15(d)-14(a)
Exhibit 31.2 — Certification of Principal Financial and Accounting Officer pursuant to Rule 13a-14(a) or Rule 15(d)-14(a)
Exhibit 32.1 — Certification pursuant to 18 U.S.C. §1350 as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 32.2 — Certification pursuant to 18 U.S.C. §1350 as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002

PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

MINISTRY PARTNERS INVESTMENT COMPANY, LLC

CONSOLIDATED BALANCE SHEETS

SEPTEMBER 30, 2012 AND DECEMBER 31, 2011

 (Dollars in Thousands Except Unit Data)

	2012			2011
	(Unaudited)			(Audited)
Assets:
Cash	$	11,711		$	11,167
Loans receivable, net of allowance for loan losses of $3,985 and $4,127 as of September 30, 2012 and December 31, 2011, respectively		153,649			165,355
Accrued interest receivable		633			725
Property and equipment, net		241			303
Debt issuance costs		79			104
Foreclosed assets		3,050			1,374
Other assets		332			253
Total assets	$	169,695		$	179,281
Liabilities and members’ equity
Liabilities:
Borrowings from financial institutions	$	104,650		$	110,280
Notes payable		54,680			59,030
Accrued interest payable		22			15
Other liabilities		487			478
Total liabilities		159,839			169,803
Members' Equity:
Series A preferred units, 1,000,000 units authorized, 117,100 units issued and outstanding at September 30, 2012 and December 31, 2011 (liquidation preference of $100 per unit)		11,715			11,715
Class A common units, 1,000,000 units authorized, 146,522 units issued and outstanding at September 30, 2012 and December 31, 20111,509		1,509			1,509
Accumulated deficit		(3,368	)		(3,746	)
Total members' equity		9,856			9,478
Total liabilities and members' equity	$	169,695		$	179,281

The accompanying notes are an integral part of these consolidated financial statements.

F-1

 MINISTRY PARTNERS INVESTMENT COMPANY, LLC

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(Dollars in Thousands)

	Three months ended September 30,					Nine months ended September 30,
	2012		2011			2012			2011
Interest income:
Interest on loans	$	2,480	$	2,657		$	7,493		$	8,258
Interest on interest-bearing accounts		37		22			111			69
Total interest income		2,517		2,679			7,604			8,327
Interest expense:
Borrowings from financial institutions		676		1,150			2,050			3,601
Notes payable		601		641			1,843			1,962
Total interest expense		1,277		1,791			3,893			5,563
Net interest income		1,240		888			3,711			2,764
Provision (credit) for loan losses		87		822			(49	)		1,305
Net interest income after provision (credit) for loan losses		1,153		66			3,760			1,459
Non-interest income		30		28			90			166
Non-interest expenses:
Salaries and benefits		509		399			1,423			1,136
Marketing and promotion		43		37			112			98
Office operations		333		341			1,131			1,091
Legal and accounting		107		132			536			557
Total non-interest expenses		992		909			3,202			2,882
Income (loss) before provision for income taxes		191		(815	)		648			(1,257	)
Provision for income taxes		4		3			12			11
Net income (loss)	$	187	$	(818	)	$	636		$	(1,268	)

The accompanying notes are an integral part of these consolidated financial statements.

F-2

MINISTRY PARTNERS INVESTMENT COMPANY, LLC

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011

(Dollars in Thousands)

	2012			2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	636		$	(1,268	)
Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities:
Depreciation		94			90
Amortization of deferred loan fees		(105	)		(139	)
Amortization of debt issuance costs		126			172
Provision (credit) for loan losses		(49	)		1,305
Accretion of allowance for loan losses on restructured loans		(46	)		(67	)
Accretion of loan discount		(5	)		(56	)
Changes in:
Accrued interest receivable		91			(6	)
Other assets		(80	)		(145	)
Other liabilities and accrued interest payable		16			(89	)
Net cash provided (used) by operating activities		678			(203	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Loan purchases		(10,894	)		--
Loan originations		(8,999	)		(4,307	)
Loan sales		2,425			5,390
Loan principal collections, net		27,703			12,539
Purchase of property and equipment		(32	)		(8	)
Net cash provided by investing activities		10,203			13,614
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in borrowings from financial institutions		(5,629	)		(10,844	)
Net changes in notes payable		(4,350	)		(3,103	)

F-3

Debt issuance costs		(100	)		(109	)
Purchase of preferred units		--			(45	)
Dividends paid on preferred units		(258	)		(234	)
Net cash used by financing activities		(10,337	)		(14,335	)
Net increase (decrease) in cash	$	544		$	(924	)
Cash at beginning of period		11,167			7,078
Cash at end of period	$	11,711		$	6,154
Supplemental disclosures of cash flow information
Interest paid	$	3,886		$	5,446
Income taxes paid	$	14		$	--
Transfer of loans to foreclosed assets	$	1,676		$	1,374

The accompanying notes are an integral part of these consolidated financial statements.

F-4

MINISTRY PARTNERS INVESTMENT COMPANY, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The accounting and financial reporting policies of MINISTRY PARTNERS INVESTMENT COMPANY, LLC (the “Company”, “we”, or “our”) and our wholly-owned subsidiaries, Ministry Partners Funding, LLC, MP Realty Services, Inc., and Ministry Partners Securities, LLC, conform to accounting principles generally accepted in the United States and general financial industry practices.  The accompanying interim consolidated financial statements have not been audited.  A more detailed description of our accounting policies is included in our 2011 annual report filed on Form 10-K.  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 September 30, 2012 and for the three and nine months ended September 30, 2012 and 2011 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 September 30, 2012 and 2011 are not necessarily indicative of the results for the full year.

1.  Summary of Significant Accounting Policies

Nature of Business

Ministry Partners Investment Company, LLC (the “Company”) was incorporated in California in 1991 as a C corporation and converted to a limited liability company on December 31, 2008.  The Company is owned by a group of 12 federal and state chartered credit unions, none of which owns a majority of the voting equity units of the Company.  One credit union owns only preferred units while the others own both common and preferred units.  Offices of the Company are located in Brea, California.  The Company provides funds for real property secured loans for the benefit of evangelical churches and church organizations.  The Company funds its operations primarily through the sale of debt and equity securities and through other borrowings.  Most of the Company’s loans are purchased from its largest equity investor, the Evangelical Christian Credit Union (“ECCU”), of Brea, California. The Company also originates church and ministry loans independently. Nearly all of the Company’s business and operations currently are conducted in California and its mortgage loan investments cover approximately 33 states, with the largest number of loans made to California borrowers.

In 2007, the Company created a wholly-owned special purpose subsidiary, Ministry Partners Funding, LLC (“MPF”), for the purpose of warehousing church and ministry mortgages purchased from ECCU or originated by the Company for later securitization.  MPF’s loan purchasing activity continued through early 2010, after which its operations ceased and its assets, including loans, were transferred to the Company.  MPF has no liabilities and is currently inactive. The Company closed down active operations of MPF effective as of December 31, 2009 but intends to maintain MPF’s existence as a Delaware limited liability company for possible future use as a financing vehicle to effect debt financing transactions.  MPF did not securitize any of its loans.

On November 13, 2009, the Company formed a wholly-owned subsidiary, MP Realty Services, Inc., a California corporation (“MP Realty”).  MP Realty provides loan brokerage and other real estate services to credit unions, financial institutions, churches and ministries in connection with the Company’s mortgage financing activities and services it provides to federal and state chartered credit unions. On February 23, 2010, the California Department of Real Estate issued MP Realty a license to operate as a corporate real estate broker.

On April 26, 2010, we formed Ministry Partners Securities, LLC, a Delaware limited liability company (“MP Securities”).  On July 6, 2010, MP Securities became a registered broker dealer firm under Section 15 of the Securities Exchange Act of 1934.  Effective as of March 2, 2011, MP Securities’ application for membership in the Financial Industry Regulatory Authority (“FINRA”) was approved.  MP Securities has been formed to provide financing solutions for churches, charitable institutions and faith-based organizations and act as a selling agent for securities offered by such entities. On September 24,2012, MP Securities received a no objection letter from FINRA, thereby authorizing MP Securities to act as a selling agent for the Company’s Class A Notes offering that will be offered under a registration statement filed with the U.S. Securities and Exchange Commission (“SEC”).  In addition to serving as a selling agent for the Company’s Class A Notes and other debt securities, MP Securities will distribute debt securities issued by religious organizations, as well as by business members of credit unions it serves and act as a selling agent in placing mortgage backed business loans made by credit unions to institutional investors.

F-5

Conversion to LLC

Effective December 31, 2008, the Company converted its form of organization from a corporation organized under California law to a limited liability company organized under the laws of the State of California.  With the filing of Articles of Organization-Conversion with the California Secretary of State, the separate existence of Ministry Partners Investment Corporation ceased and the entity continued by operation of law under the name Ministry Partners Investment Company, LLC.

By operation of law, the converted entity continued with all of the rights, privileges and powers of the corporate entity and is managed by a group of managers that previously served as the Board of Directors.  The executive officers and key management team remained intact.  The converted entity by operation of law possessed all of the properties and assets of the converted corporation and remains responsible for all of the notes, debts, contract claims and obligations of the converted corporation.

Since the conversion became effective, the Company is managed by a group of managers that provides oversight of the affairs and carries out their duties similar to the role and function that the Board of Directors performed under the previous bylaws.  Operating like a Board of Directors, the managers have full, exclusive and complete discretion, power and authority to oversee the management of Company affairs.  Instead of Articles of Incorporation and Bylaws, management structure and governance procedures are now governed by the provisions of an Operating Agreement that has been entered into by and between the Company’s managers and members.

Principles of Consolidation

The consolidated financial statements include the accounts of Ministry Partners Investment Company, LLC and its wholly-owned subsidiaries, MPF, MP Realty and MP Securities.  All significant inter-company balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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.  Material estimates that are particularly susceptible to significant change in the near term relate to, but are not limited to, the determination of the allowance for loan losses and the valuation of foreclosed real estate.

Loans Receivable

Loans that management has the intent and ability to hold for the foreseeable future are reported at their outstanding unpaid principal balance adjusted for an allowance for loan losses, deferred loan fees and costs, and loan discounts. Interest income on loans is accrued on a daily basis using the interest method. Loan origination fees and costs are deferred and recognized as an adjustment to the related loan yield using the straight-line method, which results in an amortization that is materially the same as the interest method.  Loan discounts represent an offset against interest accrued and unpaid which has been added to loans that have been restructured.  Loan discounts are accreted to interest income over the term of the loan using the interest method once the loan is no longer considered impaired and is no longer in its restructure period.  Loan discounts may also represent the difference between the purchase price of a loan and the outstanding principal balance of the loan.  These discounts are accreted to interest income over the term of the loan using the interest method.

The accrual of interest is discontinued at the time the loan is 90 days past due.  Past due status is based on contractual terms of the loan. In all cases, loans are placed on nonaccrual or charged off at an earlier date if collection of principal or interest is considered doubtful.

F-6

All interest accrued but not collected for loans that are placed on nonaccrual or charged off are reversed against interest income. The interest on these loans is accounted for on the cash basis or cost-recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

Allowance for Loan Losses

The Company sets aside an allowance or reserve for loan losses through charges to earnings, which are shown in the Company’s Consolidated Statements of Operations as a provision for loan losses.  Loan losses are charged against the allowance when management believes the uncollectability of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.

In evaluating the level of the allowance for loan losses, we consider the type of loan, amount of loans in our portfolio, adverse situations that may affect our borrowers’ ability to pay and estimated value of underlying collateral and credit quality trends (including trends in non-performing loans expected to result from existing conditions).  Until 2011, we had never recorded a charge-off on our mortgage loan investments.  As a result, we have a limited historical loss experience to assist us in assessing estimated future losses.

The allowance for loan loss is monitored by our senior management on an ongoing basis.  The allowance consists of general and specific components. The general component covers non-classified loans and is based on historical loss experience adjusted for qualitative factors.  In establishing the allowance for loan losses, management considers significant factors that affect the collectability of our loan portfolio. While historical loss experience provides a reasonable starting point for the analysis, such experience by itself does not form a sufficient basis to determine the appropriate level of the allowance for loan losses.

In determining the general component of the allowance, we examine the performance characteristics of our loan portfolio, including charge-offs, delinquency ratios, loan restructurings and modifications and other significant factors that, in management’s judgment, may affect our ability to collect loans in the portfolio as of the evaluation date.  In 2009, we also added a factor relating to the portion of our loan portfolio that is held in a loan participation interest.  The net effect of adding this factor in our analysis resulted in an increase in the allowance for loan losses that reflects the greater risk of loss associated with holding a loan participation interest in which we do not serve as the lead lender for the loan.

While we have not added any new qualitative factors in the analysis of our loan portfolio since 2009, in March 2012 we refined our analysis by segregating our loans into pools based on the position of the underlying collateral and the risk rating of the loan.  Risk ratings are determined by grading a borrower on certain metrics, which include financial performance, strength of management, credit history, and condition of the local economy.  These ratings are updated on an annual basis, or more frequently as necessary.  By segregating the portfolio in this manner, our senior management team is better able to assess the potential impact of various risk factors depending on the quality of the loans in a particular pool. The potential impact of factors such as the risk of charge-offs, impairment, delinquency, restructuring, decreases in borrower financial condition, and continued low commercial real estate values throughout the country fluctuates depending on the quality of the loan.  As a result, management has increased the weight of these factors for loans with a higher risk rating.   This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

All loans in the loan portfolio are subject to impairment analysis.  The Company reviews its loan portfolio monthly by examining delinquency reports, information related to the financial condition of its borrowers and the collateral value of its loans.  Through this process, the Company identifies potential impaired loans.  A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal and interest when due according to the contractual terms of the loan agreement.  Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting future scheduled principal and interest payments when due.  Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired.  Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower's prior payment record, and the amount of the shortfall in relation to the principal and interest owed.  A loan is generally deemed to be impaired when it is 90 days or more past due, or earlier when facts and circumstances indicate that it is probable that a borrower will be unable to make payments in accordance with the loan contract.

F-7

Impairment is measured on a loan-by-loan basis by either the present value of expected future cash flows discounted at the loan's original effective interest rate, the obtainable market price, or the fair value of the collateral if the loan is collateral dependent.    Loans or portions thereof are charged off when they are determined by management to be uncollectible.  Uncollectability is evaluated periodically on all loans classified as “Loans of Lesser Quality.”  As the Company has an established practice of working to explore every possible means of repayment with its borrowers, it has historically not charged off a loan until foreclosure is completed.  Among other variables, management will consider factors such as the financial condition of the borrower and the value of the underlying collateral in assessing uncollectability.

Troubled Debt Restructurings

A troubled debt restructuring is a loan for which the Company, for reasons related to a borrower’s financial difficulties, grants a concession to a borrower that the Company would not otherwise consider. From time to time, we have restructured a mortgage loan in light of theborrower'scircumstances and capabilities. We review each of these cases on an individual basis and approve any restructure based on the guidance stipulated in our collections policy. If we decide to accept a loan restructure, we generally will not forgive or reduce the principal amount owed on the loan; in addition, the typical maturity term for a restructured loan does not exceed five years.  A restructuring of a loan usually involves an interest rate modification, extension of the maturity date, or reduction of accrued interest owed on the loan on a contingent or absolute basis.

When we receive a request for a modification or restructure, we evaluate the strength of the borrower’s financial condition, leadership of the pastoral team and board, developments that have impacted the church and its leadership team, local economic conditions, the value of the underlying collateral, the borrower’s commitment to sound budgeting and financial controls, whether there is a denominational guaranty of any portion of the indebtedness, debt service coverage for the borrower, availability of other collateral and any other relevant factors unique to the borrower.  While we have no written policy that establishes criteria for when a request for restructuring a loan will be approved, our Credit Review Committee reviews each request, solicits written reports and recommendations from management, and summaries of the requests and actions taken by the Credit Review Committee are presented to the Company’s managers for their review at quarterly meetings throughout the year.

Loans that are renewed at below-market terms are considered to be troubled debt restructurings if the below-market terms represent a concession due to the borrower’s troubled financial condition. Troubled debt restructurings are classified as impaired loans and are measured at the present value of estimated future cash flows using the loan's effective rate at inception of the loan. The change in the present value of cash flows attributable to the passage of time is reported as interest income.  If the loan is considered to be collateral dependent, impairment is measured based on the fair value of the collateral.

In the current economic market, loan restructures often produce a better outcome for our loan portfolio than a foreclosure action. Given our specialized knowledge and experience working with churches and ministries, entering into a loan modification often enables our borrowers to keep their ministries intact and avoid foreclosure.  With a successful loan restructure, we avoid a loan charge-off and protect the interests of the investors and borrowers we serve.

Loan Portfolio Segments and Classes

Management segregates the loan portfolio into portfolio segments for purposes of evaluating the allowance for loan losses. A portfolio segment is defined as the level at which the Company develops and documents a systematic method for determining its allowance for loan losses. The portfolio segments are segregated based on loan types and the underlying risk factors present in each loan type. Such risk factors are periodically reviewed by management and revised as deemed appropriate.

F-8

The Company’s loan portfolio consists of one segment – church loans. The loan portfolio is segregated into the following portfolio classes:

Wholly-Owned First Collateral Position. This portfolio class consists of the wholly-owned loans for which the Company possesses a senior lien on the collateral underlying the loan.

Wholly-Owned Junior Collateral Position. This portfolio class consists of the wholly-owned loans for which the Company possesses a lien on the underlying collateral that is superseded by another lien on the same collateral.  This class also contains any loans that are not secured. These loans present higher credit risk than loans for which the Company possesses a senior lien due to the increased risk of loss should the loan default.

Participations First Collateral Position. This portfolio class consists of the participated loans for which the Company possesses a senior lien on the collateral underlying the loan. Loan participations present higher credit risk than wholly-owned loans because the Company does not maintain full control over the disposition and direction of actions regarding the management and collection of the loans.  The lead lender directs most servicing and collection activities and major actions must be coordinated and negotiated with the other participants, whose best interests regarding the loan may not align with those of the Company.

Participations Junior Collateral Position. This portfolio class consists of the participated loans for which the Company possesses a lien on the underlying collateral that is superseded by another lien on the same collateral.  Loan participations in the junior collateral position loans have higher credit risk than wholly-owned loans and participated loans where the Company possesses a senior lien on the collateral.  The increased risk is the result of the factors presented above relating to both junior lien positions and participations.

Credit Quality Indicators

The Company’s policies provide for the classification of loans that are considered to be of lesser quality as watch, substandard, doubtful, or loss assets. An asset is considered substandard if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Substandard assets include those assets characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. Assets classified as doubtful have all of the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses make collection or liquidation in full highly questionable and improbable, based on currently existing facts, conditions and values. Assets (or portions of assets) classified as loss are those considered uncollectible and of such little value that their continuance as assets is not warranted. Assets that do not expose the Company to risk sufficient to warrant classification in one of the aforementioned categories, but which possess potential weaknesses that deserve close attention, are designated as watch.

Foreclosed Assets

Assets acquired through foreclosure or other proceedings are initially recorded at fair value at the date of foreclosure less estimated costs of disposal, which establishes a new cost.  After foreclosure, valuations are periodically performed by management and foreclosed assets held for sale are carried at the lower of cost or fair value, less estimated costs of disposal.  Any write-down to fair value at the time of foreclosure is charged to the allowance for loan losses.  If the fair value, less costs to sell, of the foreclosed property decreases during the holding period, a valuation allowance is established with a charge to operating expenses taken.  The Company’s real estate assets acquired through foreclosure or other proceedings are evaluated regularly to ensure that the recorded amount is supported by its current fair value and that valuation allowances to reduce the varying amount to fair value less estimated costs of disposal are recorded as necessary.  Revenue and expense from the operation of the Company’s foreclosed assets and changes in the valuation allowance are included in net expenses from foreclosed assets.  When the foreclosed property is sold, a gain or loss is recognized on the sale for the difference between the sales proceeds and the carrying amount of the property.

F-9

Transfers of Financial Assets

Transfers of financial assets are accounted for as sales when control over the assets has been surrendered. Control over transferred assets is deemed to have been surrendered when (1) the assets have been isolated from the

Company, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

From time to time, the Company sells participation interests in mortgage loans it has originated or acquired. In order to recognize the transfer of a portion of a financial asset as a sale, the transferred portion and any portion that continues to be held by the transferor must represent a participating interest and the transfer of the participating interest must meet the conditions for surrender of control. To qualify as a participating interest (i) each portion of a financial asset must represent a proportionate ownership interest in an entire financial asset, (ii) from the date of transfer, all cash flows received from the entire financial asset must be divided proportionately among the participating interest holders in an amount equal to their share of ownership, (iii) the transfer must be made on a non-recourse basis (other than standard representations and warranties made under the loan participation sale agreement) to, or subordination by, any participating interest holder, and (iv) no party has the right to pledge or exchange the entire financial asset. If the participating interest or surrender of control criteria is not met, the transaction is accounted for as a secured borrowing arrangement.

Under some circumstances, when the Company sells participations in a wholly-owned loan receivable that it services, it retains a servicing asset that is initially measured at fair value.  As quoted market prices are generally not available for these assets, the Company estimates fair value based on the present value of future expected cash flows associated with the loan receivable.  The Company amortizes servicing assets over the life of the associated receivable using the interest method.  Any gain or loss recognized on the sale of loans receivable depends in part on both the previous carrying amount of the financial assets involved in the sale, allocated between the assets sold and the interests that continue to be held by the Company based on their relative fair value at the date of transfer and the proceeds received.

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 seven years.

Debt Issuance Costs

Debt issuance costs are related to borrowings from financial institutions and offerings of debt securities and are amortized into expense over the contractual terms of the debt or the life of the offering, respectively.

Income Taxes

Effective December 31, 2008, the Company converted from a C corporation to a California limited liability company (LLC). As a result, the stockholders of the Company became members of the LLC on the conversion date. The LLC is treated as a partnership for income tax purposes; therefore, the Company is no longer a tax-paying entity for federal or state income tax purposes, and no federal or state income tax will be recorded in its financial statements after the date of conversion. Income and losses of the Company are passed through to the members of the LLC for tax reporting purposes. The Company is subject to a California gross receipts fee of approximately $12,000 per year for years ending on and after December 31, 2009.  The Company’s subsidiaries are LLCs except for MP Realty, which was organized as a California corporation.  MP Realty incurred a tax loss for the year ended December 31, 2011 and recorded a provision of $800 for the state minimum franchise tax.

Although the Company is not a federal or state income tax-paying entity, it is nonetheless subject to Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) for Income Taxes for all “open” tax periods for which the statute of limitations has not yet run.  The Company uses a recognition threshold and a measurement attribute for the consolidated financial statement recognition and measurement of a tax position taken in a tax return. Benefits from tax positions are recognized in the financial statements only when it is more likely than not that the tax position will be sustained upon examination by the appropriate taxing authority that would have full knowledge of all relevant information. A tax position that meets the more-likely-than-not recognition threshold is measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold are recognized in the first subsequent financial reporting period in which that threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not recognition threshold are derecognized in the first subsequent financial reporting period in which that threshold is no longer met.

F-10

Employee Benefit Plan

Contributions to the qualified employee retirement plan are recorded as compensation cost in the period incurred.

Recent Accounting Pronouncements

In December 2011, the FASB issued new guidance Accounting Standards Update (ASU) No. 2011-11, “Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities.” This new guidance requires expanded information about financial instruments or derivatives that are either presented on a net basis in the balance sheet or subject to an enforceable master netting arrangement or similar arrangement. The new guidance does not change existing offsetting criteria in U.S. GAAP or the permitted balance sheet presentation for items meeting the criteria. The new disclosure requirements in the ASU are intended to enhance comparability between financial statements prepared using U.S. GAAP and those prepared using International Financial Reporting Standards (IFRS). The amendments in this guidance are effective during interim and annual periods beginning on or after January 1, 2013.  The Company does not expect this guidance to have a material impact on its consolidated financial statements.

2.  Related Party Transactions

We maintain most of our cash funds at ECCU, our largest equity investor. Total funds held with ECCU were $11.0 million and $10.9 million at September 30, 2012 and December 31, 2011, respectively. Interest earned on funds held with ECCU totaled $110.6 thousand and $68.2 thousand for the nine months ended September 30, 2012 and 2011, respectively.

We lease physical facilities and purchase other services from ECCU pursuant to a written lease and services agreement. Charges of $77.3 thousand and $85.7 thousand for the nine months ended September 30, 2012 and 2011, respectively, were incurred for these services and are included in office operations expense. The method used to arrive at the periodic charge is based on the fair market value of services provided.  We believe that this method is reasonable.

From time to time, we purchase mortgage loans, including loan participation interests from ECCU, our largest equity owner.  During the nine month period ended September 30, 2012, we purchased $5.8 million of loans from ECCU.  We did not purchase any loans from ECCU during the nine months ended September 30, 2011.  With regards to all loans purchased from ECCU, we recognized $3.8 million and $5.8 million of interest income during the nine months ended September 30, 2012 and 2011, respectively.  ECCU currently acts as the servicer for 70 of the 126 loans in the Company’s loan portfolio.  Under the terms of the loan servicing agreement we entered into with ECCU, a servicing fee of 50 to 65 basis points is deducted from the interest payments the Company receives on the wholly-owned loans ECCU services for the Company.  In lieu of a servicing fee, loan participations the Company purchases from ECCU generally have pass-through rates which are 50 to 75 basis points lower than the loan’s contractual rate.  On a limited number of loan participation interests purchased from ECCU, representing $5.4 million of loans at September 30, 2012, the pass-through rate is between 88 and 135 basis points lower than the contractual rate.  The Company negotiates the pass-through interest rates with ECCU on a loan by loan basis.  At September 30, 2012, the Company’s investment in wholly-owned loans serviced by ECCU totaled $43.3 million, while the Company’s investment in loan participations serviced by ECCU totaled $42.6 million.  From time to time, the Company pays fees for additional services ECCU provides for servicing these loans.  These fees amounted to $3.8 thousand during the nine months ended September 30, 2011. We paid fewer than one thousand dollars of these fees during the nine months ended September 30, 2012.

ECCU has also repurchased mortgage loans from us as part of our liquidity management practices.  In addition, ECCU has from time to time repurchased from the Company fractional participations in the loan investments which ECCU already services, usually around 1% of the loan balance, to facilitate compliance with National Credit Union Association (“NCUA”) rules when participations in those loans were sold to federal credit unions.  Each sale or purchase of a mortgage loan investment or participation interest with ECCU was consummated under a Related Party Transaction Policy adopted by the Company’s Board.  No gain or loss was incurred on these sales.  No whole loans or loan participations were sold to ECCU during the nine months ended September 30, 2012 and 2011, respectively.

F-11

Other Related Party Transactions

On December 28, 2011, we entered into a Loan Purchase Agreement with ECCU, pursuant to which ECCU agreed to repurchase two of our impaired mortgage loan interests in exchange for a cash purchase price of $4.5 million. In addition to the delivery of the cash purchase price, ECCU also transferred to us a 1% participation interest and second deed of trust in a loan which resulted in us holding a 100% interest in such loan. While the 1% loan participation interest and second deed of trust we acquired had a principal balance of $25 thousand and $500 thousand, respectively, we received no value for these loan interests since the acquired loans were in default and the value of the real property was estimated to be approximately $1.2 million less than the outstanding principal balance of the mortgage loan interest we owned prior to entering into the Loan Purchase Agreement.

Prior to entering into negotiations with ECCU, we notified ECCU that we believed that ECCU had breached certain representations and warranties set forth in mortgage loan purchase agreements we had entered into with ECCU to purchase three (3) mortgage loan interests for an aggregate sum of $6.6 million. In exchange for the delivery of the $4.5 million purchase price and mortgage loan interests acquired from ECCU, we agreed to grant a release, waiver and discharge of certain claims we had made for an alleged breach of representations and warranties made by ECCU in connection with three (3) loans we had acquired from ECCU. We also agreed to grant a complete release and discharge for any claims arising out of the purchase, servicing and any actions undertaken by ECCU as the lead lender for an additional nine (9) loans we previously acquired from ECCU which no cause for claims had been identified, or which were reasonably expected to be, subject to any claims arising in connection with the purchase of such loans.  This loan sale enabled us to recover $914 thousand of allowance for loan losses that had been previously recorded on two of the loans we sold to ECCU.

While no independent valuation was made in determining the value of the claims we released in favor of ECCU, we believe that litigation risks and uncertainties in pursuing such claims resulted in an arms-length purchase price mutually agreed upon with ECCU in exchange for granting a release of such claims. Prior to entering into the Loan Purchase Agreement, we requested and received independent market valuations for the impaired loan interests that were transferred to and received from ECCU pursuant to the terms of the Loan Purchase Agreement. In addition, we relied upon the advice of independent legal counsel in evaluating litigation risks we faced in pursuing an action against ECCU arising from our purchase of these mortgage loan interests. None of our managers that serve as an officer, director or employee of ECCU participated in any of the discussions, review and approval of the Loan Purchase Agreement. As a result, the terms, conditions and provisions of the Loan Purchase Agreement were negotiated and approved by our independent managers in accordance with our Related Party Transaction Policy.

On December 14, 2007, the Board of Directors appointed R. Michael Lee to serve as a Company director.  Mr. Lee serves as Vice President Member Relations, Midwest Region, of Alloya Corporate Federal Credit Union (“Alloya”), formerly Members United Corporate Federal Credit Union (“Members United”).  See Note 6 for information regarding the Company’s borrowings from Members United.  The Company has $92.0 thousand on deposit with Alloya as of September 30, 2012.

From time to time, our Board and members of our executive management team have purchased investor notes from us. One of our Board members, Mr. Art Black, is the beneficial owner of a living trust that holds $224.3 thousand of our Class A Notes. Another of our Board members, Mr. Van C Elliott, owns $83.6 thousand of our notes.

We have also entered into a selling agreement with our wholly-owned subsidiary, MP Securities, pursuant to which MP Securities will assist us in distributing our 2012 Secured Investment Certificates, which are notes we sell under a private placement memorandum and which are secured by loans or cash. The sales commissions and cost reimbursements paid to any broker-dealer firms that are engaged to assist in the distribution of such certificates will not exceed 3% of the amount of certificates sold.  MP Securities will also act as a selling agent for our Class A Notes offering pursuant to a Registration Statement which was declared effective by the SEC on October 11, 2012.  Our affiliate, MP Securities, will sell most of the Class A Notes being registered.  Each participating broker in the Class A Notes offering, including MP Securities, will be entitled to receive commissions ranging from .5%, plus an amount equal to .25% per annum on the average note balance for a Variable Series Note to 5% for a Flex Series or 60 month Fixed Series Note depending on whether it sells a Fixed Series, Variable Series or Flex Series note and the term of the respective note sold (12 months to 84 months).  For repeat purchasers of our Class A Notes, the gross commissions payable to the managing broker for the Offering and share of commissions payable to MP Securities will be reduced by 0.25% of the total amount of Class A Notes sold in the offering to a repeat investor who is then, or has been within the immediately preceding thirty (30) days, a noteholder.

F-12

To assist in evaluating any related transactions we may enter into with a related party, our Board has adopted a Related Party Transaction Policy. Under this policy, a majority of the members of our Board and majority of our independent Board members must approve a material transaction that we enter into with a related party.  As a result, we anticipate that all future transactions that we undertake with an affiliate or related party will be on terms believed by our management to be no less favorable than are available from unaffiliated third parties and will be approved by a majority of our independent Board members.

3.  Loans Receivable and Allowance for Loan Losses

We originate church mortgage loans, participate in church mortgage loans and also purchase entire church mortgage loans.  The loans fall into four classes:  whole loans for which the Company possesses the first collateral position, whole loans that are either unsecured or for which the Company possesses a junior collateral position, participated loans for which the Company possesses the first collateral position and participated loans for which the Company possesses a junior collateral position.  All of the loans are made to various evangelical churches and related organizations, primarily to purchase, construct or improve facilities. Loan maturities extend through 2022.Loans yielded a weighted average of 6.43% as of September 30, 2012, compared to a weighted average yield of 6.40% as of September 30, 2011.

On May 15, 2012, the Company entered into a Loan Purchase Agreement with Trinity Pacific Investments and Trinity Pacific OC involving two mortgage loan interests it had acquired from ECCU, which were the subject of foreclosure proceedings.  In exchange for transferring all rights, title and interest in these two mortgage loan interests, the Company received $2.425 million in cash and was relieved of any further obligations regarding the mortgage loan interests sold. Both loans were considered impaired.  The recorded investment in these loans was $2.460 million after discounts.  The loans also carried a total of $300 thousand in specific reserves that had been recorded in prior periods and set aside an an allowance for loan losses.  $35 thousand of these specific reserves were charged off against our allowance for loan losses.  The Company reversed the remaining $265 thousand of specific reserves related to these two loans, reducing the Company’s provision and allowance for loan losses and improving the Company’s balance sheet and statement of operations as of and for the nine month period ended September 30, 2012.

In addition, on September 18, 2012, the Company entered into a Deed in Lieu of Foreclosure Agreement with one of its borrowers.  As a result of this agreement, the Company received the property securing one of its impaired mortgage loan interests.  The Company has recorded the entire outstanding amount of the loan, $958.8 thousand, as a real estate owned asset on its financial statements.  As the value of the collateral less estimated costs to sell is greater than the the Company’s investment, no valuation allowance has been recorded on this property.

Allowance for Loan Losses

An allowance for loan losses of $4.0 million as of September 30, 2012 and $4.1 million as of December 31, 2011 has been established for loans receivable. For the nine month period ended September 30, 2012, we reported total charge-offs of $47 thousand on three of our mortgage loan investments. Pursuant to the Trinity Loan Purchase Agreement we entered into on May 15, 2012, we also reversed $265 thousand of provisions for loan losses related to two impaired loans that we sold.  Management believes that the allowance for loan losses as of September 30, 2012 and December 31, 2011 is appropriate. Changes in the allowance for loan losses for the three and nine months ended September 30, 2012 and the year ended December 31, 2011 are as follows:

F-13

	Three Months Ended September 30, 2012			Nine months ended September 30, 2012			Year Ended December 31, 2011
Balance, beginning of period	$	3,921		$	4,127		$	3,997
Provisions for loan loss		87			(49	)		1,487
Chargeoffs		--			(47	)		(1,279	)
Accretion of allowance           related to restrusctured           loans	$	(23	)		(46	)		(78	)
Balance, end of period	$	3,985		$	3,985		$	4,127

Non-Performing Loans

Non-performing loans include non-accrual loans, loans 90 days or more past due and still accruing, restructured loans, and other impaired loans where the net present value of estimated future cash flows is lower than the outstanding principal balance.  Non-accrual loans represent loans on which interest accruals have been discontinued.  Restructured loans are loans in which the borrower has been granted a concession on the interest rate or the original repayment terms due to financial distress. Non-performing loans are closely monitored on an ongoing basis as part of our loan review and work-out process.  The potential risk of loss on these loans is evaluated by comparing the loan balance to the fair value of any underlying collateral or the present value of projected future cash flows.  The following is a summary of our nonperforming loans:

	September 30		December 31		September 30
	2012		2011		2011
Impaired loans with an allowance for loan loss	$	11,617	$	18,168	$	22,337
Impaired loans without an allowance for loan loss		7,054		4,774		4,369
Total impaired loans	$	18,671	$	22,942	$	26,706
Allowance for loan losses related to impaired loans	$	2,967	$	3,064	$	2,860
Total non-accrual loans	$	18,449	$	22,942	$	26,706
Total loans past due 90 days or more and still accruing		--		--	$	614

We had eleven nonaccrual loans as of September 30, 2012 and fifteen at December 31, 2011.  As of September 30, 2012, we have completed foreclosure proceedings on two loan participation interests we acquired from ECCU.  We also acquired a property under the provisions of a Deed in Lieu of Foreclosure Agreement we entered into with one borrower.  In addition, we have two loans totaling $3.4 million that are currently in foreclosure proceedings.  There is a reserve of $275.6 thousand that has been recorded as an allowance for loan losses on these loans.  In April 2012, we completely wrote off one nonaccrual loan as uncollectible.  However, as this loan carried a discount for the entire principal balance, our recorded investment in the loan was zero and the write-off had no impact on our net loans receivable balance.  As of September 30, 2011, we had one loan with a balance of $614 thousand that was past due 90 days and still accruing.  This loan matured on July 1, 2011, but was in the process of being extended as of September 30, 2011.  In October, 2011, the extension was completed and payment received to bring the loan current.   The loan has remained current since the extension was completed.

The Company’s loan portfolio is comprised of one segment – church loans. The loans fall into four classes: whole loans for which the Company possesses the first collateral position, whole loans that are either unsecured or for which the Company possesses a junior collateral position, participated loans for which the Company possesses the first collateral position, and participated loans for which the Company possesses a junior collateral position.

F-14

Loans by portfolio segment (church loans) and the related allowance for loan losses are presented below. Loans and the allowance for loan losses are further segregated by impairment methodology (dollars in thousands).

	Loans and Allowance for Loan Losses (by segment) As of
	September 30, 2012		December 31, 2011
Loans:
Balance	$	158,536	$	170,920
Individually evaluated
for impairment	$	18,671	$	22,942
Collectively
evaluated for impairment	$	139,865	$	147,978
Allowance for loan losses:
Balance	$	3,985	$	4,127
Individually evaluated
for impairment	$	2,967	$	3,064
Collectively
evaluated for impairment	$	1,018	$	1,063

The Company has established a standard loan grading system to assist management and review personnel in their analysis and supervision of the loan portfolio.  The loan grading system is as follows:

Pass: The borrower generates sufficient cash flow to fund its debt service obligations.  The borrower may be able to obtain similar financing from other lenders with comparable terms.  The risk of default is considered low.

Watch: These loans exhibit potential or developing weaknesses that deserve extra attention from credit management personnel. If the developing weakness is not corrected or mitigated, there may be deterioration in the ability of the borrower to repay the debt in the future.  Loans graded Watch must be reported to executive management and the Board of Managers.  Potential for loss under adverse circumstances is elevated, but not foreseeable.

Substandard: Loans and other credit extensions bearing this grade are considered to be inadequately protected by the current sound worth and debt service capacity of the borrower or of any pledged collateral. These obligations, even if apparently protected by collateral value, have well-defined weaknesses related to adverse financial, managerial, economic, ministry, or environmental conditions which have clearly jeopardized repayment of principal and interest as originally intended. Furthermore, there is the possibility that some future loss will be sustained if such weaknesses are not corrected.

Doubtful: This classification consists of loans that display the properties of substandard loans with the added characteristic that the severity of the weaknesses makes collection or liquidation in full highly questionable or improbable based upon currently existing facts, conditions, and values. The probability of some loss is very high, but because of certain important and reasonably specific factors, the amount of loss cannot be exactly determined. Such pending factors could include merger or liquidation, additional capital injection, refinancing plans, or perfection of liens on additional collateral.

F-15

Loss: Loans in this classification are considered uncollectible and cannot be justified as a viable asset. This classification does not mean the loan has absolutely no recovery value, but that it is neither practical nor desirable to defer writing off this loan even though partial recovery may be obtained in the future.

The following table is a summary of the loan portfolio credit quality indicators by loan class at September 30, 2012 and 2011, which is the date on which the information was updated for each credit quality indicator (dollars in thousands):

Credit Quality Indicators (by class) As of  September 30, 2012
	Wholly-Owned First		Wholly-Owned Junior		Participation First		Participation Junior		Total
Grade:
Pass	$	82,777	$	2,272	$	38,231	$	981	$	124,261
Watch		10,284		3,710		4,534		-		18,528
Substandard		4,070		3,880		-		-		7,950
Doubtful		4,956		-		2,841		-		7,797
Loss		-		-		-		-		-
Total	$	102,087	$	9,862	$	45,606	$	981	$	158,536

Credit Quality Indicators (by class) As of December 31, 2011
	Wholly Owned First		Wholly Owned Junior		Participation First		Participation Junior		Total
Grade:
Pass	$	89,597	$	8,173	$	32,782	$	-	$	130,552
Watch		4,616		3,448		7,210		-		15,274
Substandard		3,237		3,883		4,089		1,006		12,215
Doubtful		8,091		1,155		3,633		-		12,879
Loss		-		-		-		-		-
Total	$	105,541	$	16,659	$	47,714	$	1,006	$	170,920

F-16

The following table sets forth certain information with respect to the Company’s loan portfolio delinquencies by loan class and amount at September 30, 2012 and 2011 (dollars in thousands):

Age Analysis of Past Due Loans (by class)

As of September 30, 2012

													Recorded
													Investment
	30-59 Days		60-89 Days		Greater Than		Total				Total		90 Days or more
	Past Due		Past Due		90 Days		Past Due		Current		Loans		and Accruing
Church loans:
Wholly-Owned First	$	8,697	$	-	$	814	$	9,511	$	92,576	$	102,087	$	-
Wholly-Owned Junior		3,719		-		-		3,719		6,143		9,862		-
Participation First		-		1,453		2,611		4,064		41,542		45,606		-
Participation Junior		-		-		-		-		981		981		-
Total	$	12,416	$	1,453	$	3,425	$	17,294	$	141,242	$	158,536	$	-

 

Age Analysis of Past Due Loans (by class)
As of December 31, 2011
													Recorded
													Investment
	30-59 Days		60-89 Days		Greater Than		Total				Total		90 Days or more
	Past Due		Past Due		90 Days		Past Due		Current		Loans		and Accruing
Church loans:
Wholly-Owned First	$	6,537	$	613	$	7,522	$	14,672	$	90,869	$	105,541	$	-
Wholly-Owned Junior		3,448		-		1,159		4,607		12,052		16,659		-
Participation First		-		-		3,633		3,633		44,081		47,714		-
Participation Junior		-		-		-		-		1,006		1,006		-
Total	$	9,985	$	613	$	12,314	$	22,912	$	148,008	$	170,920	$	-

F-17

The following table is a summary of impaired loans by loan class at September 30, 2012 and December 31, 2011.  The recorded investment in impaired loans reflects the balances in the financials statements, whereas the unpaid principal balance reflects the balances before discounts and partial chargeoffs (dollars in thousands):

Impaired Loans (by class)
As of and for the three months ended September 30, 2012
			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
	Investment		Balance		Allowance		Investment		Recognized
With no related allowance recorded:
Church loans:
Wholly-Owned First	$	4,063	$	4,478	$	-	$	4,073	$	28
Wholly-Owned Junior		216		222		-		216		3
Participation First		2,611		2,744		-		2,611		-
Participation Junior		-		-		-		-		-
With an allowance recorded:
Church loans:
Wholly-Owned First		7,384		7,854		2,620		7,597		44
Wholly-Owned Junior		3,595		3,671		328		3,595		40
Participation First		230		252		19		231		-
Participation Junior		-		-		-		-		-
Total:
Church loans	$	18,099	$	19,221	$	2,967	$	18,323	$	115

Impaired Loans (by class)
As of and for the nine months ended September 30, 2012
			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
	Investment		Balance		Allowance		Investment		Recognized
With no related allowance recorded:
Church loans:
Wholly-Owned First	$	4,063	$	4,478	$	-	$	4,153	$	85
Wholly-Owned Junior		216		222		-		217		9
Participation First		2,611		2,744		-		2,633		-
Participation Junior		-		-		-		-		-
With an allowance recorded:
Church loans:
Wholly-Owned First		7,384		7,854		2,620		8,144		141
Wholly-Owned Junior		3,595		3,671		328		3,597		107
Participation First		230		252		19		565		-
Participation Junior		-		-		-		-		-
Total:
Church loans	$	18,099	$	19,221	$	2,967	$	19,309	$	342

F-18

Impaired Loans (by class)
As of and for the Year Ended December 31, 2011
			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
	Investment		Balance		Allowance		Investment		Recognized
With no related allowance recorded:
Church loans:
Wholly-Owned First	$	1,678	$	1,685	$	-	$	1,691	$	98
Wholly-Owned Junior		-		434		-		-		-
Participation First		2,655		2,655		-		2,699		-
Participation Junior		-		-		-		-		-
With an allowance recorded:
Church loans:
Wholly-Owned First		11,893		12,587		1,773		12,053		254
Wholly-Owned Junior		4,511		4,603		1,111		4,520		146
Participation First		978		978		180		983		-
Participation Junior		-		-		-		-		-
Total:
Church loans	$	21,715	$	22,942	$	3,064	$	21,946	$	498

A summary of nonaccrual loans by loan class at September 30, 2012 and December 31, 2011 is as follows (dollars in thousands):

Loans on Nonaccrual Status (by class)
As of September 30, 2012
Church loans:
Wholly-Owned First	$	11,949
Wholly-Owned Junior		3,658
Participation First		2,842
Participation Junior		-
Total	$	18,449

Loans on Nonaccrual Status (by class)
As of December 31, 2011
Church loans:
Wholly-Owned First	$	14,272
Wholly-Owned Junior		5,037
Participation First		3,633
Participation Junior		-
Total	$	22,942

F-19

The following are summaries of troubled debt restructurings by loan class that were modified during the period ended September 30 (dollars in thousands):

Troubled Debt Restructurings (by class)
For the three months ended September 30, 2012
			Pre-Modification Outstanding		Post-Modification Outstanding		Recorded
	Number of Loans		Recorded Investment		Recorded Investment		Investment At Period End
Church loans:
Wholly-Owned First		1	$	981	$	995	$	995
Wholly-Owned Junior		-		-		-		-
Participation First		-		-		-		-
Participation Junior		-		-		-		-
Total		1	$	981	$	995	$	995

Troubled Debt Restructurings (by class)
For the nine months ended September 30, 2012
			Pre-Modification Outstanding		Post-Modification Outstanding		Recorded
	Number of Loans		Recorded Investment		Recorded Investment		Investment At Period End
Church loans:
Wholly-Owned First		3	$	5,571	$	5,585	$	5,427
Wholly-Owned Junior		2		430		430		420
Participation First		1		271		249		230
Participation Junior		-		-		-		-
Total		6	$	6,272	$	6,264	$	6,077

F-20

Troubled Debt Restructurings (by class)
For the three months ended September 30, 2011
			Pre-Modification Outstanding		Post-Modification Outstanding		Recorded
	Number of Loans		Recorded Investment		Recorded Investment		Investment At Period End
Church loans:
Wholly-Owned First		-	$	-	$	-	$	-
Wholly-Owned Junior		-		-		-		-
Participation First		-		-		-		-
Participation Junior		-		-		-		-
Total		-	$	-	$	-	$	-

Troubled Debt Restructurings (by class)
For the nine months ended September 30, 2011
			Pre-Modification Outstanding		Post-Modification Outstanding		Recorded
	Number of Loans		Recorded Investment		Recorded Investment		Investment At Period End
Church loans:
Wholly-Owned First		9	$	15,246	$	15,323	$	15,214
Wholly-Owned Junior		4		4,467		4,561		4,510
Participation First		-		-		-		-
Participation Junior		-		-		-		-
Total		13	$	19,713	$	19,884	$	19,724

For 9 of the 11 restructured loans in our portfolio, unpaid accrued interest at the time of the loan restructure was added to the principal balance.  The amount of interest added was also recorded as a loan discount, and thus did not increase our net loan balance. Another restructured loan represents the modified loan balance upon foreclosure on two of three underlying properties.  In addition, for each of the 13 restructured loans, the interest rate was lowered.  Each borrower involved in a troubled debt restructuring was experiencing financial difficulties at the time the loan was restructured.

A summary of troubled debt restructurings that defaulted during the periods ended September 30, 2012 and 2011 is as follows (dollars in thousands):

There were no loan modifications classified as TDRs within the last twelve months that defaulted during the three months ended September 30, 2012.

F-21

Troubled Debt Restructurings Defaulted (by class)

During the nine months ended September 30, 2012

	Number of		Recorded
	Loans		Investment
Troubled debt restructurings that subsequently defaulted:
Church loans:
Wholly-Owned First		1	$	2,054
Wholly-Owned Junior		1		420
Participation First		1		230
Participation Junior		-		-
Total:
Church loans		3	$	2,704

Troubled Debt Restructurings Defaulted (by class)

During the three months ended September 30, 2011

	Number of		Recorded
	Loans		Investment
Troubled debt restructurings that subsequently defaulted:
Church loans:
Wholly-Owned First		-	$	-
Wholly-Owned Junior		1		3,173
Participation First		-		-
Participation Junior		-		-
Total:
Church loans		1	$	3,173

Troubled Debt Restructurings Defaulted (by class)

During the nine months ended September 30, 2011

	Number of		Recorded
	Loans		Investment
Troubled debt restructurings that subsequently defaulted:
Church loans:
Wholly-Owned First		5	$	8,552
Wholly-Owned Junior		3		4,291
Participation First		-		-
Participation Junior		-		-
Total:
Church loans		8	$	12,843

F-22

Loans modified in a troubled debt restructuring are closely monitored for delinquency as an early indicator for future default.  If loans modified in a troubled debt restructuring subsequently default, the Company evaluates such loans for potential further impairment.  As a result of this evaluation, specific reserves may be increased or adjustments may be made in the allocation of reserves.

No additional funds were committed to be advanced in connection with loans modified in troubled debt restructurings as of September 30, 2012 and December 31, 2011.

4.  Foreclosed Assets

Assets acquired through foreclosure or other proceedings are initially recorded at fair value at the date of foreclosure less estimated costs of disposal, which establishes a new cost.  After foreclosure, valuations are periodically performed by management and foreclosed assets held for sale are carried at the lower of cost or fair value, less estimated costs of disposal.  Any write-down to fair value at the time of foreclosure is charged to the allowance for loan losses.  The Company’s real estate assets acquired through foreclosure or other proceedings are evaluated regularly to ensure that the recorded amount is supported by its current fair value and that valuation allowances to reduce the varying amount to fair value less estimated costs of disposal are recorded as necessary.  Revenue and expense from the operation of the Company’s foreclosed assets and changes in the valuation allowance are included in net expenses from foreclosed assets.

Foreclosed assets consist of four properties.  One property was acquired during 2011 in satisfaction of a secured loan.  The property had a carrying value of $1.4 million at September 30, 2012 and no valuation allowance has been required for this property.  An additional two properties were acquired in February 2012 in partial satisfaction of a secured loan.  The properties had a carrying value of $717.2 thousand at September 30, 2012 and no valuation allowance has been required for these properties.  Finally, one property was acquired in September 2012 as a result of a Deed in Lieu of Foreclosure Agreement the Company entered into with a borrower.  The property had a carrying value of $958.8 thousand at September 30, 2012 and no valuation allowance has been required for this property.  The Company held $3.1 million and $1.4 million of foreclosed assets at September 30, 2012 and September 30, 2011, respectively.

5.  Loan Participation Sales

During the year ended December 31, 2011, the Company sold participations in two church loans totaling $5.4 million but retained servicing responsibilities for these loans.  As a result, we recorded servicing assets totaling $146.9 thousand, which are being amortized using the interest method.  The amortization of servicing assets is recorded as an adjustment to interest income and totaled  $13.6 thousand for the nine months ended September 30, 2012.  We did not sell participations in any loans during the nine months ended September 30, 2012.

A summary of servicing assets for the nine months ended September 30, 2012 and the year ended December 31, 2011 is as follows:

	2012		2011
Balance, beginning of period	$	138	$	--
Additions:
Servicing obligations from sale of loan participations		--		147
Subtractions:
Amortization		19		9
Balance, end of period	$	119	$	138

F-23

6.  Line of Credit and Other Borrowings

Members United Facilities

On October 12, 2007, the Company entered into two note and security agreements with Members United, a federally chartered credit union located in Warrenville, Illinois, which provides financial services to member credit unions. One note and security agreement was for a secured $10 million revolving line of credit, which is referred to as the “$10 Million LOC,” and the other was for a secured $50 million revolving line of credit.  The latter was amended on May 8, 2009 to allow the Company to borrow up to $100 million through the revolving line of credit. The Company refers to this as the “$100 Million CUSO Line.” Both credit facilities were secured by certain mortgage loans. The Company utilized the $10 Million LOC for short-term liquidity purposes and the $100 Million CUSO Line for mortgage loan investments.

On August 27, 2008, the Company borrowed the entire $10 million available on the $10 Million LOC at a rate of 3.47%.  As a result of this financing, the $10 Million LOC was converted to a term loan with a maturity date of August 26, 2011 and we paid off this facility in 2011.

Pursuant to the terms of the Company’s promissory note with Members United, once the loan was fully drawn, the total outstanding balance was termed out over a five year period with a 30 year amortization payment schedule.  In addition, the term loan interest rate was specified by Members United and was re-priced to a market fixed or variable rate determined at the time the loan is restructured.  We used our $100 million Members United credit facility to assist us in financing our business.  For 2011, the weighted average interest rate we paid on the Members United facility was 3.98%.

On November 4, 2011, the Company and the National Credit Union Administration Board As Liquidating Agent of Members United Corporate Federal Credit Union (“Lender”) entered into an $87.3 million credit facility refinancing transaction (the “MU Credit Facility”).  The MU Credit Facility replaces the original $100 million CUSO Line entered into by and between the Company and Members United Corporate Federal Credit Union on May 7, 2008.  Unless the principal amount of the indebtedness due is accelerated under the terms of the MU Credit Facility loan documents, the principal balance and any interest due on the MU Credit Facility will mature on October 31, 2018.  Accrued interest is due and payable monthly in arrears on the MU Credit Facility on the first day of each month at the lesser of the maximum interest rate permitted by applicable law under the loan documents or 2.525%.  The term loan may be repaid or retired without penalty, but any amounts repaid or prepaid under the MU Credit Facility may not be re-borrowed.  The balance of the MU Credit Facility was $81.9 million and $86.9 million at September 30, 2012 and December 31, 2011, respectively.

The MU Credit Facility includes a number of borrower covenants, including affirmative covenants to maintain the collateral free of liens, to timely pay the amounts due on the facility, to provide the Lender with interim or annual financial statements and annual and periodic reports filed with the U.S. Securities and Exchange Commission and maintain a minimum collateralization ratio of at least 128%.  If at any time the Company fails to maintain its required minimum collateralization ratio, it will be required to deliver cash or qualifying mortgage loans in an amount sufficient to enable it to meet its obligation to maintain a minimum collateralization ratio.  As of December 31, 2011, the collateral securing the MU Credit Facility had an aggregate principal balance of $111.4 million which satisfied the minimum collateralization ratio for this facility.  As of September 30, 2012, the collateral securing the MU Credit Facility had an aggregate principal balance of $105.8 million, which satisfies the minimum collateralization ratio.

In addition to the minimum collateralization requirement, the MU Credit Facility also includes covenants which prevent the Company from renewing or extending a loan pledged as collateral under this facility unless certain conditions have been met and requires the borrower to deliver current financial statements to the Company.  Under the terms of the MU Credit Facility, the Company has established a lockbox maintained for the benefit of Lender that will receive all payments made by collateral obligors.  The Company’s obligation to repay the outstanding balance on this facility may be accelerated upon the occurrence of an “Event of Default” as defined in the MU Credit Facility.  Such Events of Default include, among others, failure to make timely payments due under the MU Credit Facility and the Company's breach of any of its covenants.  As of September 30, 2012 and December 31, 2011, the Company was in compliance with its covenants under the MU Credit Facility.

F-24

WesCorp Facility

On November 30, 2009, the Company entered into a Loan and Security agreement with Western Corporate Federal Credit Union (“WesCorp”), a federally chartered credit union located in San Dimas, California.  The agreement provided for a secured $28 million term loan, referred to as the “WesCorp Facility.”  We used $24.6 million of the proceeds from the WesCorp credit facility to pay-off our Bank of Montreal credit facility.  The WesCorp credit facility had a fixed interest rate of 3.95% and was initially secured by approximately $59.2 million of mortgage loans we previously pledged to secure a credit facility we had established with the Bank of Montreal but has been subsequently paid off. Thus, the loan was initially secured by excess collateral of approximately $30.8 million.

On March 20, 2009, the NCUA assumed control of WesCorp under a conservatorship proceeding initiated by the NCUA under regulations adopted under the Federal Credit Union Act.  Effective as of October 1, 2010, WesCorp was placed into liquidation by the NCUA.  Pursuant to a letter dated October 25, 2010, we were advised that our WesCorp credit facility had been transferred to the Asset Management Assistance Center (“AMAC”), a facility established by the NCUA.

On November 4, 2011, the Company and the National Credit Union Administration Board As Liquidating Agent of Western Corporate Federal Credit Union (previously herein defined as “Lender”) entered into a $23.5 million credit facility refinancing transaction (the “WesCorp Credit Facility Extension”).  The WesCorp Credit Facility Extension amends, restates and replaces the WesCorp Facility entered into by and between the Company and Western Corporate Federal Credit Union on November 30, 2009.  Unless the principal amount due on the WesCorp Credit Facility Extension is accelerated under the terms of the loan documents evidencing such credit facility, the principal balance and any interest due on the facility will be payable in full on October 31, 2018.  Accrued interest on the WesCorp Credit Facility Extension is due monthly in arrears on the first day of each month at the lesser of the maximum rate permitted by applicable law under the loan documents or 2.525%.  The term loan may be repaid or retired without penalty, but any amounts repaid or prepaid under the WesCorp Credit Facility Extension may not be re-borrowed.  As of September 30, 2012 and December 31, 2011, $22.7 and $23.4 million, respectively, was outstanding on the WesCorp Credit Facility Extension.

The WesCorp Credit Facility Extension includes a number of borrower covenants, including affirmative covenants to maintain the collateral free of liens, to timely pay the amounts due on the facility, to provide the Lender with interim or annual financial statements and annual and periodic reports filed with the U.S. Securities and Exchange Commission and maintain a minimum collateralization ratio of at least 150%.  If at any time the Company fails to maintain its required minimum collateralization ratio, it will be required to deliver cash or qualifying mortgage loans in an amount sufficient to enable it to meet its obligation to maintain a minimum collateralization ratio.  As of September 30, 2012 and December 31, 2011, the collateral securing the WesCorp Credit Facility Extension had an aggregate principal balance of $34.5 million and $35.3 million, respectively, which satisfies the minimum collateralization ratio for this facility.  As of September 30, 2012 and December 31, 2011, the Company was in compliance with its covenants under the Wescorp Credit Facility Extension.

F-25

Both the MU Credit Facility and WesCorp Credit Facility Extension are secured by certain of the Company’s mortgage loans previously held as collateral under the $100 Million CUSO Line and the WesCorp Facility.  Future estimated principal pay downs of our bank borrowings during the twelve month periods ending September 30 are as follows:

2013	$	3,366
2014		3,467
2015		3,555
2016		3,639
2017		3,739
Thereafter		86,884
	$	104,650

In addition to regular principal payments, we also made $3.2 million in principal payments during the nine months ended September 30, 2012 in order to remain in compliance with the minimum collateralization ratio requirement of our credit facility borrowings.

7.  Notes Payable

We also rely on our investor notes to make investments in mortgage loan assets and fund our general operations. Except for our private offering of secured notes, the notes are unsecured and are payable to investors who have purchased the securities, including individuals, churches, and Christian ministries, many of whom are members of ECCU. Notes pay interest at stated spreads over an index rate that is adjusted every month. Interest can be reinvested or paid at the investor's option. The Company may repurchase all or a portion of these notes at any time at its sole discretion, and may allow investors to redeem their notes prior to maturity at its sole discretion.  We have offered our investor notes under registered offerings with the SEC and in private placements that are exempt under the provisions of the Securities Act of 1933, as amended.  Our Alpha Class Notes were initially registered with the SEC in July 2001 and an additional $75.0 million of new Alpha Notes were registered with the SEC in May 2007.  The sale of our Alpha Class Notes was discontinued in April 2008.

The Alpha Class Notes contain covenants pertaining to limitations on restricted payment, maintenance of tangible net worth, limitation on issuance of additional notes and incurrence of indebtedness.  The Alpha Class Notes require the Company to maintain a minimum tangible adjusted net worth, as defined in the Loan and Standby Trust Agreement, of not less than $4.0 million.  The Company’s other indebtedness, as defined in the Loan and Standby Trust Agreement, and subject to certain exceptions enumerated therein, may not exceed $10.0 million outstanding at any time while any Alpha Class Note is outstanding.  The Company is in compliance with these covenants as of September 30, 2012.  At September 30, 2012 and December 31, 2011, $3.3 million and $4.4 million of Alpha Class Notes were outstanding, respectively.

In addition to the Alpha Class Notes, the Company has also offered its Class A Notes in three series, including a Fixed Series, Flex Series and Variable Series pursuant to registration statements filed with the SEC.    On June 24, 2011, we filed a Registration Statement with the SEC seeking to register an additional $75 million of the Company’s Class A Notes.  All of the Class A Notes are unsecured.  The offering includes three categories of notes, including a fixed interest note, a variable interest note, and a flex note, which allows borrowers to increase their interest rate once a year with certain limitations.  The interest rates the Company pays on the Fixed Series Notes and the Flex Series Notes are determined by reference to the Swap Index, an index that is based upon a weekly average Swap rate reported by the Federal Reserve Board, and is in effect on the date they are issued, or in the case of the Flex Series Notes, on the date the interest rate is reset. These notes bear interest at the Swap Index plus a rate spread of 1.7% to 2.5% and have maturities ranging from 12 to 84 months.  The interest rates the Company pays on the Variable Series Notes are determined by reference to the Variable Index in effect on the date the interest rate is set and bear interest at a rate of the Swap Index plus a rate spread of 1.50% to 1.80%.  Effective as of January 5, 2009, the Variable Index is defined under the Class A Notes as the three month LIBOR rate.

F-26

The Class A Notes also contain restrictive covenants pertaining to paying dividends, making redemptions, acquiring, purchasing or making certain payments, requiring the maintenance of minimum tangible net worth, limitations on the issuance of additional notes and incurring of indebtedness.  The Class A Notes require the Company to maintain a minimum tangible adjusted net worth, as defined in the Class A Notes Trust Indenture Agreement, of not less than $4.0 million.  The Company is not permitted to issue any Class A Notes if, after giving effect to such issuance, the Alpha Class Notes then outstanding would have an aggregate unpaid balance exceeding $100.0 million.  The Company’s other indebtedness, as defined in the Class A Notes Trust Indenture Agreement, and subject to certain exceptions enumerated therein, may not exceed $20.0 million outstanding at any time while any Class A Notes are outstanding.  The Company was in compliance with these covenants as of September 30, 2012.

The Class A Notes were issued under a Trust Indenture between the Company and U.S. Bank National Association (US Bank).  The Class A Notes are part of up to $200 million of Class A Notes the Company may issue pursuant to the US Bank Indenture.  At September 30, 2012 and December 31, 2011, $41.9 million and $46.5 million of these notes were outstanding, respectively.

Effective as of May 15, 2012, the Company temporarily discontinued the sale of the Class A Notes and deregistered the securities remaining unsold under the Company’s Registration Statement on Form S-1, initally filed with the SEC on December 23, 2009 and declared effective on June 3, 2010.  The Company has subsequently filed a Registration Statement seeking to register $75 million of its Class A Notes with the SEC.  This Registration Statement was declared effective as of October 11, 2012, and the Company has resumed the sale of its Class A Notes.

Historically, most of the Company’s unsecured notes have been renewed by investors upon maturity.  Because the Company has discontinued its sale of Alpha Class Notes effective as of April 18, 2008, all holders of such notes that mature in the future may reinvest such sums by purchasing Class A Notes that have been registered with the Securities and Exchange Commission.  For matured notes that are not renewed, the Company funds the redemption in part through proceeds from the repayment of loans, and issuing new notes payable.

From time to time, we have also sold unsecured general obligation notes having various terms to ministries and ministry related organizations in private offerings under the Securities Act of 1933, as amended.  Except for a small number of investors (in total not exceeding 35 persons), the holders of these notes are accredited investors within the  meaning of Regulation D under the Securities Act.

We have the following notes payable at September 30, 2012 (dollars in thousands):

SEC Registered Public Offerings	Amount		Weighted Average Interest Rate
Class A Offering	$	41,866		41.7	%
National Alpha Offering		3,341		5.58	%
Private Offerings
Special Offering		9,177		4.60	%
Special Subordinated Notes		6		5.45	%
Secured Notes		55		2.49	%
International Offering		235		4.05	%
Total	$	54,680		4.33	%

F-27

During the quarter ended June 30, 2012, the Company launched the sale of its 2012 Secured Investment Certificates pursuant to a limited offering to qualified investors that meet the requirements of Rule 506 of Regulation D.  The secured investment certificates have been offered with maturity terms of 36, 60 and 84 months at an interest rate fixed on the date of issuance, as determined by the then current seven-day average rate reported by the U.S. Federal Reserve Board for interest rate swaps.  Wilmington Savings Fund Society, FSB, serves as the trustee for the secured investment certificates.  Under the terms of the Trust Indenture entered into with Wilmington Savings Fund Society, FSB, the Company has established a mortgage loan investment fund for the benefit of investors and is required to maintain a minimum collateralization ratio equal to at least 105% of the principal amount of secured investment certificates that are issued and outstanding.

The Trust Indenture entered into with Wilimington Savings Fund Society , FSB, also contains standard covenants which require the Company to refrain from permitting any other senior lien to be created or maintained on the collateral securing the certificates, refrain from paying any dividends on the Company’s equity units if there is an uncured event of default with respect to the certificates, make timely payments of interest and principal due on the certificates and secure the assets of the fund.  The Company is in compliance with these covenants as of September 30, 2012.  At September 30, 2012, $55.3 thousand of these secured certificates were outstanding.  $67.8 thousand in cash was pledged as collateral on these notes.  There were no secured certificates outstanding as of December 31, 2011.

Future maturities for the Company’s investor notes during the twelve month period ending September 30 are as follows (dollars in thousands):

2013	$	24,862
2014		10,727
2015		7,698
2016		7,393
2017		2,899
Thereafter		1,101
	$	54,680

8.  Preferred and Common Units Under LLC Structure

On December 31, 2008, both our Class I Preferred Stock and Class II Preferred Stock were converted into Series A Preferred Units pursuant to a Plan of Conversion adopted by our shareholders. The Series A Preferred Units are entitled to a cumulative preferred return, payable quarterly in arrears, equal to the liquidation preference times a dividend rate of 190 basis points over the 1-year LIBOR rate in effect on the last day of the calendar month in which the preferred return is paid (“Preferred Return”).  In addition, the Series A Preferred Units are entitled to an annual preferred distribution, payable in arrears, equal to 10% of our profits less the Preferred Return (“Preferred Distribution”).

The Series A Preferred Units have a liquidation preference of $100 per unit; have no voting rights; and are subject to redemption in whole or in part at our election on December 31 of any year, for an amount equal to the liquidation preference of each unit, plus any accrued and unpaid Preferred Return and Preferred Distribution on such units. The Series A Preferred Units have priority as to earnings and distributions over our Class A Common Units.  We have a right of first refusal in the event that one of our Class A Common Unit or Series A Preferred Unit holders proposes to sell or transfer such units.  If we fail to pay a Preferred Return for four consecutive quarters, the holders of the Series A Preferred Units have the right to appoint two managers.
 

F-28

On December 31, 2008, upon conversion from a corporation to an limited liability company, our common stock was converted into Class A Common Units under the Plan of Conversion that was adopted by our shareholders.  In accordance with the terms of the Plan of Conversion and Operating Agreement approved by our shareholders and managers, all voting rights are held by the holders of our Class A Common Units.

9.  Retirement Plans

401(k)

Employees who are at least 21 years of age are eligible to participate in the Insperity 401(k) plan upon the hire date. No minimum service is required and the minimum age is 21. Each employee may elect voluntary contributions not to exceed 60% of salary, subject to certain limits based on Federal tax law. The plan has a matching program, the amount and percentage of which is annually determined by the managers. Matching contributions for the nine months ended September 30, 2012 and September 30, 2011 were $41.9 thousand and $32.2 thousand, respectively.

Profit Sharing

The profit sharing plan is for all employees who, at the end of the calendar year, are at least 21 years old, still employed, and have at least 900 hours of service during the plan year. The amount annually contributed on behalf of each qualified employee is determined by the managers and is calculated as a percentage of the eligible employee's annual earnings. Plan forfeitures are used to reduce the our annual contribution. We did not make any contributions for the plan during the year ended December 31, 2011.  No profit sharing contribution has been made or approved for the nine months ended September 30, 2012.

10.  Loan Commitments

Unfunded Commitments

Unfunded commitments are commitments for possible future extensions of credit to our customers or existing customers of ECCU. Unfunded commitments totaled $75.0 thousand at September 30, 2012 and $181.8 thousand at December 31, 2011.

11.  Fair Value Measurements

Fair Value Measurements Using Fair Value Hierarchy

Measurements of fair value are classified within a hierarchy based upon inputs that give the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:

· Level 1 inputs are quoted prices (unadjusted) for identical assets or liabilities in active markets.  

· Level 2 inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical assets and liabilities in inactive markets, inputs that are observable for the asset or liability (such as interest rates, prepayment speeds, credit risks, etc.), or inputs that are derived principally from or corroborated by observable market data by correlation or by other means.  

· Level 3 inputs are unobservable and reflect an entity’s own assumptions about the assumptions that market participants would use in pricing the assets or liabilities.In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurementin its entirety requires judgment, and considers factors specific to the asset or liability.

F-29

Fair Value of Financial Instruments

The carrying amounts and estimated fair values of our financial instruments at September 30, 2012 and December 31, 2011, are as follows:

	Fair Value Measurements at September 30, 2012 using
			Quoted  Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	Carrying Value		Level 1		Level 2		Level 3		Fair Value
FINANCIAL ASSETS:
Cash	$	11,711	$	11,711	$	-	$	-	$	11,711
Loans, net		153,649		-		-		157,349		157,349
Accrued interest receivable		633		-		-		633		633
FINANCIAL LIABILITIES:
Notes payables	$	54,680	$	-	$		$	56,448	$	56,448
Bank borrowings		104,650		-				108,229		108,229
Other financial liabilities		107		-				107		107

	December 31, 2011
	Carrying Amount			Estimated Fair Value
Financial assets:
Cash		$	11,167		$	11,167
Loans receivable			165,355			168,383
Accrued interest receivable			863			863
Financial liabilities:
Notes payable			59,030			60,833
Bank borrowings			110,280			111,371
Other financial liabilities			104			104

Management uses judgment in estimating the fair value of the Company’s financial instruments; however, there are inherent weaknesses in any estimation technique. Therefore, for substantially all financial instruments, the fair value estimates presented herein are not necessarily indicative of the amounts the Company could have realized in a sales transaction at September 30, 2012 and December 31, 2011.

The following methods and assumptions were used to estimate the fair value of financial instruments:

Cash – The carrying amounts reported in the balance sheets approximate fair value for cash.

Loans – Fair value is estimated by discounting the future cash flows using the current average rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.

Notes Payable – The fair value of fixed maturity notes is estimated by discounting the future cash flows using the rates currently offered for notes payable of similar remaining maturities.  The discount rate is estimated by Company management by using market rates which reflect the interest rate risk inherent in the notes.

Borrowings from Financial Institutions – The fair value of borrowings from financial institutions are estimated using discounted cash flow analyses based on current incremental borrowing rates for similar types of borrowing arrangements. The discount rate is estimated Company management by using market rates which reflect the interest rate risk inherent in the notes.

F-30

Derivative Financial Instruments – The fair values for interest rate swap agreements and interest rate caps are based upon the amounts required to settle the contracts.

Off-Balance Sheet Instruments – The fair value of loan commitments is based on fees currently charged to enter into similar agreements, taking into account the remaining term of the agreements and the counterparties' credit standing. The fair value of loan commitments is insignificant at September 30, 2012 and December 31, 2011.

Fair Value Measured on a Nonrecurring Basis

Certain assets are measured at fair value on a nonrecurring basis; that is, the assets are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). The following table presents such assets carried on the balance sheet by caption and by level within the valuation hierarchy:

		Fair Value Measurements Using:
		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
		(Level 1)		(Level 2)		(Level 3)		Total
Assets at September 30, 2012:
Impaired loans (net of allowance and discount)	$	-	$	-	$	8,384	$	8,384
Foreclosed assets		-		-		3,050		3,050
	$	-	$	-	$	11,434	$	11,434
Assets at December 31, 2011:
Impaired loans (net of allowance and discount)	$	-	$	-	$	11,887	$	11,887
Foreclosed assets		-		-		1,374		1,374
	$	-	$	-	$	13,261	$	13,261

Impaired Loans

Collateral-dependent impaired loans are carried at the fair value of the collateral less estimated costs to sell, incorporating assumptions that experienced parties might use in estimating the value of such collateral. The fair value of collateral is determined based on appraisals. In some cases, adjustments were made to the appraised values for various factors including age of the appraisal, age of comparables included in the appraisal, and known changes in the market and in the collateral. When significant adjustments were based on unobservable inputs, the resulting fair value measurement has been categorized as a Level 3 measurement. Otherwise, collateral-dependent impaired loans are categorized under Level 2.

Foreclosed Assets  

Real estate acquired through foreclosure or other proceedings (foreclosed assets) is initially recorded at fair value at the date of foreclosure less estimated costs of disposal, which establishes a new cost. After foreclosure, valuations are periodically performed and foreclosed assets held for sale are carried at the lower of cost or fair value, less estimated costs of disposal. The fair values of real properties initially are determined based on appraisals. In some cases, adjustments were made to the appraised values for various factors including age of the appraisal, age of comparables included in the appraisal, and known changes in the market or in the collateral. Subsequent valuations of the real properties are based on management estimates or on updated appraisals. Foreclosed assets are categorized under Level 3 when significant adjustments are made by management to appraised values based on unobservable inputs. Otherwise, foreclosed assets are categorized under Level 2 if their values are based solely on appraisals. 

F-31

The valuation methodologies used to measure the fair value adjustments for Level 3 assets recorded at fair value on a nonrecurring basis at September 30, 2012 are summarized below:

Assets	Fair Value	Valuation Techniques	Unobservable Input	Range (Weighted Average)
Impaired Loans	8,384	Discounted appraised value	Selling cost	10% (10%)
		Internal evaluations	Discount due to age of appraisal	0% - 5% (0.12%)
Foreclosed assets	3,050	Discounted appraised value	Selling cost	10% (10%)
		Internal evaluations	Discount due to age of appraisal	0% - 5% (1.18%)

F-32

Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations

SAFE HARBOR CAUTIONARY STATEMENT

This Form 10-Q contains forward-looking statements regarding Ministry Partners Investment Company, LLC and our wholly-owned subsidiaries, Ministry Partners Funding, LLC, MP Realty, and MP Securities, LLC, including, without limitation, statements regarding our expectations with respect to revenue, credit losses, levels of non-performing assets, expenses, earnings and other measures of financial performance.  Statements that are not statements of historical facts may be deemed to be forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995.  The words “anticipate,” “believe,” “estimate,” “expect,” “plan,” “intend,” “should,” “seek,” “will,” and similar expressions are intended to identify these forward-looking statements, but are not the exclusive means of identifying them.  These forward-looking statements reflect the current views of our management.

These forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties that are subject to change based upon various factors (many of which are beyond our control).  Such risks, uncertainties and other factors that could cause our financial performance to differ materially from the expectations expressed in such forward-looking statements include, but are not limited to, the risks set forth in our Annual Report on Form 10-K for the year ended December 31, 2011, as well as the following:

· We are a highly leveraged company and our indebtedness could adversely affect our financial condition and business;

· we depend on the sale of our debt securities to finance our business and have relied on the renewals or reinvestments made by our holders of debt securities when their debt securities mature to fund our business;

· our ability to maintain liquidity or access to other sources of funding;

· changes in the cost and availability of funding facilities;

· the allowance for loan losses that we have set aside prove to be insufficient to cover actual losses on our loan portfolio;

· we rely upon our largest equity holder to originate profitable church and ministry related mortgage loans;

· because we rely on credit facilities to finance our investments in church mortgage loans, disruptions in the credit markets, financial markets and economic conditions that adversely impact the value of church mortgage loans can negatively affect our financial condition and performance;

· we are required to comply with certain covenants and restrictions in our primary credit facilities that, if not met, could trigger repayment obligations of the outstanding principal balance on short notice;  and

As used in this quarterly report, the terms “we”, “us”, “our” or the “Company” means Ministry Partners Investment Company, LLC and our wholly-owned subsidiaries, Ministry Partners Funding, LLC, MP Realty, and MP Securities, LLC.

OVERVIEW

We were incorporated in 1991 as a credit union service organization and we invest in and originate mortgage loans made to evangelical churches, ministries, schools and colleges.  Our loan investments are generally secured by a first mortgage lien on properties owned and occupied by evangelical churches, schools, colleges and ministries.  We converted to a limited liability company form of organization on December 31, 2008.

3

The following discussion and analysis compares the results of operations for the three and nine month periods ended September 30, 2012 and September 30, 2011 and should be read in conjunction with the accompanying financial statements and Notes thereto.

Results of Operations

Three Months Ended September 30, 2012 vs. Three Months Ended September 30, 2011

	Three months ended September 30,					Comparison
	2012		2011			$ Difference			% Difference
Interest income:
Interest on loans	$	2,480	$	2,657		$	(177	)		(7	%)
Interest on interest-bearing accounts		37		22			15			68	%
Total interest income		2,517		2,679			(162	)		(6	%)
Interest expense:
Borrowings from financial institutions		676		1,150			(474	)		(41	%)
Notes payable		601		641			(40	)		(6	%)
Total interest expense*		1,277		1,791			(514	)		(29	%)
Net interest income		1,240		888			352			40	%
Provision (credit) for loan losses*		87		822			(735	)		(89	%)
Net interest income after provision (credit) for loan losses		1,153		66			1,087			1647	%
Non-interest income		30		28			2			7	%
Non-interest expenses:
Salaries and benefits		509		399			110			28	%
Marketing and promotion		43		37			6			16	%
Office operations		333		341			(8	)		(2	%)
Legal and accounting		107		132			(25	)		(19	%)
Total non-interest expenses		992		909			83			9	%
Income (loss) before provision for income taxes		191		(815	)		1,006			123	%
Provision for income taxes		4		3			1			33	%
Net income (loss)	$	187	$	(818	)	$	1,005			123	%

4

During the three months ended September 30, 2012, we reported net income of $187 thousand. Our continued profitability in the third quarter of 2012 is primarily attributable to reduced borrowing rates on our borrowings from financial institutions from a weighted average of 4.08% during the three months ended September 30, 2011 as compared to 2.53% for the three months ended September 30, 2012 and a reduction in our provisions for loan losses.  The reduction in financing costs for our primary credit facilities occurred after we completed a refinancing transaction with the NCUA in November 2011 that lowered the interest rates on $110 million of borrowings on our two credit facilities.  This refinancing transaction, as well as paydowns of $4.3 million on our borrowings since September 2011, decreased interest expense on borrowings from financial institutions by $474 thousand.  While we took $87 thousand of provisions for loan losses in the third quarter of 2012, this represented a $735 thousand decrease from provisions taken in September 2011 related to the declining value of collateral on our collateral dependent loans.  These positive contributions to net income were partially offset by a $177 thousand decrease in interest income we received on our mortgage loans, as well as a $110 thousand increase in salary and benefits expense.

The decrease in our total interest income as compared to the prior year is due entirely to the decrease in our loan portfolio.  Our average interest-earning loans decreased from $163.2 million during the third quarter of 2011 to $148.7 million during the third quarter of 2012, a decrease of $14.5 million.  Due to a higher average cash balance from prior year, we have received $15 thousand in additional interest income from our money market accounts held with other institutions as compared to the three month period ended September 30, 2011. However, as these accounts only produce an average yield of just over 1%, these gains were not sufficient to completely offset the decrease in interest income on loans.

Total interest expense decreased by $514 thousand from the third quarter of 2011 primarily because of the refinancing transaction we completed with the NCUA in late 2011.  This transaction lowered our average interest rates on borrowings from financial institutions to 2.53% from 4.08%.  This decrease is also related partially to a $40 thousand decrease in interest expense on notes payable, as our average notes payable balance has declined by $4.1 million from September 2011 to September 2012.

The lower interest rates on our borrowings and decrease in the aggregate principal balance due on our investor notes led to an increase in net interest income for the quarter ended September 30, 2012 of $352 thousand over the previous year’s third quarter.  Despite the decrease in interest income we received on our mortgage loan investments, the large decrease in interest expense on borrowings from financial institutions led to higher net interest income.

Net interest income after provision for loan losses increased by $1.1 million for the quarter ended September 30, 2012 over the three months ended September 30, 2011.  During the third quarter of 2012, we restructured the terms on several of our existing troubled debt restructures which led to new estimates of future cash flows and ultimately resulted in additional provisions for loan losses of $87 thousand.  In September of 2011, we recorded provisions for loan losses of $822 thousand as a result of additional impairment on our collateral dependent loans.  There was no such impairment in the current year.  The large provisions taken in the prior year combined with the higher net interest income in the current year led to the substantial increase in net interest income after provision for loan losses.

We also had other income of $30 thousand in the third quarter of 2012 primarily due to rental income on our REO property and servicing fee income we earned on two loans participations we sold but on which we retained servicing rights.  This is comparable to the $28 thousand we earned from rental income and servicing fee income during the same period in the prior year.

Our non-interest operating expenses for the three months ended September 30, 2012 increased by $83 thousand over the same period ended September 30, 2011, an increase of 9%.  This increase is due almost entirely to a 28% increase in salaries and benefits expense.  Since the end of September 2011, we have hired four additional employees to assist in the growth of our finance, lending and note sales departments, increasing our total employees from 16 to 20, an increase of 25%.  Our marketing expenses were similar to the prior year, which is expected as we did not engage in any significant marketing activities during the third quarter of 2012 while we awaited approval to sell our Class A Notes.  Despite opening a new office in Fresno for our wholly-owned subsidiary, MP Securities, in the current year, our office operations expenses decreased for the three month period ended September 30, 2012.  This is primarily related to a large decrease in expenses associated with the management of our loan portfolio.  These expenses have declined mainly due to the decrease in impaired loans from the prior year, from $26.7 million to $18.7 million. These loans often require additional appraisals, insurance and other fees that we pay on the borrower’s behalf.  We also incurred a $25 thousand decrease in legal and accounting expenses, as a significant portion of the legal expenses we incurred during the third quarter of 2012 were related to the preparation of our new Class A Notes prospectus and were capitalized as debt issuance costs.

5

Nine months ended September 30, 2012 vs. Nine months ended September 30, 2011

	Nine months ended September 30,						Comparison
	2012			2011			$ Difference			% Difference
Interest income:
Interest on loans	$	7,493		$	8,258		$	(765	)		(9	%)
Interest on interest-bearing accounts		111			69			42			61	%
Total interest income		7,604			8,327			(723	)		(9	%)
Interest expense:
Borrowings from financial institutions		2,050			3,601			(1,551	)		(43	%)
Notes payable		1,843			1,962			(119	)		(6	%)
Total interest expense		3,893			5,563			(1,670	)		(30	%)
Net interest income		3,711			2,764			947			34	%
Provision (credit) for loan losses		(49	)		1,305			(1,354	)		(104	%)
Net interest income after provision (credit) for loan losses		3,760			1,459			2,301			158	%
Non-interest income		90			166			(76	)		(46	%)
Non-interest expenses:
Salaries and benefits		1,423			1,136			287			25	%
Marketing and promotion		112			98			14			14	%
Office operations		1,131			1,091			40			4	%
Legal and accounting		536			557			(21	)		(4	%)
Total non-interest expenses		3,202			2,882			320			11	%
Income (loss) before provision for income taxes		648			(1,257	)		1,905			(152	%)
Provision for income taxes		12			11			1			9	%
Net income (loss)	$	636		$	(1,268	)	$	1,904			(150	%)

6

During the nine months ended September 30, 2012, we reported net income of $636 thousand as compared to a net loss of $1.3 million for the nine months ended September 30, 2011. As noted above, our year to date profits in 2012 are primarily attributable to a net credit of $49 thousand to our provisions for loan losses as a result of the sale of two impaired loans and to reduced borrowing rates on our borrowings from financial institutions from a weighted average of 4.13% during the nine months ended September 30, 2011, to 2.53% for the nine months ended September 30, 2012.  This decrease occurred when we completed a refinancing transaction with the NCUA for our primary credit facilities in November 2011 that lowered the interest rates on $110 million of borrowings in our two credit facilities.  This refinancing transaction, as well as paydowns of $6.3 million since September 2011, decreased interest expense on borrowings from financial institutions by $1.6 million. For the nine month period ended September 30, 2012, we also reported a significant decrease in our provision for loan losses. In the second quarter 2012, we recorded a $265 thousand reversal of previously recorded provisions for loan losses when we sold two impaired loans at a price greater than our estimated fair value.  After recording $87 thousand of provisions in the third quarter, the total credit to loan losses for the nine months ended September 30, 2012 was $49 thousand.  Conversely, during the nine months ended September 30, 2011, we took $1.3 million of provisions related to increases in impairment on our non-performing loans and an increase in general reserves.  The decreases in interest expense and provisions over the prior year were partially offset by decreases in interest income we received on our mortgage loans as well as by an increase in salary and benefits expense.

Total interest income decreased by $723 thousand for the year to date ended September 30, 2012 as compared to the nine month period ended September 30, 2011.  The $17.5 million decrease on the year to date average balance of our loans receivable since September 2011 has been the primary driver of this decrease.  In addition, we have recognized $33 thousand less income from the amortization of deferred loan fees, as several participation sales in the first nine months of 2011 led to the immediate recognition of a portion of those loan fees.  We have not sold any loan participations during the first nine months of 2012.  The decrease in interest income related to the paydowns in our loan portfolio has been offset somewhat by an increase in income from interest-earning accounts we hold with other financial institutions as we have increased our average cash balance by $6.1 million over the prior year.

Total interest expense decreased by $1.7 million from the nine months ended September 30, 2012.  This decrease is related partially to a $119 thousand decrease in interest expense on notes payable, as our investor notes payable balance has declined by $4.3 million from September 2011 to September 2012.  The decrease in interest expense is primarily due, however, to savings of $1.6 million on borrowings from financial institutions related to the refinancing transaction we completed with the NCUA in late 2011.  This transaction has helped lead to an increase of $947 thousand in net interest income for the nine month period ended September 30, 2012 as compared to the previous year.

Provisions for loan losses decreased by $1.4 million from the prior year.  Approximately $265 thousand of this decrease was related to the sale of two impaired loans to a third party in May 2012.  These loans were collateral dependent and were sold at a price greater than our estimate of the collateral value, resulting in a reversal of a portion of the specific reserves previously recorded on these loans.  Despite taking some additional general reserves and specific reserves throughout the year, we have a net credit of $49 thousand in provision for loan losses at September 30, 2012.  Conversely, during the first nine months of 2011, we took additional specific reserves due to a decrease in collateral value on  several of our collateral dependent loans.  We also increased our general reserves during the first three quarters of 2011.  As collateral values have stabilized and performance of our loan portfolio has improved, it has not been necessary to record large provisions for loan losses throughout 2012.  With the improvement in underlying collateral values on our loan portfolio, the Company has reported net interest income after provisions for loan losses of $3.8 million for the nine month period ended September 30, 2012, as compared to $1.5 million for the nine month period ended September 30, 2011.

We have experienced a decrease in the amount of non-interest income we have received in the current year over the prior year.  We have recorded $90 thousand of other income during the first nine months of 2012 primarily due to rental income on our REO property and servicing fee income we earned on two loans participations we sold but on which we retained servicing rights.  This is an increase over the rental income and servicing income we received during the first nine months of 2011.  In the prior year, however, our non-interest income was bolstered by gains of $127 thousand related to loan participations sold in the first half of 2011.  There have been no loan participation sales during the first three quarters of 2012.

7

Our non-interest operating expenses for the nine months ended September 30, 2012 have increased primarily due to increased salary and benefits expense stemming from an increase in our staff.  Since the end of September 2011, we have hired four additional employees to assist in the growth of our finance, lending and note sales departments, increasing our total employees from 16 to 20, an increase of 25% in our personnel, which corresponds to the 25% increase in salaries and benefits expenses.  We also incurred $48 thousand in additional office operations expenses during the first three quarters of 2012 compared to 2011 due to an increase in human resources expenses related to additional employees, an increase in insurance costs, and expenses related to opening an office for MP Securities in May 2012.

Net Interest Income and Net Interest Margin

Our earnings depend largely upon the difference between the income we receive from interest-earning assets, which consist principally of mortgage loan investments and interest-earning accounts with other financial institutions, and the interest paid on our debt securities and credit facility borrowings. This difference is net interest income. Net interest margin is net interest income expressed as a percentage of average total interest-earning assets.

The following table provides information, for the periods indicated, on the average amounts outstanding for the major categories of interest-earning assets and interest-bearing liabilities, the amount of interest earned or paid, the yields and rates on major categories of interest-earning assets and interest-bearing liabilities, and the net interest margin:

	Average Balances and Rates/Yields
	For the Three Months Ended September 30,
	(Dollars in Thousands)
	2012							2011
	Average Balance		Interest Income/ Expense		Average Yield/ Rate			Average Balance		Interest Income/ Expense		Average Yield/ Rate
Assets:
Interest-earning accounts with    other financial institutions	$	13,890	$	37		1.04	%	$	7,258	$	22		1.21	%
Interest-earning loans [1]		148,712		2,480		6.64	%		163,245		2,657		6.46	%
Total interest-earning assets		162,602		2,517		6.16	%		170,503		2,679		6.23	%
Non-interest-earning assets		10,095		--		--			11,744		--		--
Total Assets		172,697		2,517		5.80	%		182,247		2,679		5.83	%
Liabilities:
Public offering notes – Class A		43,323		445		4.09	%		45,942		469		4.05	%
Public offering notes – Alpha   Class		3,485		49		5.57	%		4,990		72		5.75	%
Special offering notes		9,001		104		4.59	%		8,984		98		4.30	%
International notes		228		2		4.11	%		154		2		4.98	%
Subordinated notes		6		*		5.45	%		147		*		0.22	%
Secured notes		55		*		2.49	%		--		--		--
Borrowings from financial institutions		106,179		676		2.53	%		111,923		1,150		4.08	%
Total interest-bearing liabilities	$	162,277	$	1,277		3.13	%	$	172,140	$	1,791		4.13	%
Net interest income			$	1,240						$	888
Net interest margin [2]						3.03	%						2.07	%
[1] Loans are net of deferred fees but gross of the allowance for loan losses
[2] Net interest margin is equal to net interest income as a percentage of average total assets. * Represents amounts less than $0.5 thousand.

8

Average interest-earning assets decreased to $162.6 million during the three months ended September 30, 2012, from $170.5 million during the same period in 2011, a decrease of $7.9 million or 5%. The average yield on these assets decreased to 6.16% for the three months ended September 30, 2012 from 6.23% for the three months ended September 30, 2011. This average yield decrease is related to the higher average balance in interest-earning accounts with other financial institutions.  These assets earn only 1% and they comprise a larger portion of interest-earning assets compared to the prior year.  Interest earning accounts held with other financial institutions increased to $13.9 million at September 30, 2012 as compared to $7.3 million at September 30, 2011, an increase of 90%. The yield on interest-earning loans for the three months ended September 30, 2012 increased to 6.64% from 6.46%.  This is partially the result of an increase in the weighted average interest rate of the loan portfolio from 6.40% to 6.43%, as well as additional deferred loan fee amortization included in interest income in the third quarter of 2012 related to early paydowns of several loans.  The larger balance of interest earning accounts with other financial institutions relative to the rest of our assets was mitigated by the increase in loan yield and the decrease in non-interest-earning assets, but still resulted in a decrease in the average yield on total assets decreased to 5.80% from 5.83%.

Average interest-bearing liabilities, consisting of notes payable and borrowings from financial institutions, decreased to $162.3 million during the three months ended September 30, 2012, from $172.9 million during the same period in 2011. The average rate paid on these liabilities decreased to 3.13% for the three months ended September 30, 2012, from 4.13% for the same period in 2011. This decrease is due primarily to the refinancing transaction completed with the NCUA in November 2011, which lowered the interest rates on our two credit facilities to 2.53% from 4.08%.

Net interest income for the three months ended September 30, 2012, was $1.2 million, which was an increase of $352 thousand, or 40%, for the same period in 2011.  Net interest margin increased 96 basis points to 3.03% for the quarter ended September 30, 2012, compared to 2.07% for the quarter ended September 30, 2011.

	Average Balances and Rates/Yields
	For the Nine months ended September 30,
	(Dollars in Thousands)
	2012							2011
	Average Balance		Interest Income/ Expense		Average Yield/ Rate			Average Balance		Interest Income/ Expense		Average Yield/ Rate
Assets:
Interest-earning accounts with    other financial institutions	$	14,008	$	111		1.06	%	$	7,856	$	69		1.17	%
Interest-earning loans [1]		152,715		7,493		6.55	%		170,219		8,258		6.47	%
Total interest-earning assets		166,723		7,604		6.09	%		178,075		8,327		6.24	%
Non-interest-earning assets		9,892		--		--			11,197		--		--
Total Assets		176,615		7,604		5.73	%		189,272		8,327		5.87	%
Liabilities:
Public offering notes – Class A		45,826		1,391		4.05	%		46,202		1,415		4.08	%
Public offering notes – Alpha   Class		3,882		164		5.63	%		5,156		221		5.73	%
Special offering notes		8,252		280		4.54	%		9,461		288		3.92	%
International notes		209		7		4.31	%		174		6		4.53	%
Subordinated notes		6		*		5.45	%		675		32		6.37	%
Secured notes		23		*		2.55	%		--		--		--
Borrowings from financial institutions		108,162		2,050		2.53	%		116,154		3,601		4.13	%
Total interest-bearing liabilities	$	166,360	$	3,893		3.13	%	$	177,822		5,563		4.17	%
Net interest income			$	3,711						$	2,764
Net interest margin [2]						2.97	%						2.08	%
[1] Loans are net of deferred fees but gross of the allowance for loan losses
[2] Net interest margin is equal to net interest income as a percentage of average total assets.
* Represents amounts less than $0.5 thousand.

9

Average interest-earning assets decreased to $166.7 million during the nine months ended September 30, 2012, from $178.1 million during the same period in 2011, a decrease of $11.4 million or 6%. The average yield on these assets decreased to 6.09% for the nine months ended September 30, 2012 from 6.24% for the nine months ended September 30, 2011. As described above, this average yield decrease is related to the higher average balance in interest-earning accounts we held with other financial institutions.  Interest earning accounts held with other financial institutions increased to $14.0 million at September 30, 2012 as compared to $7.9 million at September 30, 2011, an increase of 77%. In contrast, the yield on interest-earning loans for the nine months ended September 30, 2012 increased to 6.55% from 6.47%.  This is mainly the result of an increase in the weighted average interest rate of the loan portfolio.  Despite the increase in interest rates in the portfolio and the decrease in non-interest earning assets, the higher relative balance of interest earning accounts with other financial has caused the average yield on total assets to decrease from 5.87% to 5.73%.

Average interest-bearing liabilities, consisting of notes payable and borrowings from financial institutions, decreased to $166.4 million during the nine months ended September 30, 2012, from $177.8 million during the same period in 2011. The average rate paid on these liabilities decreased to 3.13% for the nine months ended September 30, 2012, as compared to 4.17% for the same period in 2011. This decrease is due primarily to the refinancing transaction completed with the NCUA in November 2011, which lowered the interest rates on our two credit facilities to 2.53% from 4.13%.

Net interest income for the nine months ended September 30, 2012 was $3.7 million, which was an increase of $947 thousand, or 34%, for the same period in 2011.  Net interest margin increased 89 basis points to 2.97% for the first three quarters of 2012, compared to 2.08% for the first three quarters of 2011.

The following table sets forth, for the periods indicated, the dollar amount of changes in interest earned and paid for our interest-earning assets and interest-bearing liabilities, the amount of change attributable to changes in average daily balances (volume), and changes in interest rates (rate).

Rate/Volume Analysis of Net Interest Income
	Three months Ended September 30, 2012 vs. 2011
	Increase (Decrease) Due to Change in
	Volume			Rate			Total
	(Dollars in Thousands)
Increase (Decrease) in Interest Income:
Interest-earning account with other financial institutions	$	18		$	(4	)	$	14
Total loans		(251	)		75			(176	)
		(233	)		71			(162	)
Increase (Decrease) in Interest Expense:
Public offering notes – Class A		(26	)		3			(23	)
Public offering notes – Alpha Class		(21	)		(2	)		(23	)
Special offering notes		--			6			6
International notes		--			--			--
Subordinated notes		--			--			--
Secured notes		--			--			--
Other		(56	)		(418	)		(474	)
		(103	)		(411	)		(514	)
Change in net interest income	$	(130	)	$	482		$	352

10

Rate/Volume Analysis of Net Interest Income
	Nine months ended September 30, 2012 vs. 2011
	Increase (Decrease) Due to Change in
	Volume			Rate			Total
	(Dollars in Thousands)
Increase (Decrease) in Interest Income:
Interest-earning account with other financial institutions	$	50		$	(8	)	$	42
Total loans		(865	)		100			(765	)
		(815	)		92			(723	)
Increase (Decrease) in Interest Expense:
Public offering notes – Class A		(11	)		(12	)		(23	)
Public offering notes – Alpha Class		(54	)		(4	)		(58	)
Special offering notes		(39	)		32			(7	)
International notes		1			--			1
Subordinated notes		(28	)		(4	)		(32	)
Secured notes		--			--			--
Other		(233	)		(1,318	)		(1,551	)
		(364	)		(1,306	)		(1,670	)
Change in net interest income	$	(451	)	$	1,398		$	947

Financial Condition

Comparison of Financial Condition at September 30, 2012 and December 31, 2011

							Comparison
Assets:	2012 (Unaudited)			2011  (Audited)			$ Difference			% Difference
Cash	$	11,711		$	11,167		$	544			5	%
Loans receivable, net of allowance for loan losses of $3,895 and $4,127 as of September 30, 2012 and December 31, 2011, respectively		153,649			165,355			(11,706	)		(7	%)
Accrued interest receivable		633			725			(92	)		(13	%)
Property and equipment, net		241			303			(62	)		(20	%)
Debt issuance costs		79			104			(25	)		(24	%)
Foreclosed assets		3,050			1,374			1,676			122	%
Other assets		332			253			79			31	%
Total assets	$	169,695		$	179,281		$	( 9,586	)		(5	%)
Liabilities and members’ equity
Liabilities:
Borrowings from financial institutions	$	104,650		$	110,280		$	(5,630	)		(5	%)
Notes payable		54,680			59,030			(4,350	)		(7	%)
Accrued interest payable		22			15			7			47	%
Other liabilities		487			478			9			2	%
Total liabilities		159,839			169,803			(9,964	)		(6	%)
Members' Equity:
Series A preferred units		11,715			11,715			--			--
Class A common units1,509		1,509			1,509			--			--
Accumulated deficit		(3,368	)		(3,746	)		378			10	%
Total members' equity		9,856			9,478			378			4	%
Total liabilities and members' equity	$	169,695		$	179,281		$	( 9,586	)		(5	%)

11

General.  Total assets decreased by $9.6 million, or 5%, between December 31, 2011 and September 30, 2012.  This decrease was due to the payoff and sale of several loans, as well as large principal paydowns made by borrowers on other loans we held.  A small portion of these proceeds were retained as cash, but most of these proceeds were used to pay down our borrowings from financial institutions and several of our Class A Notes that matured during the period between May 15,2012 and through the quarter ended September 30, 2012, as we could not sell our Class A Notes during this period.  Our loans receivable, net of allowance for loan losses, decreased by $11.7 million, or 7%, over this period.  Approximately $4.3 million of this decrease was due to decreases in impaired loan balances.  Our borrowings from financial institutions decreased by $5.6 million, or 5%.

During the nine month period ended September 30, 2012, gross loans receivable decreased by $12.4 millon, or 7%.  This decrease is due to the net paydown of $7.8 million of loan principal on our mortgage loan investments, which is a result of $27.7 million of loan principal paydowns offset by $10.9 million of loan purchases and $9.0 million of loan originations.  The net paydown of loan principal is mainly a result of early pay-offs of existing loans and non-renewals of maturing loans.  In many cases, these non-renewals occur because a loan has fallen outside of our lending policy and cannot be refinanced by us.  Additionally, our loan balance has decreased as we have recorded $47 thousand in partial loan charge-offs, transferred $1.7 million to foreclosed assets, and sold two impaired loans for $2.4 million.

Our portfolio consists entirely of loans made to evangelical churches and ministries.  Approximately 99.9% of these loans are secured by real estate, while two loans that represent less than 0.1% of our portfolio are unsecured.  Our performing loan portfolio yielded a weighted average interest rate of 6.43% at September 30, 2012, and atDecember 31, 2011.

Non-performing Assets.  Non-performing assets consist of non-accrual loans, troubled debt restructurings, and three foreclosed assets, which are real estate properties.  Non-accrual loans include any loan that becomes 90 days or more past due and any other loan where management assesses full collectability of principal and interest to be in question.  Once a loan is put on non-accrual status, the balance of any accrued interest is immediately reversed.  Loans past due 90 days or more will not return to accrual status until they become current.  Troubled debt restructurings will not return to accrual status until they perform according to their modified payment terms without exception for at least six months.

Some non-accrual loans are considered collateral dependent.  These are defined as loans where there is a significant possibility that repayment of principal will involve the sale or operation of collateral securing the loan.  For collateral dependent loans, any payment of interest we receive is recorded against principal.  As a result, interest income is not recognized until the loan is no longer considered impaired. For non-accrual loans that are not considered collateral dependent, we do not accrue interest income, but we recognize income on a cash basis.  We had eleven nonaccrual loans as of September 30, 2012, down from fifteen at December 31, 2011.  In June 2011, the Company completed foreclosure proceedings on a loan participation interest it acquired from ECCU.  Prior to this foreclosure sale, we had never foreclosed on or taken a charge-off on a mortgage loan investment we acquired.  Since that time, we acquired two properties in February 2012 in partial satisfaction of one of our mortgage loan investments and we acquired one other property in September 2012 pursuant to a Deed in Lieu of Foreclosure Agreement we entered into with a borrower.

12

The following table presents our non-performing assets:

Non-performing Assets
($ in thousands)
	September 30, 2012		December 31, 2011
Non-Performing Loans:1
Collateral Dependent:
Delinquencies over 90-Days	$	2,611	$	6,586
Troubled Debt Restructurings2		8,583		8,873
Total Collateral Dependent Loans		11,194		15,459
Non-Collateral Dependent:
Delinquencies over 90-Days		--		--
Other Impaired loans		--		--
Troubled Debt Restructurings		7,477		7,483
Total Non-Collateral Dependent Loans		7,477		7,483
Loans 90 Days past due and still accruing		--		--
Total Non-Performing Loans		18,671		22,942
Foreclosed Assets		3,050		1,374
Total Non-performing Assets	$	21,721	$	24,316
1 These loans are presented at the balance of unpaid principal less interest payments recorded against principal.
2 Includes $814 thousand and $6.2 million of restructured loans that were over 90 days delinquent as of September 30, 2012 and December 31, 2011, respectively.

At September 30, 2012, we had ten restructured loans that were on non-accrual status.  One of these loans was over 90 days delinquent.  In addition, we had one non-restructured loan that was over 90 days past due.  We also had one restructured loan that has performed according to terms for twelve months and has been put on accrual status; however, it is still considered non-performing.  As discussed in Note 3 of the financial statements, in May 2012 we sold two non-performing loans to a third party for $2.4 million.  Both loans were considered collateral dependent.  In September 2012, we executed a Deed in Lieu of Foreclosure Agreement with a borrower related to the collateral underlying an impaired loan and transferred the loan balance of $959 thousand into foreclosed assets. As of September 30, 2012, we had four foreclosed properties valued at $3.1 million.

At December 31, 2011, we had eleven restructured loans that were on non-accrual status.  Five of these loans were over 90 days delinquent.  We had four non-restructured loans that were over 90 days past due.  One of these loans was acquired in the transaction we entered into with ECCU in December, 2011 in which ECCU repurchased two impaired loans from us in exchange for a cash purchase price of $4.5 million and two non-performing loans.  One of the acquired non-performing loans was written off during the second quarter of 2012, however, as it was carried on our financial statements at a net investment of zero, the write-off had no impact on our net loans receivable balance.  As of December 31, 2011, we held one foreclosed asset in the amount of $1.4 million.

13

Allowance for Loan Losses.  We maintain an allowance for loan losses that we consider adequate to cover both the inherent risk of loss associated with the loan portfolio as well as the risk associated with specific loans that we have identified as having a significant chance of resulting in loss.

Allowances taken to address the inherent risk of loss in the loan portfolio are considered general reserves.  We include various factors in our analysis. These are weighted based on the level of risk represented and for the potential impact on our portfolio.  These factors include:

- Changes in lending policies and procedures, including changes in underwriting standards and collection;

- Changes in national, regional and local economic and business conditions and developments that affect the collectability of the portfolio;

- Changes in the volume and severity of past due loans, the volume of nonaccrual loans, and the volume and severity of adversely classified loans;

- Changes in the value of underlying collateral for collateral-dependent loans;

- The effect of credit concentrations; and

- The rate of defaults on loans modified as troubled debt restructurings within the previous twelve months.

In addition, we include additional general reserves for our loans that are collateralized by a junior lien or that are unsecured.  In order to more accurately determine the potential impact these factors have on our portfolio, we segregate our loans into pools based on risk rating when we perform our analysis.  Risk factors are weighted differently depending upon the quality of the loans in the pool.  In general, risk factors are given a higher weighting for lower quality loans, which results in greater general reserves related to these loans.  We evaluate these factors on a quarterly basis to ensure that we have adequately addressed the risk inherent in our loan portfolio.

We also examine our entire loan portfolio regularly to identify individual loans which we believe have a greater risk of loss than is addressed by the general reserves.   These are identified by examining delinquency reports, both current and historic, monitoring collateral value, and performing a periodic review of borrower financial statements.  For loans that are collateral dependent, management first determines the value at risk on the investment, defined as the unpaid principal balance, net of discounts, less the collateral value net of estimated costs associated with selling a foreclosed property.  This entire value at risk is reserved.  For impaired loans that are not collateral dependent, management will record an impairment based on the present value of expected future cash flows.  Loans that carry a specific reserve are formally reviewed quarterly, although reserves will be adjusted more frequently if additional information regarding the loan’s status or its underlying collateral is received.

Finally, our allowance for loan losses includes reserves related to troubled debt restructurings.  These reserves are calculated as the difference in the net present value of payment streams between a troubled debt restructuring at its modified terms as compared to its original terms, discounted at the original interest rate on the loan.  These reserves are recorded at the time of the restructuring. The change in the present value of cash flows attributable to the passage of time is reported as interest income.

The process of providing adequate allowance for loan losses involves discretion on the part of management, and as such, losses may differ from current estimates.  We have attempted to maintain the allowance at a level which compensates for losses that may arise from unknown conditions.  At September 30, 2012 and December 31, 2011, the allowance for loan losses was $4.0 million and $4.1 million, respectively.  This represented 2.5% of our gross loans receivable at both of those respective dates.   

14

	Allowance for Loan Losses
	as of and for the
	Nine months ended						Year Ended
	September 30,						December 31,
	2012			2011			2011
Balances:	($ in thousands)
Average total loans
outstanding during period	$	164,696		$	183,924		$	181,855
Total loans outstanding
at end of the period	$	158,536		$	175,819		$	170,920
Allowance for loan losses:
Balance at the beginning of period	$	4,127		$	3,997		$	3,997
Provision charged to expense		(49	)		1,305			1,487
Charge-offs
Wholly-Owned First		35			--			--
Wholly-Owned Junior		--			--			--
Participation First		12			1,279			1,279
Participation Junior		--			--			--
Total		47			1,279			1,279
Recoveries
Wholly-Owned First		--			--			--
Wholly-Owned Junior		--			--			--
Participation First		--			--			--
Participation Junior		--			--			--
Total		--			--			--
Net loan charge-offs
(recoveries)		47			1,279			1,279
Accretion of allowance related to restructured loans		46			67			78
Balance	$	3,985		$	3,956		$	4,127
Ratios:
Net loan charge-offs to average total  loans		0.03	%		0.70	%		0.70	%
Provision for loan losses to average total       loans1		(0.03	%)		0.71	%		0.82	%
Allowance for loan losses to total loans at        the end of the period		2.51	%		2.25	%		2.41	%
Allowance for loan losses to        non-performing  loans		21.34	%		14.81	%		18.00	%
Net loan charge-offs to allowance for
loan losses at the end of the period		1.18	%		32.33	%		30.99	%
Net loan charge-offs to Provision for loan        losses1		(95.92	%)		98.01	%		86.01	%

1 Provisions for loan losses were negative during the nine months ended September 30, 2012 due to a $265 thousand reversal of specific reserves related to the sale of two non-performing loans.

Borrowings from Financial Institutions.  At September 30, 2012, we had $104.7 million in borrowings from financial institutions.  This is a decrease of $5.6 million from December 31, 2011.  This decrease is the result of regular monthly payments made on both the MU Credit Facility and the Wescorp Credit Facility Extension, as well as $3.2 million of additional paydowns made to ensure compliance with the minimum collateralization ratio on these borrowings.

Notes Payable.  Our investor notes payable consist of debt securities sold under several registered national offerings as well as notes sold in private placements.  These investor notes had a balance of $54.7 million at September 30, 2012, which was a decrease of $4.4 million.  Due to the temporary discontinuation of the sale of our Class A Notes on May 15, 2012 and deregistration of the securities remaining unsold under the Company’s Registration Statement which was declared effective on June 3, 2010, we were not able to sell our Class A Notes during the third quarter of 2012.  On October 11, 2012, our new Registration Statement to register $75 million of our Class A Notes was declared effective, which has allowed us to resume the sale of our Class A Notes.

Members’ Equity.  Total members’ equity was $9.9 million at September 30, 2012, which represents an increase of $378 thousand from $9.5 million at December 31, 2011.  Our $636 thousand in net income during the first nine months of the year is offset partially by $258 thousand of expenses related to our Series A Preferred Units, which require quarterly dividend payments.  We did not repurchase or sell any ownership units during the nine months ended September 30, 2012.

15

Liquidity and Capital Resources

September 30, 2012 vs. September 30, 2011

Maintenance of adequate liquidity requires that sufficient resources be available at all times to meet cash flow requirements of the Company. Desired liquidity may be achieved from both assets and liabilities. Cash, investments in interest-bearing time deposits in other financial institutions, maturing loans, payments of principal and interest on loans and potential loan sales are sources of asset liquidity. Sales of investor notes and access to credit lines also serve as sources of additional liquidity. The Company reviews its liquidity position on a regular basis based upon its current position and expected trends of loans and investor notes. Management believes that the Company maintains adequate sources of liquidity to meet its liquidity needs.

Historically, we have relied on the sale of our debt securities to finance our mortgage loan investments.  We have increased our marketing efforts related to the sale of privately placed special offering notes and our 2012 Secured Investment Certificates pursuant to a Rule 506 offering and we believe that the sale of these notes will enable the Company to meet its liquidity needs for the near future.  The Company has filed a new Registration Statement with the SEC to register $75 million of its Class A Notes.  This Registration Statement was deemed effective as of October 11, 2012 and the Company has resumed the sale of its Class A Notes through the assistance of its wholly-owned subsidiary, MP Securities.  By offering the Class A Notes and privately placed Secured Investment Certificates under the Company’s Rule 506 offering, the Company expects to increase its investment in mortgage loans and thereby generate increased interest income.  However, we also plan on selling participations in a portion of those mortgage loan investments.  The cash gained from these sales will be used to originate additional loan investments or to fund operating activities.

We have been successful in generating reinvestments by our debt security holders when the notes that they hold mature.  During the nine months ended September 30, 2012, our investors renewed their debt securities investments at a 43% rate.  This rate was 80% during the first quarter of 2012 and has decreased primarily because the Company temporarily suspended the sale of its Class A Notes on May 15, 2012 and was unable to renew maturing notes.  During the nine months ended September 30, 2011, 78% of our investors renewed their investments or reinvested in new debt securities offered by us.   

The net increase in cash during the nine months ended September 30, 2012 was $544 thousand, as compared to a net decrease of $924 thousand for the nine months ended September 30, 2011, an increase of $1.5 million. Net cash provided by operating activities totaled $678 thousand for the nine months ended September 30, 2012, as compared to net cash used by operating activities of $203 thousand for the same period in 2011. This increase in net cash provided by operating activities is attributable primarily to the increase in net income over the same period in 2011.

Net cash provided by investing activities totaled $10.2 million during the nine months ended September 30, 2012, as compared to $13.6 million provided during the nine months ended September 30, 2011, a decrease in cash of $3.4 million. This decrease is primarily related to the sale of $5.4 million of loan participations during the nine months ended September 30, 2011.  Two loans were sold for $2.4 million during the nine months ended September 30, 2012, a difference in loan sales of $3.0 million.  While we have received $15.2 million in additional principal payments from the prior year, we have used those payments to purchase or originate $15.6 million more loans than during the first nine months of 2011.

Net cash used by financing activities totaled $10.3 million for the nine month period ended September 30, 2012, a decrease in cash used of $4.0 million from $14.3 million used in financing activities during the nine months ended September 30, 2011. This difference is primarily attributable to the decrease in the amount of paydowns on our borrowings from financial institutions.

At September 30, 2012, our cash, which includes cash reserves and cash available for investment in mortgage loans, was $11.7 million, an increase of $544 thousand  from $11.2 million, at December 31, 2011.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Act of 1934 and are not required to provide the information under this item.

16

Item 4.  Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, including our Chief Executive Officer and Chief Financial Officer, supervised and participated in an evaluation of our disclosure controls and procedures as of September 30, 2012.  After evaluating the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a - 15(e) and 15d - 15(e)) as of the end of the period covered by this quarterly report, our Chief Executive Officer and Chief Financial Officer have concluded that as of the evaluation date, our disclosure controls and procedures were adequate and effective to ensure that material information relating to the Company would be made known to them by others within the Company, particularly during the period in which this quarterly report was being prepared.

Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports filed under the Exchange Act is accumulated and communicated to our management, including the President and Principal Accounting Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Controls

There were no changes in our internal controls over financial reporting that occurred in the third quarter of 2012 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1.  Legal Proceedings

As of the date of this Report, there is no material litigation, threatened or pending, against us. Our management is not aware of any disagreements, disputes or other matters which may lead to the filing of legal proceedings involving us.

Item 1A.  Risk Factors

As of the date of this filing, there have been no material changes from the risk factors disclosed in the Company’s Annual Report on Form 10-K filed for the year ended December 31, 2011.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 3.  Defaults Upon Senior Securities

None

Item 4.  Mine Safety Disclosure

None 

Item 5.  Other Information

None.

17

Item 6.  Exhibits

Exhibit No.	Description of Exhibit
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15(d)-14(a)
31.2	Certification of Acting Principal Financial and Accounting Officer pursuant to Rule 13a-14(a) or Rule 15(d)-14(a)
32.1	Certification pursuant to 18 U.S.C. §1350 as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification pursuant to 18 U.S.C. §1350 as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002
101*	The following information from Ministry Partners Investment Company, LLC’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2012, formatted in XBRL (eXtensible Business Reporting Language):  (i) Consolidated Statements of Operations for the three and nine months ended September 30, 2012 and 2011; (ii) Consolidated Balance Sheets as of September 30, 2012 and  December 31, 2011; (iii) Consolidated  Statements of Cash Flows for the nine months ended September 30, 2012 and 2011; and (iv) Notes to Consolidated Financial Statements.
*  Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability under those sections.

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:           November 14, 2012

	MINISTRY PARTNERS INVESTMENT
	COMPANY, LLC
(Registrant)	By: /s/ Susan B. Reilly
	Susan B. Reilly,
	Chief Financial Officer

18

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY

ACT OF 2002

I, Billy M. Dodson, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Ministry Partners Investment Company, LLC;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the issuer as of, and for, the periods presented in this report;
4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) for the registrant and we have:

(a)     Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared.

(b)     Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)     Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;

(d)     Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has material affected, or is reasonably likely to materially effect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)     All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)     Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: November 14, 2012	By: /s/ Billy M. Dodson
	Billy M. Dodson
	President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF ACTING PRINCIPAL FINANCIAL

AND ACCOUNTING OFFICER PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Susan B. Reilly, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Ministry Partners Investment Company, LLC;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the issuer as of, and for, the periods presented in this report;
4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) for the registrant and we have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared.
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
(d)	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's forth fiscal quarter in the case of an annual report) that has material affected, or is reasonably likely to materially effect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: November 14, 2012	By: /s/ Susan B. Reilly
	Susan B. Reilly
	Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

Each of the undersigned hereby certifies, pursuant to 18 U.S.C. Section 1350, in his capacity as President of Ministry Partners Investment Company, LLC, (the “Company”) that, to his knowledge, this Quarterly Report on Form 10-Q for the period ended September 30, 2012 (the "Report") fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition of the Company at the end of such period and the results of operations of the Company for such period.

Date: November 14, 2012	By:  /s/ Billy M. Dodson
	Billy M. Dodson,
	President and Chief Executive Officer

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

            Each of the undersigned hereby certifies, pursuant to 18 U.S.C. Section 1350, in her capacity as Chief Financial Officer of Ministry Partners Investment Company, LLC, (the "Company") that, to her knowledge, this Quarterly Report on Form 10-Q for the period ended September 30, 2012 (the "Report") fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition of the Company at the end of such period and the results of operations of the Company for such period.

Date: November 14, 2012	By: /s/ Susan B. Reilly
	Susan B. Reilly,
	Chief Financial Officer

XML

Line of Credit and Other Borrowings (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Future estimated principal pay downs for borrowings
2013	$ 3,366
2014	3,467
2015	3,555
2016	3,639
2017	3,739
Thereafter	86,884
Total	$ 104,650	$ 110,280

XML

Fair Value Measurements (Details2) (Fair Value Measured on a Nonrecurring Basis, Significant Unobservable Inputs Level 3, USD $) In Thousands, unless otherwise specified			9 Months Ended
	Sep. 30, 2012	Dec. 31, 2011	Sep. 30, 2012 Impaired loans	Sep. 30, 2012 Foreclosed and repossessed assets
Fair value of financial assets	$ 11,434	$ 13,261	$ 8,384	$ 3,050
Valuation Techniques			Discounted appraised value, Internal evaluations	Discounted appraised value, Internal evaluations
Unobservable Input			Selling cost, Discount due to age of appraisal	Selling cost, Discount due to age of appraisal
Range (Weighted Average)			10% (10%) , 0% - 5% (0.12%)	10% (10%), 0% - 5% (1.18%)

XML

Fair Value Measurements (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
FINANCIAL ASSETS:
Accrued interest receivable	$ 633	$ 725
Carrying Amount
FINANCIAL ASSETS:
Cash	11,711	11,167
Loans, net	153,649	165,355
Accrued interest receivable	633	863
FINANCIAL LIABILITIES:
Notes payables	54,680	59,030
Bank borrowings	104,650	110,280
Other financial liabilities	107	104
Fair Value
FINANCIAL ASSETS:
Cash	11,711	11,167
Loans, net	157,349	168,383
Accrued interest receivable	633	863
FINANCIAL LIABILITIES:
Notes payables	56,448	60,833
Bank borrowings	108,229	111,371
Other financial liabilities	107	104
Fair Value | Quoted Prices in Active Markets& for Identical Assets Level 1
FINANCIAL ASSETS:
Cash	11,711
Loans, net
Accrued interest receivable
FINANCIAL LIABILITIES:
Notes payables
Bank borrowings
Other financial liabilities
Fair Value | Significant Other Observable Inputs Level 2
FINANCIAL ASSETS:
Cash
Loans, net
Accrued interest receivable
FINANCIAL LIABILITIES:
Notes payables
Bank borrowings
Other financial liabilities
Fair Value | Significant Unobservable Inputs Level 3
FINANCIAL ASSETS:
Cash
Loans, net	157,349
Accrued interest receivable	633
FINANCIAL LIABILITIES:
Notes payables	56,448
Bank borrowings	108,229
Other financial liabilities	$ 107

XML

Loans and Allowance for Losses (Details7) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012 N	Sep. 30, 2011 N	Sep. 30, 2012 N	Sep. 30, 2011 N
Number of Loans	1		6	13
Pre-Modification Outstanding Recorded Investment	$ 981		$ 6,272	$ 19,713
Post-Modification Outstanding Recorded Investment	995		6,264	19,884
Recorded Investment At Period End	995		6,077	19,724
Wholly-Owned First
Number of Loans	1		3	9
Pre-Modification Outstanding Recorded Investment	981		5,571	15,246
Post-Modification Outstanding Recorded Investment	995		5,585	15,323
Recorded Investment At Period End	995		5,427	15,214
Wholly-Owned Junior
Number of Loans			2	4
Pre-Modification Outstanding Recorded Investment			430	4,467
Post-Modification Outstanding Recorded Investment			430	4,561
Recorded Investment At Period End			420	4,510
Participation First
Number of Loans			1
Pre-Modification Outstanding Recorded Investment			271
Post-Modification Outstanding Recorded Investment			249
Recorded Investment At Period End			230
Participation Junior
Number of Loans
Pre-Modification Outstanding Recorded Investment
Post-Modification Outstanding Recorded Investment
Recorded Investment At Period End

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Loans and Allowance for Losses (Details Narrative) (USD $)	3 Months Ended	9 Months Ended	12 Months Ended
	Sep. 30, 2012	Sep. 30, 2012	Dec. 31, 2011	Jun. 30, 2012	Sep. 30, 2011	Dec. 31, 2010
Weighted average interest rate (in percent)	6.43%	6.43%	6.40%		6.40%
Sale of Loans Receivable to Trinity Pacific, recorded investment	$ 11,617,000	$ 11,617,000	$ 18,168,000		$ 22,337,000
Balance, end of period	3,985,000	3,985,000	4,127,000	3,921,000		3,997,000
Chargeoffs		(47,000)	(1,279,000)
Loans subject to foreclosure proceedings	3,400,000	3,400,000
Reserves for loans subject to foreclosure	275,600	275,600
Total loans past due 90 days or more and still accruing					614,000
Other real estate owned					958,800
Trinity Pacific Investments and Trinity Pacific OC
Sale of Loans Receivable to Trinity Pacific, recorded investment	2,460,000	2,460,000
Specific Reserves	300,000	300,000
Trinity Pacific Investments and Trinity Pacific OC
Sale of Loans Receivable to Trinity Pacific Investments and Trinity Pacific OC, purchase price		2,425,000
Specific Reserves chargedoff to allowance for loan losses		35,000
Specific Reserves reversed		$ 265,000

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Notes Payable (Details1) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Future maturities of notes payable
2013	$ 3,366
2014	3,467
2015	3,555
2016	3,639
2017	3,739
Thereafter	86,884
Total	54,680	59,030
Notes Payable
Future maturities of notes payable
2013	24,862
2014	10,727
2015	7,698
2016	7,393
2017	2,899
Thereafter	1,101
Total	$ 54,680

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Loan Participation Sales (Details) (USD $)	9 Months Ended	12 Months Ended
	Sep. 30, 2012	Dec. 31, 2011
Loan Participation Sales Details
Balance, beginning of period	$ 138,000
Additions: Servicing obligations from sale of loan participations		147,000
Subtractions: Amortization	19,000	9,000
Balance, end of period	$ 119,000	$ 138,000

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Fair Value Measurements (Details1) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Fair value of Assets
Foreclosed assets	$ 3,050	$ 1,374
Fair Value Measured on a Nonrecurring Basis | Quoted Prices in Active Markets& for Identical Assets Level 1
Fair value of Assets
Impaired loans (net of allowance and discount)
Foreclosed assets
Assets, Fair value
Fair Value Measured on a Nonrecurring Basis | Significant Other Observable Inputs Level 2
Fair value of Assets
Impaired loans (net of allowance and discount)
Foreclosed assets
Assets, Fair value
Fair Value Measured on a Nonrecurring Basis | Significant Unobservable Inputs Level 3
Fair value of Assets
Impaired loans (net of allowance and discount)	8,384	11,887
Foreclosed assets	3,050	1,374
Assets, Fair value	11,434	13,261
Fair Value Measured on a Nonrecurring Basis | Fair Value
Fair value of Assets
Impaired loans (net of allowance and discount)	8,384	11,887
Foreclosed assets	3,050	1,374
Assets, Fair value	$ 11,434	$ 13,261

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Foreclosed Assets

9 Months Ended

Sep. 30, 2012

Repossessed Assets [Abstract]

Foreclosed Assets

4.  Foreclosed Assets

Assets acquired through foreclosure or other proceedings are initially recorded at fair value at the date of foreclosure less estimated costs of disposal, which establishes a new cost.  After foreclosure, valuations are periodically performed by management and foreclosed assets held for sale are carried at the lower of cost or fair value, less estimated costs of disposal.  Any write-down to fair value at the time of foreclosure is charged to the allowance for loan losses.  The Company’s real estate assets acquired through foreclosure or other proceedings are evaluated regularly to ensure that the recorded amount is supported by its current fair value and that valuation allowances to reduce the varying amount to fair value less estimated costs of disposal are recorded as necessary.  Revenue and expense from the operation of the Company’s foreclosed assets and changes in the valuation allowance are included in net expenses from foreclosed assets.

Foreclosed assets consist of four properties.  One property was acquired during 2011 in satisfaction of a secured loan.  The property had a carrying value of $1.4 million at September 30, 2012 and no valuation allowance has been required for this property.  An additional two properties were acquired in February 2012 in partial satisfaction of a secured loan.  The properties had a carrying value of $717.2 thousand at September 30, 2012 and no valuation allowance has been required for these properties.  Finally, one property was acquired in September 2012 as a result of a Deed in Lieu of Foreclosure Agreement the Company entered into with a borrower.  The property had a carrying value of $958.8 thousand at September 30, 2012 and no valuation allowance has been required for this property.  The Company held $3.1 million and $1.4 million of foreclosed assets at September 30, 2012 and September 30, 2011, respectively.

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Preferred and Common Units Under LLC (Details Narrative) (USD $)			9 Months Ended
	Sep. 30, 2012	Dec. 31, 2011	Sep. 30, 2012 Series A Preferred Units
Preferred Stock, variable dividend payment rate			190 basis points over the 1-year LIBOR
Annual preferred distribution as a percentage of profits less the preferred return			10.00%
Liquidation preference, per share	$ 100.00	$ 100.00	$ 100

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Loans and Allowance for Losses (Details3) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011	Sep. 30, 2012 Wholly-Owned First	Dec. 31, 2011 Wholly-Owned First	Sep. 30, 2012 Wholly-Owned Junior	Dec. 31, 2011 Wholly-Owned Junior	Sep. 30, 2012 Participation First	Dec. 31, 2011 Participation First	Sep. 30, 2012 Participation Junior	Dec. 31, 2011 Participation Junior	Sep. 30, 2012 Pass	Dec. 31, 2011 Pass	Sep. 30, 2012 Pass Wholly-Owned First	Dec. 31, 2011 Pass Wholly-Owned First	Sep. 30, 2012 Pass Wholly-Owned Junior	Dec. 31, 2011 Pass Wholly-Owned Junior	Sep. 30, 2012 Pass Participation First	Dec. 31, 2011 Pass Participation First	Sep. 30, 2012 Pass Participation Junior	Dec. 31, 2011 Pass Participation Junior	Sep. 30, 2012 Watch	Dec. 31, 2011 Watch	Sep. 30, 2012 Watch Wholly-Owned First	Dec. 31, 2011 Watch Wholly-Owned First	Sep. 30, 2012 Watch Wholly-Owned Junior	Dec. 31, 2011 Watch Wholly-Owned Junior	Sep. 30, 2012 Watch Participation First	Dec. 31, 2011 Watch Participation First	Sep. 30, 2012 Watch Participation Junior	Dec. 31, 2011 Watch Participation Junior	Sep. 30, 2012 Substandard	Dec. 31, 2011 Substandard	Sep. 30, 2012 Substandard Wholly-Owned First	Dec. 31, 2011 Substandard Wholly-Owned First	Sep. 30, 2012 Substandard Wholly-Owned Junior	Dec. 31, 2011 Substandard Wholly-Owned Junior	Sep. 30, 2012 Substandard Participation First	Dec. 31, 2011 Substandard Participation First	Sep. 30, 2012 Substandard Participation Junior	Dec. 31, 2011 Substandard Participation Junior	Sep. 30, 2012 Doubtful	Dec. 31, 2011 Doubtful	Sep. 30, 2012 Doubtful Wholly-Owned First	Dec. 31, 2011 Doubtful Wholly-Owned First	Sep. 30, 2012 Doubtful Wholly-Owned Junior	Dec. 31, 2011 Doubtful Wholly-Owned Junior	Sep. 30, 2012 Doubtful Participation First	Dec. 31, 2011 Doubtful Participation First	Sep. 30, 2012 Doubtful Participation Junior	Dec. 31, 2011 Doubtful Participation Junior	Sep. 30, 2012 Loss	Dec. 31, 2011 Loss	Sep. 30, 2012 Loss Wholly-Owned First	Dec. 31, 2011 Loss Wholly-Owned First	Sep. 30, 2012 Loss Wholly-Owned Junior	Dec. 31, 2011 Loss Wholly-Owned Junior	Sep. 30, 2012 Loss Participation First	Dec. 31, 2011 Loss Participation First	Sep. 30, 2012 Loss Participation Junior	Sep. 30, 2011 Loss Participation Junior
Credit risks rated loans	$ 158,536	$ 170,920	$ 102,087	$ 105,541	$ 9,862	$ 16,659	$ 45,606	$ 47,714	$ 981	$ 1,006	$ 124,261	$ 130,552	$ 82,777	$ 89,597	$ 2,272	$ 8,173	$ 38,231	$ 32,782	$ 981		$ 18,528	$ 15,274	$ 10,284	$ 4,616	$ 3,710	$ 3,448	$ 4,534	$ 7,210			$ 7,950	$ 12,215	$ 4,070	$ 3,237	$ 3,880	$ 3,883		$ 4,089		$ 1,006	$ 7,797	$ 12,879	$ 4,956	$ 8,091		$ 1,155	$ 2,841	$ 3,633

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Loans and Allowance for Losses (Details2) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Loans:
Balance	$ 158,536	$ 170,920
Individually evaluated for impairment	18,671	22,942
Collectively evaluated for impairment	139,865	147,978
Allowance for loan losses:
Balance	3,985	4,127
Individually evaluated for impairment	2,967	3,064
Collectively evaluated for impairment	$ 1,018	$ 1,063

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Retirement Plans (Details Narrative) (USD $)	9 Months Ended
	Sep. 30, 2012 N	Sep. 30, 2011
Insperity 401(k) plan
Minimum age restriction for participation (in years)	21
Maximum voluntary percentage contributions of salary (as a percent)	60.00%
Matching contributions by employer	$ 41,900	$ 32,200
Profit Sharing
Minimum age restriction for participation (in years)	21
Minimum number of service hours required in plan year to be elegible under plan	900

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Loans and Allowance for Losses (Details4) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011	Sep. 30, 2011
Aging categories of performing loans and nonaccrual loans
30-59 Days Past Due	$ 12,416	$ 9,985
60-89 Days Past Due	1,453	613
Greater Than 90 Days	3,425	12,314
Total Past Due	17,294	22,912
Current	141,242	148,008
Total Loans	158,536	170,920
Recorded Investment 90 Days or more and Accruing			614
Wholly-Owned First
Aging categories of performing loans and nonaccrual loans
30-59 Days Past Due	8,697	6,537
60-89 Days Past Due		613
Greater Than 90 Days	814	7,522
Total Past Due	9,511	14,672
Current	92,576	90,869
Total Loans	102,087	105,541
Recorded Investment 90 Days or more and Accruing
Wholly-Owned Junior
Aging categories of performing loans and nonaccrual loans
30-59 Days Past Due	3,719	3,448
60-89 Days Past Due
Greater Than 90 Days		1,159
Total Past Due	3,719	4,607
Current	6,143	12,052
Total Loans	9,862	16,659
Recorded Investment 90 Days or more and Accruing
Participation First
Aging categories of performing loans and nonaccrual loans
30-59 Days Past Due
60-89 Days Past Due	1,453
Greater Than 90 Days	2,611	3,633
Total Past Due	4,064	3,633
Current	41,542	44,081
Total Loans	45,606	47,714
Recorded Investment 90 Days or more and Accruing
Participation Junior
Aging categories of performing loans and nonaccrual loans
30-59 Days Past Due
60-89 Days Past Due
Greater Than 90 Days
Total Past Due
Current	981	1,006
Total Loans	981	1,006
Recorded Investment 90 Days or more and Accruing

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Loans and Allowance for Losses (Details5) (USD $) In Thousands, unless otherwise specified				3 Months Ended	9 Months Ended	3 Months Ended	9 Months Ended	3 Months Ended	9 Months Ended	3 Months Ended	9 Months Ended	3 Months Ended	9 Months Ended
	Sep. 30, 2012	Dec. 31, 2011	Sep. 30, 2011	Sep. 30, 2012 Wholly-Owned First	Sep. 30, 2012 Wholly-Owned First	Sep. 30, 2012 Wholly-Owned Junior	Sep. 30, 2012 Wholly-Owned Junior	Sep. 30, 2012 Participation First	Sep. 30, 2012 Participation First	Sep. 30, 2012 Participation Junior	Sep. 30, 2012 Participation Junior	Sep. 30, 2012 Church Loans Total	Sep. 30, 2012 Church Loans Total
Recorded investment, With no related allowance	$ 7,054	$ 4,774	$ 4,369	$ 4,063	$ 4,063	$ 216	$ 216	$ 2,611	$ 2,611
Unpaid principal balance, With no related allowance				4,478	4,478	222	222	2,744	2,744
Average Recorded Investment, With no related allowance				4,073	4,153	216	217	2,611	2,633		0
Interest income recognized, With no related allowance				28	85	3	9		0		0
Recorded investment, With an allowance recorded	11,617	18,168	22,337	7,384	7,384	3,595	3,595	230	230
Unpaid principal balance, With an allowance recorded				7,854	7,854	3,671	3,671	252	252
Allowance for loan losses related to impaired loans	2,967	3,064	2,860	2,620	2,620	328	328	19	19			2,967	2,967
Average Recorded Investment, With an allowance recorded				7,597	8,144	3,595	3,597	231	565		0
Interest income recognized, With an allowance recorded				44	141	40	107		0		0
Recorded investment												18,099	18,099
Unpaid principal balance	18,671	22,942	26,706									19,221	19,221
Average Recorded Investment												18,323	19,309
Interest income recognized												$ 115	$ 342

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Loans Receivable and Allowance for Loan Losses

9 Months Ended

Sep. 30, 2012

Loans Receivable And Allowance For Loan Losses

Loans

3.  Loans Receivable and Allowance for Loan Losses

We originate church mortgage loans, participate in church mortgage loans and also purchase entire church mortgage loans.  The loans fall into four classes:  whole loans for which the Company possesses the first collateral position, whole loans that are either unsecured or for which the Company possesses a junior collateral position, participated loans for which the Company possesses the first collateral position and participated loans for which the Company possesses a junior collateral position.  All of the loans are made to various evangelical churches and related organizations, primarily to purchase, construct or improve facilities. Loan maturities extend through 2022.Loans yielded a weighted average of 6.43% as of September 30, 2012, compared to a weighted average yield of 6.40% as of September 30, 2011.

On May 15, 2012, the Company entered into a Loan Purchase Agreement with Trinity Pacific Investments and Trinity Pacific OC involving two mortgage loan interests it had acquired from ECCU, which were the subject of foreclosure proceedings.  In exchange for transferring all rights, title and interest in these two mortgage loan interests, the Company received $2.425 million in cash and was relieved of any further obligations regarding the mortgage loan interests sold. Both loans were considered impaired.  The recorded investment in these loans was $2.460 million after discounts.  The loans also carried a total of $300 thousand in specific reserves that had been recorded in prior periods and set aside an an allowance for loan losses.  $35 thousand of these specific reserves were charged off against our allowance for loan losses.  The Company reversed the remaining $265 thousand of specific reserves related to these two loans, reducing the Company’s provision and allowance for loan losses and improving the Company’s balance sheet and statement of operations as of and for the nine month period ended September 30, 2012.

In addition, on September 18, 2012, the Company entered into a Deed in Lieu of Foreclosure Agreement with one of its borrowers.  As a result of this agreement, the Company received the property securing one of its impaired mortgage loan interests.  The Company has recorded the entire outstanding amount of the loan, $958.8 thousand, as a real estate owned asset on its financial statements.  As the value of the collateral less estimated costs to sell is greater than the the Company’s investment, no valuation allowance has been recorded on this property.

Allowance for Loan Losses

An allowance for loan losses of $4.0 million as of September 30, 2012 and $4.1 million as of December 31, 2011 has been established for loans receivable. For the nine month period ended September 30, 2012, we reported total charge-offs of $47 thousand on three of our mortgage loan investments. Pursuant to the Trinity Loan Purchase Agreement we entered into on May 15, 2012, we also reversed $265 thousand of provisions for loan losses related to two impaired loans that we sold.  Management believes that the allowance for loan losses as of September 30, 2012 and December 31, 2011 is appropriate. Changes in the allowance for loan losses for the three and nine months ended September 30, 2012 and the year ended December 31, 2011 are as follows:

	Three Months Ended September 30, 2012			Nine months ended September 30, 2012			Year Ended December 31, 2011
Balance, beginning of period	$	3,921		$	4,127		$	3,997
Provisions for loan loss		87			(49	)		1,487
Chargeoffs		--			(47	)		(1,279	)
Accretion of allowance           related to restrusctured           loans	$	(23	)		(46	)		(78	)
Balance, end of period	$	3,985		$	3,985		$	4,127

Non-Performing Loans

Non-performing loans include non-accrual loans, loans 90 days or more past due and still accruing, restructured loans, and other impaired loans where the net present value of estimated future cash flows is lower than the outstanding principal balance.  Non-accrual loans represent loans on which interest accruals have been discontinued.  Restructured loans are loans in which the borrower has been granted a concession on the interest rate or the original repayment terms due to financial distress. Non-performing loans are closely monitored on an ongoing basis as part of our loan review and work-out process.  The potential risk of loss on these loans is evaluated by comparing the loan balance to the fair value of any underlying collateral or the present value of projected future cash flows.  The following is a summary of our nonperforming loans:

	September 30		December 31		September 30
	2012		2011		2011
Impaired loans with an allowance for loan loss	$	11,617	$	18,168	$	22,337
Impaired loans without an allowance for loan loss		7,054		4,774		4,369
Total impaired loans	$	18,671	$	22,942	$	26,706
Allowance for loan losses related to impaired loans	$	2,967	$	3,064	$	2,860
Total non-accrual loans	$	18,449	$	22,942	$	26,706
Total loans past due 90 days or more and still accruing		--		--	$	614

We had eleven nonaccrual loans as of September 30, 2012 and fifteen at December 31, 2011.  As of September 30, 2012, we have completed foreclosure proceedings on two loan participation interests we acquired from ECCU.  We also acquired a property under the provisions of a Deed in Lieu of Foreclosure Agreement we entered into with one borrower.  In addition, we have two loans totaling $3.4 million that are currently in foreclosure proceedings.  There is a reserve of $275.6 thousand that has been recorded as an allowance for loan losses on these loans.  In April 2012, we completely wrote off one nonaccrual loan as uncollectible.  However, as this loan carried a discount for the entire principal balance, our recorded investment in the loan was zero and the write-off had no impact on our net loans receivable balance.  As of September 30, 2011, we had one loan with a balance of $614 thousand that was past due 90 days and still accruing.  This loan matured on July 1, 2011, but was in the process of being extended as of September 30, 2011.  In October, 2011, the extension was completed and payment received to bring the loan current.   The loan has remained current since the extension was completed.

The Company’s loan portfolio is comprised of one segment – church loans. The loans fall into four classes: whole loans for which the Company possesses the first collateral position, whole loans that are either unsecured or for which the Company possesses a junior collateral position, participated loans for which the Company possesses the first collateral position, and participated loans for which the Company possesses a junior collateral position.

Loans by portfolio segment (church loans) and the related allowance for loan losses are presented below. Loans and the allowance for loan losses are further segregated by impairment methodology (dollars in thousands).

	Loans and Allowance for Loan Losses (by segment) As of
	September 30, 2012		December 31, 2011
Loans:
Balance	$	158,536	$	170,920
Individually evaluated
for impairment	$	18,671	$	22,942
Collectively
evaluated for impairment	$	139,865	$	147,978
Allowance for loan losses:
Balance	$	3,985	$	4,127
Individually evaluated
for impairment	$	2,967	$	3,064
Collectively
evaluated for impairment	$	1,018	$	1,063

The Company has established a standard loan grading system to assist management and review personnel in their analysis and supervision of the loan portfolio.  The loan grading system is as follows:

Pass: The borrower generates sufficient cash flow to fund its debt service obligations.  The borrower may be able to obtain similar financing from other lenders with comparable terms.  The risk of default is considered low.

Watch: These loans exhibit potential or developing weaknesses that deserve extra attention from credit management personnel. If the developing weakness is not corrected or mitigated, there may be deterioration in the ability of the borrower to repay the debt in the future.  Loans graded Watch must be reported to executive management and the Board of Managers.  Potential for loss under adverse circumstances is elevated, but not foreseeable.

Substandard: Loans and other credit extensions bearing this grade are considered to be inadequately protected by the current sound worth and debt service capacity of the borrower or of any pledged collateral. These obligations, even if apparently protected by collateral value, have well-defined weaknesses related to adverse financial, managerial, economic, ministry, or environmental conditions which have clearly jeopardized repayment of principal and interest as originally intended. Furthermore, there is the possibility that some future loss will be sustained if such weaknesses are not corrected.

Doubtful: This classification consists of loans that display the properties of substandard loans with the added characteristic that the severity of the weaknesses makes collection or liquidation in full highly questionable or improbable based upon currently existing facts, conditions, and values. The probability of some loss is very high, but because of certain important and reasonably specific factors, the amount of loss cannot be exactly determined. Such pending factors could include merger or liquidation, additional capital injection, refinancing plans, or perfection of liens on additional collateral.

Loss: Loans in this classification are considered uncollectible and cannot be justified as a viable asset. This classification does not mean the loan has absolutely no recovery value, but that it is neither practical nor desirable to defer writing off this loan even though partial recovery may be obtained in the future.

The following table is a summary of the loan portfolio credit quality indicators by loan class at September 30, 2012 and 2011, which is the date on which the information was updated for each credit quality indicator (dollars in thousands):

Credit Quality Indicators (by class) As of  September 30, 2012
	Wholly-Owned First		Wholly-Owned Junior		Participation First		Participation Junior		Total
Grade:
Pass	$	82,777	$	2,272	$	38,231	$	981	$	124,261
Watch		10,284		3,710		4,534		-		18,528
Substandard		4,070		3,880		-		-		7,950
Doubtful		4,956		-		2,841		-		7,797
Loss		-		-		-		-		-
Total	$	102,087	$	9,862	$	45,606	$	981	$	158,536

Credit Quality Indicators (by class) As of December 31, 2011
	Wholly Owned First		Wholly Owned Junior		Participation First		Participation Junior		Total
Grade:
Pass	$	89,597	$	8,173	$	32,782	$	-	$	130,552
Watch		4,616		3,448		7,210		-		15,274
Substandard		3,237		3,883		4,089		1,006		12,215
Doubtful		8,091		1,155		3,633		-		12,879
Loss		-		-		-		-		-
Total	$	105,541	$	16,659	$	47,714	$	1,006	$	170,920

Age Analysis of Past Due Loans (by class)

As of September 30, 2012

													Recorded
													Investment
	30-59 Days		60-89 Days		Greater Than		Total				Total		90 Days or more
	Past Due		Past Due		90 Days		Past Due		Current		Loans		and Accruing
Church loans:
Wholly-Owned First	$	8,697	$	-	$	814	$	9,511	$	92,576	$	102,087	$	-
Wholly-Owned Junior		3,719		-		-		3,719		6,143		9,862		-
Participation First		-		1,453		2,611		4,064		41,542		45,606		-
Participation Junior		-		-		-		-		981		981		-
Total	$	12,416	$	1,453	$	3,425	$	17,294	$	141,242	$	158,536	$	-

 

Age Analysis of Past Due Loans (by class)
As of December 31, 2011
													Recorded
													Investment
	30-59 Days		60-89 Days		Greater Than		Total				Total		90 Days or more
	Past Due		Past Due		90 Days		Past Due		Current		Loans		and Accruing
Church loans:
Wholly-Owned First	$	6,537	$	613	$	7,522	$	14,672	$	90,869	$	105,541	$	-
Wholly-Owned Junior		3,448		-		1,159		4,607		12,052		16,659		-
Participation First		-		-		3,633		3,633		44,081		47,714		-
Participation Junior		-		-		-		-		1,006		1,006		-
Total	$	9,985	$	613	$	12,314	$	22,912	$	148,008	$	170,920	$	-

The following table is a summary of impaired loans by loan class at September 30, 2012 and December 31, 2011.  The recorded investment in impaired loans reflects the balances in the financials statements, whereas the unpaid principal balance reflects the balances before discounts and partial chargeoffs (dollars in thousands):

Impaired Loans (by class)
As of and for the three months ended September 30, 2012
			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
	Investment		Balance		Allowance		Investment		Recognized
With no related allowance recorded:
Church loans:
Wholly-Owned First	$	4,063	$	4,478	$	-	$	4,073	$	28
Wholly-Owned Junior		216		222		-		216		3
Participation First		2,611		2,744		-		2,611		-
Participation Junior		-		-		-		-		-
With an allowance recorded:
Church loans:
Wholly-Owned First		7,384		7,854		2,620		7,597		44
Wholly-Owned Junior		3,595		3,671		328		3,595		40
Participation First		230		252		19		231		-
Participation Junior		-		-		-		-		-
Total:
Church loans	$	18,099	$	19,221	$	2,967	$	18,323	$	115

Impaired Loans (by class)
As of and for the nine months ended September 30, 2012
			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
	Investment		Balance		Allowance		Investment		Recognized
With no related allowance recorded:
Church loans:
Wholly-Owned First	$	4,063	$	4,478	$	-	$	4,153	$	85
Wholly-Owned Junior		216		222		-		217		9
Participation First		2,611		2,744		-		2,633		-
Participation Junior		-		-		-		-		-
With an allowance recorded:
Church loans:
Wholly-Owned First		7,384		7,854		2,620		8,144		141
Wholly-Owned Junior		3,595		3,671		328		3,597		107
Participation First		230		252		19		565		-
Participation Junior		-		-		-		-		-
Total:
Church loans	$	18,099	$	19,221	$	2,967	$	19,309	$	342

Impaired Loans (by class)
As of and for the Year Ended December 31, 2011
			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
	Investment		Balance		Allowance		Investment		Recognized
With no related allowance recorded:
Church loans:
Wholly-Owned First	$	1,678	$	1,685	$	-	$	1,691	$	98
Wholly-Owned Junior		-		434		-		-		-
Participation First		2,655		2,655		-		2,699		-
Participation Junior		-		-		-		-		-
With an allowance recorded:
Church loans:
Wholly-Owned First		11,893		12,587		1,773		12,053		254
Wholly-Owned Junior		4,511		4,603		1,111		4,520		146
Participation First		978		978		180		983		-
Participation Junior		-		-		-		-		-
Total:
Church loans	$	21,715	$	22,942	$	3,064	$	21,946	$	498

A summary of nonaccrual loans by loan class at September 30, 2012 and December 31, 2011 is as follows (dollars in thousands):

Loans on Nonaccrual Status (by class)
As of September 30, 2012
Church loans:
Wholly-Owned First	$	11,949
Wholly-Owned Junior		3,658
Participation First		2,842
Participation Junior		-
Total	$	18,449

Loans on Nonaccrual Status (by class)
As of December 31, 2011
Church loans:
Wholly-Owned First	$	14,272
Wholly-Owned Junior		5,037
Participation First		3,633
Participation Junior		-
Total	$	22,942

The following are summaries of troubled debt restructurings by loan class that were modified during the period ended September 30 (dollars in thousands):

Troubled Debt Restructurings (by class)
For the three months ended September 30, 2012
			Pre-Modification Outstanding		Post-Modification Outstanding		Recorded
	Number of Loans		Recorded Investment		Recorded Investment		Investment At Period End
Church loans:
Wholly-Owned First		1	$	981	$	995	$	995
Wholly-Owned Junior		-		-		-		-
Participation First		-		-		-		-
Participation Junior		-		-		-		-
Total		1	$	981	$	995	$	995

Troubled Debt Restructurings (by class)
For the nine months ended September 30, 2012
			Pre-Modification Outstanding		Post-Modification Outstanding		Recorded
	Number of Loans		Recorded Investment		Recorded Investment		Investment At Period End
Church loans:
Wholly-Owned First		3	$	5,571	$	5,585	$	5,427
Wholly-Owned Junior		2		430		430		420
Participation First		1		271		249		230
Participation Junior		-		-		-		-
Total		6	$	6,272	$	6,264	$	6,077

Troubled Debt Restructurings (by class)
For the three months ended September 30, 2011
			Pre-Modification Outstanding		Post-Modification Outstanding		Recorded
	Number of Loans		Recorded Investment		Recorded Investment		Investment At Period End
Church loans:
Wholly-Owned First		-	$	-	$	-	$	-
Wholly-Owned Junior		-		-		-		-
Participation First		-		-		-		-
Participation Junior		-		-		-		-
Total		-	$	-	$	-	$	-

Troubled Debt Restructurings (by class)
For the nine months ended September 30, 2011
			Pre-Modification Outstanding		Post-Modification Outstanding		Recorded
	Number of Loans		Recorded Investment		Recorded Investment		Investment At Period End
Church loans:
Wholly-Owned First		9	$	15,246	$	15,323	$	15,214
Wholly-Owned Junior		4		4,467		4,561		4,510
Participation First		-		-		-		-
Participation Junior		-		-		-		-
Total		13	$	19,713	$	19,884	$	19,724

For 9 of the 11 restructured loans in our portfolio, unpaid accrued interest at the time of the loan restructure was added to the principal balance.  The amount of interest added was also recorded as a loan discount, and thus did not increase our net loan balance. Another restructured loan represents the modified loan balance upon foreclosure on two of three underlying properties.  In addition, for each of the 13 restructured loans, the interest rate was lowered.  Each borrower involved in a troubled debt restructuring was experiencing financial difficulties at the time the loan was restructured.

A summary of troubled debt restructurings that defaulted during the periods ended September 30, 2012 and 2011 is as follows (dollars in thousands):

There were no loan modifications classified as TDRs within the last twelve months that defaulted during the three months ended September 30, 2012.

Troubled Debt Restructurings Defaulted (by class)

During the nine months ended September 30, 2012

	Number of		Recorded
	Loans		Investment
Troubled debt restructurings that subsequently defaulted:
Church loans:
Wholly-Owned First		1	$	2,054
Wholly-Owned Junior		1		420
Participation First		1		230
Participation Junior		-		-
Total:
Church loans		3	$	2,704

Troubled Debt Restructurings Defaulted (by class)

During the three months ended September 30, 2011

	Number of		Recorded
	Loans		Investment
Troubled debt restructurings that subsequently defaulted:
Church loans:
Wholly-Owned First		-	$	-
Wholly-Owned Junior		1		3,173
Participation First		-		-
Participation Junior		-		-
Total:
Church loans		1	$	3,173

Troubled Debt Restructurings Defaulted (by class)

During the nine months ended September 30, 2011

	Number of		Recorded
	Loans		Investment
Troubled debt restructurings that subsequently defaulted:
Church loans:
Wholly-Owned First		5	$	8,552
Wholly-Owned Junior		3		4,291
Participation First		-		-
Participation Junior		-		-
Total:
Church loans		8	$	12,843

Loans modified in a troubled debt restructuring are closely monitored for delinquency as an early indicator for future default.  If loans modified in a troubled debt restructuring subsequently default, the Company evaluates such loans for potential further impairment.  As a result of this evaluation, specific reserves may be increased or adjustments may be made in the allocation of reserves.

No additional funds were committed to be advanced in connection with loans modified in troubled debt restructurings as of September 30, 2012 and December 31, 2011.

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Loans and Allowance for Losses (Details6) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011	Sep. 30, 2011
Nonaccrual loans	$ 18,449	$ 22,942	$ 26,706
Wholly-Owned First
Nonaccrual loans	11,949	14,272
Wholly-Owned Junior
Nonaccrual loans	3,658	5,037
Participation First
Nonaccrual loans	2,842	3,633
Participation Junior
Nonaccrual loans

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Notes Payable (Details Narrative) (USD $) In Thousands, unless otherwise specified						9 Months Ended					9 Months Ended
	Sep. 30, 2012	Dec. 31, 2011	Sep. 30, 2012 Alpha Class Notes	Dec. 31, 2011 Alpha Class Notes	May 31, 2007 Alpha Class Notes	Sep. 30, 2012 Class A Notes	Dec. 31, 2011 Class A Notes	May 04, 2011 Class A Notes	Jun. 03, 2010 Class A Notes	Apr. 30, 2008 Class A Notes	Sep. 30, 2012 Variable Series Notes	Sep. 30, 2012 Secured Investment Certificates
Registration of three series of Class A Notes					$ 75,000			$ 100,000	$ 100,000	$ 80,000
Minimum tangible adjusted net worth Required to be maintained			4,000			4,000
Maximum ceiling on aggregate unpaid balance if net worth requirement not met			100,000			100,000
Maximum ceiling on other debts			10,000			20,000
Notes outstanding	54,680	59,030	3,341	4,400		41,866	46,500					55
Notes interest rate description						Swap Index plus a rate spread of 1.7% to 2.5%					Swap Index plus a rate spread of 1.50% to 1.80%
Notes maturity period (in months)						Mar. 31, 2014					Mar. 31, 2009
Class A Notes, maximum issuable						$ 200,000
Collateral Outstanding												67.8

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Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Consolidated Balance Sheets
Cash	$ 11,711	$ 11,167
Loans receivable, net of allowance for loan losses of $3,985 and $4,127 as of September 30, 2012 and December 31, 2011, respectively	153,649	165,355
Accrued interest receivable	633	725
Property and equipment, net	241	303
Debt issuance costs	79	104
Foreclosed assets	3,050	1,374
Other assets	332	253
Total assets	169,695	179,281
Borrowings from financial institutions	104,650	110,280
Notes payable	54,680	59,030
Accrued interest payable	22	15
Other liabilities	487	478
Total liabilities	159,839	169,803
Series A preferred units, 1,000,000 units authorized, 117,100 units issued and outstanding at September 30, 2012 and December 31, 2011 (liquidation preference of $100 per unit)	11,715	11,715
Class A common units, 1,000,000 units authorized, 146,522 units issued and outstanding at September 30, 2012 and December 31, 2011	1,509	1,509
Accumulated deficit	(3,368)	(3,746)
Total members' equity	9,856	9,478
Total liabilities and members' equity	$ 169,695	$ 179,281

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Loan Commitments (Details Narrative) (USD $)	Sep. 30, 2012	Dec. 31, 2011
Loan Commitments Details Narrative
Unfunded loan commitments	$ 75,000	$ 181,800

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Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2012

Notes to Financial Statements

Summary of Significant Accounting Policies

1.  Summary of Significant Accounting Policies

Nature of Business

Ministry Partners Investment Company, LLC (the “Company”) was incorporated in California in 1991 as a C corporation and converted to a limited liability company on December 31, 2008.  The Company is owned by a group of 12 federal and state chartered credit unions, none of which owns a majority of the voting equity units of the Company.  One credit union owns only preferred units while the others own both common and preferred units.  Offices of the Company are located in Brea, California.  The Company provides funds for real property secured loans for the benefit of evangelical churches and church organizations.  The Company funds its operations primarily through the sale of debt and equity securities and through other borrowings.  Most of the Company’s loans are purchased from its largest equity investor, the Evangelical Christian Credit Union (“ECCU”), of Brea, California. The Company also originates church and ministry loans independently. Nearly all of the Company’s business and operations currently are conducted in California and its mortgage loan investments cover approximately 33 states, with the largest number of loans made to California borrowers.

In 2007, the Company created a wholly-owned special purpose subsidiary, Ministry Partners Funding, LLC (“MPF”), for the purpose of warehousing church and ministry mortgages purchased from ECCU or originated by the Company for later securitization.  MPF’s loan purchasing activity continued through early 2010, after which its operations ceased and its assets, including loans, were transferred to the Company.  MPF has no liabilities and is currently inactive. The Company closed down active operations of MPF effective as of December 31, 2009 but intends to maintain MPF’s existence as a Delaware limited liability company for possible future use as a financing vehicle to effect debt financing transactions.  MPF did not securitize any of its loans.

On November 13, 2009, the Company formed a wholly-owned subsidiary, MP Realty Services, Inc., a California corporation (“MP Realty”).  MP Realty provides loan brokerage and other real estate services to credit unions, financial institutions, churches and ministries in connection with the Company’s mortgage financing activities and services it provides to federal and state chartered credit unions. On February 23, 2010, the California Department of Real Estate issued MP Realty a license to operate as a corporate real estate broker.

On April 26, 2010, we formed Ministry Partners Securities, LLC, a Delaware limited liability company (“MP Securities”).  On July 6, 2010, MP Securities became a registered broker dealer firm under Section 15 of the Securities Exchange Act of 1934.  Effective as of March 2, 2011, MP Securities’ application for membership in the Financial Industry Regulatory Authority (“FINRA”) was approved.  MP Securities has been formed to provide financing solutions for churches, charitable institutions and faith-based organizations and act as a selling agent for securities offered by such entities. On September 24,2012, MP Securities received a no objection letter from FINRA, thereby authorizing MP Securities to act as a selling agent for the Company’s Class A Notes offering that will be offered under a registration statement filed with the U.S. Securities and Exchange Commission (“SEC”).  In addition to serving as a selling agent for the Company’s Class A Notes and other debt securities, MP Securities will distribute debt securities issued by religious organizations, as well as by business members of credit unions it serves and act as a selling agent in placing mortgage backed business loans made by credit unions to institutional investors.

Conversion to LLC

Effective December 31, 2008, the Company converted its form of organization from a corporation organized under California law to a limited liability company organized under the laws of the State of California.  With the filing of Articles of Organization-Conversion with the California Secretary of State, the separate existence of Ministry Partners Investment Corporation ceased and the entity continued by operation of law under the name Ministry Partners Investment Company, LLC.

By operation of law, the converted entity continued with all of the rights, privileges and powers of the corporate entity and is managed by a group of managers that previously served as the Board of Directors.  The executive officers and key management team remained intact.  The converted entity by operation of law possessed all of the properties and assets of the converted corporation and remains responsible for all of the notes, debts, contract claims and obligations of the converted corporation.

Since the conversion became effective, the Company is managed by a group of managers that provides oversight of the affairs and carries out their duties similar to the role and function that the Board of Directors performed under the previous bylaws.  Operating like a Board of Directors, the managers have full, exclusive and complete discretion, power and authority to oversee the management of Company affairs.  Instead of Articles of Incorporation and Bylaws, management structure and governance procedures are now governed by the provisions of an Operating Agreement that has been entered into by and between the Company’s managers and members.

Principles of Consolidation

The consolidated financial statements include the accounts of Ministry Partners Investment Company, LLC and its wholly-owned subsidiaries, MPF, MP Realty and MP Securities.  All significant inter-company balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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.  Material estimates that are particularly susceptible to significant change in the near term relate to, but are not limited to, the determination of the allowance for loan losses and the valuation of foreclosed real estate.

Loans Receivable

Loans that management has the intent and ability to hold for the foreseeable future are reported at their outstanding unpaid principal balance adjusted for an allowance for loan losses, deferred loan fees and costs, and loan discounts. Interest income on loans is accrued on a daily basis using the interest method. Loan origination fees and costs are deferred and recognized as an adjustment to the related loan yield using the straight-line method, which results in an amortization that is materially the same as the interest method.  Loan discounts represent an offset against interest accrued and unpaid which has been added to loans that have been restructured.  Loan discounts are accreted to interest income over the term of the loan using the interest method once the loan is no longer considered impaired and is no longer in its restructure period.  Loan discounts may also represent the difference between the purchase price of a loan and the outstanding principal balance of the loan.  These discounts are accreted to interest income over the term of the loan using the interest method.

The accrual of interest is discontinued at the time the loan is 90 days past due.  Past due status is based on contractual terms of the loan. In all cases, loans are placed on nonaccrual or charged off at an earlier date if collection of principal or interest is considered doubtful.

All interest accrued but not collected for loans that are placed on nonaccrual or charged off are reversed against interest income. The interest on these loans is accounted for on the cash basis or cost-recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

Allowance for Loan Losses

The Company sets aside an allowance or reserve for loan losses through charges to earnings, which are shown in the Company’s Consolidated Statements of Operations as a provision for loan losses.  Loan losses are charged against the allowance when management believes the uncollectability of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.

In evaluating the level of the allowance for loan losses, we consider the type of loan, amount of loans in our portfolio, adverse situations that may affect our borrowers’ ability to pay and estimated value of underlying collateral and credit quality trends (including trends in non-performing loans expected to result from existing conditions).  Until 2011, we had never recorded a charge-off on our mortgage loan investments.  As a result, we have a limited historical loss experience to assist us in assessing estimated future losses.

The allowance for loan loss is monitored by our senior management on an ongoing basis.  The allowance consists of general and specific components. The general component covers non-classified loans and is based on historical loss experience adjusted for qualitative factors.  In establishing the allowance for loan losses, management considers significant factors that affect the collectability of our loan portfolio. While historical loss experience provides a reasonable starting point for the analysis, such experience by itself does not form a sufficient basis to determine the appropriate level of the allowance for loan losses.

In determining the general component of the allowance, we examine the performance characteristics of our loan portfolio, including charge-offs, delinquency ratios, loan restructurings and modifications and other significant factors that, in management’s judgment, may affect our ability to collect loans in the portfolio as of the evaluation date.  In 2009, we also added a factor relating to the portion of our loan portfolio that is held in a loan participation interest.  The net effect of adding this factor in our analysis resulted in an increase in the allowance for loan losses that reflects the greater risk of loss associated with holding a loan participation interest in which we do not serve as the lead lender for the loan.

While we have not added any new qualitative factors in the analysis of our loan portfolio since 2009, in March 2012 we refined our analysis by segregating our loans into pools based on the position of the underlying collateral and the risk rating of the loan.  Risk ratings are determined by grading a borrower on certain metrics, which include financial performance, strength of management, credit history, and condition of the local economy.  These ratings are updated on an annual basis, or more frequently as necessary.  By segregating the portfolio in this manner, our senior management team is better able to assess the potential impact of various risk factors depending on the quality of the loans in a particular pool. The potential impact of factors such as the risk of charge-offs, impairment, delinquency, restructuring, decreases in borrower financial condition, and continued low commercial real estate values throughout the country fluctuates depending on the quality of the loan.  As a result, management has increased the weight of these factors for loans with a higher risk rating.   This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

All loans in the loan portfolio are subject to impairment analysis.  The Company reviews its loan portfolio monthly by examining delinquency reports, information related to the financial condition of its borrowers and the collateral value of its loans.  Through this process, the Company identifies potential impaired loans.  A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal and interest when due according to the contractual terms of the loan agreement.  Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting future scheduled principal and interest payments when due.  Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired.  Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower's prior payment record, and the amount of the shortfall in relation to the principal and interest owed.  A loan is generally deemed to be impaired when it is 90 days or more past due, or earlier when facts and circumstances indicate that it is probable that a borrower will be unable to make payments in accordance with the loan contract.

Impairment is measured on a loan-by-loan basis by either the present value of expected future cash flows discounted at the loan's original effective interest rate, the obtainable market price, or the fair value of the collateral if the loan is collateral dependent.    Loans or portions thereof are charged off when they are determined by management to be uncollectible.  Uncollectability is evaluated periodically on all loans classified as “Loans of Lesser Quality.”  As the Company has an established practice of working to explore every possible means of repayment with its borrowers, it has historically not charged off a loan until foreclosure is completed.  Among other variables, management will consider factors such as the financial condition of the borrower and the value of the underlying collateral in assessing uncollectability.

Troubled Debt Restructurings

A troubled debt restructuring is a loan for which the Company, for reasons related to a borrower’s financial difficulties, grants a concession to a borrower that the Company would not otherwise consider. From time to time, we have restructured a mortgage loan in light of theborrower'scircumstances and capabilities. We review each of these cases on an individual basis and approve any restructure based on the guidance stipulated in our collections policy. If we decide to accept a loan restructure, we generally will not forgive or reduce the principal amount owed on the loan; in addition, the typical maturity term for a restructured loan does not exceed five years.  A restructuring of a loan usually involves an interest rate modification, extension of the maturity date, or reduction of accrued interest owed on the loan on a contingent or absolute basis.

When we receive a request for a modification or restructure, we evaluate the strength of the borrower’s financial condition, leadership of the pastoral team and board, developments that have impacted the church and its leadership team, local economic conditions, the value of the underlying collateral, the borrower’s commitment to sound budgeting and financial controls, whether there is a denominational guaranty of any portion of the indebtedness, debt service coverage for the borrower, availability of other collateral and any other relevant factors unique to the borrower.  While we have no written policy that establishes criteria for when a request for restructuring a loan will be approved, our Credit Review Committee reviews each request, solicits written reports and recommendations from management, and summaries of the requests and actions taken by the Credit Review Committee are presented to the Company’s managers for their review at quarterly meetings throughout the year.

Loans that are renewed at below-market terms are considered to be troubled debt restructurings if the below-market terms represent a concession due to the borrower’s troubled financial condition. Troubled debt restructurings are classified as impaired loans and are measured at the present value of estimated future cash flows using the loan's effective rate at inception of the loan. The change in the present value of cash flows attributable to the passage of time is reported as interest income.  If the loan is considered to be collateral dependent, impairment is measured based on the fair value of the collateral.

In the current economic market, loan restructures often produce a better outcome for our loan portfolio than a foreclosure action. Given our specialized knowledge and experience working with churches and ministries, entering into a loan modification often enables our borrowers to keep their ministries intact and avoid foreclosure.  With a successful loan restructure, we avoid a loan charge-off and protect the interests of the investors and borrowers we serve.

Loan Portfolio Segments and Classes

Management segregates the loan portfolio into portfolio segments for purposes of evaluating the allowance for loan losses. A portfolio segment is defined as the level at which the Company develops and documents a systematic method for determining its allowance for loan losses. The portfolio segments are segregated based on loan types and the underlying risk factors present in each loan type. Such risk factors are periodically reviewed by management and revised as deemed appropriate.

The Company’s loan portfolio consists of one segment – church loans. The loan portfolio is segregated into the following portfolio classes:

Wholly-Owned First Collateral Position. This portfolio class consists of the wholly-owned loans for which the Company possesses a senior lien on the collateral underlying the loan.

Wholly-Owned Junior Collateral Position. This portfolio class consists of the wholly-owned loans for which the Company possesses a lien on the underlying collateral that is superseded by another lien on the same collateral.  This class also contains any loans that are not secured. These loans present higher credit risk than loans for which the Company possesses a senior lien due to the increased risk of loss should the loan default.

Participations First Collateral Position. This portfolio class consists of the participated loans for which the Company possesses a senior lien on the collateral underlying the loan. Loan participations present higher credit risk than wholly-owned loans because the Company does not maintain full control over the disposition and direction of actions regarding the management and collection of the loans.  The lead lender directs most servicing and collection activities and major actions must be coordinated and negotiated with the other participants, whose best interests regarding the loan may not align with those of the Company.

Participations Junior Collateral Position. This portfolio class consists of the participated loans for which the Company possesses a lien on the underlying collateral that is superseded by another lien on the same collateral.  Loan participations in the junior collateral position loans have higher credit risk than wholly-owned loans and participated loans where the Company possesses a senior lien on the collateral.  The increased risk is the result of the factors presented above relating to both junior lien positions and participations.

Credit Quality Indicators

The Company’s policies provide for the classification of loans that are considered to be of lesser quality as watch, substandard, doubtful, or loss assets. An asset is considered substandard if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Substandard assets include those assets characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. Assets classified as doubtful have all of the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses make collection or liquidation in full highly questionable and improbable, based on currently existing facts, conditions and values. Assets (or portions of assets) classified as loss are those considered uncollectible and of such little value that their continuance as assets is not warranted. Assets that do not expose the Company to risk sufficient to warrant classification in one of the aforementioned categories, but which possess potential weaknesses that deserve close attention, are designated as watch.

Foreclosed Assets

Assets acquired through foreclosure or other proceedings are initially recorded at fair value at the date of foreclosure less estimated costs of disposal, which establishes a new cost.  After foreclosure, valuations are periodically performed by management and foreclosed assets held for sale are carried at the lower of cost or fair value, less estimated costs of disposal.  Any write-down to fair value at the time of foreclosure is charged to the allowance for loan losses.  If the fair value, less costs to sell, of the foreclosed property decreases during the holding period, a valuation allowance is established with a charge to operating expenses taken.  The Company’s real estate assets acquired through foreclosure or other proceedings are evaluated regularly to ensure that the recorded amount is supported by its current fair value and that valuation allowances to reduce the varying amount to fair value less estimated costs of disposal are recorded as necessary.  Revenue and expense from the operation of the Company’s foreclosed assets and changes in the valuation allowance are included in net expenses from foreclosed assets.  When the foreclosed property is sold, a gain or loss is recognized on the sale for the difference between the sales proceeds and the carrying amount of the property.

Transfers of Financial Assets

Transfers of financial assets are accounted for as sales when control over the assets has been surrendered. Control over transferred assets is deemed to have been surrendered when (1) the assets have been isolated from the

Company, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

From time to time, the Company sells participation interests in mortgage loans it has originated or acquired. In order to recognize the transfer of a portion of a financial asset as a sale, the transferred portion and any portion that continues to be held by the transferor must represent a participating interest and the transfer of the participating interest must meet the conditions for surrender of control. To qualify as a participating interest (i) each portion of a financial asset must represent a proportionate ownership interest in an entire financial asset, (ii) from the date of transfer, all cash flows received from the entire financial asset must be divided proportionately among the participating interest holders in an amount equal to their share of ownership, (iii) the transfer must be made on a non-recourse basis (other than standard representations and warranties made under the loan participation sale agreement) to, or subordination by, any participating interest holder, and (iv) no party has the right to pledge or exchange the entire financial asset. If the participating interest or surrender of control criteria is not met, the transaction is accounted for as a secured borrowing arrangement.

Under some circumstances, when the Company sells participations in a wholly-owned loan receivable that it services, it retains a servicing asset that is initially measured at fair value.  As quoted market prices are generally not available for these assets, the Company estimates fair value based on the present value of future expected cash flows associated with the loan receivable.  The Company amortizes servicing assets over the life of the associated receivable using the interest method.  Any gain or loss recognized on the sale of loans receivable depends in part on both the previous carrying amount of the financial assets involved in the sale, allocated between the assets sold and the interests that continue to be held by the Company based on their relative fair value at the date of transfer and the proceeds received.

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 seven years.

Debt Issuance Costs

Debt issuance costs are related to borrowings from financial institutions and offerings of debt securities and are amortized into expense over the contractual terms of the debt or the life of the offering, respectively.

Income Taxes

Effective December 31, 2008, the Company converted from a C corporation to a California limited liability company (LLC). As a result, the stockholders of the Company became members of the LLC on the conversion date. The LLC is treated as a partnership for income tax purposes; therefore, the Company is no longer a tax-paying entity for federal or state income tax purposes, and no federal or state income tax will be recorded in its financial statements after the date of conversion. Income and losses of the Company are passed through to the members of the LLC for tax reporting purposes. The Company is subject to a California gross receipts fee of approximately $12,000 per year for years ending on and after December 31, 2009.  The Company’s subsidiaries are LLCs except for MP Realty, which was organized as a California corporation.  MP Realty incurred a tax loss for the year ended December 31, 2011 and recorded a provision of $800 for the state minimum franchise tax.

Although the Company is not a federal or state income tax-paying entity, it is nonetheless subject to Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) for Income Taxes for all “open” tax periods for which the statute of limitations has not yet run.  The Company uses a recognition threshold and a measurement attribute for the consolidated financial statement recognition and measurement of a tax position taken in a tax return. Benefits from tax positions are recognized in the financial statements only when it is more likely than not that the tax position will be sustained upon examination by the appropriate taxing authority that would have full knowledge of all relevant information. A tax position that meets the more-likely-than-not recognition threshold is measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold are recognized in the first subsequent financial reporting period in which that threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not recognition threshold are derecognized in the first subsequent financial reporting period in which that threshold is no longer met.

Employee Benefit Plan

Contributions to the qualified employee retirement plan are recorded as compensation cost in the period incurred.

Recent Accounting Pronouncements

In December 2011, the FASB issued new guidance Accounting Standards Update (ASU) No. 2011-11, “Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities.” This new guidance requires expanded information about financial instruments or derivatives that are either presented on a net basis in the balance sheet or subject to an enforceable master netting arrangement or similar arrangement. The new guidance does not change existing offsetting criteria in U.S. GAAP or the permitted balance sheet presentation for items meeting the criteria. The new disclosure requirements in the ASU are intended to enhance comparability between financial statements prepared using U.S. GAAP and those prepared using International Financial Reporting Standards (IFRS). The amendments in this guidance are effective during interim and annual periods beginning on or after January 1, 2013.  The Company does not expect this guidance to have a material impact on its consolidated financial statements.

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Foreclosed Assets (Details Narrative) (USD $)	9 Months Ended	12 Months Ended
	Sep. 30, 2012 N	Dec. 31, 2011 N
Foreclosed Assets Details Narrative
Number of property acquired in satisfaction of a secured loan		1
Property acquired through foreclosure	$ 1,400
Number of property acquired in partial satisfaction of a secured loan	2
Property acquired through foreclosure	717.2
Number of property acquired through a deed in lieu of foreclosure	1
Property acquired through a deed in lieu of foreclosure	958.8
Foreclosed assets	$ 3,050,000	$ 1,374,000

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Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2012

Fair Value Measurements Tables

Schedule of carrying amounts and estimated fair values of our financial instruments

	Fair Value Measurements at September 30, 2012 using
			Quoted  Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	Carrying Value		Level 1		Level 2		Level 3		Fair Value
FINANCIAL ASSETS:
Cash	$	11,711	$	11,711	$	-	$	-	$	11,711
Loans, net		153,649		-		-		157,349		157,349
Accrued interest receivable		633		-		-		633		633
FINANCIAL LIABILITIES:
Notes payables	$	54,680	$	-	$		$	56,448	$	56,448
Bank borrowings		104,650		-				108,229		108,229
Other financial liabilities		107		-				107		107

	December 31, 2011
	Carrying Amount			Estimated Fair Value
Financial assets:
Cash		$	11,167		$	11,167
Loans receivable			165,355			168,383
Accrued interest receivable			863			863
Financial liabilities:
Notes payable			59,030			60,833
Bank borrowings			110,280			111,371
Other financial liabilities			104			104

Schedule Of Fair Value Measured on a Nonrecurring Basis

		Fair Value Measurements Using:
		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
		(Level 1)		(Level 2)		(Level 3)		Total
Assets at September 30, 2012:
Impaired loans (net of allowance and discount)	$	-	$	-	$	8,384	$	8,384
Foreclosed assets		-		-		3,050		3,050
	$	-	$	-	$	11,434	$	11,434
Assets at December 31, 2011:
Impaired loans (net of allowance and discount)	$	-	$	-	$	11,887	$	11,887
Foreclosed assets		-		-		1,374		1,374
	$	-	$	-	$	13,261	$	13,261

Schedule of valuation methodologies used to measure the fair value adjustments for Level 3 assets recorded at fair value on a nonrecurring basis

Assets	Fair Value	Valuation Techniques	Unobservable Input	Range (Weighted Average)
Impaired Loans	8,384	Discounted appraised value	Selling cost	10% (10%)
		Internal evaluations	Discount due to age of appraisal	0% - 5% (0.12%)
Foreclosed assets	3,050	Discounted appraised value	Selling cost	10% (10%)
		Internal evaluations	Discount due to age of appraisal	0% - 5% (1.18%)

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Loan Participation Sales (Details Narrative) (USD $)	9 Months Ended	12 Months Ended
	Sep. 30, 2012	Dec. 31, 2011 N
Loan Participation Sales Details Narrative
Number of church loans sold		2
Proceeds form the sale of church loans		$ 5,400,000
Servicing Assets		146,900
Amortization of servicing assets	$ 13,600

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Related Party Transactions (Details Narrative) (USD $)	0 Months Ended	12 Months Ended	9 Months Ended
	May 19, 2009	Dec. 31, 2011 N	Sep. 30, 2012 ECCU N	Sep. 30, 2011 ECCU	Dec. 31, 2011 ECCU	Sep. 30, 2012 Art Black, Board Member Class A Notes	Sep. 30, 2012 Van Elliott, Board Member Class A Notes
Funds held with ECCU			$ 11,000,000		$ 10,900,000
Interest earned on funds held with ECCU			110,600	68,200
Charges paid for physical facilities & purchase of other services			77,300	85,700
Mortgage Loan purchased			5,800,000	0
Interest income on Loan purchased			3,800,000	5,800,000
Number of loans serviced by related party			70
Number of Loans held by entity			126
Related party servicing Fees lower end of the range (as a percent)			0.50%
Related party servicing Fees higher end of the range (as a percent)			0.65%
Pass through rates lower end of the range (as a percent)			0.50%
Pass through rates higher end of the range (as a percent)			0.75%
Pass through rates for loans under Loan Participation interest lower end of the range (as a percent)			0.88%
Pass through rates for loans under Loan Participation interest higher end of the range (as a percent)			1.35%
Purchase of loans under Loan Participation Interest			5,400,000
Investment in wholly owned loan serviced by Related party			43,300,000
Investment in loan participation serviced by Related party			42,600,000
Servicing fees paid				3,800
Percentage of loan balances already serviced by related party (as a percent)			1.00%
Impaired Loans purchased by ECCU		2
Impaired Loans purchased by ECCU, cash purchase price		4,500,000
Participation Interest Transferred by ECCU		1.00%
Participation Interest principal balance		25,000
Second Deed of Trust Principal Balance		500,000
Value of property (amount lower than the outstanding principal balance of impaired loans sold)		1,200,000
Mortgage Loan interest purchase agreements entered into with ECCU, number of impaired loans to be purchased		3
Mortgage Loan interest purchase agremeents entered into with ECCU, cash purchase price		6,600,000
Recovery of allowance for loan losses		914,000
Funds held by Alloya Corporate Federal Credit Union			92,000
Notes Held by related parties						224,300	83,600
Notes sold to Western Federal Credit Union	$ 19,300,000
Selling agreement entered into with MP Securities			We have also entered into a selling agreement with our wholly-owned subsidiary, MP Securities, pursuant to which MP Securities will assist us in distributing our 2012 Secured Investment Certificates, which are notes we sell under a private placement memorandum and which are secured by loans or cash. The sales commissions and cost reimbursements paid to any broker-dealer firms that are engaged to assist in the distribution of such certificates will not exceed 3% of the amount of certificates sold. MP Securities will also act as a selling agent for our Class A Notes offering pursuant to a Registration Statement filed with the SEC on July 3, 2012.  At the time the registration statement is deemed effective, we anticipate that our affiliate, MP Securities, will sell most of the Class A Notes being registered. Each participating broker in the Class A Notes offering, including MP Securities, will be entitled to receive commissions ranging from .5%, plus an amount equal to .25% per annum on the average note balance for a Variable Series Note to 5% for a Flex Series or 60 month Fixed Series Note depending on whether it sells a Fixed Series, Variable Series or Flex Series note and the term of the respective note sold (12 months to 84 months).

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Related Party Transactions

9 Months Ended

Sep. 30, 2012

Related Party Transactions [Abstract]

Related Party Transactions

2.  Related Party Transactions

We maintain most of our cash funds at ECCU, our largest equity investor. Total funds held with ECCU were $11.0 million and $10.9 million at September 30, 2012 and December 31, 2011, respectively. Interest earned on funds held with ECCU totaled $110.6 thousand and $68.2 thousand for the nine months ended September 30, 2012 and 2011, respectively.

We lease physical facilities and purchase other services from ECCU pursuant to a written lease and services agreement. Charges of $77.3 thousand and $85.7 thousand for the nine months ended September 30, 2012 and 2011, respectively, were incurred for these services and are included in office operations expense. The method used to arrive at the periodic charge is based on the fair market value of services provided.  We believe that this method is reasonable.

From time to time, we purchase mortgage loans, including loan participation interests from ECCU, our largest equity owner.  During the nine month period ended September 30, 2012, we purchased $5.8 million of loans from ECCU.  We did not purchase any loans from ECCU during the nine months ended September 30, 2011.  With regards to all loans purchased from ECCU, we recognized $3.8 million and $5.8 million of interest income during the nine months ended September 30, 2012 and 2011, respectively.  ECCU currently acts as the servicer for 70 of the 126 loans in the Company’s loan portfolio.  Under the terms of the loan servicing agreement we entered into with ECCU, a servicing fee of 50 to 65 basis points is deducted from the interest payments the Company receives on the wholly-owned loans ECCU services for the Company.  In lieu of a servicing fee, loan participations the Company purchases from ECCU generally have pass-through rates which are 50 to 75 basis points lower than the loan’s contractual rate.  On a limited number of loan participation interests purchased from ECCU, representing $5.4 million of loans at September 30, 2012, the pass-through rate is between 88 and 135 basis points lower than the contractual rate.  The Company negotiates the pass-through interest rates with ECCU on a loan by loan basis.  At September 30, 2012, the Company’s investment in wholly-owned loans serviced by ECCU totaled $43.3 million, while the Company’s investment in loan participations serviced by ECCU totaled $42.6 million.  From time to time, the Company pays fees for additional services ECCU provides for servicing these loans.  These fees amounted to $3.8 thousand during the nine months ended September 30, 2011. We paid fewer than one thousand dollars of these fees during the nine months ended September 30, 2012.

ECCU has also repurchased mortgage loans from us as part of our liquidity management practices.  In addition, ECCU has from time to time repurchased from the Company fractional participations in the loan investments which ECCU already services, usually around 1% of the loan balance, to facilitate compliance with National Credit Union Association (“NCUA”) rules when participations in those loans were sold to federal credit unions.  Each sale or purchase of a mortgage loan investment or participation interest with ECCU was consummated under a Related Party Transaction Policy adopted by the Company’s Board.  No gain or loss was incurred on these sales.  No whole loans or loan participations were sold to ECCU during the nine months ended September 30, 2012 and 2011, respectively.

Other Related Party Transactions

On December 28, 2011, we entered into a Loan Purchase Agreement with ECCU, pursuant to which ECCU agreed to repurchase two of our impaired mortgage loan interests in exchange for a cash purchase price of $4.5 million. In addition to the delivery of the cash purchase price, ECCU also transferred to us a 1% participation interest and second deed of trust in a loan which resulted in us holding a 100% interest in such loan. While the 1% loan participation interest and second deed of trust we acquired had a principal balance of $25 thousand and $500 thousand, respectively, we received no value for these loan interests since the acquired loans were in default and the value of the real property was estimated to be approximately $1.2 million less than the outstanding principal balance of the mortgage loan interest we owned prior to entering into the Loan Purchase Agreement.

Prior to entering into negotiations with ECCU, we notified ECCU that we believed that ECCU had breached certain representations and warranties set forth in mortgage loan purchase agreements we had entered into with ECCU to purchase three (3) mortgage loan interests for an aggregate sum of $6.6 million. In exchange for the delivery of the $4.5 million purchase price and mortgage loan interests acquired from ECCU, we agreed to grant a release, waiver and discharge of certain claims we had made for an alleged breach of representations and warranties made by ECCU in connection with three (3) loans we had acquired from ECCU. We also agreed to grant a complete release and discharge for any claims arising out of the purchase, servicing and any actions undertaken by ECCU as the lead lender for an additional nine (9) loans we previously acquired from ECCU which no cause for claims had been identified, or which were reasonably expected to be, subject to any claims arising in connection with the purchase of such loans.  This loan sale enabled us to recover $914 thousand of allowance for loan losses that had been previously recorded on two of the loans we sold to ECCU.

While no independent valuation was made in determining the value of the claims we released in favor of ECCU, we believe that litigation risks and uncertainties in pursuing such claims resulted in an arms-length purchase price mutually agreed upon with ECCU in exchange for granting a release of such claims. Prior to entering into the Loan Purchase Agreement, we requested and received independent market valuations for the impaired loan interests that were transferred to and received from ECCU pursuant to the terms of the Loan Purchase Agreement. In addition, we relied upon the advice of independent legal counsel in evaluating litigation risks we faced in pursuing an action against ECCU arising from our purchase of these mortgage loan interests. None of our managers that serve as an officer, director or employee of ECCU participated in any of the discussions, review and approval of the Loan Purchase Agreement. As a result, the terms, conditions and provisions of the Loan Purchase Agreement were negotiated and approved by our independent managers in accordance with our Related Party Transaction Policy.

On December 14, 2007, the Board of Directors appointed R. Michael Lee to serve as a Company director.  Mr. Lee serves as Vice President Member Relations, Midwest Region, of Alloya Corporate Federal Credit Union (“Alloya”), formerly Members United Corporate Federal Credit Union (“Members United”).  See Note 6 for information regarding the Company’s borrowings from Members United.  The Company has $92.0 thousand on deposit with Alloya as of September 30, 2012.

From time to time, our Board and members of our executive management team have purchased investor notes from us. One of our Board members, Mr. Art Black, is the beneficial owner of a living trust that holds $224.3 thousand of our Class A Notes. Another of our Board members, Mr. Van C Elliott, owns $83.6 thousand of our notes.

We have also entered into a selling agreement with our wholly-owned subsidiary, MP Securities, pursuant to which MP Securities will assist us in distributing our 2012 Secured Investment Certificates, which are notes we sell under a private placement memorandum and which are secured by loans or cash. The sales commissions and cost reimbursements paid to any broker-dealer firms that are engaged to assist in the distribution of such certificates will not exceed 3% of the amount of certificates sold.  MP Securities will also act as a selling agent for our Class A Notes offering pursuant to a Registration Statement which was declared effective by the SEC on October 11, 2012.  Our affiliate, MP Securities, will sell most of the Class A Notes being registered.  Each participating broker in the Class A Notes offering, including MP Securities, will be entitled to receive commissions ranging from .5%, plus an amount equal to .25% per annum on the average note balance for a Variable Series Note to 5% for a Flex Series or 60 month Fixed Series Note depending on whether it sells a Fixed Series, Variable Series or Flex Series note and the term of the respective note sold (12 months to 84 months).  For repeat purchasers of our Class A Notes, the gross commissions payable to the managing broker for the Offering and share of commissions payable to MP Securities will be reduced by 0.25% of the total amount of Class A Notes sold in the offering to a repeat investor who is then, or has been within the immediately preceding thirty (30) days, a noteholder.

To assist in evaluating any related transactions we may enter into with a related party, our Board has adopted a Related Party Transaction Policy. Under this policy, a majority of the members of our Board and majority of our independent Board members must approve a material transaction that we enter into with a related party.  As a result, we anticipate that all future transactions that we undertake with an affiliate or related party will be on terms believed by our management to be no less favorable than are available from unaffiliated third parties and will be approved by a majority of our independent Board members.

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Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Consolidated Balance Sheets
Allowance for loan losses	$ 3,985	$ 4,127
Preferred units - Series A, units authorized	1,000,000	1,000,000
Preferred units - Series A, units issued	117,100	117,100
Preferred units - Series A, units outstanding	117,100	117,100
Common units - Class A, units authorized	1,000,000	1,000,000
Common units - Class A, units issued	146,522	146,522
Common units - Class A, units outstanding	146,522	146,522
Liquidation preference	$ 100	$ 100

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Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2012

Summary Of Significant Accounting Policies Policies

Nature of Business

Nature of Business

Ministry Partners Investment Company, LLC (the “Company”) was incorporated in California in 1991 as a C corporation and converted to a limited liability company on December 31, 2008.  The Company is owned by a group of 12 federal and state chartered credit unions, none of which owns a majority of the voting equity units of the Company.  One credit union owns only preferred units while the others own both common and preferred units.  Offices of the Company are located in Brea, California.  The Company provides funds for real property secured loans for the benefit of evangelical churches and church organizations.  The Company funds its operations primarily through the sale of debt and equity securities and through other borrowings.  Most of the Company’s loans are purchased from its largest equity investor, the Evangelical Christian Credit Union (“ECCU”), of Brea, California. The Company also originates church and ministry loans independently. Nearly all of the Company’s business and operations currently are conducted in California and its mortgage loan investments cover approximately 33 states, with the largest number of loans made to California borrowers.

In 2007, the Company created a wholly-owned special purpose subsidiary, Ministry Partners Funding, LLC (“MPF”), for the purpose of warehousing church and ministry mortgages purchased from ECCU or originated by the Company for later securitization.  MPF’s loan purchasing activity continued through early 2010, after which its operations ceased and its assets, including loans, were transferred to the Company.  MPF has no liabilities and is currently inactive. The Company closed down active operations of MPF effective as of December 31, 2009 but intends to maintain MPF’s existence as a Delaware limited liability company for possible future use as a financing vehicle to effect debt financing transactions.  MPF did not securitize any of its loans.

On November 13, 2009, the Company formed a wholly-owned subsidiary, MP Realty Services, Inc., a California corporation (“MP Realty”).  MP Realty provides loan brokerage and other real estate services to credit unions, financial institutions, churches and ministries in connection with the Company’s mortgage financing activities and services it provides to federal and state chartered credit unions. On February 23, 2010, the California Department of Real Estate issued MP Realty a license to operate as a corporate real estate broker.

On April 26, 2010, we formed Ministry Partners Securities, LLC, a Delaware limited liability company (“MP Securities”).  On July 6, 2010, MP Securities became a registered broker dealer firm under Section 15 of the Securities Exchange Act of 1934.  Effective as of March 2, 2011, MP Securities’ application for membership in the Financial Industry Regulatory Authority (“FINRA”) was approved.  MP Securities has been formed to provide financing solutions for churches, charitable institutions and faith-based organizations and act as a selling agent for securities offered by such entities. On September 24,2012, MP Securities received a no objection letter from FINRA, thereby authorizing MP Securities to act as a selling agent for the Company’s Class A Notes offering that will be offered under a registration statement filed with the U.S. Securities and Exchange Commission (“SEC”).  In addition to serving as a selling agent for the Company’s Class A Notes and other debt securities, MP Securities will distribute debt securities issued by religious organizations, as well as by business members of credit unions it serves and act as a selling agent in placing mortgage backed business loans made by credit unions to institutional investors.

Conversion to LLC

Conversion to LLC

Effective December 31, 2008, the Company converted its form of organization from a corporation organized under California law to a limited liability company organized under the laws of the State of California.  With the filing of Articles of Organization-Conversion with the California Secretary of State, the separate existence of Ministry Partners Investment Corporation ceased and the entity continued by operation of law under the name Ministry Partners Investment Company, LLC.

By operation of law, the converted entity continued with all of the rights, privileges and powers of the corporate entity and is managed by a group of managers that previously served as the Board of Directors.  The executive officers and key management team remained intact.  The converted entity by operation of law possessed all of the properties and assets of the converted corporation and remains responsible for all of the notes, debts, contract claims and obligations of the converted corporation.

Since the conversion became effective, the Company is managed by a group of managers that provides oversight of the affairs and carries out their duties similar to the role and function that the Board of Directors performed under the previous bylaws.  Operating like a Board of Directors, the managers have full, exclusive and complete discretion, power and authority to oversee the management of Company affairs.  Instead of Articles of Incorporation and Bylaws, management structure and governance procedures are now governed by the provisions of an Operating Agreement that has been entered into by and between the Company’s managers and members.

Principles of Consolidation

Principles of Consolidation

The consolidated financial statements include the accounts of Ministry Partners Investment Company, LLC and its wholly-owned subsidiaries, MPF, MP Realty and MP Securities.  All significant inter-company balances and transactions have been eliminated in consolidation.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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.  Material estimates that are particularly susceptible to significant change in the near term relate to, but are not limited to, the determination of the allowance for loan losses and the valuation of foreclosed real estate.

Loans Receivable

Loans Receivable

Loans that management has the intent and ability to hold for the foreseeable future are reported at their outstanding unpaid principal balance adjusted for an allowance for loan losses, deferred loan fees and costs, and loan discounts. Interest income on loans is accrued on a daily basis using the interest method. Loan origination fees and costs are deferred and recognized as an adjustment to the related loan yield using the straight-line method, which results in an amortization that is materially the same as the interest method.  Loan discounts represent an offset against interest accrued and unpaid which has been added to loans that have been restructured.  Loan discounts are accreted to interest income over the term of the loan using the interest method once the loan is no longer considered impaired and is no longer in its restructure period.  Loan discounts may also represent the difference between the purchase price of a loan and the outstanding principal balance of the loan.  These discounts are accreted to interest income over the term of the loan using the interest method.

The accrual of interest is discontinued at the time the loan is 90 days past due.  Past due status is based on contractual terms of the loan. In all cases, loans are placed on nonaccrual or charged off at an earlier date if collection of principal or interest is considered doubtful.

All interest accrued but not collected for loans that are placed on nonaccrual or charged off are reversed against interest income. The interest on these loans is accounted for on the cash basis or cost-recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

Allowance for Loan Losses

Allowance for Loan Losses

The Company sets aside an allowance or reserve for loan losses through charges to earnings, which are shown in the Company’s Consolidated Statements of Operations as a provision for loan losses.  Loan losses are charged against the allowance when management believes the uncollectability of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.

In evaluating the level of the allowance for loan losses, we consider the type of loan, amount of loans in our portfolio, adverse situations that may affect our borrowers’ ability to pay and estimated value of underlying collateral and credit quality trends (including trends in non-performing loans expected to result from existing conditions).  Until 2011, we had never recorded a charge-off on our mortgage loan investments.  As a result, we have a limited historical loss experience to assist us in assessing estimated future losses.

The allowance for loan loss is monitored by our senior management on an ongoing basis.  The allowance consists of general and specific components. The general component covers non-classified loans and is based on historical loss experience adjusted for qualitative factors.  In establishing the allowance for loan losses, management considers significant factors that affect the collectability of our loan portfolio. While historical loss experience provides a reasonable starting point for the analysis, such experience by itself does not form a sufficient basis to determine the appropriate level of the allowance for loan losses.

In determining the general component of the allowance, we examine the performance characteristics of our loan portfolio, including charge-offs, delinquency ratios, loan restructurings and modifications and other significant factors that, in management’s judgment, may affect our ability to collect loans in the portfolio as of the evaluation date.  In 2009, we also added a factor relating to the portion of our loan portfolio that is held in a loan participation interest.  The net effect of adding this factor in our analysis resulted in an increase in the allowance for loan losses that reflects the greater risk of loss associated with holding a loan participation interest in which we do not serve as the lead lender for the loan.

While we have not added any new qualitative factors in the analysis of our loan portfolio since 2009, in March 2012 we refined our analysis by segregating our loans into pools based on the position of the underlying collateral and the risk rating of the loan.  Risk ratings are determined by grading a borrower on certain metrics, which include financial performance, strength of management, credit history, and condition of the local economy.  These ratings are updated on an annual basis, or more frequently as necessary.  By segregating the portfolio in this manner, our senior management team is better able to assess the potential impact of various risk factors depending on the quality of the loans in a particular pool. The potential impact of factors such as the risk of charge-offs, impairment, delinquency, restructuring, decreases in borrower financial condition, and continued low commercial real estate values throughout the country fluctuates depending on the quality of the loan.  As a result, management has increased the weight of these factors for loans with a higher risk rating.   This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

All loans in the loan portfolio are subject to impairment analysis.  The Company reviews its loan portfolio monthly by examining delinquency reports, information related to the financial condition of its borrowers and the collateral value of its loans.  Through this process, the Company identifies potential impaired loans.  A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal and interest when due according to the contractual terms of the loan agreement.  Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting future scheduled principal and interest payments when due.  Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired.  Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower's prior payment record, and the amount of the shortfall in relation to the principal and interest owed.  A loan is generally deemed to be impaired when it is 90 days or more past due, or earlier when facts and circumstances indicate that it is probable that a borrower will be unable to make payments in accordance with the loan contract.

Impairment is measured on a loan-by-loan basis by either the present value of expected future cash flows discounted at the loan's original effective interest rate, the obtainable market price, or the fair value of the collateral if the loan is collateral dependent.    Loans or portions thereof are charged off when they are determined by management to be uncollectible.  Uncollectability is evaluated periodically on all loans classified as “Loans of Lesser Quality.”  As the Company has an established practice of working to explore every possible means of repayment with its borrowers, it has historically not charged off a loan until foreclosure is completed.  Among other variables, management will consider factors such as the financial condition of the borrower and the value of the underlying collateral in assessing uncollectability.

Troubled Debt Restructurings

Troubled Debt Restructurings

A troubled debt restructuring is a loan for which the Company, for reasons related to a borrower’s financial difficulties, grants a concession to a borrower that the Company would not otherwise consider. From time to time, we have restructured a mortgage loan in light of theborrower'scircumstances and capabilities. We review each of these cases on an individual basis and approve any restructure based on the guidance stipulated in our collections policy. If we decide to accept a loan restructure, we generally will not forgive or reduce the principal amount owed on the loan; in addition, the typical maturity term for a restructured loan does not exceed five years.  A restructuring of a loan usually involves an interest rate modification, extension of the maturity date, or reduction of accrued interest owed on the loan on a contingent or absolute basis.

When we receive a request for a modification or restructure, we evaluate the strength of the borrower’s financial condition, leadership of the pastoral team and board, developments that have impacted the church and its leadership team, local economic conditions, the value of the underlying collateral, the borrower’s commitment to sound budgeting and financial controls, whether there is a denominational guaranty of any portion of the indebtedness, debt service coverage for the borrower, availability of other collateral and any other relevant factors unique to the borrower.  While we have no written policy that establishes criteria for when a request for restructuring a loan will be approved, our Credit Review Committee reviews each request, solicits written reports and recommendations from management, and summaries of the requests and actions taken by the Credit Review Committee are presented to the Company’s managers for their review at quarterly meetings throughout the year.

Loans that are renewed at below-market terms are considered to be troubled debt restructurings if the below-market terms represent a concession due to the borrower’s troubled financial condition. Troubled debt restructurings are classified as impaired loans and are measured at the present value of estimated future cash flows using the loan's effective rate at inception of the loan. The change in the present value of cash flows attributable to the passage of time is reported as interest income.  If the loan is considered to be collateral dependent, impairment is measured based on the fair value of the collateral.

In the current economic market, loan restructures often produce a better outcome for our loan portfolio than a foreclosure action. Given our specialized knowledge and experience working with churches and ministries, entering into a loan modification often enables our borrowers to keep their ministries intact and avoid foreclosure.  With a successful loan restructure, we avoid a loan charge-off and protect the interests of the investors and borrowers we serve.

Loan Portfolio Segments and Classes

Loan Portfolio Segments and Classes

Management segregates the loan portfolio into portfolio segments for purposes of evaluating the allowance for loan losses. A portfolio segment is defined as the level at which the Company develops and documents a systematic method for determining its allowance for loan losses. The portfolio segments are segregated based on loan types and the underlying risk factors present in each loan type. Such risk factors are periodically reviewed by management and revised as deemed appropriate.

The Company’s loan portfolio consists of one segment – church loans. The loan portfolio is segregated into the following portfolio classes:

Wholly-Owned First Collateral Position. This portfolio class consists of the wholly-owned loans for which the Company possesses a senior lien on the collateral underlying the loan.

Wholly-Owned Junior Collateral Position. This portfolio class consists of the wholly-owned loans for which the Company possesses a lien on the underlying collateral that is superseded by another lien on the same collateral.  This class also contains any loans that are not secured. These loans present higher credit risk than loans for which the Company possesses a senior lien due to the increased risk of loss should the loan default.

Participations First Collateral Position. This portfolio class consists of the participated loans for which the Company possesses a senior lien on the collateral underlying the loan. Loan participations present higher credit risk than wholly-owned loans because the Company does not maintain full control over the disposition and direction of actions regarding the management and collection of the loans.  The lead lender directs most servicing and collection activities and major actions must be coordinated and negotiated with the other participants, whose best interests regarding the loan may not align with those of the Company.

Participations Junior Collateral Position. This portfolio class consists of the participated loans for which the Company possesses a lien on the underlying collateral that is superseded by another lien on the same collateral.  Loan participations in the junior collateral position loans have higher credit risk than wholly-owned loans and participated loans where the Company possesses a senior lien on the collateral.  The increased risk is the result of the factors presented above relating to both junior lien positions and participations.

Credit Quality Indicators

Credit Quality Indicators

The Company’s policies provide for the classification of loans that are considered to be of lesser quality as watch, substandard, doubtful, or loss assets. An asset is considered substandard if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Substandard assets include those assets characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. Assets classified as doubtful have all of the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses make collection or liquidation in full highly questionable and improbable, based on currently existing facts, conditions and values. Assets (or portions of assets) classified as loss are those considered uncollectible and of such little value that their continuance as assets is not warranted. Assets that do not expose the Company to risk sufficient to warrant classification in one of the aforementioned categories, but which possess potential weaknesses that deserve close attention, are designated as watch.

Foreclosed Assets

Foreclosed Assets

Assets acquired through foreclosure or other proceedings are initially recorded at fair value at the date of foreclosure less estimated costs of disposal, which establishes a new cost.  After foreclosure, valuations are periodically performed by management and foreclosed assets held for sale are carried at the lower of cost or fair value, less estimated costs of disposal.  Any write-down to fair value at the time of foreclosure is charged to the allowance for loan losses.  If the fair value, less costs to sell, of the foreclosed property decreases during the holding period, a valuation allowance is established with a charge to operating expenses taken.  The Company’s real estate assets acquired through foreclosure or other proceedings are evaluated regularly to ensure that the recorded amount is supported by its current fair value and that valuation allowances to reduce the varying amount to fair value less estimated costs of disposal are recorded as necessary.  Revenue and expense from the operation of the Company’s foreclosed assets and changes in the valuation allowance are included in net expenses from foreclosed assets.  When the foreclosed property is sold, a gain or loss is recognized on the sale for the difference between the sales proceeds and the carrying amount of the property.

Transfers of Financial Assets

Transfers of Financial Assets

Transfers of financial assets are accounted for as sales when control over the assets has been surrendered. Control over transferred assets is deemed to have been surrendered when (1) the assets have been isolated from the

Company, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

From time to time, the Company sells participation interests in mortgage loans it has originated or acquired. In order to recognize the transfer of a portion of a financial asset as a sale, the transferred portion and any portion that continues to be held by the transferor must represent a participating interest and the transfer of the participating interest must meet the conditions for surrender of control. To qualify as a participating interest (i) each portion of a financial asset must represent a proportionate ownership interest in an entire financial asset, (ii) from the date of transfer, all cash flows received from the entire financial asset must be divided proportionately among the participating interest holders in an amount equal to their share of ownership, (iii) the transfer must be made on a non-recourse basis (other than standard representations and warranties made under the loan participation sale agreement) to, or subordination by, any participating interest holder, and (iv) no party has the right to pledge or exchange the entire financial asset. If the participating interest or surrender of control criteria is not met, the transaction is accounted for as a secured borrowing arrangement.

Under some circumstances, when the Company sells participations in a wholly-owned loan receivable that it services, it retains a servicing asset that is initially measured at fair value.  As quoted market prices are generally not available for these assets, the Company estimates fair value based on the present value of future expected cash flows associated with the loan receivable.  The Company amortizes servicing assets over the life of the associated receivable using the interest method.  Any gain or loss recognized on the sale of loans receivable depends in part on both the previous carrying amount of the financial assets involved in the sale, allocated between the assets sold and the interests that continue to be held by the Company based on their relative fair value at the date of transfer and the proceeds received.

Property and Equipment

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 seven years.

Debt Issuance Costs

Debt Issuance Costs

Debt issuance costs are related to borrowings from financial institutions and offerings of debt securities and are amortized into expense over the contractual terms of the debt or the life of the offering, respectively.

Income Taxes

Income Taxes

Effective December 31, 2008, the Company converted from a C corporation to a California limited liability company (LLC). As a result, the stockholders of the Company became members of the LLC on the conversion date. The LLC is treated as a partnership for income tax purposes; therefore, the Company is no longer a tax-paying entity for federal or state income tax purposes, and no federal or state income tax will be recorded in its financial statements after the date of conversion. Income and losses of the Company are passed through to the members of the LLC for tax reporting purposes. The Company is subject to a California gross receipts fee of approximately $12,000 per year for years ending on and after December 31, 2009.  The Company’s subsidiaries are LLCs except for MP Realty, which was organized as a California corporation.  MP Realty incurred a tax loss for the year ended December 31, 2011 and recorded a provision of $800 for the state minimum franchise tax.

Although the Company is not a federal or state income tax-paying entity, it is nonetheless subject to Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) for Income Taxes for all “open” tax periods for which the statute of limitations has not yet run.  The Company uses a recognition threshold and a measurement attribute for the consolidated financial statement recognition and measurement of a tax position taken in a tax return. Benefits from tax positions are recognized in the financial statements only when it is more likely than not that the tax position will be sustained upon examination by the appropriate taxing authority that would have full knowledge of all relevant information. A tax position that meets the more-likely-than-not recognition threshold is measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold are recognized in the first subsequent financial reporting period in which that threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not recognition threshold are derecognized in the first subsequent financial reporting period in which that threshold is no longer met.

Employee Benefit Plan

Employee Benefit Plan

Contributions to the qualified employee retirement plan are recorded as compensation cost in the period incurred.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In December 2011, the FASB issued new guidance Accounting Standards Update (ASU) No. 2011-11, “Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities.” This new guidance requires expanded information about financial instruments or derivatives that are either presented on a net basis in the balance sheet or subject to an enforceable master netting arrangement or similar arrangement. The new guidance does not change existing offsetting criteria in U.S. GAAP or the permitted balance sheet presentation for items meeting the criteria. The new disclosure requirements in the ASU are intended to enhance comparability between financial statements prepared using U.S. GAAP and those prepared using International Financial Reporting Standards (IFRS). The amendments in this guidance are effective during interim and annual periods beginning on or after January 1, 2013.  The Company does not expect this guidance to have a material impact on its consolidated financial statements.

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Document and Entity Information	9 Months Ended
	Sep. 30, 2012
Document And Entity Information
Entity Registrant Name	Ministry Partners Investment Company, LLC
Entity Central Index Key	0000944130
Document Type	10-Q
Document Period End Date	Sep. 30, 2012
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Is Entity a Well-known Seasoned Issuer?	No
Is Entity a Voluntary Filer?	No
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding	146,522
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2012

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Loans Receivable and Allowance for Losses (Tables)

9 Months Ended

Sep. 30, 2012

Loans Receivable And Allowance For Losses Tables

Schedule to changes in the allowance for loan losses

	Three Months Ended September 30, 2012			Nine months ended September 30, 2012			Year Ended December 31, 2011
Balance, beginning of period	$	3,921		$	4,127		$	3,997
Provisions for loan loss		87			(49	)		1,487
Chargeoffs		--			(47	)		(1,279	)
Accretion of allowance           related to restrusctured           loans	$	(23	)		(46	)		(78	)
Balance, end of period	$	3,985		$	3,985		$	4,127

Schedule of nonperforming loans

	September 30		December 31		September 30
	2012		2011		2011
Impaired loans with an allowance for loan loss	$	11,617	$	18,168	$	22,337
Impaired loans without an allowance for loan loss		7,054		4,774		4,369
Total impaired loans	$	18,671	$	22,942	$	26,706
Allowance for loan losses related to impaired loans	$	2,967	$	3,064	$	2,860
Total non-accrual loans	$	18,449	$	22,942	$	26,706
Total loans past due 90 days or more and still accruing		--		--	$	614

Schedule of impaired financing receivables

	Loans and Allowance for Loan Losses (by segment) As of
	September 30, 2012		December 31, 2011
Loans:
Balance	$	158,536	$	170,920
Individually evaluated
for impairment	$	18,671	$	22,942
Collectively
evaluated for impairment	$	139,865	$	147,978
Allowance for loan losses:
Balance	$	3,985	$	4,127
Individually evaluated
for impairment	$	2,967	$	3,064
Collectively
evaluated for impairment	$	1,018	$	1,063

Schedule of loan portfolio credit quality indicators by loan class

Credit Quality Indicators (by class) As of  September 30, 2012
	Wholly-Owned First		Wholly-Owned Junior		Participation First		Participation Junior		Total
Grade:
Pass	$	82,777	$	2,272	$	38,231	$	981	$	124,261
Watch		10,284		3,710		4,534		-		18,528
Substandard		4,070		3,880		-		-		7,950
Doubtful		4,956		-		2,841		-		7,797
Loss		-		-		-		-		-
Total	$	102,087	$	9,862	$	45,606	$	981	$	158,536

Credit Quality Indicators (by class) As of December 31, 2011
	Wholly Owned First		Wholly Owned Junior		Participation First		Participation Junior		Total
Grade:
Pass	$	89,597	$	8,173	$	32,782	$	-	$	130,552
Watch		4,616		3,448		7,210		-		15,274
Substandard		3,237		3,883		4,089		1,006		12,215
Doubtful		8,091		1,155		3,633		-		12,879
Loss		-		-		-		-		-
Total	$	105,541	$	16,659	$	47,714	$	1,006	$	170,920

Schedule of Age Analysis of Past Due Loans by class

Age Analysis of Past Due Loans (by class)

As of September 30, 2012

													Recorded
													Investment
	30-59 Days		60-89 Days		Greater Than		Total				Total		90 Days or more
	Past Due		Past Due		90 Days		Past Due		Current		Loans		and Accruing
Church loans:
Wholly-Owned First	$	8,697	$	-	$	814	$	9,511	$	92,576	$	102,087	$	-
Wholly-Owned Junior		3,719		-		-		3,719		6,143		9,862		-
Participation First		-		1,453		2,611		4,064		41,542		45,606		-
Participation Junior		-		-		-		-		981		981		-
Total	$	12,416	$	1,453	$	3,425	$	17,294	$	141,242	$	158,536	$	-

 

Age Analysis of Past Due Loans (by class)
As of December 31, 2011
													Recorded
													Investment
	30-59 Days		60-89 Days		Greater Than		Total				Total		90 Days or more
	Past Due		Past Due		90 Days		Past Due		Current		Loans		and Accruing
Church loans:
Wholly-Owned First	$	6,537	$	613	$	7,522	$	14,672	$	90,869	$	105,541	$	-
Wholly-Owned Junior		3,448		-		1,159		4,607		12,052		16,659		-
Participation First		-		-		3,633		3,633		44,081		47,714		-
Participation Junior		-		-		-		-		1,006		1,006		-
Total	$	9,985	$	613	$	12,314	$	22,912	$	148,008	$	170,920	$	-

Schedule of Loans on Nonaccrual Status (by class)

Impaired Loans (by class)
As of and for the three months ended September 30, 2012
			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
	Investment		Balance		Allowance		Investment		Recognized
With no related allowance recorded:
Church loans:
Wholly-Owned First	$	4,063	$	4,478	$	-	$	4,073	$	28
Wholly-Owned Junior		216		222		-		216		3
Participation First		2,611		2,744		-		2,611		-
Participation Junior		-		-		-		-		-
With an allowance recorded:
Church loans:
Wholly-Owned First		7,384		7,854		2,620		7,597		44
Wholly-Owned Junior		3,595		3,671		328		3,595		40
Participation First		230		252		19		231		-
Participation Junior		-		-		-		-		-
Total:
Church loans	$	18,099	$	19,221	$	2,967	$	18,323	$	115

Impaired Loans (by class)
As of and for the nine months ended September 30, 2012
			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
	Investment		Balance		Allowance		Investment		Recognized
With no related allowance recorded:
Church loans:
Wholly-Owned First	$	4,063	$	4,478	$	-	$	4,153	$	85
Wholly-Owned Junior		216		222		-		217		9
Participation First		2,611		2,744		-		2,633		-
Participation Junior		-		-		-		-		-
With an allowance recorded:
Church loans:
Wholly-Owned First		7,384		7,854		2,620		8,144		141
Wholly-Owned Junior		3,595		3,671		328		3,597		107
Participation First		230		252		19		565		-
Participation Junior		-		-		-		-		-
Total:
Church loans	$	18,099	$	19,221	$	2,967	$	19,309	$	342

Impaired Loans (by class)
As of and for the Year Ended December 31, 2011
			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
	Investment		Balance		Allowance		Investment		Recognized
With no related allowance recorded:
Church loans:
Wholly-Owned First	$	1,678	$	1,685	$	-	$	1,691	$	98
Wholly-Owned Junior		-		434		-		-		-
Participation First		2,655		2,655		-		2,699		-
Participation Junior		-		-		-		-		-
With an allowance recorded:
Church loans:
Wholly-Owned First		11,893		12,587		1,773		12,053		254
Wholly-Owned Junior		4,511		4,603		1,111		4,520		146
Participation First		978		978		180		983		-
Participation Junior		-		-		-		-		-
Total:
Church loans	$	21,715	$	22,942	$	3,064	$	21,946	$	498

Schedule troubled debt restructurings by loan class

A summary of nonaccrual loans by loan class at September 30, 2012 and December 31, 2011 is as follows (dollars in thousands):

Loans on Nonaccrual Status (by class)
As of September 30, 2012
Church loans:
Wholly-Owned First	$	11,949
Wholly-Owned Junior		3,658
Participation First		2,842
Participation Junior		-
Total	$	18,449

Loans on Nonaccrual Status (by class)
As of December 31, 2011
Church loans:
Wholly-Owned First	$	14,272
Wholly-Owned Junior		5,037
Participation First		3,633
Participation Junior		-
Total	$	22,942

The following are summaries of troubled debt restructurings by loan class that were modified during the period ended September 30 (dollars in thousands):

Troubled Debt Restructurings (by class)
For the three months ended September 30, 2012
			Pre-Modification Outstanding		Post-Modification Outstanding		Recorded
	Number of Loans		Recorded Investment		Recorded Investment		Investment At Period End
Church loans:
Wholly-Owned First		1	$	981	$	995	$	995
Wholly-Owned Junior		-		-		-		-
Participation First		-		-		-		-
Participation Junior		-		-		-		-
Total		1	$	981	$	995	$	995

Troubled Debt Restructurings (by class)
For the nine months ended September 30, 2012
			Pre-Modification Outstanding		Post-Modification Outstanding		Recorded
	Number of Loans		Recorded Investment		Recorded Investment		Investment At Period End
Church loans:
Wholly-Owned First		3	$	5,571	$	5,585	$	5,427
Wholly-Owned Junior		2		430		430		420
Participation First		1		271		249		230
Participation Junior		-		-		-		-
Total		6	$	6,272	$	6,264	$	6,077

Troubled Debt Restructurings (by class)
For the three months ended September 30, 2011
			Pre-Modification Outstanding		Post-Modification Outstanding		Recorded
	Number of Loans		Recorded Investment		Recorded Investment		Investment At Period End
Church loans:
Wholly-Owned First		-	$	-	$	-	$	-
Wholly-Owned Junior		-		-		-		-
Participation First		-		-		-		-
Participation Junior		-		-		-		-
Total		-	$	-	$	-	$	-

Troubled Debt Restructurings (by class)
For the nine months ended September 30, 2011
			Pre-Modification Outstanding		Post-Modification Outstanding		Recorded
	Number of Loans		Recorded Investment		Recorded Investment		Investment At Period End
Church loans:
Wholly-Owned First		9	$	15,246	$	15,323	$	15,214
Wholly-Owned Junior		4		4,467		4,561		4,510
Participation First		-		-		-		-
Participation Junior		-		-		-		-
Total		13	$	19,713	$	19,884	$	19,724

Troubled Debt Restructurings Defaulted (by class)

During the nine months ended September 30, 2012

	Number of		Recorded
	Loans		Investment
Troubled debt restructurings that subsequently defaulted:
Church loans:
Wholly-Owned First		1	$	2,054
Wholly-Owned Junior		1		420
Participation First		1		230
Participation Junior		-		-
Total:
Church loans		3	$	2,704

Troubled Debt Restructurings Defaulted (by class)

During the three months ended September 30, 2011

	Number of		Recorded
	Loans		Investment
Troubled debt restructurings that subsequently defaulted:
Church loans:
Wholly-Owned First		-	$	-
Wholly-Owned Junior		1		3,173
Participation First		-		-
Participation Junior		-		-
Total:
Church loans		1	$	3,173

Troubled Debt Restructurings Defaulted (by class)

During the nine months ended September 30, 2011

	Number of		Recorded
	Loans		Investment
Troubled debt restructurings that subsequently defaulted:
Church loans:
Wholly-Owned First		5	$	8,552
Wholly-Owned Junior		3		4,291
Participation First		-		-
Participation Junior		-		-
Total:
Church loans		8	$	12,843

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Consolidated Statements of Operations (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Interest income:
Interest on loans	$ 2,480	$ 2,657	$ 7,493	$ 8,258
Interest on interest-bearing accounts	37	22	111	69
Total interest income	2,517	2,679	7,604	8,327
Interest expense:
Borrowings from financial institutions	676	1,150	2,050	3,601
Notes payable	601	641	1,843	1,962
Total interest expense	1,277	1,791	3,893	5,563
Net interest income	1,240	888	3,711	2,764
Provision (credit) for loan losses	87	822	(49)	1,305
Net interest income after provision (credit) for loan losses	1,153	66	3,760	1,459
Non-interest income	30	28	90	166
Non-interest expenses:
Salaries and benefits	509	399	1,423	1,136
Marketing and promotion	43	37	112	98
Office operations	333	341	1,131	1,091
Legal and accounting	107	132	536	557
Total non-interest expenses	992	909	3,202	2,882
Income (loss) before provision for income taxes	191	(815)	648	(1,257)
Provision for income taxes	4	3	12	11
Net income (loss)	$ 187	$ (818)	$ 636	$ (1,268)

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Notes Payable

9 Months Ended

Sep. 30, 2012

Notes Payable [Abstract]

Notes Payable

7.  Notes Payable

We also rely on our investor notes to make investments in mortgage loan assets and fund our general operations. Except for our private offering of secured notes, the notes are unsecured and are payable to investors who have purchased the securities, including individuals, churches, and Christian ministries, many of whom are members of ECCU. Notes pay interest at stated spreads over an index rate that is adjusted every month. Interest can be reinvested or paid at the investor's option. The Company may repurchase all or a portion of these notes at any time at its sole discretion, and may allow investors to redeem their notes prior to maturity at its sole discretion.  We have offered our investor notes under registered offerings with the SEC and in private placements that are exempt under the provisions of the Securities Act of 1933, as amended.  Our Alpha Class Notes were initially registered with the SEC in July 2001 and an additional $75.0 million of new Alpha Notes were registered with the SEC in May 2007.  The sale of our Alpha Class Notes was discontinued in April 2008.

The Alpha Class Notes contain covenants pertaining to limitations on restricted payment, maintenance of tangible net worth, limitation on issuance of additional notes and incurrence of indebtedness.  The Alpha Class Notes require the Company to maintain a minimum tangible adjusted net worth, as defined in the Loan and Standby Trust Agreement, of not less than $4.0 million.  The Company’s other indebtedness, as defined in the Loan and Standby Trust Agreement, and subject to certain exceptions enumerated therein, may not exceed $10.0 million outstanding at any time while any Alpha Class Note is outstanding.  The Company is in compliance with these covenants as of September 30, 2012.  At September 30, 2012 and December 31, 2011, $3.3 million and $4.4 million of Alpha Class Notes were outstanding, respectively.

In addition to the Alpha Class Notes, the Company has also offered its Class A Notes in three series, including a Fixed Series, Flex Series and Variable Series pursuant to registration statements filed with the SEC.    On June 24, 2011, we filed a Registration Statement with the SEC seeking to register an additional $75 million of the Company’s Class A Notes.  All of the Class A Notes are unsecured.  The offering includes three categories of notes, including a fixed interest note, a variable interest note, and a flex note, which allows borrowers to increase their interest rate once a year with certain limitations.  The interest rates the Company pays on the Fixed Series Notes and the Flex Series Notes are determined by reference to the Swap Index, an index that is based upon a weekly average Swap rate reported by the Federal Reserve Board, and is in effect on the date they are issued, or in the case of the Flex Series Notes, on the date the interest rate is reset. These notes bear interest at the Swap Index plus a rate spread of 1.7% to 2.5% and have maturities ranging from 12 to 84 months.  The interest rates the Company pays on the Variable Series Notes are determined by reference to the Variable Index in effect on the date the interest rate is set and bear interest at a rate of the Swap Index plus a rate spread of 1.50% to 1.80%.  Effective as of January 5, 2009, the Variable Index is defined under the Class A Notes as the three month LIBOR rate.

The Class A Notes also contain restrictive covenants pertaining to paying dividends, making redemptions, acquiring, purchasing or making certain payments, requiring the maintenance of minimum tangible net worth, limitations on the issuance of additional notes and incurring of indebtedness.  The Class A Notes require the Company to maintain a minimum tangible adjusted net worth, as defined in the Class A Notes Trust Indenture Agreement, of not less than $4.0 million.  The Company is not permitted to issue any Class A Notes if, after giving effect to such issuance, the Alpha Class Notes then outstanding would have an aggregate unpaid balance exceeding $100.0 million.  The Company’s other indebtedness, as defined in the Class A Notes Trust Indenture Agreement, and subject to certain exceptions enumerated therein, may not exceed $20.0 million outstanding at any time while any Class A Notes are outstanding.  The Company was in compliance with these covenants as of September 30, 2012.

The Class A Notes were issued under a Trust Indenture between the Company and U.S. Bank National Association (US Bank).  The Class A Notes are part of up to $200 million of Class A Notes the Company may issue pursuant to the US Bank Indenture.  At September 30, 2012 and December 31, 2011, $41.9 million and $46.5 million of these notes were outstanding, respectively.

Effective as of May 15, 2012, the Company temporarily discontinued the sale of the Class A Notes and deregistered the securities remaining unsold under the Company’s Registration Statement on Form S-1, initally filed with the SEC on December 23, 2009 and declared effective on June 3, 2010.  The Company has subsequently filed a Registration Statement seeking to register $75 million of its Class A Notes with the SEC.  This Registration Statement was declared effective as of October 11, 2012, and the Company has resumed the sale of its Class A Notes.

Historically, most of the Company’s unsecured notes have been renewed by investors upon maturity.  Because the Company has discontinued its sale of Alpha Class Notes effective as of April 18, 2008, all holders of such notes that mature in the future may reinvest such sums by purchasing Class A Notes that have been registered with the Securities and Exchange Commission.  For matured notes that are not renewed, the Company funds the redemption in part through proceeds from the repayment of loans, and issuing new notes payable.

From time to time, we have also sold unsecured general obligation notes having various terms to ministries and ministry related organizations in private offerings under the Securities Act of 1933, as amended.  Except for a small number of investors (in total not exceeding 35 persons), the holders of these notes are accredited investors within the  meaning of Regulation D under the Securities Act.

We have the following notes payable at September 30, 2012 (dollars in thousands):

SEC Registered Public Offerings	Amount		Weighted Average Interest Rate
Class A Offering	$	41,866		41.7	%
National Alpha Offering		3,341		5.58	%
Private Offerings
Special Offering		9,177		4.60	%
Special Subordinated Notes		6		5.45	%
Secured Notes		55		2.49	%
International Offering		235		4.05	%
Total	$	54,680		4.33	%

During the quarter ended June 30, 2012, the Company launched the sale of its 2012 Secured Investment Certificates pursuant to a limited offering to qualified investors that meet the requirements of Rule 506 of Regulation D.  The secured investment certificates have been offered with maturity terms of 36, 60 and 84 months at an interest rate fixed on the date of issuance, as determined by the then current seven-day average rate reported by the U.S. Federal Reserve Board for interest rate swaps.  Wilmington Savings Fund Society, FSB, serves as the trustee for the secured investment certificates.  Under the terms of the Trust Indenture entered into with Wilmington Savings Fund Society, FSB, the Company has established a mortgage loan investment fund for the benefit of investors and is required to maintain a minimum collateralization ratio equal to at least 105% of the principal amount of secured investment certificates that are issued and outstanding.

The Trust Indenture entered into with Wilimington Savings Fund Society , FSB, also contains standard covenants which require the Company to refrain from permitting any other senior lien to be created or maintained on the collateral securing the certificates, refrain from paying any dividends on the Company’s equity units if there is an uncured event of default with respect to the certificates, make timely payments of interest and principal due on the certificates and secure the assets of the fund.  The Company is in compliance with these covenants as of September 30, 2012.  At September 30, 2012, $55.3 thousand of these secured certificates were outstanding.  $67.8 thousand in cash was pledged as collateral on these notes.  There were no secured certificates outstanding as of December 31, 2011.

Future maturities for the Company’s investor notes during the twelve month period ending September 30 are as follows (dollars in thousands):

2013	$	24,862
2014		10,727
2015		7,698
2016		7,393
2017		2,899
Thereafter		1,101
	$	54,680

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Line of Credit and Other Borrowings

9 Months Ended

Sep. 30, 2012

Line Of Credit And Other Borrowings

Line of Credit and Other Borrowings

6.  Line of Credit and Other Borrowings

Members United Facilities

On October 12, 2007, the Company entered into two note and security agreements with Members United, a federally chartered credit union located in Warrenville, Illinois, which provides financial services to member credit unions. One note and security agreement was for a secured $10 million revolving line of credit, which is referred to as the “$10 Million LOC,” and the other was for a secured $50 million revolving line of credit.  The latter was amended on May 8, 2009 to allow the Company to borrow up to $100 million through the revolving line of credit. The Company refers to this as the “$100 Million CUSO Line.” Both credit facilities were secured by certain mortgage loans. The Company utilized the $10 Million LOC for short-term liquidity purposes and the $100 Million CUSO Line for mortgage loan investments.

On August 27, 2008, the Company borrowed the entire $10 million available on the $10 Million LOC at a rate of 3.47%.  As a result of this financing, the $10 Million LOC was converted to a term loan with a maturity date of August 26, 2011 and we paid off this facility in 2011.

Pursuant to the terms of the Company’s promissory note with Members United, once the loan was fully drawn, the total outstanding balance was termed out over a five year period with a 30 year amortization payment schedule.  In addition, the term loan interest rate was specified by Members United and was re-priced to a market fixed or variable rate determined at the time the loan is restructured.  We used our $100 million Members United credit facility to assist us in financing our business.  For 2011, the weighted average interest rate we paid on the Members United facility was 3.98%.

On November 4, 2011, the Company and the National Credit Union Administration Board As Liquidating Agent of Members United Corporate Federal Credit Union (“Lender”) entered into an $87.3 million credit facility refinancing transaction (the “MU Credit Facility”).  The MU Credit Facility replaces the original $100 million CUSO Line entered into by and between the Company and Members United Corporate Federal Credit Union on May 7, 2008.  Unless the principal amount of the indebtedness due is accelerated under the terms of the MU Credit Facility loan documents, the principal balance and any interest due on the MU Credit Facility will mature on October 31, 2018.  Accrued interest is due and payable monthly in arrears on the MU Credit Facility on the first day of each month at the lesser of the maximum interest rate permitted by applicable law under the loan documents or 2.525%.  The term loan may be repaid or retired without penalty, but any amounts repaid or prepaid under the MU Credit Facility may not be re-borrowed.  The balance of the MU Credit Facility was $81.9 million and $86.9 million at September 30, 2012 and December 31, 2011, respectively.

The MU Credit Facility includes a number of borrower covenants, including affirmative covenants to maintain the collateral free of liens, to timely pay the amounts due on the facility, to provide the Lender with interim or annual financial statements and annual and periodic reports filed with the U.S. Securities and Exchange Commission and maintain a minimum collateralization ratio of at least 128%.  If at any time the Company fails to maintain its required minimum collateralization ratio, it will be required to deliver cash or qualifying mortgage loans in an amount sufficient to enable it to meet its obligation to maintain a minimum collateralization ratio.  As of December 31, 2011, the collateral securing the MU Credit Facility had an aggregate principal balance of $111.4 million which satisfied the minimum collateralization ratio for this facility.  As of September 30, 2012, the collateral securing the MU Credit Facility had an aggregate principal balance of $105.8 million, which satisfies the minimum collateralization ratio.

In addition to the minimum collateralization requirement, the MU Credit Facility also includes covenants which prevent the Company from renewing or extending a loan pledged as collateral under this facility unless certain conditions have been met and requires the borrower to deliver current financial statements to the Company.  Under the terms of the MU Credit Facility, the Company has established a lockbox maintained for the benefit of Lender that will receive all payments made by collateral obligors.  The Company’s obligation to repay the outstanding balance on this facility may be accelerated upon the occurrence of an “Event of Default” as defined in the MU Credit Facility.  Such Events of Default include, among others, failure to make timely payments due under the MU Credit Facility and the Company's breach of any of its covenants.  As of September 30, 2012 and December 31, 2011, the Company was in compliance with its covenants under the MU Credit Facility.

WesCorp Facility

On November 30, 2009, the Company entered into a Loan and Security agreement with Western Corporate Federal Credit Union (“WesCorp”), a federally chartered credit union located in San Dimas, California.  The agreement provided for a secured $28 million term loan, referred to as the “WesCorp Facility.”  We used $24.6 million of the proceeds from the WesCorp credit facility to pay-off our Bank of Montreal credit facility.  The WesCorp credit facility had a fixed interest rate of 3.95% and was initially secured by approximately $59.2 million of mortgage loans we previously pledged to secure a credit facility we had established with the Bank of Montreal but has been subsequently paid off. Thus, the loan was initially secured by excess collateral of approximately $30.8 million.

On March 20, 2009, the NCUA assumed control of WesCorp under a conservatorship proceeding initiated by the NCUA under regulations adopted under the Federal Credit Union Act.  Effective as of October 1, 2010, WesCorp was placed into liquidation by the NCUA.  Pursuant to a letter dated October 25, 2010, we were advised that our WesCorp credit facility had been transferred to the Asset Management Assistance Center (“AMAC”), a facility established by the NCUA.

On November 4, 2011, the Company and the National Credit Union Administration Board As Liquidating Agent of Western Corporate Federal Credit Union (previously herein defined as “Lender”) entered into a $23.5 million credit facility refinancing transaction (the “WesCorp Credit Facility Extension”).  The WesCorp Credit Facility Extension amends, restates and replaces the WesCorp Facility entered into by and between the Company and Western Corporate Federal Credit Union on November 30, 2009.  Unless the principal amount due on the WesCorp Credit Facility Extension is accelerated under the terms of the loan documents evidencing such credit facility, the principal balance and any interest due on the facility will be payable in full on October 31, 2018.  Accrued interest on the WesCorp Credit Facility Extension is due monthly in arrears on the first day of each month at the lesser of the maximum rate permitted by applicable law under the loan documents or 2.525%.  The term loan may be repaid or retired without penalty, but any amounts repaid or prepaid under the WesCorp Credit Facility Extension may not be re-borrowed.  As of September 30, 2012 and December 31, 2011, $22.7 and $23.4 million, respectively, was outstanding on the WesCorp Credit Facility Extension.

The WesCorp Credit Facility Extension includes a number of borrower covenants, including affirmative covenants to maintain the collateral free of liens, to timely pay the amounts due on the facility, to provide the Lender with interim or annual financial statements and annual and periodic reports filed with the U.S. Securities and Exchange Commission and maintain a minimum collateralization ratio of at least 150%.  If at any time the Company fails to maintain its required minimum collateralization ratio, it will be required to deliver cash or qualifying mortgage loans in an amount sufficient to enable it to meet its obligation to maintain a minimum collateralization ratio.  As of September 30, 2012 and December 31, 2011, the collateral securing the WesCorp Credit Facility Extension had an aggregate principal balance of $34.5 million and $35.3 million, respectively, which satisfies the minimum collateralization ratio for this facility.  As of September 30, 2012 and December 31, 2011, the Company was in compliance with its covenants under the Wescorp Credit Facility Extension.

Both the MU Credit Facility and WesCorp Credit Facility Extension are secured by certain of the Company’s mortgage loans previously held as collateral under the $100 Million CUSO Line and the WesCorp Facility.  Future estimated principal pay downs of our bank borrowings during the twelve month periods ending September 30 are as follows:

2013	$	3,366
2014		3,467
2015		3,555
2016		3,639
2017		3,739
Thereafter		86,884
	$	104,650

In addition to regular principal payments, we also made $3.2 million in principal payments during the nine months ended September 30, 2012 in order to remain in compliance with the minimum collateralization ratio requirement of our credit facility borrowings.

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Significant Accounting Policies (Details Narrative) (USD $)	9 Months Ended	12 Months Ended
	Sep. 30, 2012 N	Dec. 31, 2011
Accounting Policies
Number of Federal & state chartered credit union owing the Company	12
States covered by mortgage loan investments	33
Number of days post due date after which recognization of accrued Interest is discontinued (in days)	90
Maturity term for a restructured loan, Maximum (in years)	5
Gross Receipt fee payable to California per year		$ 12,000
Provision for minimum franchise tax		$ 800
Probability of realisation of tax position upon settlement	50.00%
Lower Range Useful life
Accounting Policies
Estimated useful lives of property and equipment	3 years
Upper Range Useful life
Accounting Policies
Estimated useful lives of property and equipment	7 years

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Loan Participation Sales (Tables)

9 Months Ended

Sep. 30, 2012

Loan Participation Sales Tables

Schedule of servicing assets

	2012		2011
Balance, beginning of period	$	138	$	--
Additions:
Servicing obligations from sale of loan participations		--		147
Subtractions:
Amortization		19		9
Balance, end of period	$	119	$	138

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Loan Commitments

9 Months Ended

Sep. 30, 2012

Loan Commitments

Loan Commitments

10.  Loan Commitments

Unfunded Commitments

Unfunded commitments are commitments for possible future extensions of credit to our customers or existing customers of ECCU. Unfunded commitments totaled $75.0 thousand at September 30, 2012 and $181.8 thousand at December 31, 2011.

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Preferred and Common Units Under LLC Structure

9 Months Ended

Sep. 30, 2012

Preferred And Common Units Under Llc Structure

Preferred and Common Units Under LLC Structure

8.  Preferred and Common Units Under LLC Structure

On December 31, 2008, both our Class I Preferred Stock and Class II Preferred Stock were converted into Series A Preferred Units pursuant to a Plan of Conversion adopted by our shareholders. The Series A Preferred Units are entitled to a cumulative preferred return, payable quarterly in arrears, equal to the liquidation preference times a dividend rate of 190 basis points over the 1-year LIBOR rate in effect on the last day of the calendar month in which the preferred return is paid (“Preferred Return”).  In addition, the Series A Preferred Units are entitled to an annual preferred distribution, payable in arrears, equal to 10% of our profits less the Preferred Return (“Preferred Distribution”).

The Series A Preferred Units have a liquidation preference of $100 per unit; have no voting rights; and are subject to redemption in whole or in part at our election on December 31 of any year, for an amount equal to the liquidation preference of each unit, plus any accrued and unpaid Preferred Return and Preferred Distribution on such units. The Series A Preferred Units have priority as to earnings and distributions over our Class A Common Units.  We have a right of first refusal in the event that one of our Class A Common Unit or Series A Preferred Unit holders proposes to sell or transfer such units.  If we fail to pay a Preferred Return for four consecutive quarters, the holders of the Series A Preferred Units have the right to appoint two managers.
 

On December 31, 2008, upon conversion from a corporation to an limited liability company, our common stock was converted into Class A Common Units under the Plan of Conversion that was adopted by our shareholders.  In accordance with the terms of the Plan of Conversion and Operating Agreement approved by our shareholders and managers, all voting rights are held by the holders of our Class A Common Units.

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Retirement Plans

9 Months Ended

Sep. 30, 2012

Retirement Plans

Retirement Plans

9.  Retirement Plans

401(k)

Employees who are at least 21 years of age are eligible to participate in the Insperity 401(k) plan upon the hire date. No minimum service is required and the minimum age is 21. Each employee may elect voluntary contributions not to exceed 60% of salary, subject to certain limits based on Federal tax law. The plan has a matching program, the amount and percentage of which is annually determined by the managers. Matching contributions for the nine months ended September 30, 2012 and September 30, 2011 were $41.9 thousand and $32.2 thousand, respectively.

Profit Sharing

The profit sharing plan is for all employees who, at the end of the calendar year, are at least 21 years old, still employed, and have at least 900 hours of service during the plan year. The amount annually contributed on behalf of each qualified employee is determined by the managers and is calculated as a percentage of the eligible employee's annual earnings. Plan forfeitures are used to reduce the our annual contribution. We did not make any contributions for the plan during the year ended December 31, 2011.  No profit sharing contribution has been made or approved for the nine months ended September 30, 2012.

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Fair Value Measurements

9 Months Ended

Sep. 30, 2012

Fair Value Measurements

Fair Value Measurements

11.  Fair Value Measurements

Fair Value Measurements Using Fair Value Hierarchy

Measurements of fair value are classified within a hierarchy based upon inputs that give the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:

· Level 1 inputs are quoted prices (unadjusted) for identical assets or liabilities in active markets.  

· Level 2 inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical assets and liabilities in inactive markets, inputs that are observable for the asset or liability (such as interest rates, prepayment speeds, credit risks, etc.), or inputs that are derived principally from or corroborated by observable market data by correlation or by other means.  

· Level 3 inputs are unobservable and reflect an entity’s own assumptions about the assumptions that market participants would use in pricing the assets or liabilities.In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurementin its entirety requires judgment, and considers factors specific to the asset or liability.

Fair Value of Financial Instruments

The carrying amounts and estimated fair values of our financial instruments at September 30, 2012 and December 31, 2011, are as follows:

	Fair Value Measurements at September 30, 2012 using
			Quoted  Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	Carrying Value		Level 1		Level 2		Level 3		Fair Value
FINANCIAL ASSETS:
Cash	$	11,711	$	11,711	$	-	$	-	$	11,711
Loans, net		153,649		-		-		157,349		157,349
Accrued interest receivable		633		-		-		633		633
FINANCIAL LIABILITIES:
Notes payables	$	54,680	$	-	$		$	56,448	$	56,448
Bank borrowings		104,650		-				108,229		108,229
Other financial liabilities		107		-				107		107

	December 31, 2011
	Carrying Amount			Estimated Fair Value
Financial assets:
Cash		$	11,167		$	11,167
Loans receivable			165,355			168,383
Accrued interest receivable			863			863
Financial liabilities:
Notes payable			59,030			60,833
Bank borrowings			110,280			111,371
Other financial liabilities			104			104

Management uses judgment in estimating the fair value of the Company’s financial instruments; however, there are inherent weaknesses in any estimation technique. Therefore, for substantially all financial instruments, the fair value estimates presented herein are not necessarily indicative of the amounts the Company could have realized in a sales transaction at September 30, 2012 and December 31, 2011.

The following methods and assumptions were used to estimate the fair value of financial instruments:

Cash – The carrying amounts reported in the balance sheets approximate fair value for cash.

Loans – Fair value is estimated by discounting the future cash flows using the current average rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.

Notes Payable – The fair value of fixed maturity notes is estimated by discounting the future cash flows using the rates currently offered for notes payable of similar remaining maturities.  The discount rate is estimated by Company management by using market rates which reflect the interest rate risk inherent in the notes.

Borrowings from Financial Institutions – The fair value of borrowings from financial institutions are estimated using discounted cash flow analyses based on current incremental borrowing rates for similar types of borrowing arrangements. The discount rate is estimated Company management by using market rates which reflect the interest rate risk inherent in the notes.

Derivative Financial Instruments – The fair values for interest rate swap agreements and interest rate caps are based upon the amounts required to settle the contracts.

Off-Balance Sheet Instruments – The fair value of loan commitments is based on fees currently charged to enter into similar agreements, taking into account the remaining term of the agreements and the counterparties' credit standing. The fair value of loan commitments is insignificant at September 30, 2012 and December 31, 2011.

Fair Value Measured on a Nonrecurring Basis

Certain assets are measured at fair value on a nonrecurring basis; that is, the assets are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). The following table presents such assets carried on the balance sheet by caption and by level within the valuation hierarchy:

		Fair Value Measurements Using:
		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
		(Level 1)		(Level 2)		(Level 3)		Total
Assets at September 30, 2012:
Impaired loans (net of allowance and discount)	$	-	$	-	$	8,384	$	8,384
Foreclosed assets		-		-		3,050		3,050
	$	-	$	-	$	11,434	$	11,434
Assets at December 31, 2011:
Impaired loans (net of allowance and discount)	$	-	$	-	$	11,887	$	11,887
Foreclosed assets		-		-		1,374		1,374
	$	-	$	-	$	13,261	$	13,261

Impaired Loans

Collateral-dependent impaired loans are carried at the fair value of the collateral less estimated costs to sell, incorporating assumptions that experienced parties might use in estimating the value of such collateral. The fair value of collateral is determined based on appraisals. In some cases, adjustments were made to the appraised values for various factors including age of the appraisal, age of comparables included in the appraisal, and known changes in the market and in the collateral. When significant adjustments were based on unobservable inputs, the resulting fair value measurement has been categorized as a Level 3 measurement. Otherwise, collateral-dependent impaired loans are categorized under Level 2.

Foreclosed Assets  

Real estate acquired through foreclosure or other proceedings (foreclosed assets) is initially recorded at fair value at the date of foreclosure less estimated costs of disposal, which establishes a new cost. After foreclosure, valuations are periodically performed and foreclosed assets held for sale are carried at the lower of cost or fair value, less estimated costs of disposal. The fair values of real properties initially are determined based on appraisals. In some cases, adjustments were made to the appraised values for various factors including age of the appraisal, age of comparables included in the appraisal, and known changes in the market or in the collateral. Subsequent valuations of the real properties are based on management estimates or on updated appraisals. Foreclosed assets are categorized under Level 3 when significant adjustments are made by management to appraised values based on unobservable inputs. Otherwise, foreclosed assets are categorized under Level 2 if their values are based solely on appraisals. 

The valuation methodologies used to measure the fair value adjustments for Level 3 assets recorded at fair value on a nonrecurring basis at September 30, 2012 are summarized below:

Assets	Fair Value	Valuation Techniques	Unobservable Input	Range (Weighted Average)
Impaired Loans	8,384	Discounted appraised value	Selling cost	10% (10%)
		Internal evaluations	Discount due to age of appraisal	0% - 5% (0.12%)
Foreclosed assets	3,050	Discounted appraised value	Selling cost	10% (10%)
		Internal evaluations	Discount due to age of appraisal	0% - 5% (1.18%)

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Loans and Allowance for Losses (Details8) (USD $) In Thousands, unless otherwise specified	3 Months Ended	9 Months Ended
	Sep. 30, 2011 N	Sep. 30, 2012 N	Sep. 30, 2011 N
Troubled debt restructurings, Subsequent defaulted	1	3	8
Recorded Investment, Subsequent defaulted	$ 3,173	$ 2,740	$ 12,843
Wholly-Owned First
Troubled debt restructurings, Subsequent defaulted		1	5
Recorded Investment, Subsequent defaulted		2,054	8,552
Wholly-Owned Junior
Troubled debt restructurings, Subsequent defaulted	1	1	3
Recorded Investment, Subsequent defaulted	3,173	420	4,291
Participation First
Troubled debt restructurings, Subsequent defaulted		1
Recorded Investment, Subsequent defaulted		230
Participation Junior
Troubled debt restructurings, Subsequent defaulted
Recorded Investment, Subsequent defaulted

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Notes Payable (Tables)

9 Months Ended

Sep. 30, 2012

Notes Payable Tables

Schedule of unsecured notes payable

SEC Registered Public Offerings	Amount		Weighted Average Interest Rate
Class A Offering	$	41,866		41.7	%
National Alpha Offering		3,341		5.58	%
Private Offerings
Special Offering		9,177		4.60	%
Special Subordinated Notes		6		5.45	%
Secured Notes		55		2.49	%
International Offering		235		4.05	%
Total	$	54,680		4.33	%

Schedule Of Maturities Due On Unsecured Note

2013	$	24,862
2014		10,727
2015		7,698
2016		7,393
2017		2,899
Thereafter		1,101
	$	54,680

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Loans and Allowance for Losses (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended	9 Months Ended	12 Months Ended
	Sep. 30, 2012	Sep. 30, 2012	Dec. 31, 2011
Loans And Allowance For Losses Details
Balance, beginning of period	$ 3,921	$ 4,127	$ 3,997
Provisions for loan losses	87	(49)	1,487
Chargeoffs		(47)	(1,279)
Change in allowance related to restructured loans	(23)	(46)	(78)
Balance, end of period	$ 3,985	$ 3,985	$ 4,127

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Notes Payable (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011	Sep. 30, 2011
Notes outstanding	$ 54,680	$ 59,030
Weighted Average Interest Rate	6.43%	6.40%	6.40%
Class A Notes
Notes outstanding	41,866	46,500
Weighted Average Interest Rate	41.70%
Alpha Class Notes
Notes outstanding	3,341	4,400
Weighted Average Interest Rate	5.58%
Special Offering
Notes outstanding	9,177
Weighted Average Interest Rate	4.60%
Special Subordinated Note
Notes outstanding	6
Weighted Average Interest Rate	5.45%
Secured Note
Notes outstanding	55
Weighted Average Interest Rate	2.49%
International Offering
Notes outstanding	235
Weighted Average Interest Rate	4.05%
Notes Payable
Notes outstanding	$ 54,680
Weighted Average Interest Rate	4.33%

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Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Consolidated Statements Of Cash Flows
Net (income) loss	$ 636	$ (1,268)
Depreciation	94	90
Amortization of deferred loan fees	(105)	(139)
Amortization of debt issuance costs	126	172
Provision (credit) for loan losses	(49)	1,305
Accretion of allowance for loan losses on restructured loans	(46)	(67)
Accretion of loan discount	(5)	(56)
Accrued interest receivable	91	(6)
Other assets	(80)	(145)
Other liabilities and accrued interest payable	16	(89)
Net cash provided (used) by operating activities	678	(203)
Loan purchases	(10,894)
Loan originations	(8,999)	(4,307)
Loan sales	2,425	5,390
Loan principal collections, net	27,703	12,539
Purchase of property and equipment	(32)	(8)
Net cash provided by investing activities	10,203	13,614
Net change in borrowings from financial institutions	(5,629)	(10,844)
Net changes in notes payable	(4,350)	(3,103)
Debt issuance costs	(100)	(109)
Purchase of preferred units		(45)
Dividends paid on preferred units	(258)	(234)
Net cash used by financing activities	(10,337)	(14,335)
Net increase (decrease) in cash	544	(924)
Cash at beginning of period	11,167	7,078
Cash at end of period	11,711	6,154
Interest paid	3,886	5,446
Income taxes paid	14
Transfer of loan to foreclosed assets	$ 1,676	$ 1,374

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Loan Participation Sales

9 Months Ended

Sep. 30, 2012

Loan Participation Sales

Loan Participation Sales

5.  Loan Participation Sales

During the year ended December 31, 2011, the Company sold participations in two church loans totaling $5.4 million but retained servicing responsibilities for these loans.  As a result, we recorded servicing assets totaling $146.9 thousand, which are being amortized using the interest method.  The amortization of servicing assets is recorded as an adjustment to interest income and totaled  $13.6 thousand for the nine months ended September 30, 2012.  We did not sell participations in any loans during the nine months ended September 30, 2012.

A summary of servicing assets for the nine months ended September 30, 2012 and the year ended December 31, 2011 is as follows:

	2012		2011
Balance, beginning of period	$	138	$	--
Additions:
Servicing obligations from sale of loan participations		--		147
Subtractions:
Amortization		19		9
Balance, end of period	$	119	$	138

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Loans and Allowance for Losses (Details1) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011	Sep. 30, 2011
Loans And Allowance For Losses Details1
Impaired loans with an allowance for loan loss	$ 11,617	$ 18,168	$ 22,337
Impaired loans without an allowance for loan loss	7,054	4,774	4,369
Total impaired loans	18,671	22,942	26,706
Allowance for loan losses related to impaired loans	2,967	3,064	2,860
Total non-accrual loans	18,449	22,942	26,706
Total loans past due 90 days or more and still accruing			$ 614

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Line of Credit and Other Borrowings (Details Narrative) (USD $) In Thousands, unless otherwise specified	9 Months Ended			0 Months Ended				3 Months Ended	9 Months Ended		9 Months Ended		0 Months Ended
	Sep. 30, 2012	Dec. 31, 2011	Sep. 30, 2011	Aug. 27, 2008 $10 Million LOC	Sep. 30, 2012 $10 Million LOC	Sep. 30, 2012 $50 Million LOC	Sep. 30, 2012 $100 Million CUSO Line	Sep. 30, 2012 MU Credit Facility	Sep. 30, 2012 MU Credit Facility	Dec. 31, 2011 MU Credit Facility	Sep. 30, 2012 WesCorp Credit Facility Extension	Dec. 31, 2011 WesCorp Credit Facility Extension	Nov. 30, 2009 WesCorp Facility	Sep. 30, 2012 WesCorp Facility
Maximum borrowing capacity					$ 10,000	$ 50,000	$ 100,000	$ 87,300	$ 87,300		$ 235,000	$ 23,500
Borrowing Made				10,000									28,000
Interest rate (as a percent)				3.47%			3.98%
Weighted Average Interest Rate	6.43%	6.40%	6.40%
Description about accrued interest									Accrued interest is due and payable monthly in arrears on the MU Credit Facility on the first day of each month at the lesser of the maximum interest rate permitted by applicable law under the loan documents or 2.525%		Accrued interest on the WesCorp Credit Facility Extension is due monthly in arrears on the first day of each month at the lesser of the maximum rate permitted by applicable law under the loan documents or 2.525%
Line of Credit, amount outstanding								81,900	81,900	86,900	22,700	23,400		22,900
Minimum collateral security required of outstanding (as a percent)								128.00%	128.00%	128.00%	150.00%
Principal balance outstanding								105,800	105,800	111,400	34,500	35,300		34,500
Principal Payment Made	3,200							854
Loan proceeds used in payment in outstanding credit facility													24,600
Fixed Intererst Rate on Loan														3.95%
Initial Pledge of Mortgage loan as collateral security													59,200
Initial Excess Pledge of Mortgage loan as collateral security													$ 30,800

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Line of Credit and Other Borrowings (Tables)

9 Months Ended

Sep. 30, 2012

Line Of Credit And Other Borrowings Tables

Schedule of future estimated principal pay downs of borrowing

2013	$	3,366
2014		3,467
2015		3,555
2016		3,639
2017		3,739
Thereafter		86,884
	$	104,650