> 

# U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

---

FORM 10-QSB

|   | x | QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
     OF THE
SECURITIES EXCHANGE ACT OF 1934  
|-- | - | ----------------------------------------------------------------------------------------
|  
|   |   | For the quarterly period ended June 30, 2004                                            
|OR
|  
|   | o | TRANSITION  REPORT UNDER SECTION 13 OR 15(d)
     OF THE
SECURITIES EXCHANGE ACT OF 1934

Commission File No. 08117

CHURCH LOANS & INVESTMENTS
TRUSTSM(Name of small business issuer in its charter)

| | Texas                                                                   |  | 75-6030254                       
| | ----------------------------------------------------------------------- |  | ---------------------------------
| | (State or other jurisdiction of
incorporation or organization)          |  | (IRS Employer
Identification No.)
| |                                                                         | 
| | 5305 I-40 West, Amarillo, Texas(Address of principal executive offices) |  | 79106(Zip Code)                  

(806) 358-3666

(Registrant's telephone number)



> Check
> whether the issuer (1) has filed all reports required to be filed by Section 13
> or 15(d) of the Exchange Act during the past 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. YesxNooAs of June 30, 2004, 9,525,149 shares
>   of the Registrant's shares of beneficial interest were outstanding.
>   Transitional Small Business Disclosure Format
>   (check one)YesoNox

> 

> CHURCH LOANS & INVESTMENTS TRUSTINDEX

PagePart I.
          Financial InformationItem 1:
          Financial StatementsCondensed Balance Sheets
          (Unaudited)
          June 30, 2004 and March 31, 2004
          
          1Condensed Statements of Income (Unaudited)
          for the three-month periods ended June
          30, 2004 and 2003
          
          2Condensed Statements of Cash Flows
          (Unaudited) for the three-month periods ended June 30, 2004 and 2003
          
          3Notes to Condensed Financial Statements
          (Unaudited)
          
          4Item 2:
          Management's Discussion and Analysis
          or Plan of Operation
          
          6Item 3:
          Controls and Procedures
          
          12Part II. Other
          InformationItem 6(a):
          Exhibits
          
          13Signatures
          
          14Exhibit Index
          
          15


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CHURCH LOANS
& INVESTMENTS TRUST (A Real Estate Investment Trust)
    PART I. FINANCIAL INFORMATION Item 1.
                Financial Statements Condensed Balance Sheets (Unaudited)
    June 30, 2004 and
    March 31,
2004  ASSETSJune 30, 2004
      
      March 31, 2004CASH AND CASH EQUIVALENTS
      $
      250,112
      $
      264,942RECEIVABLESMortgage loans and church bonds - performing
      
      34.,900,292
      
      32,228,226Interim construction loans - performing
      
      7,310,492
      
      8,705,791Nonperforming mortgage loans, church bondsand interim construction loans
      
      3,254,095
      
      3,261,381Less: Allowance for credit losses
      
      (1,733,249)
      
      (1,733,249)43,731,630
      
      42,462,149Accrued interest receivable
      
      252,152
      
      240,523Notes receivable
      
      87,817
      
      111,753Net receivables
      
      44,071,599
      
      42,814,425PROPERTY AND EQUIPMENT, net
      
      222,479
      
      214,243OTHER REAL ESTATE OWNED
      
      1,328,832
      
      1,328,832OTHER ASSETS
      
      21,733
      
      7,446TOTAL ASSETS
      $
      45,894,755
      $
      44,629,888LIABILITIES AND SHAREHOLDERS' EQUITYLIABILITIESNotes payable and line of credit:Related parties
      $
      1,807,335
      $
      1,296,692Other
      
      14,540,169
      
      15,382,69116,347,504
      
      16,679,383Accrued interest payable
      
      15,169
      
      44,366Federal income tax payable
      
      37,553
      
      37,553Other
      
      1,005,294
      
      835,313Total liabilities
      
      17,405,520
      
      17,596,615SHAREHOLDERS' EQUITYShares of beneficial interest, no par value; authorizedshares unlimited,
      9,531,745 and 8,986,208 shares
      issued at June 30, 2004 and March 31, 2004,  respectively
      
      27,788,663
      
      26,245,401Undistributed net income
      
      717,062
      
      804,362Treasury shares, at cost (6,596
      shares)
      
      (16,490)
      
      (16,490)Total shareholders' equity
      
      28,489,235
      
      27,033,273TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
      $
      45,894,755
      $
      44,629,888These condensed financial statements should be read only in connection with
      the accompanying notes to condensed financial statements.


-1-

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CHURCH LOANS
& INVESTMENTS TRUST (A Real Estate Investment Trust)
    Condensed
    Statements of Income (Unaudited)
    Three-month periods ended
    June 30,
2004 and 2003 Three-month periods ended
        June 30,2004
        
        2003INTEREST INCOME AND FEESInterest
        and fees on mortgage loans, church bondsand interim
        construction loans
        $
        855,361
        $
        1,219,330Interest on temporary investments
        
        --
        
        135,643Total interest income and fees
        
        855,361
        
        1,354,973INTEREST EXPENSE
        


        116,918

        
        266,818Net interest income
        

        738,443

        
        1,088,155OTHER INCOME, including gain on sale of otherreal estate owned of $107,643
        in 2003
        
        63,210
        
        122,750OTHER OPERATING EXPENSESGeneral and administrative
        
        248,372
        
        203,154Board of Trust Managers' fees
        
        12,000
        
        14,970Total other operating expenses
        
        260,372
        
        218,124NET INCOME
        $

        541,281

        $
        992,781WEIGHTED AVERAGE
        NUMBEROF SHARES
        OUTSTANDING
        


        9,173,267


        
        7,000,806NET INCOME PER SHARE
        
        $.06
        
        $.14DIVIDENDS PER SHARE
        
        $.07
        
        $.11These condensed financial statements should be read only in connection with
      the accompanying notes to condensed financial statements.


-2-

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CHURCH LOANS
& INVESTMENTS TRUST (A Real
Estate Investment Trust)
    Condensed Statements of Cash Flows (Unaudited)
   Three-month periods ended June 30, 2004 and 2003  Three-month periods ended June 30,2004
      
      2003CASH FLOWS FROM
      OPERATING ACTIVITIESNet income
      $
      541,281
      $
      992,781Adjustments to reconcile net income to net cashprovided by operating activities:Amortization of loan discounts
      
      (6,060)
      
      (6,499)Gain on
      sale of other real estate owned
      
      --
      
      (107,643)Changes in:Accrued
      interest receivable
      
      (11,629)
      
      160,242Accrued interest payable
      
      (29,197)
      
      15,241Other liabilities
      
      169,981
      
      407,340Other,
      net
      

      (14,287)

      

      (8,072)Net cash provided by operating activities
      

      650,089

      
      1,453,390CASH FLOWS FROM INVESTING ACTIVITIESInvestment in mortgage and interim constructionloans and church bonds
      
      (7,253,910)
      
      (3,953,814)Payments received on mortgage and interim constructionloans and church bonds
      
      5,990,489
      
      12,411,002Investments in notes
      receivable
      
      --
      
      (7,650)Payments received on notes receivable
      
      23,936
      
      77,761Purchase of property and
      equipment
      
      (8,236)
      
      --Proceeds from sale of
      other real estate owned
      

      --

      
      360,112Net cash provided (used) by investing activities
      
      (1,247,721)
      
      8,887,411CASH FLOWS FROM FINANCING ACTIVITIESBorrowings on notes payable
      and line of credit
      
      7,449,916
      
      5,670,748Principal
      payments on notes payable and line of credit
      
      (7,781,795)
      
      (15,472,100)Cash received from issuance
      of shares of beneficialinterest,
      net of issuance costs
      
      1,543,262
      
      --Cash dividends paid
      

      (628,581)

      
      (770,089)Net cash provided (used) by financing activities
      
      582,802
      
      (10,571,441)Decrease in cash and cash equivalents
      
      (14,830)
      
      (230,640)CASH AND CASH EQUIVALENTS, BEGINNING OF YEARBEGINNING OF PERIOD
      

      264,942
      
      273,432CASH AND CASH EQUIVALENTS
      AT END OF PERIOD
      $
      250,112
      $
      42,792Supplemental disclosure of cash flow informationCash paid during the period
      for interest
      $

      146,115
      $
      251,578Real
      estate acquired through foreclosure
      $

      --
      $
      148,214These condensed financial statements should be read only in connection
 with
      the accompanying
      and notes to financial statements.


-3-

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CHURCH LOANS
& INVESTMENTS TRUST (A Real
Estate Investment Trust)Notes to
    Condensed Financial Statements (Unaudited) NOTE 1 -
GENERAL
      See Summary of Significant
Accounting Policies in the Trusts Annual Report on Form 10-KSB for a
summary of the Trusts significant accounting policies.
      The unaudited condensed
financial statements included herein were prepared from the books of the Trust
in accordance with generally accepted accounting principles and reflect all
adjustments (consisting of normal recurring accruals) which are, in the opinion
of management, necessary to a fair statement of the results of operations and
financial position for the interim periods. Such financial statements generally
conform to the presentation reflected in the Trusts Annual Report to
Shareholders. The current interim period reported herein is included in the
fiscal year subject to independent audit at the end of that year and is not
necessarily an indication of the expected results for the fiscal year.
      NOTE 2 -
WEIGHTED AVERAGE INTEREST RATES


> Weighted average interest
> rates and net interest rate margins at June 30, 2004 and 2003, were as follows:

Mortgage loan and church
          bond portfolio
          
          Total
          indebtedness
          
          Net interest
          rate marginJune 30, 2004
          6.88%
          
          3.02%
          
          3.86%June 30, 2003
          7.54%
          
          3.00%
          
          4.54%


> NOTE 3 -
> CONTRACTUAL MATURITIES
>     Scheduled principal
> payments on mortgage loans, church bonds and interim loans and indebtedness
> (including notes payable) outstanding at June 30, 2004, for the five
> twelve-month periods subsequent to June 30, 2004, follow:
>   Twelve-month periodending June 30,
>         
>         Mortgage loans, church bondsand interim loans
>         
>         Indebtedness2005
>         
>         $
>         9,538,743
>         
>         $16,347,5042006
>         
>         
>         2,287,547
>         
>         --2007
>         
>         
>         2,327,997
>         
>         --2008
>         
>         
>         2,330,729
>         
>         --2009
>         
>         
>         2,347,413
>         
>         --

-4-

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CHURCH LOANS
& INVESTMENTS TRUST (A Real
Estate Investment Trust)Notes to
    Condensed Financial Statements (Unaudited)


> NOTE 4 - Mortgage Loans, Church Bonds and Interim Construction
>               Loans
>     Mortgage loans, church
> bonds and interim construction loans on which the accrual of interest had been
> discontinued amounted to $3,254,095 and $3,077,932 at June 30, 2004 and 2003,
> respectively. If interest on these mortgage loans, church bonds and interim
> construction loans had been accrued as earned, interest and fees on loans in the
> accompanying condensed statements of income would have been increased by
> approximately $79,000 and $78,000 for the three-month periods ended
> June 30, 2004 and 2003, respectively. Interest income actually recognized
> on such loans during 2004 and 2003 was approximately $24,000 and $43,000,
> respectively.
>     NOTE 5 -
> SECURITIES OFFERING
>     The Trust filed a Form S-11
> Registration Statement (the Statement) with the Securities and Exchange
> Commission indicating its intent to offer 7,000,000 additional shares at a price
> of $3.00 per share. The purpose of this offering was to raise additional capital
> in order for the Trust to make additional mortgage loans and as a result, to
> further grow the Trust. The effective date of the registration was August 14,
> 2003. In addition, on various dates from August 14, 2003 through June 30,
> 2004 this offering became effective in various states. As of June 30, 2004, the
> Trust had sold and issued an additional 2,524,343 shares resulting in an
> increase of $7,164,797, net of issuance costs of $396,133, in the Trust's
> shareholders' equity. For the three months ended June 30, 2004, the Trust has
>     sold and issued an additional 545,537 shares resulting in an increase of
>     $1,543,262, net of issuance costs of $81,250, in the Trust's shareholders'
>     equity. It is not the Trusts intent to renew this registration
> and sales of shares will cease as of August 14, 2004.
>     This information is an integral part
>       of the accompanying condensed financial statements.-5-CHURCH LOANS
> & INVESTMENTS TRUST(A Real
> Estate Investment Trust)
>     Item 2. Management's Discussion and Analysis or Plan of Operation.
>     Forward-looking
> Statement Disclaimer
>     The following
> Managements Discussion and Analysis and Plan of
> Operation includes forward-looking statements within the meaning of the Section
> 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
> Exchange Act of 1934, as amended.  All statements other than statements of
> historical fact made herein are forward-looking, which can be identified by the
> use of forward-looking terminology such as may, will,
> expect, anticipate, estimate,
> believe, continue or other similar words.  Such
> forward-looking statements are based upon managements current plans and
> expectations and are subject to risks and uncertainties that could cause actual
> results to differ materially from those described in the forward-looking
> statements, including the following:
>     Competition in the business of making loans to churches;
>         A decline in the general economic conditions;
>       A decline in real estate values thereby affecting the value of the collateral securing the loans made by the Trust;
>         A rise in interest rates resulting in higher cost of funds to the Trust prior to the re-pricing of the loans owing to the Trust;
>       Inability of the Trust to borrow funds and at reasonable rates of interest;
>         General risks of lending;
>       Change in federal or state laws affecting the Trust's operations;
>         Loss of critical management; and
>       Other risks.

> These risks and
> uncertainties are not intended to be exhaustive and should be read in
> conjunction with other cautionary statements made herein.
>     Results of
> OperationsThree-month period ended June 30, 2004 as compared to
> three-month period ended June 30, 2003
>     Our revenues are derived
> from interest income earned on loans as well as, to a lesser degree, interest
> earned on church bonds and short-term investments. During the three-month period
> ended June 30, 2004, interest income and fees decreased by $499,612 (37%) over
> the three-month period ended June 30, 2003.
>     The decrease in interest
> income and fees during the three-month period ended June 30, 2004 as compared to
> the three-month period ended June 30, 2003 was primarily attributable to a
> decrease in interest income on mortgage loans and interim loans, a decrease in
> interest earned on temporary investments and a decrease in commitment fees.
>     Interest income on mortgage
> loans decreased from $743,042 during the three-month period ended June 30, 2003
> to $591,659 during the three-month period ended June 30, 2004, a decrease of
> $151,383 (20%). Interest income on interim loans decreased from $291,708 during
> the three-month period ended June 30, 2003 to $113,935 for the three-month
> period ended June 30, 2004, a decrease of $177,773 (61%).
> 
> -6-CHURCH LOANS
> & INVESTMENTS TRUST(A Real
> Estate Investment Trust)
>     Item 2. Management's Discussion and Analysis or Plan of Operation. (Continued)
>     Results of
> OperationsThree-month period ended June 30, 2004 as compared to
> three-month period ended June 30,2003 (Continued)
>     We had no interest earned
> on temporary investments during the three-month period ended June 30, 2004
> as compared to $135,643 for the three-month period ended June 30, 2003. The
> interest earned on temporary investments during the three-month period ended
> June 30, 2003 was attributable to the sale of church bonds prior to maturity.
>     Commitment fees earned
> during the three-month period ended June 30, 2003 as compared to June 30, 2004
> decreased from $167,225 to $112,990, a decrease of $54,235 or 32%. Commitment
> fees earned during the three-month period ended June 30, 2003 included
> commitment fees recognized as a result of the payoff of two loans prior to
> maturity resulting in the immediate recognition of the unearned commitment fees
> relative to these two loans.
>     Contributing to the
> decrease in interest income and fees during the three-month period ended
> June 30, 2004 as compared to the three-month period ended June 30, 2003 was
> the decrease in the interest rates on our loan portfolio. The average interest
> rate on our loans and church bonds decreased from 7.54% as of June 30, 2003 to
> 6.88% as of June 30, 2004, a decrease of .66%.
>     There was an increase in
> the amount of our performing interim loans from $5,079,648 as of June 30,
> 2003, to $7,310,492 as of June 30, 2004. There was a decrease in performing
> mortgage loans and church bonds from $37,440,098 as of June 30, 2003 to
> $34,900,292 as of June 30, 2004. Nonperforming loans increased from $3,077,932
> as of June 30, 2003 to $3,254,095 as of June 30, 2004. Therefore, the total
> performing and nonperforming mortgage loans, church bonds and interim loans held
> by Church Loans decreased slightly from $45,597,678 as of June 30, 2003 to
> $45,464,879 as of June 30, 2004 (.3%).
>     Our net income for the
> three-month period ended June 30, 2004 was $541,281 ($.06 per share), a decrease
> of $451,500 (45%) as compared to the three-month period ended June 30, 2003.
> This decrease was attributable to the decrease in net interest income, a
> decrease in other income and an increase in operating expenses.
>     Net interest income
> decreased from $1,088,155 for the three-month period ended June 30, 2003 to
> $738,443 for the three-month period ended June 30, 2004, a decrease of $349,712
> (32%). Other income decreased from $122,750 for the three-month period ended
> June 30, 2003 to $63,210 for the three-month period ended June 30, 2004, a
> decrease of $59,540 (49%). Other income for the three-month period ended June
> 30, 2003 included gain on the sale of property acquired by us through a
> foreclosure of a nonperforming loan. This sale resulted in a gain of $107,643.
>     The decrease in our net
> interest income for the three-month period ended June 30, 2004 as compared to
> the three-month period ended June 30, 2003 was offset by a decrease in our
> interest expense. The weighted average interest rate on our debt increased
> slightly from 3.00% as of June 30, 2003 to 3.02% as of June 30, 2004. However, our interest expense
> decreased from $266,818 for the three-month period ended June 30, 2003 to
> $116,918 for the three-month period ended June 30, 2004, a decrease of $149,900
> or 56%.
>     -7-CHURCH LOANS
> & INVESTMENTS TRUST(A Real
> Estate Investment Trust)
>     Item 2. Management's Discussion and Analysis or Plan of Operation. (Continued)
>     Results of
> OperationsThree-month period ended June 30, 2004 as compared to
> three-month period ended June 30,2003 (Continued)
>     The decrease in our
> interest expense is attributable to the decrease in our debt resulting from the
> application, in the short-term, of the proceeds received from our offering of
> additional shares of beneficial interest to the payment of our debt. Our total
> liabilities decreased from $24,287,838 as of June 30, 2003 to $17,405,520, a
> decrease of $6,882,318 or 28%.
>     Nonperforming loans, church
> bonds and interim loans increased from $3,077,932 as of June 30, 2003 to
> $3,254,095 as of June 30, 2004, an increase of $176,163. The accrual of interest
> on these loans has been discontinued. If interest on these mortgage loans,
> church bonds and interim loans had been accrued as earned, interest and fees on
> loans would have been increased by approximately $79,000 and $78,000 for the
> three-month periods ended June 30, 2004 and 2003, respectively. Interest income
>     actually recognized on such loans during 2004 and 2003 was approximately
>     $24,000 and $43,000, respectively.
>     General and administrative
> expenses increased from $203,154 for the three-month period ended June 30, 2003
> to $248,372 for the three-month period ended June 30, 2004, an increase of
> $45,218 or 22%. This increase can primarily be attributed to an additional
>     full-time employee beginning in June 2003.
>     Pursuant to authority
> granted by our Board of Trust Managers, on Tuesday, June 3, 2003, the Strategic
> Planning Committee of the Board of Trust Managers authorized management to
> proceed to register an offering of an additional 7,000,000 shares of
> certificates of beneficial interest in Church Loans at a price of $3.00 per
> share. On June 26, 2003 the Board of Trust Managers formally authorized such
> offering and SEC Form S-11 was filed with the SEC on July 3, 2003. This
> offering became effective with the SEC on August 14, 2003 and in various states
> from August 14, 2003 through June 30, 2004. Sales of the shares began in
> December 2003. As of June 30, 2004, we had sold and issued an additional
> 2,524,343 shares, resulting in an increase of $7,164,797, net of issuance costs,
> in our shareholders' equity. It is not our intent to renew this
> registration and sales of shares will cease as of August 14, 2004.
>     Net income per share
> decreased from $.14 per share for the three-month period ended June 30, 2003 to
> $.06 per share for the three-month period ended June 30, 2004. This decrease was
> attributable to the decrease in our net income discussed above and in the
> dilution of earnings per share due to the issuance of additional shares as
> discussed above. Assuming that the number of shares outstanding had not changed
> from June 30, 2003 and that net income would have remained the same as that
>     reported for the
> three-month period ended June 30, 2004, then the net income per share as of June
> 30, 2004 would have been approximately $.08 per share. Therefore, the additional
> shares resulted in a dilution of earnings of approximately $.02 per share.
>     -8-CHURCH LOANS
> & INVESTMENTS TRUST(A Real
> Estate Investment Trust)
>     Item 2. Management's Discussion and Analysis or Plan of Operation. (Continued)
>     Financial ConditionJune 30, 2004 as compared
>     to March 31, 2004
>     Our performing mortgage
> loans and church bonds increased from $32,228,226 as of March 31, 2004 to
> $34,900,292 as of June 30, 2004. However, our portfolio of performing interim
> loans decreased slightly during the three-month period ended June 30, 2004 from
> $8,705,791 to $7,310,492, a decrease of $1,395,299. Mortgage loans, interim
> loans and church bonds held by us increased from $44,195,398 as of March 31,
> 2004 to $45,464,879 as of June 30, 2004, an increase of $1,269,481 (3%).
>     Nonperforming mortgage
> loans, church bonds and interim loans decreased slightly from $3,261,381 as of
> March 31, 2004 to $3,254,095 as of June 30, 2004. Total performing mortgage
> loans, church bonds and interim loans increased from $40,934,017 as of March 31,
> 2004 to $42,210,784 as of June 30, 2004, an increase of $1,276,767 (3%).
> Consistent with such increase in performing loans, total assets increased from
> $44,629,888 as of March 31, 2004 to $45,894,755 as of June 30, 2004, an increase
> of $1,264,867 (3%).
>     Our liabilities decreased
> slightly from $17,596,615 as of March 31, 2004 to $17,405,520 as of June 30,
> 2004.
>     Shareholders equity
> increased by $1,455,962 from March 31, 2004 to June 30, 2004. This increase is
> attributable to the sales during the three-month period ended June 30, 2004 of
> an additional 545,537 shares of beneficial interest. Such shares resulted in
> additional paid in capital of $1,543,262, net of issuance costs.
>     Liquidity and
> Capital Resources
>     We are engaged primarily in
> the business of making permanent and interim loans to churches and other
> non-profit organizations, and to other borrowers, including businesses engaged
> in the building and operation of assisted living centers.
>     Our assets primarily
> consist of our loan portfolio, real estate acquired through foreclosure and our
> office building and facilities. Our operational expenses are comprised of the
> maintenance of our office building, the payment of the salaries of our
> management and support staff, office expenses, fees paid to the Board of Trust
> Managers, the payment for legal and accounting services, and expenses incurred
> relative to real estate securing our loans or acquired through foreclosure.
> Substantially all of our assets are invested in the permanent and interim loans.
> Our only potential liquidity problems are related to the timely and proper
> repayment of the leveraged funds we have borrowed to make loans in excess of our
> capital and the ability to fund loan commitments. All of our indebtedness is
> generally classified as short term having maturities ranging from on
> demand to maturities repayable over various periods extending through
> fiscal 2005.
>     -9-CHURCH LOANS
> & INVESTMENTS TRUST(A Real
> Estate Investment Trust)
>     Item 2. Management's Discussion and Analysis or Plan of Operation (Continued)
>     Liquidity and
> Capital Resources (Continued)
>     All of our debt obligations
> outstanding as of June 30, 2004, in the amount of $17,405,520, will mature in
> fiscal 2005. These debt obligations primarily consist of our bank line of credit
> and Master Note Agreements. As of June 30, 2004, our loan agreement with the
> Amarillo National Bank provided for a line of credit in the amount of
> $25,000,000. The amount owing on the line of credit as of June 30, 2004 was
> $3,025,000. Although the bank line of credit matures in fiscal 2005, it is
> anticipated that the line of credit will be renewed annually. In the event that
> the bank elects not to renew the line of credit, we may under the terms of the
> loan agreement retire the line of credit over a period of time, not to exceed
> five years, equal to the weighted average remaining term of all of our real
> estate lien notes which are pledged to secure the bank line of credit.
>     At June 30, 2004, loans to
> us under Master Note Agreements, which are in effect demand notes, totaled
> $13,322,504. In the past, we have utilized our bank line of credit and the
> principal paid to us upon our outstanding loan portfolio in order to meet our
> maturing obligations.
>     At June 30, 2004, the
> balance which could be borrowed by us upon our bank line of credit was
> $21,975,000. The principal payments scheduled to be received by us upon our loan
> portfolio for the twelve-month periods ending June 30, 2005 and 2006 are
> $9,538,743 and $2,287,547, respectively. Assuming all of these scheduled
> principal payments are received, these payments, together with the balance
> available to us on our bank line of credit, should provide us with sufficient
> funds to meet our maturing obligations and fund loan commitments without the
> necessity of borrowing funds from other sources. Based upon our success in
> obtaining borrowings in the past, we are confident that, should it be necessary,
> we will be able to obtain additional bank financing in the future in sufficient
> amounts for us to timely meet all of our obligations.
>     Should all the scheduled
> principal payments upon loans not be received, and should we be unable to borrow
> against our line of credit, and should borrowings from other sources not be
> available, it would be necessary to sell a portion of our mortgage loan
> portfolio in order for us to meet all of our financial obligations. At June 30,
> 2004, the principal balance of our loan and church bond portfolio was
> $45,464,879, net of unamortized purchase discounts. The weighted average
> interest rate on loans and church bonds was 6.88% per annum. In view of the
> normal marketability of conventional loans, we might be required to discount a
> majority of these loans in order for them to be attractive for purchase. The
> principal amount of these loans if discounted to yield a weighted average
> interest rate of 12%, 14% and 16% would be $26,066,531, $22,342,743, and
> $19,549,900, respectively. There is no assurance that we would be able to sell
> all, or a portion of our portfolio of loans, in which event, it would be
> necessary to secure a loan, or loans, from a lender in order to meet our
> financial obligations. There is no assurance that we would be able to secure a
> loan in such instance. We have sold only one of the loans in our mortgage loan
> portfolio and, therefore, we have limited experience in this area.
>     -10-
>     CHURCH LOANS
> & INVESTMENTS TRUST(A Real
> Estate Investment Trust)
>     Item 2. Management's Discussion and Analysis or Plan of Operation (Continued)
>     Liquidity and
> Capital Resources (Continued)
>     Principal payments
> scheduled to be received upon our permanent loan portfolio during the
> twelve-month periods ending June 30, 2005 and 2006, if not used to fund new loan
> commitments, would be used to reduce our outstanding indebtedness. Should we use
> the payments of principal which shall be received upon our loan portfolio to
> reduce our outstanding indebtedness, our interest expense will decrease. In such
> instance, whether the decrease in the interest income will exceed, or be less
> than, the decrease in the interest expense will largely be dependent upon the
> prime rate of interest prevailing at such time due to the fact that the interest
> to be earned upon our mortgage loan portfolio is generally based upon a fixed
> rate of interest or a variable rate of interest that periodically reprices,
> while the interest to be paid by us upon our outstanding debts is directly, or
> indirectly, tied to the prime rate of interest charged by major domestic banks.
>     As of June 30, 2004, a
> substantial portion of the promissory notes evidencing the loans made by us has
> been pledged to secure our bank line of credit. Promissory notes totaling
> $24,102,466 were pledged against the bank line of credit, which had a total
> outstanding balance of $3,025,000. The required collateral for this bank loan
> was $3,327,500, leaving an excess of promissory notes which have been pledged to
> secure said bank notes of $20,774,966. These excess promissory notes may be
> reassigned by the bank to us to be sold in order to meet our financial
> obligations. Should it be necessary, in order to meet our financial obligations,
> these excess notes amounting to $20,774,966 and other additional promissory
> notes in the approximate amount of $21,523,596 (for a total amount of
> $42,298,562) would be available to be sold to meet our financial obligations.
> Should the excess promissory notes be assigned by the bank to us as heretofore
> described, the bank line of credit would continue to be secured by the required
> ratio of notes pledged to the principal balance of the bank line of credit.
> There is no assurance that we would be able to sell all, or any portion of,
> these notes.
>     Cash flows from operating
> activities consists primarily of net income. The primary components of net
> income are interest income and expense. Interest income should continue to be
> the main source of cash provided by operating activities; however, the
> availability of this cash flow is dependent upon the ability of the borrowers to
> repay loans. Although there was a slight increase in the amount of nonperforming
> loans as of June 30, 2004, compared to June 30, 2003, cash provided by operating
> activities has been and is expected to be a relatively stable source of cash
> flow.
>     Cash flows from investing
> activities results primarily from investment in and payments received on
> mortgage and interim construction loans and church bonds.
>     Cash flows from financing
> activities relate primarily to the borrowings and payments on notes payable and
> the line of credit. Borrowings are made as funds are needed to make loans or as
> current obligations become due. Based upon our success in obtaining borrowings
> in the past, we are confident that we will be able to obtain borrowings in the
> future in sufficient amounts, along with payments to be received on loans, to
> timely meet our obligations.
>     -11-CHURCH LOANS
> & INVESTMENTS TRUST(A Real
> Estate Investment Trust)
>     Item 2. Management's Discussion and Analysis or Plan of Operation (Continued)
>     Inflation
>     At June 30, 2004, the
> weighted average interest rate on our mortgage loan and church bond portfolio
> was 6.88% per annum while the weighted average interest rate upon all our
> borrowings was 3.02% per annum. Although a majority of the loans constituting
> our loan portfolio have been made at variable rates of interest that generally
> reprice either daily, annually, or otherwise periodically, a portion of the
> loans constituting our loan portfolio have been made at fixed rates of interest
> and therefore are not subject to being increased or decreased during the term of
> the loan. All of our indebtedness is either directly or indirectly tied to the
> prime rate of interest charged by major banking institutions and, therefore, is
> subject to fluctuation. During periods of inflation, the prime rate of interest
> charged by major banking institutions, as well as the interest rate or cost of
> borrowing money from any lender, generally increases. Consequently, during an
> inflationary period our interest expense would increase. Since our interest
> income would not increase as rapidly, an increase in our interest expense would
> decrease our net income. However, interest income should subsequently increase
> as variable rate loans reprice. Should the amount of our loans and the amount of
> our indebtedness remain constant, and should the weighted average interest rate
> upon the indebtedness increase to approximately 19.13% per annum, the interest
> income and the interest expense of the Trust would be substantially equal.
>     Off-Balance
> Sheet Arrangements
>     We have no off-balance sheet arrangements or
>     commitments other than our normal loan commitments.
>     New Accounting
> Standards
>     The Trust does not believe the
> adoption of any recently issued pronouncements by the Financial Accounting
> Standards Board will have a significant impact on its financial statements.Item 3.  Controls and Procedures
>     The Trusts chief
> executive officer and its senior vice president are charged with making an
> evaluation of the Trusts disclosure controls and procedures. These
> controls and procedures are designed to ensure that information required to be
> disclosed in reports mandated by the Securities Exchange Act of 1934 is
> recorded, communicated to management, and accurately reported within the
> required time periods. The Trusts chief executive officer and senior vice
> president have concluded, based upon their evaluation of these controls and
> procedures as of June 30, 2004, that the Trusts disclosure controls and
> procedures are effective.
>     There have been no
> significant changes in the Trusts internal controls or in other factors
> that could significantly affect these controls subsequent to the date of their
> evaluation.
>     -12-

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CHURCH LOANS
& INVESTMENTS TRUST(A Real
Estate Investment Trust)

PART II. OTHER INFORMATION

> Item 6(a) Exhibits:Exhibit 31.1 - Certification by the President and CEO Pursuant to Section 302 of the Sarbanes-Oxley Act and Rule
>       13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934
>       Exhibit 31.2 - Certification  by the Senior Vice President
>       and CFO Pursuant to Section 302 of the Sarbanes-Oxley Act and Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934
>       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 - President & CEO
>       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 - Senior Vice President and CFO



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CHURCH LOANS
& INVESTMENTS TRUST

SIGNATURESIn accordance  with the  requirements  of the Exchange Act, the  registrant  has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.DATE:  August 13, 2004CHURCH LOANS & INVESTMENTS TRUST
By:     /s/ B. R. McMorries
B. R. McMorriesChairman of the Board ofTrust ManagersDATE:  August 13, 2004CHURCH LOANS & INVESTMENTS TRUST
By:     /s/ Kelly ArcherKelly ArcherPresident and Chief
    Executive Officer


-14-

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> CHURCH LOANS & INVESTMENTS TRUSTEXHIBIT INDEX

ExhibitNumberDescription
          PageExhibit 31.1

          Certification by the President and CEO Pursuant to Section 302 of the Sarbanes-Oxley Act and Rule 13a-14(a) or 15d-14
          (a) under the Securities Exchange Act of 1934.

          
          16Exhibit 31.2

          Certification by the Senior Vice President and CFO Pursuant to Section 302 of the Sarbanes-Oxley Act and Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934.
          
          17Exhibit 32.1
          Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 - President & CEO.
          
          18Exhibit 32.2
          Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 - Senior Vice President
          and CFO.
          19 -15-


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