________________________________________________

                                 FORM 10-KSB405

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, DC 20549
              ________________________________________________

               [ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                    For the Fiscal Year Ended March 31, 1997

               [___] TRANSITION REPORT UNDER SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

              For the transition period from _________to ________.

                            Commission File No. 08117
              ________________________________________________

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

               Texas                                   75-6030254
    _______________________________                ___________________
    (State or other jurisdiction of                  (IRS Employer
    incorporation or organization)                 Identification No.)

         5305 I-40 West, Amarillo, Texas                  79106
    ________________________________________            __________
    (Address of principal executive offices)            (Zip Code)

                                 (806) 358-3666
                          ___________________________
                          (Issuer's telephone number)

         Securities registered pursuant to Section 12(b) of the Exchange
         Act:  None

         Securities registered pursuant to Section 12(g) of the Exchange
         Act:  Shares of Beneficial Interest

              ________________________________________________

              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.

                         Yes  [ X ]          No [___]

              Check if there is no disclosure  of delinquent  filers in response
         to Item 405 of Regulation S-B contained in this form, and no disclosure
         will be contained, to the best of registrant's
<PAGE>



         knowledge,  in definitive proxy or information statements  incorporated
         by reference  of part III of this Form 10-KSB or any  amendment to this
         Form 10-KSB.   [ X ]

              Issuer's revenues for its most recent fiscal year: $3,841,206.

              The   aggregate   market   value  of  the  voting  stock  held  by
         non-affiliates of the registrant is $14,642,356.50 as of June 10, 1997.

              The number of shares  outstanding of each of the issuer's  classes
         of common stock, as of March 31, 1997 is 7,007,402 shares of beneficial
         interest.

                      Documents Incorporated by Reference:

              Portions of the Annual Report to  Shareholders  for the year ended
         March 31, 1997, are incorporated by reference into Parts II and III.

              Exhibits  3(a) and  3(b)  included  in Form  S-11  under  File No.
         2-51235 are incorporated by reference into Part III.



                                      -2-

<PAGE>




                               TABLE OF CONTENTS
                        FORM 10-KSB ANNUAL REPORT - 1997
                        CHURCH LOANS & INVESTMENTS TRUST

                                                                      Page
                                                                      ____
        PART I

             Item 1:  Description of Business ................          4
             Item 2:  Description of Properties ..............          6
             Item 3:  Legal Proceedings ......................          6
             Item 4:  Submission of Matters to a Vote of
                       Security Holders ......................          6


        PART II

             Item 5:  Market for Registrant's Common Equity
                       and Related Stockholder Matters .......          6
             Item 6:  Management's Discussion and Analysis or
                       Plan of operation .....................          7
             Item 7:  Financial Statements ...................         13
             Item 8:  Changes in and Disagreements with
                       Accountants on Accounting and
                       Financial Disclosure ..................         13


        PART III

             Item 9:  Directors, Executive Officers, Promoters
                       and Control Persons; Compliance with
                       Section 16(a) of the Exchange Act .....         13
             Item 10: Executive Compensation .................         14
             Item 11: Security Ownership of Certain Beneficial
                       Owners and Management .................         15
             Item 12: Certain Relationships and Related
                       Transactions ..........................         16
             Item 13: Exhibits and Reports on Form 8-K .......         17


                                      -3-
<PAGE>
                                     PART I

               Item 1:       DESCRIPTION OF BUSINESS

               Church Loans &  Investments  Trust ("the Trust") is a real estate
               investment  trust  organized under the laws of the State of Texas
               in March 1963.  Although the Trust has the authority to engage in
               the business of buying,  selling and leasing of real estate,  the
               Trust has heretofore restricted its business activities primarily
               to making loans to churches and other nonprofit organizations and
               assisted  living centers which are secured by a first mortgage on
               real estate owned by such borrowers.

               The  period  of  duration  of  the  Trust,  unless  dissolved  in
               accordance with law, or by the consent of the owners of shares of
               beneficial interest in the Trust, is perpetual.  The Trust may be
               dissolved by the affirmative  vote of not less than two-thirds of
               the owners of outstanding shares of the Trust.  Owners of Secured
               Savings Certificates, a debt instrument issued by the Trust, have
               no vote in  regard  to any  activities  of the  Trust,  including
               dissolution.

               The  control  and  management  of the Trust  properties,  and all
               powers  necessary  or  appropriate  to effect  any and all of the
               purposes for which the Trust is organized, is vested in the Board
               of Trust Managers.  All managers are members of a congregation of
               the Church of Christ.

               The number of shares of  beneficial  interest  in the Trust which
               the Trust is authorized to issue is unlimited.

               The Trust is qualified as a "real estate  investment trust" under
               Sections  856-858 of the Internal Revenue Code of 1986 as amended
               (the "Internal  Revenue Code" or "Code").  It is the intention of
               the Trust to  continue  to  qualify as a real  estate  investment
               trust under the Code.

               The  Trust  maintains  an  office  located  at  5305  I-40  West,
               Amarillo, TX 79106 (telephone 806/358-3666).

               As  mentioned  above,  the  Trust  is  primarily  engaged  in the
               business of making mortgage loans to churches and other nonprofit
               organizations  and assisted  living  centers.  The Declaration of
               Trust  restricts the investments of the Trust to loans secured by
               a first  mortgage,  deed of  trust or other  lien  covering  real
               property  with the  amount of such loans not to exceed 66 2/3% of
               the value of the real  property  securing such loan as determined
               by a competent independent appraiser. Although the Trust has been
               primarily in the  business of making  long-term  mortgage  loans,
               during the past several years it has been more involved in making
               short-term   interim  or   construction   loans  to  finance  the
               construction of church

                                      -4-
<PAGE>
               buildings,  the purchase of real estate,  or the  refinancing  of
               existing  indebtedness.  Most,  if not all, of the interim  loans
               presently  being  made by the  Trust  are  associated  with  bond
               offerings of churches and other  nonprofit  organizations.  These
               interim loans are scheduled to be repaid from the proceeds of the
               bond offerings.

               The Trust is not limited to the location of the property securing
               any  loans  in which  it may  invest  and  seeks  to  spread  its
               investments in areas of the United States where favorable  yields
               prevail.

               As of March 31,  1997,  the Trust has 169  permanent  and interim
               mortgage loans and investments in church bonds having a principal
               balance of $35,448,707, with the average principal amount thereof
               being  $209,755.66.  The interest  rates on these loans vary from
               7.0% to 17% per annum with the weighted  average interest rate of
               mortgage  loans and church  bonds being 10.82% per annum at March
               31, 1997. The original terms of these loans vary from one year to
               thirty years, with the majority being for a term of twenty years.

               During the fiscal year of the Trust ending  March 31,  1997,  the
               net income of the Trust was $2,126,758, as compared to $2,359,130
               in fiscal 1996,  a decrease of 9.85%.  The decrease in net income
               of  the  Trust  was  due to  several  factors,  including  (a) an
               increase  in  non-performing  loans;  (b) a  decrease  in  income
               realized from loan purchase discounts;  and (c) a decrease in the
               average  annual  interest  rate on loans and church bonds held by
               the Trust.

               The net  income  of the  Trust  for each of the  quarters  during
               fiscal  1997  was  as  follows:  first  quarter-$471,624;  second
               quarter-$595,170;    third    quarter-$580,120;    and     fourth
               quarter-$479,844.

               The  operational  expense of the Trust  increased  from  $554,397
               during  fiscal 1996 to $561,527 in fiscal 1997.  The  operational
               expenses  of the  Trust  were  approximately  14.62% of its gross
               income for the year ended  March 31,  1997 as  compared to 13.18%
               for the year ended March 31, 1996. The operational expense of the
               Trust   included   general  and   administrative   expenses   and
               compensation to members of the Board of Trust Managers.

               During  fiscal  1997,   the  Trust   advanced  loan  proceeds  of
               $16,691,347  on 46  different  loans.  Most,  if not all, of such
               loans bear  interest at a variable  rate equal to 2% per annum in
               excess of the prime rate of interest published by the Wall Street
               Journal and known as the "Wall Street Journal Prime."

               During  fiscal  1997,  the Trust  employed a total of 4 full time
               employees  and  employed,  as needed,  one  additional  part-time
               employee.

                                      -5-
<PAGE>
     Item 2:   DESCRIPTION OF PROPERTY

               The Trust  maintains  as its only place of  business  its offices
               located at 5305 I-40 West, in Amarillo,  Texas.  Such building is
               owned by the Trust and is occupied solely by the Trust.  There is
               no debt owed by Trust in regard to its real property.

               The real properties of the Trust are not a significant portion of
               the  Trust's  assets,  representing  less than 1% of the  Trust's
               total assets.

               As  previously  mentioned,  the Trust's  primary  business is the
               making  of  mortgage  loans  to  churches  and  other   nonprofit
               organizations  and assisted  living  centers.  The Declaration of
               Trust  restricts the investments of the Trust to loans secured by
               a first  mortgage,  deed of trust,  or other lien  covering  real
               property  with the  amount of such loans not to exceed 66 2/3% of
               the  value  of  the  real  property   securing  such  loan.   The
               Declaration of Trust may not be amended  without the  affirmative
               vote of two-thirds  (2/3 rds) of the  Certificates  of Beneficial
               Interest  entitled to vote. The Board of Trust Managers'  general
               policy is to limit investment of Trust assets in any one mortgage
               loan to not more than $2,000,000. All such investment in mortgage
               loans is for the purpose of earning income for the Trust.

     Item 3:   LEGAL PROCEEDINGS

               None

     Item 4:   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

               None

                                     PART II

     Item 5:   MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
               MATTERS

               (a)           Market Information

               There is no  established  public trading market for the shares of
               beneficial  interest of the Trust.  During fiscal 1997 a total of
               126,880  shares  were  sold in the  secondary  market  at  prices
               ranging  from $2.20 to $3.00 per share.  The last sale during the
               fiscal  year was at $2.25 per share.  During  fiscal  year 1996 a
               total of  81,805  shares  were  sold in the  secondary  market at
               prices ranging from $2.25 to $2.31 per share.

                                      -6-
<PAGE>
               The  range  of  high  and  low  bid  information  for  shares  of
               beneficial interest of the Trust for each quarter within the last
               two fiscal years is as follows:


                  Quarter           Fiscal 1997   Fiscal 1996
                  -------            High    Low   High   Low
                                    _____   ____  ______ _____
                  April-June .....  $3.00  $2.25  $2.30  $2.25
                  July-September .   2.30   2.25   2.30   2.25
                  October-December   2.50   2.25   2.31   2.25
                  January-March ..   2.40   2.20   2.30   2.25

               The source of the above  information  is the Trust's own records.
               The Trust serves as the Transfer Agent for its own shares.

               (b) Holders

               At March 31, 1997 there were 2,774 shareholders of the Trust.

               (c) Dividends

               Cash dividends on all outstanding  shares of beneficial  interest
               in the Trust are declared twice annually,  for the 3 month period
               ending  March 31, and the 9 month period  ending  December 31. In
               fiscal 1996 the Trust paid a cash dividend of $.32 per share.  In
               fiscal  1997 the Trust  paid a total  cash  dividend  of $.32 per
               share.

     Item 6:   MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

               RESULTS OF OPERATIONS--1997 COMPARED TO 1996

               During the fiscal year ended March 31, 1997,  interest income and
               fees of the Trust decreased by $365,970 (8.70%) over the previous
               fiscal year. Such decrease was  attributable to several  factors,
               including (a) an increase in non-performing loans; (b) a decrease
               in  income  realized  from  loan  purchase  discounts;  and (c) a
               decrease in the average annual  interest rate on loans and church
               bonds held by the Trust.  The  increase in  non-performing  loans
               resulted in an increase  in the  interest  income that would have
               been recorded  under the original terms of  non-performing  loans
               and church bonds from  $310,000 for the year ended March 31, 1996
               to  $389,000  for the year ended March 31,  1997,  an increase of
               $79,000.  Income from the realization of loan discounts from loan
               purchases  also  decreased from $311,975 for the year ended March
               31,  1996 to  $166,457  for the year  ended  March  31,  1997,  a
               decrease of $145,518.  The average annual  interest rate on loans
               and church  bonds held by the Trust  decreased  from 11.21% as of
               March 31, 1996 to 10.82% as of March 31,  1997.  The  decrease in
               interest income caused by the decrease

                                      -7-
<PAGE>
               in the average  annual  interest  rate on loans and church  bonds
               held by the Trust was somewhat  offset by the net increase in the
               amount  of  total   performing   mortgage   loans   and   interim
               construction  loans  held by the  Trust.  Although,  there  was a
               decrease in the amount of performing  mortgage  loans held by the
               Trust from  $21,886,390 as of March 31, 1996 to $19,177,849 as of
               March 31,  1997,  there was an  increase  in  performing  interim
               construction  loans during the recent fiscal year from $7,877,489
               as of  March  31,  1996 to  $12,133,111  as of  March  31,  1997.
               Therefore,  the total performing mortgage loans, church bonds and
               performing interim construction loans held by the Trust increased
               from  $29,763,879 as of March 31, 1996 to $31,310,960 as of March
               31, 1997.

               In fiscal  1997,  the  average  aggregate  amount  of total  debt
               outstanding was $1,353,139 less than in fiscal 1996. Furthermore,
               interest  expense  decreased  by  $183,901.   Such  decrease  was
               primarily  due  to a  decrease  in the  debt  of  the  Trust  and
               secondarily  to a  decrease  in the  Trust's  cost of funds.  The
               approximate  weighted  average  annual  interest  rate  upon  the
               aggregate  outstanding  debt  decreased  from 7.72% during fiscal
               1996 to 7.12% during fiscal 1997.

               The net  income of the Trust  for 1997 was  $2,126,758  ($.30 per
               share),  a decrease of $232,372  (9.85%) from the previous fiscal
               year.  Such decrease was primarily  attributable to a decrease in
               net interest  income in fiscal 1997 as compared to fiscal 1996 as
               discussed  above and to an increase in the provision for possible
               credit losses.  The increase  provision was due to an increase in
               non-performing  assets  and the  general  risk in the  portfolio.
               Dividends  related  to 1997 were  $2,312,442  or $.33 per  share.
               Dividends  are based on  taxable  income  which  varies  from net
               income reported in the financial  statements because of temporary
               differences  (differences  between  the tax  basis of an asset or
               liability  and its reported  amount in the  financial  statements
               that will  result in  taxable  or  deductible  amounts  in future
               years).  Future dividends may be less than net income reported in
               the financial  statements because of variances in these temporary
               differences.

               During fiscal 1997,  the prime interest rate increased from 8.25%
               at March 31,  1996 to 8.50% per annum at March 31,  1997.  Should
               the prime interest rate decrease during fiscal 1998, the interest
               expense of the Trust will  generally  decrease and the net income
               of the Trust will in turn  generally  increase.  Should the prime
               interest rate increase  during fiscal 1998, the interest  expense
               of the Trust will  generally  increase  and the net income of the
               Trust will in turn generally decrease.

               Principal  payments  received on the interim and  permanent  loan
               portfolio and the church bonds held by the Trust  decreased  from
               $18,434,281 during fiscal 1996 to $14,921,586 during fiscal 1997,
               a decrease of 19.06%. This decrease was primarily attributable to

                                      -8-
<PAGE>
               the  increase in interim  loans held by the Trust as of March 31,
               1997 which  were not paid off  during  the fiscal  year and to an
               increase in the amount of non-performing  loans of the Trust from
               $2,769,345  as of March 31,  1996 to  $3,158,484  as of March 31,
               1997.  The  non-performing  loans of the Trust as compared to the
               entire loan  portfolio  of the Trust  increased  from 8.51% as of
               March 31, 1996 to 9.16% as of March 31, 1997.

               LIQUIDITY AND CAPITAL RESOURCES

               The  Trust  is  engaged  primarily  in  the  business  of  making
               permanent  and  interim  loans to churches  and other  non-profit
               organizations.  To fully utilize the Trusts  resources,  in 1995,
               the Trust began making certain  interim real estate  construction
               loans to entities  other than  churches.  At March 31, 1997,  the
               Trust had  $6,584,000 in  commitments  to one borrower to finance
               the construction of three assisted-living  centers. The assets of
               the Trust primarily  consist of its loan portfolio and its office
               building and facilities.  The operational expense of the Trust is
               comprised of the maintenance of its office building,  the payment
               of the  salaries of its  management  and  clerical  staff and the
               payment for legal and accounting  services.  Substantially all of
               the Trust assets are invested in the  permanent and interim loans
               made by the Trust. The only potential  liquidity  problems of the
               Trust are related to the timely and proper repayment by the Trust
               of the leveraged funds it has borrowed to make loans in excess of
               its  capital  and the  ability  to fund  loan  commitments  which
               totalled  $13,580,000 at March 31, 1997. All of the  indebtedness
               of the  Trust  is  generally  classified  as  short  term  having
               maturities ranging from "on demand" to maturities  repayable over
               various periods extending through 2000.

               The  annual  maturities  upon all debt  obligations  of the Trust
               outstanding  as of March 31, 1997 for the next three fiscal years
               are:  1998-$9,558,747;   1999--$2,716,725;  and  2000-$1,344,376.
               These debt obligations primarily consist of the Trust's bank line
               of  credit,   Master  Note   Agreements   and   Secured   Savings
               Certificates  ("Certificates")  which have been previously issued
               by the Trust.  Certificates outstanding as of March 31, 1997 that
               will mature  during the next three  years are:  1998--$3,512,871;
               1999-$2,716,725; and 2000-$1,344,376.

               At March 31, 1997 loans to the Trust under Master Note Agreements
               which are in effect demand notes total  $4,312,875.  In the past,
               the Trust has utilized its bank line of credit, principal paid to
               the Trust upon its outstanding  loan portfolio,  and the proceeds
               received  from  the  sale of  Certificates  in  order to meet its
               maturing obligations.

               At March 31,  1997,  the  balance  which could be borrowed by the
               Trust upon its bank line of credit was $8,266,999.  The principal
               payments scheduled to be received by the Trust upon its loan

                                      -9-
<PAGE>
               portfolio for the years ending March 31, 1998,  1999 and 2000 are
               $16,449,579,  $1,613,230, and $1,445,402,  respectively. Assuming
               all of these  scheduled  principal  payments are received,  these
               payments,  together with the balance available to Church Loans on
               its  bank  line of  credit,  would  allow  Church  Loans  to have
               sufficient  funds to meet its maturing  obligation  and fund loan
               commitments without the necessity for Church Loans having to sell
               any additional Certificates or borrow funds from other sources.

               During  fiscal 1997 and 1996 the Trust sold  Certificates  in the
               principal amounts of $2,648,579 and $4,595,999, respectively. Due
               to the cost of  registration  and of sales of such  Certificates,
               the cost of these  funds  are  normally  higher  than the cost of
               borrowing from bank sources or master notes. Therefore, the Trust
               is  presently  considering   discontinuing  the  registration  of
               Certificates  and seeking  additional bank financing.  If so, the
               Trust will have to cease the sales of Certificates as of July 16,
               1997. Based upon the success of the Trust to obtain borrowings in
               the past, the Trust is confident that, should it be necessary, it
               will be  able to sell  Certificates  or  obtain  additional  bank
               financing  in the future in  sufficient  amounts for the Trust to
               timely  meet  all  of  its   obligations.   To  the  extent  that
               Certificates  sold by the Trust have maturity  dates of one year,
               or less,  the  financial  condition  of the  Trust  would  not be
               substantially  improved since the proceeds  received by the Trust
               from the sale of Certificates will, of necessity,  be used to pay
               the  principal and interest  upon  Certificates  maturing in this
               period.

               Should all the  scheduled  principal  payments upon loans made by
               the Trust not be received, and should the Trust elect not to sell
               Certificates  or be unable  to sell  Certificates  with  maturity
               dates  and in  amounts  described  above or  should  the Trust be
               unable  to  borrow  against  its  line  of  credit,   and  should
               borrowings  from  other  sources  not be  available  it  would be
               necessary  for the Trust to sell a portion of its  mortgage  loan
               portfolio  in  order  for  it  to  meet  all  of  its   financial
               obligations. At March 31, 1997, the principal balance of the loan
               and  church  bond  portfolio  of the Trust was  $34,469,444.  The
               weighted  average  interest  rate on loans and  church  bonds was
               10.82%  per  annum.  In  view  of  the  normal  marketability  of
               conventional  loans,  the Trust  would  probably  be  required to
               discount  the great  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 $31,079,950,  $26,639,957,  and $23,309,963,
               respectively.  There is no assurance that the Trust would be able
               to sell all, or a portion of, its  portfolio  of loans,  in which
               event,  it would be necessary  for the Trust to secure a loan, or
               loans, from a lender in order for the Trust to meet its financial
               obligations.  There is no assurance  that the Trust would be able
               to secure a loan in such instance. The Trust has sold only

                                      -10-
<PAGE>
               one of the loans in its mortgage loan portfolio and therefore has
               limited experience in this area.

               Principal payments scheduled to be received by the Trust upon its
               permanent loan portfolio  during the years ending March 31, 1998,
               1999 and 2000, if not used to fund new loan commitments, would be
               used to reduce the outstanding  indebtedness of the Trust. Should
               the Trust use the payments of  principal  which shall be received
               upon its loan portfolio to reduce its  outstanding  indebtedness,
               the  interest  expense  of  the  Trust  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 by the Trust upon its 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 the Trust  upon its  outstanding  debts is  directly,  or
               indirectly,  tied to the prime rate of interest  charged by major
               domestic banks.

               As of March 31, 1997,  a  substantial  portion of the  promissory
               notes evidencing the loans made by the Trust have been pledged to
               secure its outstanding indebtedness. At March 31, 1997 promissory
               notes in the principal  amount of $9,087,494  had been pledged to
               secure  Certificates which had been previously sold by the Trust.
               The  required  collateral  for these  Certificates  (based on the
               ratio of 1.25 to 1 of notes pledged to the  principal  balance of
               the  Certificates  in  Series  A-N  and a  ratio  of 1.0 to 1 for
               Certificates  in Series O) was  $7,832,722,  leaving an excess of
               promissory  notes which have been  pledged by the Trust to secure
               said Certificates of $1,254,772.  Additionally,  promissory notes
               totalling $8,013,983 were pledged against the bank line of credit
               which had a total outstanding balance of $1,733,001. The required
               collateral for this bank loan was  $1,906,301,  leaving an excess
               of  promissory  notes which have been pledged to secure said bank
               notes  of  $6,107,682.  These  excess  promissory  notes  may  be
               reassigned  by the  Indenture  Trustee or bank to the Trust to be
               sold in order  for the Trust to meet its  financial  obligations.
               Should  it be  necessary  in  order  for the  Trust  to meet  its
               financial obligations, these excess notes amounting to $7,362,454
               and other additional  promissory notes in the approximate  amount
               of  $17,367,967  (for a total  amount  of  $24,730,421)  would be
               available  to  be  sold  by  the  Trust  to  meet  its  financial
               obligations.  Should the excess  promissory  notes be assigned by
               the  Indenture  Trustee  or  bank  to  the  Trust  as  heretofore
               described, all outstanding Certificates sold by the Trust and the
               bank line of credit would  continue to be secured by the required
               ratio  of  notes  pledged  to  the  principal  balance  of  these
               Certificates  and the bank line of credit.  There is no assurance
               that the Trust would be able to sell all, or any portion of these
               notes.

                                      -11-
<PAGE>
               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 an increase in
               the amount of non-performing  loans as of March 31, 1997 compared
               to March 31, 1996,  management does not expect material increases
               in such  loans  in the  future.  Accordingly,  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 sale
               of and payments on  Certificates  and  borrowings and payments on
               notes payable and the line of credit.  Certificates  are sold and
               borrowings  are  made as funds  are  needed  to make  loans or as
               current  obligations  become  due.  Based upon the success of the
               Trust to sell Certificates and obtain borrowings in the past, the
               Trust is confident that it will be able to sell  Certificates and
               obtain borrowings in the future in sufficient amounts, along with
               payments to be received on loans, to timely meet its obligations.

               INFLATION

               At March 31, 1997,  the  weighted  average  interest  rate on the
               mortgage  loan and church bond  portfolio of the Trust was 10.82%
               per  annum  while the  weighted  average  interest  rate upon all
               borrowings of the Trust was 7.36% per annum.  Although a majority
               of the loans  constituting  the loan  portfolio of the Trust have
               been made at variable  rates of interest that  generally  reprice
               either daily or annually, a portion of the loans constituting the
               Trust's 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 the indebtedness of the Trust
               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
               the  interest  expense  of the Trust  would  increase.  Since the
               interest  income of the Trust would not  increase as rapidly,  an
               increase in the interest  expense of the Trust would decrease the
               net  income  of  the  Trust.  However,   interest  income  should
               subsequently increase as variable rate loans reprice.  Should the
               amount  of the loans and the  amount of the  indebtedness  of the
               Trust remain  constant,  and should the weighted average interest
               rate upon the indebtedness  increase to approximately  28.20% per
               annum,  the interest income and the interest expense of the Trust
               would be substantially equal.

                                      -12-
<PAGE>
     Item 7:   FINANCIAL STATEMENTS

               Financial  Statements at March 31, 1997, and 1996 and for each of
               the  years in the  two-year  period  ended  March 31,  1997,  are
               incorporated  by  reference  from Pages 13 through 27 of the 1997
               Annual Report to Shareholders.

               The report of independent  auditors with respect to the financial
               statements at March 31, 1997,  and 1996 and for each of the years
               in the two-year  period ended March 31, 1997 is  incorporated  by
               reference from Page 12 of the 1997 Annual Report to Shareholders.

     Item 8:   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
               ACCOUNTING AND FINANCIAL DISCLOSURE

               KPMG Peat Marwick LLP was  previously  the principal  accountants
               for the Trust. As of June 1, 1995, KPMG Peat Marwick LLP sold its
               Amarillo,  Texas office to Clifton Gunderson P.L.L.C.  Therefore,
               on June 14, 1995 the Trust dismissed KPMG Peat Marwick LLP as the
               Trust's independent auditors.  The decision to change accountants
               was approved by the Board of Trust Managers.

               The KPMG Peat Marwick LLP report on the financial  statements for
               the  1995 and 1994  fiscal  years  did not  contain  any  adverse
               opinion,   disclaimer  of  opinion,   nor  any  qualification  or
               modification  as  to  uncertainty,  audit  scope,  or  accounting
               principles.

               Furthermore,  there were no disagreements  with KPMG Peat Marwick
               LLP  on  any  matter  of  accounting   principles  or  practices,
               financial statement disclosure,  or auditing scope or procedures,
               which  disagreements if not resolved to their  satisfaction would
               have  caused  them to make  reference  in  connection  with their
               opinion to the subject  matter of the  disagreement  in regard to
               the audits of the fiscal years ended March 31, 1994 and March 31,
               1995.

               The Board of Trust Managers engaged Clifton  Gunderson  P.L.L.C.,
               independent  certified public  accountants,  on June 14, 1995, as
               the  auditors of the  financial  statements  of the Trust for the
               fiscal year ending March 31, 1996.

                                    PART III

     Item 9:   DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
               PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE
               ACT

               (a)  Board  of  Trust  Managers.  The  following  information  is
               furnished as to each individual who now serves as a member of the
               Board of Trust Managers of the Trust:

                                      -13-
<PAGE>
               B. R. McMorries,  age 70, is a consulting engineer. He has served
               as a Trust Manager since 1963. He serves as Chairman of the Board
               of Trust Managers.

               Foy W. Shackelford,  age 82, is a retired dentist.  He has served
               as a Trust Manager since 1963.

               Everett B. Blanton,  age 75, is a retired dentist.  He has served
               as a Trust Manager since 1963.

               Larry Brown,  age 54, is the  President of Larry Brown  Realtors,
               Inc. and is a licensed realtor.  He has served as a Trust Manager
               since  1981.  He  serves  as  Secretary  of the  Board  of  Trust
               Managers.

               Jack R.  Vincent,  age 67, is  engaged in  farming  and  ranching
               operations. He has served as a Trust Manager since 1989.

               Robert  E.  Martin,  age 47,  is the  President/CEO  of  Santa Fe
               Federal  Credit  Union.  He has served as a Trust  Manager  since
               1990. He serves as Vice-Chairman of the Board of Trust Managers.

               Steve  Rogers,  age 49, is the  President  of Steve Rogers Co., a
               real  estate  appraisal  firm.  He has served as a Trust  Manager
               since 1990.

               Mike Bahn, age 53, is the President of Amarillo Blueprint Co., an
               office equipment and supply and reproduction  services  business.
               He has served as a Trust Manager since May, 1997. Pursuant to the
               ByLaws of the Trust,  the Board of Trust  Managers  appointed Mr.
               Bahn to the Board of Trust managers at its May, 1997 meeting.

               (b) Executive Officers. The following information is furnished as
               to each individual who now serves as an executive  officer of the
               Trust who is not mentioned under "Board of Trust Managers" above:

               M. Kelly  Archer,  age 45,  serves as Manager of  Operations  and
               Chief  Financial  Officer  of  the  Trust.  As  such  Mr.  Archer
               functions as the Executive  Officer of the Trust.  Mr. Archer has
               held this position for 15 years.

     Item 10:  EXECUTIVE COMPENSATION

               (a)  Executive Officers:

               The  following  table sets forth  certain  information  regarding
               compensation  paid during each of the Trust's  last three  fiscal
               years to the Trust's Manager of Operations  (CEO).  The Trust has
               no other  executive  officers  whose  salary,  bonuses  and other
               compensation  earned  during  fiscal 1997  exceeded  $100,000 for
               services rendered in all capacities.

                                      -14-
<PAGE>
                                         Annual Compensation
                                _____________________________________
         Name and Principal     Fiscal                   Other Annual
              Position           Year  Salary    Bonus   Compensation
         _____________________  _____  _______   _____   ____________

         CEO-M. Kelly Archer     1997 $101,267     0        $6,520
         Manager of              1996  110,333     0         6,665
         Operations              1995  112,200     0         6,050

               (b) Trust Managers' Compensation:

               The Board of Trust  Managers  of the Trust  were paid  $39,700 in
               cash as a group during the last fiscal year for services as Trust
               Managers.  The  Chairman  of the Board of Trust  Managers,  B. R.
               McMorries,  is paid $400 per month for serving in such  capacity.
               The  remaining  members of the Board of Trust  Managers  are paid
               $200 per month for  serving as a member of the  board.  All Trust
               Managers  are  paid an  additional  $100 per  board or  committee
               meeting attended.  In addition,  a Trust Manager receives $200.00
               per day for their  services  when out of town on trust  business.
               This is done on a very limited basis to inspect the collateral to
               secure a prospective loan.

               The  members of the Board of Trust  Managers of the Trust are not
               otherwise employed or compensated by the Trust.

     Item 11:  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND

               MANAGEMENT

               (a) The following  table indicates the persons known by the Trust
               to  own  beneficially  more  than 5  percent  of  the  shares  of
               beneficial interest in the Trust:

              Name and Address of       Amount of and Nature            Percent
                Beneficial Owner       of Beneficial Ownership          of Class
              ___________________      _______________________          ________

                B. R. McMorries                359,610                    5.13%

               (b) The  following  table  indicates  the  number  of  shares  of
               beneficial  ownership interest in the Trust owned by the Board of
               Trust  Managers and  Executive  Officers,  individually  and as a
               group:

                                      -15-
<PAGE>
              Name and Address of       Amount of and Nature            Percent
                Beneficial Owner       of Beneficial Ownership          of Class
         _______________________________________________________________________

                B. R. McMorries                359,610                    5.13%

                Foy W. Shackelford              22,909                    0.327%

                Everett B. Blanton               2,602                    0.037%

                Larry Brown                     27,254                    0.389%

                Jack R. Vincent                  5,564                    0.079%

                Robert E. Martin                 3,012                    0.043%

                Steve Rogers                     1,300                    0.019%

                Mike Bahn                          110                    0.002%

                M. Kelly Archer                 77,327                    1.10%
                                               _______                    ______
             All Trust Managers and
               Executive Officers              499,688                     7.13%
               as a Group

     Item 12:  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

               The Trust  issues a limited  number of "Master  Notes"  which are
               unsecured  debt  instruments  of the  Trust.  The Trust  pays the
               obligee of such notes  interest  at the rate of one  percent  per
               annum (1%) less than the prime  lending rate of  Boatmen's  First
               National  Bank of Amarillo,  the Trust's  primary  lender.  As of
               March 31, 1997, the Trust had entered into Master Note Agreements
               with B. R.  McMorries,  Chairman of the Board of Trust  Managers,
               and  related  persons,  in the  amount of  $638,900;  with Foy W.
               Shackelford, Member of the Board of Trust Managers, in the amount
               of  $298,472;  and with Larry  Brown,  Secretary  of the Board of
               Trust Managers,  and related persons,  in the amount of $178,026.
               Furthermore,  as of March 31,  1997,  the Trust  had  issued  and
               outstanding  Certificates issued to B. R. McMorries,  Chairman of
               the Board of Trust Managers,  and related persons,  in the amount
               of $290,000.  The terms of such Master Notes and Certificates are
               the same as Master Notes and Certificates entered into with other
               unrelated persons, except as to the amounts thereof.

                                      -16-
<PAGE>
     Item 13:  EXHIBITS AND REPORTS ON FORM 8-K

               (a) Exhibits

               The  Exhibits  listed on the  accompanying  Index to Exhibits are
               filed as a part of this Annual Report.

               (b) Reports on Form 8-K

               None

                                      -17-
<PAGE>
                                   SIGNATURES

         In  accordance  with  Section  13 or 15(d)  of the  Exchange  Act,  the
Registrant has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

                                  CHURCH LOANS & INVESTMENTS TRUST


DATE:  June 25, 1997              By: /S/ B.R. McMorries
                                      __________________
                                      B.R. McMorries,
                                      Chairman of the Board of
                                      Trust Managers

         In accordance  with the Exchange Act, this report has been signed below
by the following  persons on behalf of the  Registrant and in the capacities and
on the dates indicated.

          Signature                 Capacity                  Date
         _____________________  _______________________      _______

         /s/ B.R. McMorries     Chairman of the Board        6-25-97
         __________________      of Trust Managers
         B.R. McMorries          (Principal executive
                                  officer)

         __________________     Vice-Chairman of the         ___/___/___
         Foy W. Shackelford      Board of Trust Managers


         /s/ Larry Brown        Secretary of the Board       6-25-97
         __________________      of Trust Managers
         Larry Brown


         /s/ M. Kelly Archer    Principal financial and      6-25-97
         __________________      accounting officer
         M. Kelly Archer


         __________________     Trust Manager                ___/___/___
         Everett B. Blanton

                                      -18-
<PAGE>
         /s/ Jack R. Vincent    Trust Manager                6-25-97
         __________________
         Jack R. Vincent


                                Trust Manager                ___/___/___
         __________________
         Robert E. Martin


         /s/ Steve Rogers       Trust Manager                6-25-97
         __________________
         Steve Rogers


         /s/ Mike Bahn          Trust Manager                6-25-97
         __________________
         Mike Bahn

                                      -19-
<PAGE>
                        CHURCH LOANS & INVESTMENTS TRUST

                               INDEX TO EXHIBITS

                                   Item 13(a)

         (2)      None

         (3)  -   Declaration of Trust of Church Loans & Investments Trust,
                  as amended, has been previously filed under File No. 2-
                  51235 and is incorporated herein by reference.

                  Bylaws  of  Church  Loans  &  Investments  Trust,  as
                  amended,  has been  previously  filed  under File No.
                  2-51235 and is incorporated herein by reference.

         (4)  -   None other than those listed in (3) above.

         (9)  -   None

         (10) -   None

         (11) -   Statement regarding computation of per share earnings  -
                  omitted since information necessary to make the
                  computation is included in the Financial Statements and
                  Note 4 thereto.

         (13) -   Pages 12 through 27 of the 1997 Annual Report to
                  Shareholders

         (16) -   None

         (18) -   None

         (21) -   None

         (22) -   None

         (23) -   None

         (24) -   None

         (27) -   Financial Data Schedule

         (28) -   None




                                      -20-