UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549




FORM
      10-K
              
              (Mark
      One)þANNUAL REPORT PURSUANT TO
      SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934For
      the fiscal year ended December 31, 2008oTRANSITION REPORT PURSUANT TO
      SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934For
      the transition period
      from          
      to








Commission
file number:  333-4028LA




MINISTRY
PARTNERS INVESTMENT COMPANY, LLC


(Formerly
Ministry Partners Investment Corporation)


(Exact
name of small business issuer in its charter)




CALIFORNIA
                          (State
      or other jurisdiction of
                          incorporation
      or organization)
                        26-3959348
                          (I.R.S.
      Employer Identification
No.)




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


(Address
of principal executive offices)




Issuer’s
telephone number:  (714) 671-5720





Securities
registered under 12(b) of the Exchange Act:  None





Securities
registered under 12(g) of the Exchange Act:  None











Indicate
by check mark if the registrant  is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act.  Yes  o No þ.





Indicate
by check mark if the registrant  is not required to file reports
pursuant to Section 13 or Section 15(d) of the Exchange Act.  Yes
o  No
þ.





Indicate
by check mark whether the issuer (1)  has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 þ  No o.





Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.þ.





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




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.





As of
June 30, 2008, the aggregate market value of the registrant’s common stock held
by non-affiliates was $1,809,572, based upon the
most recent sale of the registrant's common stock.  The
registrant has sold no common equity units within the past sixty days and there
is no public market value for the registrant’s common equity
units.  The number of units of the registrant’s outstanding common
equity units, as of April 13, 2009, was 146,522.





DOCUMENTS
INCORPORATED BY REFERENCE




None.





MINISTRY
PARTNERS INVESTMENT COMPANY, LLC


FORM
10-K





TABLE
OF CONTENTS





Page
      No.FORWARD LOOKING STATEMENTSPart IItem
      1.
                                                            Business
                                                            4Item
      1A.
                                                            Risk Factors
                                                            16Item
      1B.
                                                            Unresolved Staff Comments
                                                            28Item
      2.
                                                            Properties
                                                            28Item
      3.
                                                            Legal Proceedings
                                                            28Item
      4.
                                                            Submission of Matters to a Vote of Security
      Holders
                                                            28Part IIItem
      5.
                                                            Market for our Common Equity, Related Stockholder
      Matters and Issuer Purchases of Equity Securities
                                                            29Item
      6.
                                                            Selected Financial Data
                                                            31Item
      7.
                                                            Management’s Discussion and Analysis of Financial
      Condition and Results of Operations
                                                            31Item
      7A.
                                                            Quantitative and Qualitative Disclosures About
      Market Risk
                                                            49Item
      8.
                                                            Financial Statements and Supplementary
      Data
                                                            49Item
      9.
                                                            Changes in and Disagreements with Accountants on
      Accounting and Financial Disclosure
                                                            50Item
      9A.
                                                            Controls and Procedures
                                                            50Item
      9B.
                                                            Other Information
                                                            51Part IIIItem
      10.
                                                            Directors and Executive Officers of the
      Registrant
                                                            51Item
      11.
                                                            Executive Compensation
                                                            55Item
      12.
                                                            Security Ownership of Certain Beneficial Owners
      and Management and Related Stockholder Matters
                                                            56Item
      13.
                                                            Certain Relationships and Related Transactions,
      and Director Independence
                                                            57Item
      14.
                                                            Principal Accountant Fees and
      Services
                                                            59Item
      15.
                                                            Exhibits and Financial Statements
      Schedules
                                                            59





Explanatory
Note for Purposes of the “Safe Harbor Provisions” of Section 21E of the
Securities Exchange Act of 1934, as amended





Certain
statements in this report, other than purely historical information, including
estimates, projections, statements relating to our business plans, objectives
and expected operating results, and the assumptions upon which those statements
are based, are “forward-looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995, Section 27A of the Securities Act
of 1933 and Section 21E of the Securities Exchange Act of 1934.
Forward-looking statements are included with respect to, among other things our
current business plan, business strategy and portfolio management. These
forward-looking statements generally are identified by the words “believe,”
“project,” “expect,” “anticipate,” “estimate,” “intend,” “strategy,” “plan,”
“may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely
result,” and similar expressions. Forward-looking statements are based on
current expectations and assumptions that are subject to risks and uncertainties
which may cause actual results or outcomes to differ materially from those
contained in the forward-looking statements. Important factors that we believe
might cause such differences are discussed in the section entitled, “Risk
Factors” in Part I, Item 1A of this Form 10-K or otherwise
accompany the forward-looking statements contained in this Form 10-K. We
undertake no obligation to update or revise publicly any forward-looking
statements, whether as a result of new information, future events or otherwise.
In assessing all forward-looking statements, readers are urged to read carefully
all cautionary statements contained in this Form 10-K.








PART
I




Item
1.   BUSINESS




Unless
otherwise indicated or the context otherwise requires, all references below in
this filing to “we”, “us”, and the “Company” are to Ministry Partners Investment
Company, LLC, a California limited liability company, together with its
wholly-owned subsidiary, Ministry Partners Funding, LLC, a Delaware limited
liability entity that was formed as a special purpose entity to purchase
qualifying mortgage loans.





History
of the Company




We were
incorporated in California in 1991 as a credit union service organization
(“CUSO”) that would
invest in and purchase mortgage loans originated by Evangelical Christian Credit
Union, a California chartered not-for-profit credit union (“ECCU”).  We are
currently owned by a group of 13 federal and state chartered credit unions, none
of which owns a majority of voting common equity units in the
Company.  Two of the credit unions own only preferred units while the
others own both common and preferred units.  On December 31, 2008, we
filed Articles of Organization-Conversion with the California Secretary of State
pursuant to which the Company was converted from a California corporation to a
limited liability company organized under California law.


-4-


As a CUSO, we invest in and originate
loans made to evangelical churches and ministry organizations.  Our
loan investments are generally secured by a first lien on church properties
and/or ministry related properties.  Although we have expanded our
role as an originator of church mortgage loans, ECCU remains our primary source
of mortgage loan investments.  We also use ECCU as our primary
servicer for our mortgage loans and to provide underwriting and loan processing
services.





Prior to
2007, our primary business focused on the acquisition of special purpose
mortgage loans that were granted to evangelical Christian churches and
organizations in connection with the acquisition, development and/or renovation
of churches or church related properties.  Funds to acquire these
mortgage loans were provided through the issuance of notes to investors and
equity investments.  In 2007, we created a wholly-owned special
purpose subsidiary, Ministry Partners Funding, LLC (“MPF”), which purchases and
warehouses church and ministry mortgages from us and ECCU for later
securitization.





In the
fourth quarter of 2007, we expanded our capabilities to originate and securitize
qualifying church mortgage loans by entering into two borrowing
facilities.  Given the collapse of mortgage-backed securities markets
and severe credit crisis that has impacted global financial markets in 2008, we
have not securitized any of the mortgage loans that our wholly-owned subsidiary,
MPF, currently owns.





We are a
California limited liability company and our principal executive offices are
located at 915 West Imperial Highway Suite 120, Brea,
California  92821.  Our telephone number is (714) 671-5720,
and our web site is located at www.ministrypartners.org.





Overview
of our Business





We are
one of the few organizations within the western United States formed to assist
evangelical Christian churches and organizations by providing financing for the
acquisition, development and/or renovation of churches or church-related
properties. To date, we have suffered minimal defaults on our mortgage loan
investment(s), and we have not defaulted on or been delinquent in the payment of
any interest or principal on our debt securities sold to investors or any of our
borrowing facilities. While we have expanded the scope of our operations to
include warehousing loans and reselling securitized pools of our church and
ministry mortgage investments, we have not been able to complete a
securitization offering of mortgage loans that are owned by our wholly-owned
subsidiary, MPF, due to the credit crisis and collapse of mortgage-backed
securities markets that became acute in 2008.





We were
formed in 1991 by ECCU for the purpose of providing financial resources that
could assist in meeting the demand for mortgage financing by churches,
ministries and church-related organizations. Since then, this market segment has
continued to grow, and both the size of the loans and number of qualified
borrowers in this sector has steadily increased. The size of the church and
ministry mortgage financing market in the United States has been estimated to
range between $20 billion and $40 billion annually. While there is no assurance
that this market will continue to grow in quantity and quality, we believe that
the demand for these loans will continue to exceed the available lending and
financing sources for this sector. We base our belief on our past experience
with making loans to this market segment. Also, because the financial base and
resources of church and ministry organizations has grown larger and these
organizations increasingly employ more sophisticated accounting and budgetary
practices, more financial institutions are now willing to originate, participate
in or purchase loans in this market segment. As a result, a limited secondary
market for these loans began to develop prior to the advent of the global credit
crisis in 2008 which forced new issuers to postpone, delay or cancel proposed
new commercial mortgage-backed securities.


-5-


With the
availability of financing and mortgage-backed loan facilities being curtailed as
global financial markets adjust to a lack of liquidity in credit markets, we
have primarily relied upon generating profits from our investment mortgage loan
portfolio.  Growth in our investment portfolio and expansion of
origination and loan participation investments in member business loans
originated by credit unions will necessarily depend upon raising additional
capital and/or funding new borrowing facilities.





Conversion
to LLC





Effective
as of December 31, 2008, the Company converted 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 Company and we are managed by a group of managers
that previously served as our Board of Directors.  Our 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.





With the
conversion to the limited liability company form of organization, the Company
seeks to combine in a single entity the best features of other organizational
structures, thereby permitting our owners to obtain the benefit of a corporate
limited liability shield, the pass-through tax and distribution benefits of a
partnership, the avoidance of a corporate level tax offered by a partnership and
the flexibility of making allocations of profit, loss and distributions offered
by  partnership treatment under the Internal Revenue
Code.





Since the
conversion became effective, the Company has been managed by a group
of managers that provides oversight of our affairs and will carry out their
duties similar to the role and function that the Board of Directors performed
under our previous bylaws.  Operating like a Board of Directors, the 5
managers have full, exclusive and complete discretion, power and authority to
oversee the management of our affairs.  Instead of Articles of
Incorporation and Bylaws, our management structure and governance procedures are
now governed by the provisions of an Operating Agreement that has been entered
into by our managers and members.


-6-


Loan
Origination, Acquisition and Underwriting





For any
church mortgage loans that we or our wholly-owned subsidiary, MPF, acquire from
ECCU, we rely upon ECCU’s underwriting capabilities and experience in providing
church and ministry related financing.  ECCU provides loan servicing
for more than $2.1 billion in loans it has originated and sold to other
financial institutions.  In 2008, we or our wholly-owned subsidiary,
MPF, purchased $156.7 million in mortgage loans from ECCU.  We have
also increased our in-house staff and devoted more resources to originating
loans.  We rely on an internally developed loan and investment policy
in originating our church loans.





Servicing





We
currently rely upon ECCU to be our primary servicer for any loans that we
originate or purchase.  All mortgage loans that are purchased by MPF
are serviced by ECCU.  As of December 31, 2008, ECCU was servicing 184
loans for us or our wholly-owned subsidiary, MPF, which totals approximately
$257.9 million in loan principal outstanding.  All loans purchased by
MPF will be eligible for inclusion in a securitized loan portfolio that we
intend to offer to investors in asset backed securities after the financial
markets for mortgage-backed securities stabilizes and pricing for such
securities becomes more feasible for new issuers.  Because the
securitization markets for mortgage-backed securities have been seriously
disrupted by the current global liquidity and credit crisis, there can be no
guarantee that we will be able to sell any of our MPF mortgage loans as part of
a pool of mortgage-backed securities in the near term.





Lending
Activities





Types
of Loans





We invest
primarily in mortgage loans secured by liens on churches, church related and/or
ministry related properties.  Generally, our loans are secured by
first mortgage liens, but we may invest in loans secured by second liens or
which are guaranteed junior secured obligations, or in unsecured loans, if such
loans meet our loan criteria.  We also invest in participation
interests in secured mortgage loans, whereby we own an undivided partial
participation interest in a mortgage with another credit union.  By
investing in a participation interest, we can participate in a larger loan
investment and diversify our mortgage loans investment portfolio while
minimizing our exposure to the aggregate amount of the loan.  When we
invest in a “participation interest”, we purchase an undivided interest in a
loan that has been originated by a credit union and we share principal and
interest payments received from the borrower in an agreed upon
manner.





As a
credit union service organization, we provide additional funds that are used to
acquire ministry loans originated by ECCU and made to its
members.  Before 2007, we relied on ECCU for both the origination and
underwriting of our mortgage loan investments. We have since expanded our
operations to include direct loan origination business to evangelical
organizations, churches, schools and ministries.  ECCU acts as our
primary servicing agent for such loans under a servicing
agreement.


-7-


Construction
Loans





Construction
loans may be made to finance the construction or restoration of facilities for
schools, worship facilities or ministry related purposes.  These loans
normally will have a final maturity that will not exceed five years, with a
construction draw period that will not exceed 12 months.  In most
instances, construction loans are interest-only on the outstanding balance drawn
for construction.  Under our Church and Ministry Loan Policy, the
maximum loan to value ratio for a construction loan is 90%.





Permanent
Loans





We
acquire or originate mortgage loans that may have an adjustable interest rate or
fixed rate.  The term for a mortgage loan may not exceed 30 years and
the maximum loan to value ratio may not exceed 90%.





Line
of Credit





We may
make line of credit arrangements available to borrowers to meet their temporary
working capital needs.  The term of such arrangements typically will
not exceed one year and provide for minimum interest payments during the term of
the loan.  For loans made to members of credit unions that are secured
by real property, accounts receivable, and/or inventory, the maximum loan to
value ratio is 90% based upon the current value of the collateral.





Letters
of Credit





Under our
Church and Ministry Loan Policy, we are authorized to issue letters of credit
granting the person named in the letter the right to demand payment from us for
up to a specified amount provided the conditions set out in the letter are
met.  We require that a letter of credit be fully secured by funds on
deposit or restricted funds on a line of credit with a draw period on the line
of credit that meets or exceeds the draw period on the letter of
credit.





Our
Loan Policies





Historically,
we have relied upon ECCU to originate mortgage loans made to churches, schools,
ministries and other non-profit corporations to purchase land, develop
facilities, construct or renovate worship facilities or refinance existing
indebtedness.  Because ECCU has been making mortgage loans for
ministry related projects for over 40 years, we have relied upon ECCU’s
successful record in underwriting profitable and performing mortgage loans and
depend upon ECCU to service such loans.





We have
expanded our operations to include loan origination activities, offering loans
with fixed and variable interest rates.  We receive an origination fee
and loan processing fee at the inception of each loan.  These fees may
be added to the principal amount of the loan or paid at closing of the
loan.  Our loan underwriting process involves a review and analysis of
the church or ministry’s financial operation, the strength of the organization’s
leadership team, prior history, financial capability, value of collateral and
general creditworthiness.


-8-


Our
Mortgage Loan Investment Standards





Our
policy is to require each of our mortgage loan investments to meet the following
criteria:





·
            Demonstration
      of Ability to Pay. The borrower must
      support its overall ability to timely pay principal and interest by its
      operational and cash flow history. For these purposes, "cash flow"
      includes donations and other revenue which the borrower can demonstrate to
      be continuing. Generally, debt service payments of the mortgage loan may
      not exceed a reasonable percentage of the borrower's cash flow over the
      expected term of the loan.





·
            Term
      of Loan.
      The remaining term of each mortgage loan must be thirty (30) years or less
      from the date we acquire or originate the
loan.





·
            Priority
      of Secured Interest. The mortgage loan must
      be evidenced by a written obligation and must be secured by a deed of
      trust on the mortgaged property.





·
            Funding
      Escrow.
      Mortgage loans must be funded through a formal escrow in a customary
      manner in order to assure that we receive good title to our security
      interest in the loan at the time the loan is
  funded.





·
            Value
      of Security. Each mortgage loan
      must be secured by real property for which there is available for review a
      recent independent appraisal or other independent valuation which supports
      the value of the property.





·
            Title
      Insurance.
      Each mortgage loan must be covered by a standard lender's title insurance
      policy.





·
            Application
      of Loan Proceeds. Procedures must be
      established to assure the loan proceeds will be used for the purposes
      authorized. Unless we waive the requirement for good cause, loan proceeds
      must be available only for expenditures on account of the project for
      which the loan was made.





·
            Inspection. We, the original
      lender, or the lender's representative must have made a personal on-site
      inspection of the property securing the
loan.





·
            Insurance. We require our
      borrowers to obtain standard insurance protection customary in the
      industry, including title insurance (to insure against title defects and
      some forms of documentation), errors and omissions insurance (to insure
      against good faith errors on the part of our employees or agents), and
      liability and casualty insurance in customary amounts. We may also require
      special insurance in connection with particular mortgage loans, including
      earthquake, flood and environmental hazard
  insurance.


-9-


·
            Lines
      of Credit and Letters of Credit.Our typical
      mortgage loan investment is a conventional real estate loan. However, from
      time to time we may make a loan commitment or loan funds pursuant to a
      line of credit or a letter of credit. These commitments and loans are
      typically secured by real property or funds pledged by the borrower. For
      amounts of $500,000 or less, we do not require an escrow or title
      insurance. We require that our loan investment committee approve the
      transaction.





·
            Credit
      Union Members.  Loans can be only made to credit union
      members or our investors, unless otherwise permitted by our Church and
      Ministry Lending Policy.





·
            Location
      of Collateral.Each mortgage loan
      must be secured by real property located in the United
      States.  Unsecured loans may be made without a geographical
      limitation provided that all payments are made in U.S. dollars and the
      financial statements of the borrower are in
  English.





·
            Loan
      Limits.The aggregate
      total of all construction loans or loans secured by junior liens on real
      property may not exceed 200% of our tangible net worth.  The
      maximum aggregate amount of any loan or loans to one borrower (or to
      related entities) may not exceed 25% of our tangible net
      worth.  The maximum aggregate amount of unsecured loans to any
      one borrower  may not exceed 50% of our tangible net
      worth.  For any loan that exceeds 50% of our tangible net worth
      or 7% of our loan portfolio, whichever is less, the loan must be approved
      by our managers prior to funding.





All loan
applicants must complete an application and provide suitable documentation
demonstrating an ability to repay the loan and submit this application to our
offices in Brea, California.  For new loans greater than $500,000, we
or our designated representative will conduct a site visit to inspect the
collateral and conduct our due diligence review of the
applicant.  Each loan must meet our Church Ministry and Loan Policy
guidelines.





With the
conversion of the Company from a corporation to a limited liability company, the
business and affairs of the Company are governed by a group of 10
managers.  Our managers establish our loan policies and review them
periodically and have authorized designated loan officers and our President to
make loans within certain limits established by our managers from time to
time.  The managers also appointed a Credit Review Committee to review
and carry out our loan policy.  The Credit Review Committee may
approve loans up to 25% of our tangible net worth or 5% of our aggregate loan
portfolio, whichever is less.  For loans exceeding the threshold, our
managers have established an Investment Committee that reviews our loans and
loan requests which exceed certain prescribed limits under our loan
policies.   Upon approval, we issue a written loan commitment to
the applicant that specifies the material terms of the loan.





Based in
part on the foregoing criteria, we have adopted a risk rating system for rating
the risk of our mortgage loan investments. Our managers and management team
monitor portfolio composition regularly and may from time to time establish
guidelines for management regulating the fraction of the portfolio that may be
invested in each risk category.  We update the risk ratings of our
mortgage loan portfolio at least annually.


-10-


Securitization





We formed
MPF as a special purpose wholly-owned, bankruptcy remote, limited liability
company under Delaware law for the purpose of serving as an acquisition vehicle
that would purchase qualifying church mortgage loans that we or ECCU
originate.  On October 30, 2007, we completed our first warehouse
lending financing transaction under a Loan, Security and Servicing Agreement
entered into by and among MPF, as borrower, Fairway Finance Company, LLC, as
lender, ECCU, as servicer, BMO Capital Markets Corp., as agent, U.S. Bank
National Association, as custodian and account bank, and Lyon Financial
Services, Inc., as back-up servicer (the “BMO Facility”).  The
BMO Facility provides that up to $150 million in qualifying church mortgage
loans may be purchased by MPF.  We intend to enter into one or more
future asset backed securitization transactions that will enable MPF to pay off
short-term indebtedness, replenish funds for future mortgage loan investments,
limit credit risk and lock in the spread between interest rates on borrowings
with the interest rates on the mortgage loans we acquire or
originate.





Although
MPF has acquired $122.7 million of qualifying church mortgage loans in a
bankruptcy remote special purpose entity since its inception, it currently holds
$111.4 million in qualifying loans that are held with the intent to issue
securities collateralized by these mortgage loans.  By securitizing
mortgage loans in this manner, we minimize the credit risk on our mortgage loans
up to the amount of the securities sold to investors and provide additional
financing capabilities to serve our credit union equity holders and other credit
union members.  In addition, the structure of this securitization
transaction is intended to insulate the securitized loans purchased by our
bankruptcy remote wholly-owned subsidiary, MPF, from our creditors if we file
for bankruptcy so that the loans that secure the asset backed securities will
not be encumbered or available to any of our creditors.





The
current financial crisis facing financial institutions has seriously disrupted
global credit markets, including the market for mortgage-backed securities such
as those we plan to issue through MPF.  As a result, we believe that a
term securitization offering is not possible at this time at prices that make
economic sense for MPF and we have placed a hold on our plans to complete a
mortgage asset backed securitization offering in 2009.





Recent
Developments in Credit Markets





Recent
and current conditions in the credit markets have adversely impacted our plan to
offer a securitized pool of our mortgage loans under the BMO
Facility.  Commencing in late 2007, the credit markets that we depend
on for warehouse lending for origination, acquisition and securitization for our
church mortgage loans began to deteriorate, and that deterioration has continued
and even worsened in 2008.  Although these credit issues began with
problems reported in the subprime market for residential home loans, these
credit conditions have completely halted the completion of securitization
transactions in most asset classes.





Despite
actions by the Federal Reserve Bank to lower interest rates and increase
liquidity, uncertainty among lenders and investors has continued to reduce
liquidity, drive up the cost of lending and drive down the value of assets in
these markets. Under these conditions, banks and other financial institutions
have reported large losses, have demanded that borrowers reduce credit exposure
to these illiquid assets resulting in “margin calls” or reductions in borrowing
availability, and the collective effect of these events have caused massive
sales of underlying assets that collateralize the loans. The need to deleverage
the balance sheets of financial institutions and find buyers for illiquid assets
has also resulted in further downward pressure on market values of the
underlying assets of financial institutions that hold substantial investments in
residential and commercial real property.


-11-


Our
business model depends on the availability of credit, both for the funding of
our acquisition of mortgage loans and origination of new loans and for the
future securitization of pools of mortgage loans that have been acquired or
originated and funded by short-term borrowings from warehouse lenders and other
institutions providing lines of credit.The continued disruption
and uncertainty in the credit markets have limited our access to new credit
facilities with which to finance additional loan originations.  As a
result, we are currently financing our loan origination activities solely out of
the proceeds of sales of our debt securities and cash generated by our loan
portfolio.  Until the crisis in the U.S financial system eases and
credit becomes more available to finance companies such as ours, we expect to
conduct limited loan origination activities.




Our
Credit Facilities





Members
United Facilities





On
October 12, 2007, we entered into two note and security agreements with Members
United. Members United is a federally chartered credit union located in
Warrenville, Illinois, which provides financial services to member credit
unions. One note and security agreement is for a secured $10 million revolving
line of credit, which we refer to as the “$10 Million LOC,” and the
other is for a secured $50 million revolving line of credit.  The
latter was amended on May 14, 2008 to allow us to borrow up to $100 million
through the revolving line of credit.  We refer to this as the “$100 Million CUSO Line.” Both
credit facilities are secured by certain mortgage loans that we have acquired or
originated. We use the $10 Million LOC for short-term liquidity purposes and the
$100 Million CUSO Line for mortgage loan investments. We may use proceeds from
either loan to service other debt securities.





On August
27, 2008, we borrowed the entire $10 million available on our $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.  The loan bears interest payable monthly at a floating rate
based on the one month London Inter-Bank Offered Rate (“LIBOR”) plus 100 basis
points.  The interest rate on the Members United term loan will be
reset monthly.  Since the credit facility expired on September 1,
2008, no new borrowings may be made under this loan facility.  As of
December 31, 2008, there was a $10.0 million outstanding balance on the Members
United term loan.





The $100
Million CUSO Line expires on September 1, 2012. This loan requires interest-only
payments during the draw period at the fixed offered rate set by Members United,
or at a variable rate indexed to the Federal Funds rate at our option. After the
draw period or term loan adjustment date expires, the then outstanding balance
on the line will be paid monthly over a 5-year period based on a 30-year
amortization at a rate of interest to be set by Members United at the time the
loan is converted.  As of December 31, 2008, the balance on the $100
Million CUSO Line was $89.9 million, and the weighted average interest rate on
the facility draws that have been made under the facility was
4.33%.  Please see section entitled “Management’s Discussion and Analysis
of Financial Condition and Results of Operations, Credit Facilities
Developments,” for a further discussion of this borrowing
facility.


-12-


Both
credit facilities are recourse obligations secured by designated mortgage loans
that we have originated or acquired. We must maintain collateral in the form of
eligible mortgage loans, as defined in the line of credit agreements, after the
initial pledge of $5 million of mortgage loans. As of December 31, 2008,
approximately $111.4 million of loans were pledged as collateral for the $100
Million CUSO Line and the $10 Million Members United term loan. We have the
right to substitute or replace one or more of the mortgage loans serving as
collateral.





The $100
Million CUSO Line contains certain affirmative covenants that are
typical for a credit facility of this nature, including requiring that we
keep our collateral free of liens and encumbrances, timely pay the amounts due
under the facility and provide Members United with current financial statements
and reports.  Other negative covenants prevent us from selling all of
our assets, from consolidating with or merging into another entity, from
impairing or incurring a lien on the collateral securing the credit facility or
creating new indebtedness incurred outside ordinary borrowings in the sale of
debt and note securities, loans entered into for purchasing or originating
mortgage loans, or borrowings entered into by our wholly-owned subsidiary, MPF,
to acquire eligible mortgage loans.





BMO
Facility





On
October 30, 2007, we completed our first warehouse lending  financing
transaction with Fairway Finance Company, LLC and BMO Capital Markets
Corp.  Under the terms of the BMO Facility, MPF was authorized to
acquire up to $150 million in qualifying mortgage loans that we or ECCU
originate.  The BMO Facility contemplates that MPF will be able to
consummate a securitization transaction, thereby enabling MPF to pay off its
outstanding indebtedness to its warehouse lender and continue to originate,
purchase and warehouse qualifying church mortgage loans.





The BMO
Facility requires that MPF maintain a minimum borrowing equity of $20 million or
a 75% maximum loan to asset ratio relative to the net pool balance of eligible
mortgage loans that may be purchased by MPF, as adjusted for certain
concentration limits for eligible loans, whichever is less.  Failure
to satisfy this minimum borrower equity threshold is an event of default under
the loan documents.  Although the BMO Facility has a termination date
of October 30, 2010, the termination date may be accelerated if certain
termination events occur under the loan documents.





The BMO
Facility contains standard borrower representations, covenants and events of
default, including failing to make required payments on the credit facility,
failing to timely cure a borrowing base deficit, incurrence of a default under
MPF's mortgage loan purchase agreements, the occurrence of an event causing
termination of the service agreement, the occurrence of a material adverse event
that affects MPF's ability to collect on its mortgage loan investments, and
other default provisions typical of warehouse financing agreements. The
agreements also contain customary borrower affirmative and negative covenants
that require MPF to operate its activities as a special purpose bankruptcy
remote entity, and to conduct its affairs and operations with ourselves and any
other affiliated entities on an arms-length basis.


-13-


As part
of the BMO Facility financing arrangement, the Bank of Montreal, in its capacity
as a liquidity purchaser, BMO Capital Markets Corp., as liquidity agent, and
Fairway Finance Company, LLC, in its capacity as lender, entered into a
Liquidity Asset Purchase Agreement dated October 30, 2007 (the “Liquidity Agreement”). Under
the terms of that Liquidity Agreement, the Bank of Montreal agreed to serve as a
liquidity bank for the BMO Facility.  As a result of deteriorating
global credit market conditions, the Liquidity Agreement was terminated by BMO
Capital Markets Corp. on or about October 30, 2008 due to the Bank of Montreal’s
refusal to renew its agreement to provide financing assistance under the BMO
Facility.





With the
termination of the Liquidity Agreement on or about October 30, 2008, a “facility
termination date” occurred under the BMO Facility loan documents.  As
a result, MPF could no longer request that any excess funds remaining in the
facility collection account be distributed to MPF after any amounts due under
the facility were paid.  In addition, on or after the occurrence of a
facility termination date, BMO Capital Markets Corp. is permitted to require
that all funds held in the collection account be used to pay all outstanding
expenses and costs due under the facility, then to accrued and unpaid interest
on the outstanding indebtedness under the facility and any remaining amounts
applied to reduce the loan balance on the facility to zero.  The
termination of the Liquidity Agreement also causes all cash payments received
from mortgage payments in the facility collection account to remain in the
facility, thereby preventing MPF from gaining access to any excess funds
available in the BMO Facility collection account after all accrued interest,
expenses and facility costs have been paid.





Commencing
on or after April 30, 2009, and continuing not less than twelve months
thereafter, MPF has also agreed to enter into a term securitization financing
transaction, whole loan sale or other refinancing event in an amount equal to or
greater than $50 million for the purpose of arranging takeout financing for
certain mortgage loans held in the facility.  Failure to meet this
takeout financing commitment constitutes an event of default under the BMO
Facility loan documents.  We have met with representatives of BMO
Capital Markets Corp. to discuss an acceptable solution to this takeout
financing requirement in light of the global credit crisis.  We intend
to continue these discussions in an effort to find a mutually acceptable
solution and we expect to complete these negotiations on or before April 30,
2009.  Assuming that we can satisfy all conditions imposed for an
extension and/or waiver of certain provisions in the BMO Facility loan
documents, we are also requesting that MPF be permitted to request distributions
of a portion of any excess funds held in the facility collection account from
time to time after payment of costs, expenses and accrued interest.





In an
effort to address our obligations under the BMO Facility, we intend to expand
our efforts to raise additional capital through the issuance of debt securities
and other investment vehicles in order to enhance our liquidity and availability
of capital funds.  In addition, we are also evaluating strategies for
reducing our balance sheet leverage that could include the sale of mortgage
assets to banks, credit unions, financial institutions and other
investors.


-14-


Competition





Although
the demand for church financing is both broad and fragmented, no one firm has a
dominant competitive position in the market.  We compete with church
bond financing companies, banks, savings and loan associations, denominational
loan funds, REITs, insurance companies and other financial institutions to
service this market.  Many of these entities have greater marketing
resources, extensive networks of offices and locations, larger staffs and lower
cost of operations due to their size.  We believe, however, we have
developed an efficient, effective and economical operation that (i) specializes
in identifying and creating a diversified portfolio of church mortgage loans
that we or ECCU originate and (ii) preserves our capital base and generates
consistent income for distribution to our note holders and equity
investors.





We rely
upon the extensive experience of our officers, management and managers in
working with ministry related financing transactions, loan origination,
investment in churches, schools, ministries and non-profit
organizations.  We also rely upon the extensive experience of ECCU,
its management team and directors in meeting the financial needs of churches,
ministries, schools and ministry minded members.  Our
agreements  with ECCU provide a steady source of mortgage loans that
are originated or serviced by ECCU and also provide us with a network of
relationships with ministry oriented investors, entities and organizations that
are active in financing ministry related projects.





Regulation





We are
organized as a credit union service organization and, as a result, are subject
to the regulations promulgated by the National Credit Union Administration that
apply to CUSOs.  As a CUSO, we primarily serve the interests of credit
union equity holders and members of such credit unions.  We are also
subject to various laws and regulations which govern:  (1) credit
granting activities; (2) establishment of maximum interest rates; (3)
disclosures to borrowers and investors in our equity securities; (4) secured
transactions; (5) foreclosure, judicial sale and creditor remedies that are
available to a secured lender; and (6) the licensure requirements of mortgage
lenders, finance lenders, brokers and financiers.





We
conduct loan originating activities for churches and related ministry
projects.  Many states regulate the investment in or origination of
mortgage loans.  Under the California Finance Lender’s Law, no lender
may engage in the business of providing services as a “finance lender” or
“broker” without obtaining a license from the California Department of
Corporations, unless otherwise exempt under the law.  We conduct our
commercial lending activities under California Finance Lender License #
603F994.





As we
expand our loan originations outside of the state of California, we will have to
comply with laws and regulations of those states.  The statutes which
govern mortgage lending and origination vary from state to
state.  Because these laws are constantly changing, due in part, to
the challenge facing the housing industry and financial institutions from
subprime lending activities, it is difficult to comprehensively identify,
accurately interpret and effectively train our personnel with respect to all of
these laws and regulations.  We intend to comply with all applicable
laws and regulations wherever we do business, and will undertake a best efforts
program to do so, including the engagement of professional consultants, legal
counsel, and other experts as deemed necessary by our
management.


-15-


Effective
with the filing of Articles of Organization-Conversion with the California
Secretary of State, we have converted from a corporate form of organization to a
limited liability company organized under the laws of the State of
California.  Commencing on December 31, 2008, we intend to be treated
as a partnership rather than a corporation for U.S. tax law
purposes.  As a result, profits and losses will flow directly to our
equity investors under the provisions of our Operating Agreement and
organizational documents.  If we fail to qualify as a partnership in
any taxable year, we will be subject to federal income tax on our net taxable
income at regular corporate tax rates.  As a limited liability company
organized under California law, we are also subject to an annual franchise fee
plus a gross receipts tax on our gross revenues from our California based
activities if our income is in excess of $250 thousand per year.





Patents,
Trademarks and Licensing





We do not
rely upon any significant patent, trademark, license or franchise to operate our
business.  We own the rights to the trademarks “Ministry Partners
Investment Corporation®” and “Ministry Partners®” and design and have obtained
U.S. trademark registrations for both marks with the U.S. Patent and Trademark
Office.





Employees





Effective
as of January 1, 2008, we entered into a staffing agreement with Administaff
Companies, II, L.P. for personnel and administrative services.  As of
December 31, 2008, we had a total of nine full-time employees we engage under
this arrangement.  None of our employees are covered by a collective
bargaining agreement, and we believe that we have an excellent relationship with
our employees and staff.





Item
1A.  RISK FACTORS





Our
business faces many risks.  The risks described below may not be the
only risks we face. Additional risks that we do not yet know of or that we
currently believe are immaterial may also impair our business operations. If any
of the events or circumstances described in the following risk factors actually
occur, our business, financial condition or results of operations could suffer,
and the value of our equity securities could decline. The U.S. economy is
currently in an economic recession and we expect this to have a significant
impact on our business and operations, including, without limitation, the credit
quality of our loan portfolio, our liquidity and our earnings. You should know
that many of the risks described may apply to more than just the subsection in
which we grouped them for the purpose of this presentation. As a result, you
should consider all of the following risks, together with all of the other
information in this Annual Report on Form 10-K, before deciding to invest in our
securities.


-16-


Risks
Related to the Financial Services Industry and Financial Markets





We
do not know what impact the U.S. government’s plans to purchase large amounts of
illiquid, mortgage-backed and other securities, or its plans to modify the terms
of outstanding loans, will have on the financial markets or our
business.





In
response to the financial crises affecting the banking system, financial
markets, investment banks and other financial institutions, the U.S. government
enacted the Emergency Economic Stabilization Act of 2008, or EESA, on October 3,
2008. Pursuant to the EESA, the U.S. Treasury has the authority to, among other
things, purchase up to $700 billion of mortgage-backed and other securities from
financial institutions for the purpose of stabilizing the financial markets. As
part of this plan, the U.S. government also recently made preferred equity
investments in a number of the largest financial institutions. More recently,
the U.S. government has approved an additional financial stimulus package, and
President Obama and members of Congress have proposed modifying the terms of
certain loans, including real estate mortgages and asset-backed securities. On
March 23, 2009, President Obama announced new initiatives that address major
regulatory changes in the manner that financial institutions will be governed in
an effort to remove distressed assets from the balance sheet of banks and
financial institutions that have substantial investments in mortgage-backed
securities.  It is not clear what impact these initiatives will have
on the financial markets, including the illiquidity in the global credit markets
and the downward trends and extreme levels of volatility in the global equity
markets. Moreover, while the details of some of these initiatives are not yet
finalized, it appears that these initiatives will not directly benefit our
business.





Continuance
of current economic conditions could further harm our financial condition,
income and ability to make distributions to our equity holders.




Beginning
in mid-2007 and continuing through the date of this report, the financial system
in the United States, including credit markets and markets for real estate and
real estate-related assets, has been subject to unprecedented
turmoil.  This turmoil has resulted in severe limitations on the
availability of credit, significant declines in the value of real estate and
real estate related assets, impairment of the ability of many borrowers to repay
their obligations and illiquidity in the markets for real estate and real
estate-related assets.  These events have had significant adverse
effects on our business including significant increases in our provision for
loan losses and the unavailability of financing to provide securitization
financing for the loans we hold in our wholly-owned subsidiary, MPF, and support
our current and new mortgage loan investments.  Continuation of
current economic conditions could further harm our financial condition, income
and ability to make distributions to our equity investors.


-17-


Deterioration
of market conditions will likely continue to negatively impact our business,
results of operations and financial condition, including liquidity.





The
market in which we operate is affected by a number of factors that are largely
beyond our control but can nonetheless have a potentially significant, negative
impact on our business. These factors include, among other things:




•
            Interest
      rates and credit spreads;




•
            The
      availability of credit, including the price, terms and conditions under
      which it can be obtained;





•
            Loan
      values relative to the value of the underlying real estate
      assets;




•
            Default
      rates on special purpose mortgage loans for churches and ministries and
      the amount of the related losses;




•
            The
      actual and perceived state of the real estate markets for church
      properties and special use facilities;
and





•
            Unemployment
      rates.




Changes
in these factors are difficult to predict, and a change in one factor can affect
other factors. For example, during 2007, increased default rates in the subprime
mortgage market played a role in causing credit spreads to widen, reducing
availability of credit on favorable terms, reducing liquidity and price
transparency of real estate-related assets, resulting in difficulty in obtaining
accurate mark-to-market valuations, and causing a negative perception of the
state of the real estate markets generally.  These conditions worsened
during 2008 as a result of the ongoing global credit and liquidity crisis and
continue to have a significantly negative impact on our ability to obtain
capital at attractive borrowing rates.  We do not currently know the
full extent to which this market disruption will affect us or the markets in
which we operate, and we are unable to predict its length or ultimate
severity.  If the challenging conditions continue, we may experience
further tightening of liquidity, additional impairment charges as well as
additional challenges in raising capital and obtaining investment or other
financing on attractive terms or at all.  In addition, if current
market conditions continue or deteriorate and we are unable to restructure our
short-term borrowing facilities, we could experience a rapid, significant
deterioration of our liquidity, business, results of operations and financial
condition.





A
prolonged economic slowdown, a lengthy or severe recession, or declining real
estate values could harm our operations.





We
believe the risks associated with our business are more severe during periods
similar to those we are currently experiencing in which an economic slowdown or
recession is accompanied by declining real estate values. Declining real estate
values generally reduce the level of new mortgage loan originations, since
borrowers often use increases in the value of their existing properties to
support the purchase of, or investment in, or renovation of their worship
facilities. Borrowers may also be less able to pay principal and interest on our
loans, and the loans underlying our securities, if the real estate economy
weakens. Further, declining real estate values significantly increase the
likelihood that we will incur losses on our loans in the event of default
because the value of our collateral may be insufficient to cover our investment
in such loans. Any sustained period of increased payment delinquencies,
foreclosures or losses could adversely affect both our net interest income from
loans as well as our ability to originate, sell and securitize loans, which
would significantly harm our revenues, results of operations, financial
condition, liquidity, business prospects and our ability to make distributions
to our equity investors.


-18-


Interest
rate fluctuations and shifts in the yield curve may cause losses.





Our
primary interest rate exposures relate to our mortgage loan investments,
floating rate debt obligations and interest rate swaps. Changes in interest
rates, including changes in expected interest rates or “yield curves,” affect
our business in a number of ways. Changes in the general level of interest rates
can affect our net interest income, which is the difference between the interest
income we earn on our interest-earning assets and the interest expense we incur
in connection with our interest-bearing liabilities and hedges. Changes in the
level of interest rates also can affect, among other things, our ability to
originate and acquire mortgages and the value of our mortgage
investments.





In the
event of a significant rising interest rate environment and/or economic
downturn, loan defaults may increase and result in credit losses that would
adversely affect our liquidity and operating results. Interest rates are highly
sensitive to many factors, including governmental monetary and tax policies,
domestic and international economic and political conditions, and other factors
beyond our control.





Our
ability to execute our business strategy, particularly the growth of our
mortgage loan investments portfolio, depends to a significant degree on our
ability to obtain additional capital. Our financing strategy is dependent on our
ability to obtain debt financing at rates that provide a positive net spread. If
spreads for such liabilities widen or if availability of credit facilities
ceases to exist, then our ability to execute future financings will be severely
restricted.





Risks
of our Business




Our
ability to obtain additional liquidity and capital resources has been, and may
continue to be, adversely affected by the global recessionary economic
conditions and adverse developments in the capital markets.




Our
business requires a substantial amount of liquidity to fund investments, to pay
expenses, to increase our total mortgage loan investments, make interest
payments to our note investors, and to acquire and hold assets. Developments in
the capital markets have substantially reduced the debt and equity capital
available to us and have adversely affected our ability to consummate a
securitization transaction that would enable us to satisfy our takeout financing
covenant in our BMO Facility and execute our business plan.


-19-


With
respect to our borrowing facilities, we believe that certain types of financing
arrangements that we have used will not be available for the foreseeable future
to fund the acquisition or origination of mortgage loan investments we have
typically acquired, including warehouse lines of credit for short-term financing
and securitizations for long-term financing of our mortgage loan investments.
Our continued use of secured bank financing will depend on our ability to
negotiate renewals and acceptable modifications of our current lines of
credit.




We
are seeking, and expect we will continue to seek, alternative financing
arrangements in response to current market conditions, but we cannot assure you
that we will be able to develop these financing sources on acceptable interest
terms, or at all. We may need to use a combination of approaches that involves
the sale of a portion of our mortgage loan investments, identifying new credit
union investors, or other institutional investors to the extent feasible. Our
ability to originate and acquire mortgage loan investments may decline under
alternative financing arrangements which may result in lower income and cash
flow for distribution and a reduction in our mortgage loan investments
assets.




The
failure to secure financing on acceptable terms or in sufficient amounts may
reduce our income by limiting our ability to originate loans and acquire
mortgage loan investments and reduce our interest income and increase our
financing expense. A reduction in our net income could impair our liquidity and
our ability to make distributions to our investors. We cannot assure you that
any, or sufficient, funding or capital will be available to us in the future on
terms that are acceptable to us.




We
may not be able to finance our investments on a long-term basis on attractive
terms, including by means of securitization, which may require us to seek more
costly financing for our investments or to liquidate assets.





When we
acquire mortgage loans that we finance on a short-term basis with a view to
securitization or other long-term financing through our wholly-owned subsidiary,
MPF, we bear the risk of being unable to securitize the assets or otherwise
finance them on a long-term basis at attractive prices or in a timely matter, or
at all. If it is not possible or economical for us to securitize or otherwise
finance such assets on a long-term basis, we may be unable to pay down our
short-term credit facilities, or be required to liquidate the assets at a loss
in order to do so. For example, as a result of the continued deterioration in
the credit markets beginning in 2007, financing investments with securitizations
or other long-term non-recourse financing not subject to margin requirements has
not been available or economical for the past year, and we do not expect it to
be possible or economical to complete a securitization financing transaction for
the foreseeable future. These conditions make it highly likely that we will have
to use less efficient forms of financing for any new investments, which will
result in fewer loan acquisitions or originations of profitable mortgages and
thereby reduce the amount of our earnings available for distribution to our
equity investors and funds available for operations and
investments.


-20-


If
we are unable to obtain an extension or waiver of our commitment to complete a
securitization transaction by April 30, 2009 under our BMO Facility, an event of
default would occur under our loan documents.





When we
entered into the BMO Facility, we anticipated that any mortgage investments made
by our wholly-owned subsidiary, MPF, would be warehoused for future
securitization in a  mortgage-backed securities financing
transaction.  Under our BMO Facility loan documents, we agreed that
commencing on or after April 30, 2009, and continuing not less than 12 months
thereafter, MPF  would enter into a term securitization financing
transaction, whole loan sale or other refinancing event in an amount equal to or
greater than $50 million for the purpose of arranging takeout financing for
certain mortgage loans held in the facility.





Our BMO
Facility was not designed to be a long-term financing arrangement and its
continued use depends on our ability to arrange for, complete and fund the
repayment of this facility in minimum increments of $50 million or more
commencing on or after April 30, 2009.  As of December 31, 2008, MPF
owed $85.3 million under the BMO Facility.  If we are unable to obtain
a waiver, extension or modification of this takeout financing covenant, an event
of default will occur under the BMO Facility loan documents.  In that
event, the lender will be able to exercise any and all remedies under the loan
documents which would include increasing the interest rate on the facility to
the prime rate plus 2%, seizing collateral or selling assets.





If an
event of default occurs under the BMO Facility, all of the assets in the
facility would be subject to seizure or sale, but the lender would not be able
to obtain payment from us to repay any indebtedness owed under the
facility.  We are currently in discussions with representatives of our
BMO Facility lender to work out an acceptable extension, waiver or restructuring
of our credit facility.  While we expect to successfully complete
these discussions on or before April 30, 2009, we cannot assure investors
that we will be able to successfully restructure this facility on favorable
terms or at all.  If we are unsuccessful in this restructuring or
modification of the facility, our liquidity could be materially impaired, an
event of default under our BMO Facility and Members United credit facility could
occur and lead to other consequences which would have a material adverse effect
on our business.





Although
we seek to favorably match the interest rate return on our mortgage loan
investments with out debt financing commitments, we are subject to significant
interest rate risk.





Our
investment and business strategy depends on our ability to successfully finance
our investments in mortgage loans that provide a positive spread as compared to
our cost of borrowing.  A substantial portion of our loan investments
provide for a fixed interest rate with a typical five year
maturity.  Most of our borrowing arrangements with our note investors
and credit facility lenders, however, provide for variable rates of interest
that are indexed to short-term borrowing rates. As a
result, the volatility of interest rates could result in reduced earnings or
losses for us and negatively affect our ability to make distributions of
earnings to our equity investors.


-21-


Limitations
on our liquidity and ability to raise capital may adversely affect
us.





Liquidity
management is critical to the management of our balance sheet and our ability to
grow our business and meet our financing commitments. Our primary sources of
liquidity are our bank credit facilities, issuances of debt and equity
securities in capital markets transactions, prepayments and repayments of our
loan assets and, to a lesser extent, sales of mortgage assets.





Our
general practice in recent years has been to fund loan acquisitions with
borrowings under our bank facilities. We then repay borrowings on our bank
facilities with proceeds from the sale of investor notes, mortgage loan
prepayments and repayments and our operating income. Our ability to access
capital to repay borrowings under our bank facilities is subject to variability
based upon a number of factors, including volatility in the capital markets, the
relative interest rates that we are prepared to pay for our debt facilities, the
ability of our borrowers to access capital to repay or prepay their obligations
to us and our ability to sell our mortgage loan assets. Any occurrence that
disrupts our ability to access capital from these sources may have a material
adverse effect on our ability to grow our business, meet our commitments and
make distributions.





Under the
terms of our $100 Million CUSO Line, two loan tranches of $42,816,455 and
$23,961,623 become subject to an interest rate adjustment on April 3,
2009.  Once the draw period of the facility expires, or the line is
fully drawn, the outstanding balance due under such loans will be termed out
over a five year period with a 30 year amortization payment
schedule.  We are continuing to negotiate with Members United to
convert the $100 Million CUSO Line to a term loan arrangement with a mutually
acceptable interest rate.





While we
are optimistic that we will be able to restructure our debt facility
arrangements with Members United in the next few months, no assurances or
guarantees can be given that we will be able to reach an agreement on a mutually
acceptable interest rate, maturity term or other loan modification
terms.  Failure to reach an acceptable debt restructuring agreement
could have a material adverse effect on our earnings if the interest rate on the
Members United loan facility exceeds our expected interest income from our
mortgage loan investments.





Thus, we
will need access to substantial capital during the first half of 2009 at times
and in amounts that may not match with the timing, terms, conditions and
covenants of our credit facilities.  While we believe that we have
sufficient access to capital under our bank facilities and from our equity note
investors to meet these commitments, our access to liquidity to originate and
acquire mortgage loans will be substantially limited unless and until we can
successfully restructure our credit facilities with Members United, BMO Capital
Markets Corp. and Fairway Finance, LLC.





Our
reliance on significant amounts of debt to finance investments may subject
us to an increased risk of loss, reduce our return on investments, reduce our
ability to make distributions to our equity investors and possibly result in the
foreclosure of any assets subject to secured financing.





We have
historically incurred a significant amount of debt to finance operations, which
could compound losses and reduce our ability to make distributions to our equity
investors. Changes in market conditions have caused, and may continue to cause,
availability of financing to decrease and the cost of financing to increase
relative to the income that we can derive from investments, which has impaired,
and may continue to impair, the returns we can achieve and our ability to make
distributions to our equity investors. Our debt service payments reduce the net
income available for distributions to our equity investors. Most of our assets
are pledged as collateral for borrowings. To the extent that we fail to meet our
debt service obligations, we risk the loss of some or all of our respective
assets to foreclosure or sale to satisfy these debt obligations. Currently, our
Articles of Organization and Operating Agreement do not impose any limitations
on the extent to which we may leverage our assets.


-22-


Our
financing arrangements contain covenants that restrict our operations, and any
default under these arrangements would inhibit our ability to grow our business,
increase revenue and make distributions to our equity investors.




Our
financing arrangements contain extensive restrictions, covenants and events of
default. Failure to meet or satisfy any of these covenants could result in an
event of default under these agreements. Any event of default may materially
adversely affect us. These agreements may contain cross-default provisions so
that an event of default under any agreement will trigger an event of default
under other agreements, giving our lenders the right to declare all amounts
outstanding under their particular credit agreement to be immediately due and
payable, and enforce their rights by foreclosing on or otherwise liquidating
collateral pledged under these agreements.





These
restrictions may interfere with our ability to obtain financing or to engage in
other business activities. Furthermore, our default under any of our financing
arrangements could have a material adverse effect on our business, financial
condition, liquidity and results of operations and our ability to make
distributions to our equity investors.





We
engage in transactions with related parties and our policies and procedures
regarding these transactions may be insufficient to address any conflicts of
interest that may arise.





Under our
code of business conduct, we have established procedures regarding the review,
approval and ratification of transactions which may give rise to a conflict of
interest between us and any employee, officer, trustee, their immediate family
members, other businesses under their control and other related persons. In the
ordinary course of our business operations, we have ongoing relationships and
have engaged in transactions with several related entities. These procedures may
not be sufficient to address any conflicts of interest that may
arise.




Our
reserves for loan losses may prove inadequate, which could have a material
adverse effect on us.




We
maintain and regularly evaluate financial reserves to protect against potential
future losses. Our reserves reflect management's judgment of the probability and
severity of losses. We cannot be certain that our judgment will prove to be
correct and that reserves will be adequate over time to protect against
potential future losses because of unanticipated adverse changes in the economy
or events adversely affecting specific assets, borrowers, industries in which
our borrowers operate or markets in which our borrowers or their properties are
located. If our reserves for credit losses prove inadequate we could suffer
losses which would have a material adverse effect on our financial performance,
the market prices of our securities and our ability to pay
dividends.


-23-


We
are subject to the risks associated with loan participations, such as less than
full control rights.





Some of
our assets are participation interests in loans or co-lender arrangements in
which we share the rights, obligations and benefits of the loan with other
lenders. We may need the consent of these parties to exercise our rights under
such loans, including rights with respect to amendment of loan documentation,
enforcement proceedings in the event of default and the institution of, and
control over, foreclosure proceedings. Similarly, a majority of the participants
may be able to take actions to which we object but to which we will be bound if
our participation interest represents a minority interest. We may be adversely
affected by this lack of full control.




Increases
in interest rates during the term of a loan may adversely impact a borrower's
ability to repay a loan at maturity or to prepay a loan.




If
interest rates increase during the term of our loan, a borrower may not be able
to obtain the necessary funds to repay our loan at maturity through refinancing.
Increasing interest rates may hinder a borrower's ability to refinance our loan
because the underlying property cannot satisfy the debt service coverage
requirements necessary to obtain new financing or because the value of the
property has decreased. If a borrower is unable to repay our loan at maturity,
we could suffer a loss and we will not be able to reinvest proceeds in assets
with higher interest rates. As a result, our financial performance and ability
to make distributions to our members could be materially adversely
affected.




Our
growth is dependent on leverage, which may create other risks.




Our
success is dependent, in part, upon our ability to grow our balance sheet assets
through leverage. Our organizational and governing documents do not limit the
amount of indebtedness which we may incur. Our managers have overall
responsibility for our financing strategy. Member approval is not required for
changes to our financing strategy.




Leverage
creates an opportunity for increased net income, but at the same time creates
risks. For example, leveraging magnifies changes in our net worth. We will incur
leverage only when there is an expectation that it will enhance returns,
although there can be no assurance that our use of leverage will prove to be
beneficial. Moreover, there can be no assurance that we will be able to meet our
debt service obligations and, to the extent that we cannot, we risk the loss of
some or all of our assets or a financial loss if we are required to liquidate
assets at a commercially inopportune time.


-24-


Because
we share some common managers and officers with ECCU, our management has
conflicts of interest with the interests of ECCU.





Some of
our managers and officers are also directors and/or officers of
ECCU.  Conflicts of interest are inherent in mortgage loan
transactions between ourselves and ECCU.  These conflicts of interest
are inherent in:





•              Our
decisions as to which mortgage loans ECCU will make available to
us;


•             
O
 •             
O








•              our
Chairman and Chief Executive Officer is a full time employee of
ECCU;


•              two
of our managers are also employees of ECCU;


•              one
of our managers is also a director of ECCU;


•              we
acquire most of our mortgage loan investments from or through ECCU;


•              we
contract with ECCU for our office facilities and administrative services;
and


•             
w








We
may from time to time have insufficient liquidity, which could impair our
ability to timely pay some or all of our debt obligations.





From time
to time, our revenues could be less than our debt obligations. This could be
true even though the principal amount of our receivables exceeds that of our
liabilities because the rates of payment on our receivables may be slower than
that on our obligations. Ordinarily, we expect to be able to draw on our cash
reserves and our credit facilities to fund these shortfalls. However, if these
shortfalls are greater than we anticipate and/or our cash resources are not
sufficient, we would need to look for additional financing. If additional
financing is not available, we could default on the payment of some or all of
our debt securities. Also, a delay or default in the payment of a significant
amount of our mortgage loan investments would impair our ability to pay our
other debt.





Unexpected
interest rate fluctuations could reduce or eliminate our profit
margins.





Our
profitability is primarily a function of the spread between the yield on our
mortgage loan investments and the interest rates we must pay on our debt
securities and on our credit facilities. A decrease in this spread would
adversely affect our profits and could hamper our ability to pay our debt
obligations, our general administrative expenses and our other operating
costs.


-25-


The
rapid increase in our mortgage loan investments has been financed in material
part through the use of leverage, which may reduce the return on our investments
and cash available for distribution.




Our
portfolio has been financed in material part through the use of
leverage.  Using leverage subjects us to risks associated with debt
financing, including the risks that:





•
      the cash provided by our operating activities will not be sufficient to
      meet required payments of principal and
  interest;





•
      the cost of financing will increase relative to the income from the assets
      financed, reducing the income we have available to make distributions to
      our equity investors; and





•
      our investments may have maturities that differ from the maturities of the
      related financing and, consequently, the risk that the terms of any
      refinancing we obtain will not be






If we are
unable to secure refinancing or modifications of our currently outstanding
credit facilities, when due, on acceptable terms, we may be forced to dispose of
some of our assets upon disadvantageous terms or to obtain financing at
unfavorable terms, either of which may result in losses to us or reduce the cash
flow available to meet our debt service obligations or to make distributions to
our equity investors.




Any
hedging transactions that we enter into may limit our gains or result in
losses.




We use
derivatives to hedge a portion of our interest rate exposure, and this approach
has certain risks, including the risk that losses on a hedge position will
reduce the cash available for distribution to our equity investors and that such
losses may exceed the amount invested in such instruments. We have adopted a
general policy with respect to the use of derivatives, which generally allows us
to use derivatives where appropriate, but does not set forth specific policies
and procedures or require that we hedge any specific amount of risk. From time
to time, we use derivative instruments in our risk management strategy to limit
the effects of changes in interest rates on our mortgage loan investments. A
hedge may not be effective in eliminating all of the risks inherent in any
particular position. Our profitability may be adversely affected during any
period as a result of the use of derivatives.




Our
Loan Portfolio is concentrated geographically and focused on loans to churches
and religious organizations.





We are
among a limited number of institutions specialized in providing loans to
evangelical churches and church organizations. Moreover, a majority of our loans
are to California borrowers or are secured by properties located in California,
a market that has been negatively impacted by the collapse of the residential
real estate market and decrease in real estate prices. Even though the number of
institutions making and/or investing in mortgage loans to churches and church
related organizations has increased in recent years, these loans are secured
by special purpose facilities. As a result, if the properties securing such
mortgages must be sold, there may be a limited number of buyers available for
such properties. Nevertheless, we believe that there is a great deal of
diversity in the types of not-for-profit organizations and entities that could
be potential acquirers of properties of this nature, including, but
not limited to, other churches, schools, clinics, community development
agencies, universities and educational institutions, day care, social
services, assisted living facilities and relief organizations.


-26-


We
may need, from time to time, to sell or hypothecate our mortgage loan
investments.





Because
the market for our mortgage loans is specialized, the prices at which our
portfolio could be liquidated are uncertain. The amount we would realize is
dependent on several factors, including the quality and yield of similar
mortgage loans and the prevailing financial market and economic conditions. It
is possible that we could realize substantially less than the face amount of our
mortgage loans, should we be required to sell or hypothecate them. Thus, the
amount we could realize for the liquidation of our mortgage loan investments is
uncertain and cannot be predicted.





We
depend on reinvestments by our investors to maintain and increase our asset
base.





In the
past, we have sold a significant amount of our new debt securities to our
existing investors when their debt securities matured. Historically, we have
enjoyed a significant rate of reinvestment by our investors upon maturity of
their debt obligations. For example, during the years 2008 and 2007, 76% and
72%, respectively, of our investors extended their investments or reinvested in
new debt securities upon maturity of their notes. There is no assurance that
these past rates of reinvestment will continue in the future. If our investors
do not reinvest in substantial amounts, our ability to maintain or grow our
asset base could be impaired.





In
the event a borrower defaults on one of our mortgage loan investments, we will
generally need to recover our investment through the sale of the property
securing the loan.





In that
event, the value of the real property security may prove insufficient, in which
case we would not recover the amount of our investment Even though an appraisal
of the property may be obtained at the time the loan is originated, the
property's value could decline as a result of a number of subsequent events,
including:





•
            uninsured
      casualty loss (such as an earthquake or
flood);


•
            a
      decline in the local real estate
market;


•
            undiscovered
      defects on the property;


•
            waste
      or neglect of the property;


•
            a
      downturn in demographic and residential
trends;


•
            a
      decline in growth in the area in which the property is located. Also,
      churches and church-related properties are generally not as marketableas
      more common commercial, retail or residential
  properties.





The
occurrence of any of these factors could severely impair the value of our
security for our mortgage loan investment.


-27-


There
is a possibility that we could incur foreclosures and losses in connection with
our mortgage loan investments during recessionary or depressed economic
periods.





Recessionary
or depressed periods typically occur on a cyclic basis by an unpredictable time
and with uncertain lengths. Also, such events can be triggered by terrorist
acts, war, large scale economic dislocations, or widespread and large corporate
bankruptcies. The effects of these events cannot presently be predicted. We
could incur losses as a result of borrower defaults and foreclosures on our
mortgage loan investments. Also, during times of recession or depression, the
demand for our mortgage loans, even in times of declining interest rates, is
likely to decline. Also, in connection with any sale or hypothecation of a
mortgage loan, we would likely have to agree to be responsible in whole or in
part for a limited period of time for any delinquencies or default. If we should
experience significant delinquency rates, our revenues would materially decrease
and, subject to our other available cash resources at the time, our ability to
timely pay our debt securities obligations or our other indebtedness may be
substantially impaired.





Item
1B.  UNRESOLVED STAFF COMMENTS





None.





Item
2.  PROPERTIES




Our
business offices are located at 915 West Imperial Highway, Suite 120, Brea,
California 92821.  Our telephone number is (714)
671-5720.




We
currently rent our offices (approximately 4,970 square feet of rentable space)
from ECCU under the terms of an Office Lease dated November 4,
2008.  The lease has an initial term of five years and we have an
option to renew for two additional periods of five years each.  For
2008, base rent was $8,946 per month.  In the second year of the
lease, base rent will increase to $9,443 per month.




Item
3. LEGAL PROCEEDINGS




None




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




On
December 11, 2008, the Company held a special meeting of stockholders to
consider and act upon a proposed Plan of Conversion pursuant to which the
Company would convert from a corporation organized under California law to a
limited liability company organized under California law.  The Plan of
Conversion was approved by the Company’s common stockholders and holders of
Class I and Class II Preferred Stock at a Special Meeting of Stockholders held
at the Company’s offices in Brea, California.





To
approve the Plan of Conversion, a majority of the total number of shares of
common stock outstanding as of the record date and two-thirds of the Class I and
Class II Preferred Stock, voting separately as a class, was required to approve
the Plan.  100% of the Company’s common stockholders, 96.6% of the
holders of the Company’s Class I Preferred Stock and 100% of the Company’s Class
II Preferred Stock approved the adoption of the Plan of
Conversion.  No votes were cast against the proposal.


-28-


PART
II




Item
5. MARKET FOR OUR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES




Price
Range of Common Stock





There is
no public market for our Class A Common Units and Series A
Units.  Effective as of December 31, 2008, the Company filed Articles
of Organization-Conversion with the California Secretary of State pursuant to
which the Company converted from a California corporation to a California
limited liability company.  As a result of the conversion, each share
of the Company’s common stock immediately outstanding prior to the conversion
date was converted into one fully paid and non-assessable unit of our Class A
Common Units and each holder of our Class I and Class II Preferred Stock
received one Series A Unit for each share of Class I and Class II Preferred
Stock exchanged.  As a result of the conversion, the Company has a
total of 11 common equity holders who own a total of  our 146,522
Class A Common Units.





Sale
of Equity Securities by Issuer





On
September 12, 2008, we sold 11,578 shares of our Class I Preferred Stock to one
of our equity investors at a price of $100 per share.





Purchases
of Equity Securities by Issuer





On March
27, 2008, we purchased 500 shares of our Class I Preferred Stock at a price of
$100 per share in a private transaction.  On November 7, 2008, we
purchased 1,400 shares of Class I Preferred Stock in a separate and unrelated
private transaction prior to completion of our Plan of Conversion at a price of
$100 per share.





Dividends





We have
to date paid regular dividends on our Class I and Class II Preferred Stock prior
to the conversion of the Company from a corporation to a limited liability
company, and after the conversion, our Series A Units.  For 2007 and
2008, we paid no dividends on our common stock.


-29-


During
2007 and 2008, we declared dividends on our Class I and Class II Preferred Stock
as follows:





CLASS
      I PREFERRED STOCKQuarter
                  
                  Dividends
      Declared
                    and Paid per Share2008
                  
                  
                  2007Fourth
                  
                  $
                  1.029
                  
                  
                  $
                  1.561Third
                  
                  $
                  1.469
                  
                  
                  $
                  1.762Second
                  
                  $
                  1.316
                  
                  
                  $
                  1.830First
                  
                  $
                  1.101
                  
                  
                  $
                  1.753Total
      dividends declared
                  
                  $
                  4.915
                  
                  
                  $
                  6.906





CLASS
      II PREFERRED STOCKQuarter
                  
                  Dividends
      Declared
                    and Paid per Share2008
                  
                  
                  2007Fourth
                  
                  $
                  0.252
                  
                  
                  $
                  0.252Third
                  
                  $
                  0.252
                  
                  
                  $
                  0.252Second
                  
                  $
                  0.249
                  
                  
                  $
                  0.249First
                  
                  $
                  0.249
                  
                  
                  $
                  0.247Total
      dividends declared
                  
                  $
                  1.002
                  
                  
                  $
                  1.000





With the
approval of our Plan of Conversion and filing of Articles of
Organization-Conversion with the California Secretary of State, our profits and
losses will be allocated to the holders of common units and preferred units in a
manner that provides a preferential return for the Series A Unit
holders.  Each holder of a Series A Unit will be entitled to receive a
quarterly preferred return payment that is equal to a percentage of the $100 per
unit liquidation preference, which percentage will be one hundred ninety (190)
basis points higher than the LIBOR for one year in effect on the last day of the
calendar month for which the preferred return is declared by the managers
(“Preferred Income
Payment”).  This percentage will be applied to the liquidation
preference of the Series A Units in the amount of $100 per unit.





Preferred
Income Payments will have priority over payment of profits or income to the
Class A Unit holders and any series or class of common units that are hereafter
issued.  In the event that we accrue cumulative Preferred Income
Payments that have not been paid, no distribution of earnings may be made to the
holders of common units until such Preferred Income Payments have been
made.





In
addition to quarterly Preferred Income Payments, we have also agreed to set
aside funds for payment to the holders of the Series A Units an amount equal to
10% of the our net profits earned for any fiscal year, after subtracting the
amount of quarterly Preferred Income Payments made during such
year.  This priority distribution of our net profits after payment of
quarterly Preferred Income Payments will be made to holders of the Series A
Units on a pro rata basis.  The balance of any profits, taking into
consideration the preferred distribution to the holders of Series A Units, will
be allocated to all holders of our common units in proportion to their
percentage interests in our common units.


-30-


In the
event of a loss, the Operating Agreement provides that losses will be allocated
first to the holders of common units and then to the Series A Unit holders until
their respective capital accounts have been reduced to zero.  If the
capital accounts of the members cannot offset the entire loss, the balance will
be allocated, pro rata, to the holders of common units in proportion to their
respective ownership interest in the Company.





Item 6.  SELECTED FINANCIAL
DATA





We are a
“smaller reporting company” as defined by Regulation S-K and as such, are not
providing the information contained in this item pursuant to Regulation
S-K.





Item
7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS





Cautionary
Notice Regarding Forward Looking Statements





We desire
to take advantage of the “safe harbor” provisions of the Private Securities
Litigation Reform Act of 1995. This filing contains a number of forward-looking
statements which reflect management’s current views and expectations with
respect to our business, strategies, products, future results and events, and
financial performance. All statements made in this filing other than statements
of historical fact, including statements addressing operating performance,
events, or developments which management expects or anticipates will or may
occur in the future, including statements related to volume growth, revenues,
profitability, new services, adequacy of funds from operations, statements
expressing general optimism about future operating results, and non-historical
information, are forward looking statements. In particular, the words “believe,”
“expect,” “intend,” “anticipate,” “estimate,” “may,” variations of such words,
and similar expressions identify forward-looking statements, but are not the
exclusive means of identifying such statements, and their absence does not mean
that the statement is not forward-looking. These forward-looking statements are
subject to certain risks and uncertainties, including those discussed below. Our
actual results, performance or achievements could differ materially from
historical results as well as those expressed in, anticipated, or implied by
these forward-looking statements. We do not undertake any obligation to revise
these forward-looking statements to reflect any future events or
circumstances.





Readers
should not place undue reliance on these forward-looking statements, which are
based on management’s current expectations and projections about future events,
are not guarantees of future performance, are subject to risks, uncertainties
and assumptions (including those described below), and apply only as of the date
of this filing. Our actual results, performance or achievements could differ
materially from the results expressed in, or implied by, these forward-looking
statements. Factors which could cause or contribute to such differences include,
but are not limited to, the risks discussed in our Annual Report on Form 10-K
and in the press releases and other communications to equity members issued by
us from time to time which attempt to advise interested parties of the risks and
factors which may affect our business. We undertake no obligation to publicly
update or revise any forward-looking statements, whether as a result of new
information, future events, or otherwise.


-31-


Overview





Our
primary mission is to make loan financing available to the evangelical Christian
community, primarily for the acquisition and improvement of church-related
properties. We do this by originating and investing in mortgage loans made to
churches, most of which are secured by church and church-related real property
owned by and/or maintained for the benefit of evangelical churches or church
organizations, including Christian schools, ministries and related
organizations.





We obtain
funds for our mortgage loan investments from the sale of our debt securities,
which are sold primarily to investors who are in or associated with the
Christian community, including individuals, ministries and organizations
associated with evangelical churches and their governing
associations.  We also obtain funds from lines of credit provided by
financial institutions and from our equity investors.




Our goals
are to provide funds for loans to evangelical churches and church organizations
on a cost effective basis, and to provide funds for member business loans
originated by other credit unions. In addition, we intend to operate in such a
way as to provide competitive yields to purchasers of our notes, earnings for
our common and Series A Unit holders, and a general increase in the value of our
Class A Common Units and Series A Units for the benefit of our
investors.





We serve
as a financing source for evangelical Christian churches and organizations and
fund the purchase of mortgage loans through the sale of investor notes and
equity investments, and since 2007, through borrowings.  With the
completion of the BMO Facility and Members United financing facilities in 2007,
our total assets grew from $67.7 million at December 31, 2006 to $275.1 million
at December 31, 2008.  Total liabilities also grew from $54.6 at
December 31, 2006, to $262.3 million at December 31, 2008.  Of these
total liabilities owed as of December 31, 2008, (i) $85.3 million was owed
by MPF under the BMO Facility; (ii) $10 million on the $10 Million LOC to
Members United; (iii) $89.9 million on the $100 Million CUSO Line to Members
United; and (iv) $75.8 million to our note investors.





With the
rapid increase in our total assets and liabilities on our balance sheet,
interest income received on our investments increased from $3.1 million in
fiscal year 2006 to $13.8 million for fiscal year 2008.  Because we
benefitted from low short-term interest rates on our short-term borrowing
facilities in 2008 and certain tax benefits realized in connection with our
conversion to a limited liability company form of organization, our net income
increased to $744 thousand for fiscal year 2008, as compared to a net loss of
$299 thousand in fiscal year 2007.  Our continued profitability will
depend upon (i) successfully matching and managing our investment returns from
the mortgages that we originate, acquire and hold with our short-term borrowing
costs; (ii) finding alternative sources of capital to enable us to decrease our
reliance on debt financing for future growth; (iii) adding additional services
that will generate non-interest income in order to diversify our sources of
income; and (iv) successfully restructuring our line of credit arrangements with
Members United and BMO Capital Markets Corp.


-32-


New
Opportunities





The
continued dislocation in the global credit markets has limited our access to new
credit facilities with which to finance additional loan
originations.  As a result, we are currently financing our loan
origination activities solely out of the proceeds of sales of our debt
securities and cash generated by our loan portfolio.  Until the crisis
in the U.S financial system eases and credit becomes more available to finance
companies such as ours, we expect to conduct limited loan origination
activities.





While our
loan origination and securitization activities have been curtailed by the global
financial crisis, we have identified a number of business opportunities that do
not depend on raising new capital or increasing our debt leverage ratios. 
Among those activities are consulting services to borrowers and lenders in our
specialized niche, including rendering advice on debt restructuring, troubled
loan workouts, and providing other financial services to borrowers.  We
believe our extensive experience and expertise in the church finance services
industry positions us to earn significant fee income from these
activities.





In
addition, we have planned important investments in data processing systems that
will enable us to build value creation platforms in the areas of loan servicing
and loan origination for third party lenders.  These systems also have the
potential to deliver long-term cost reduction to our operations by eliminating
the need for certain outsourced services and by streamlining credit and
portfolio administrative services.  We expect to have substantially
completed these investments in systems and their implementation by the end of
2009.





We also
intend to expand our efforts to raise capital through the issuance of debt
securities and other investment vehicles in 2009 in order to increase our
liquidity and capital funds.  In addition, we may consider strategies
for reducing our leverage that may include the sale of mortgage loan assets on
the open market to banks, credit unions, and other investors.





Our loan
portfolio continues to perform at an acceptable level.  As of December
31, 2008, the 90-day delinquency rate in our loan portfolio, on a consolidated
basis, was 1.05%.  We modified two loans to assist the borrowers in
meeting their obligations, and one loan was in foreclosure.





Conversion
to Limited Liability Company





Effective
as of  December 31, 2008, we have converted to a California limited
liability company pursuant to a plan of conversion approved by our shareholders
on December 11, 2008.  We developed the plan and executed this
statutory conversion primarily to eliminate our ongoing income tax liabilities
and provide for a more flexible capital raising structure.  Pursuant
to a valuation performed by an independent consultant in connection with the
conversion, we have concluded that we will be entitled to recover approximately
$140 thousand of federal income taxes paid in previous years as a result of the
adoption of the Plan of Conversion.


-33-


Consolidated
Results of Operations





Our
Balance Sheet for the Years Ended December 31, 2008 and 2007





At
December 31, 2008 and 2007, we held mortgage loans representing $257.2 and
$116.3 million, respectively.  Mortgage loans constituted 93.5% and
96.0% of our total assets at December 31, 2008 and 2007,
respectively.  During the year ended December 31, 2008, we acquired or
originated $176.0 million of loans, including $60.3 million by
MPF.  We acquired $156.7 million in loans from ECCU in 2008, as
compared to $73.3 million in 2007.





As of
December 31, 2008, approximately 90% of all loans that we or MPF owned were
originated by ECCU and purchased in whole or as a participation
interest.  The remainder were originated directly through our loan
origination services.  As of December 31, 2008, we had one loan with a
balance of $2.7 million that was more than 90 days past due and was on
non-accrual status.  In addition, we had two loans with balances
totaling $2.3 million at December 31, 2008 that were restructured during the
fourth quarter.  We had no impaired loans, non-accrual loans, or loans
past due more than 90 days at December 31, 2007.  We have had no
writeoffs of our loans.





As of
December 31, 2008, our total borrowings under our BMO Facility was $85.3
million.  We used the BMO Facility to purchase loans from us or ECCU
until such time as they can be included in a securitization
transaction.  We previously had a line of credit facility with ECCU,
which was terminated in October, 2007.  We had no borrowings under the
ECCU line of credit as of December 31, 2007.  Including our BMO
Facility and the $100 Million CUSO Line, our line of credit borrowings increased
to $175.1 million at December 31, 2008, as compared to $46.3 million at December
31, 2007.  We also had $10.0 million outstanding on the Members United
term note.  As of December 31, 2008, the balance on our $100 Million
CUSO Line was $89.9 million.





Obligations
to our note investors increased from $62.1 million at December 31, 2007 to $75.8
million at December 31, 2008.  Our total liabilities at December 31,
2008 and 2007 were $262.3 and $109.2 million, respectively.  Our total
equity was $12.8 and $11.9 million at December 31, 2008 and 2007,
respectively.





Results of Operations for the Years
Ended December 31, 2008 and December 31, 2007





Despite a
challenging credit market, primarily driven by a collapse in the liquidity of
mortgage-backed securities, we had a record year of earnings and net income for
our company.  As further described below, the most significant factors
influencing our consolidated results for the year ended December 31, 2008, as
compared to 2007 were:





•
            the
      growth in our total assets and mortgage loan investments from $121 million
      at December 31, 2007 to $275 million at December 31,
      2008;





•
            for
      most of 2008, we were able to benefit from lower borrowing costs for our
      credit facilities;


-34-


•
            our
      conversion from a corporation form of organization to a limited liability
      company, thereby providing significant income tax
  savings;





•
            an
      increased provision for loan
losses;





•
            increased
      operating costs incurred as a result of expanding our office facilities
      and added complexity of our operations;
and





•
            the
      increase in net interest income resulting from the growth in our mortgage
      loan assets.





Interest
income on loans increased from $4.6 million to $13.5 million for the year ended
December 31, 2008 due to increases in mortgage loans that we
acquired.  Total interest income increased from $4.9 million to $13.8
million during the year ended December 31, 2008, as compared to the year ended
December 31, 2007.





Interest
expense on our lines of credit increased from $377 thousand in 2007 to $6.1
million due to increases on our borrowings under the BMO Facility and Members
United loan facilities.  Our interest expense payable to our note
investors increased from $3.2 million to $3.6 million for the year ended
December 31, 2008, primarily due to an increase in the amount of notes
outstanding.





Total
interest expense increased from $3.6 million to $9.8 million as a result of
these increased borrowing obligations.  Net interest income increased
to $4.1 million for 2008, as compared to $1.3 million in
2007.  Non-interest income increased from $8 thousand in 2007 to $39
thousand in 2008, primarily due to an increase in late fees and loan referral
fees received.





Personnel
expenses for salaries increased $211 thousand, or 23.8%, to $1.1 million for
2008 compared to $886 thousand during 2007.  This increase is the
result of adding support personnel in the finance and accounting, loan, and note
departments during 2008.  Our office expenses, insurance and related
operations expenses increased by $809 thousand, or 163.4%, to $1.3 million, as
compared to $495 thousand for the year ended December 31, 2007.  The
increase in office expenses is related to an increase in the size of our
company.





Professional
costs for legal, accounting and consulting services increased by $237
thousand,  or 75.7%, to $550 thousand, as compared to $313
thousand.   These increased expenses were due to a full year of
amortization of costs related to opening the BMO Facility and Members United
financing transactions, as well as to additional legal and accounting services
required as our company has grown in size and complexity.  During
2008, we completed a new securities offering of our Class A Notes, entered into
a new trust indenture relationship with US Bank as trustee, consummated a
conversion of our company to a limited liability company and completed a
restructuring of our capital structure and have adapted to increasing reporting
and accounting complexities as our operations have
expanded.   The increase in salary expense, office operations
expense, and expenses related to legal and accounting services caused
non-interest expenses to increase from $1.8 million during 2007 to $3.0 million
during 2008, an increase of 68.9%.


-35-


For the
year ended December 31, 2008, we earned net income of $744 thousand, as compared
to net loss of $299 thousand for the year ended December 31, 2007, an increase
of $1.0 million.  This increase was primarily due to the additional
loans receivable acquired during the year at higher interest rates than the
rates paid on the additional debt incurred.





Comparison
of the Years Ended December 31, 2007 and December 31, 2006





Interest
income on loans increased from $3.0 million to $4.6 million for the year ended
December 31, 2007, primarily due to increases in mortgage loans that we
acquired.  Total interest income increased from $3.1 million to $4.9
million at December 31, 2007, as compared to the year ended December 31,
2006.





Interest
expense on our lines of credit increased from $-0- in 2006 to $377 thousand due
to our borrowings under the BMO Facility and Members United loan
facilities.  Our interest expense payable to our debt security holders
increased from $2.4 million to $3.2 million for the year ended December 31,
2007, primarily due to an increase in the amount of notes outstanding from $54.3
million at December 31, 2006 to $62.1 million at December 31, 2007.





Total
interest expenses increased from $2.4 million to $3.6 million as a result of
these increased borrowing obligations.  Net interest income increased
to $1.3 million for 2007, as compared to $747 thousand in 2006.





Non-interest
income decreased from $233 thousand  to $8 thousand in 2007, primarily
due to lower consulting fees and loan commitment fees on letters of
credit.





Personnel
expenses for salaries increased $475 thousand, or 115.2%, to $886 thousand
compared to $411 thousand.  We have added a new Vice President of
Lending and Vice President Finance and Accounting in an effort to expand our
services and operations.





Our
office expenses, insurance and related operations expenses increased by $314
thousand, or 174.3%, to $495 thousand, as compared to $181 thousand for the year
ended December 31, 2006.  Professional costs for legal, accounting and
consulting services increased by $154 thousand, or 97.1%, to $313 thousand, as
compared to $159 thousand.   These increased expenses were due to
costs incurred in undertaking the BMO Facility and Members United financing
transactions, restructuring of our trustee arrangements for our note investors,
engaging in capital raising initiatives, and our efforts to respond to new
accounting guidelines for consolidating entities and corporate
governance.





Non-interest
expenses increased from $832 thousand to $1.8 million, an increase of $965
thousand or 115.9%.  This increase is primarily attributable to
increases in salaries and benefits of $475 thousand, office operations and other
expenses of $314 thousand and legal and accounting expenses of $154
thousand.


-36-


For the
year ended December 31, 2007, we incurred a net loss of $299 thousand, as
compared to net earnings of $98 thousand for the year ended December 31, 2006, a
decrease of $397 thousand or 404.1%.  This decrease was primarily due
to an increase in non-interest expense of $965 thousand and a decrease in
non-interest income of $225 thousand, which were offset by an increase in net
interest income of $584 thousand and a decrease in the income tax provision of
$208 thousand.





Net
Interest Income and Net Interest Margin





Our
earnings depend largely upon the difference between the income we receive from
interest-earning assets, which are principally mortgage loan investments and
interest-earning accounts with other financial institutions, and the interest
paid on notes payable and lines of credit. 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 tables provide 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:





Distribution,
      Rate and Yield Analysis of Net Interest IncomeFor
      the Years Ended December 31,2008
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  2007Average
      Balance
                                  
                                  
                                  Interest
      Income/ Expense
                                  
                                  
                                  Average
      Yield/ Rate
                                  
                                  
                                  Average
      Balance
                                  
                                  
                                  Interest
      Income/ Expense
                                  
                                  
                                  Average
      Yield/ RateAssets:Interest-earning
      accounts
                                    with
      other financial institutions
                                  
                                  $
                                  11,549
                                  
                                  
                                  $
                                  383
                                  
                                  
                                  
                                  3.32
                                  %
                                  
                                  $
                                  6,058
                                  
                                  
                                  $
                                  294
                                  
                                  
                                  
                                  4.85
                                  %Total
      loans [1]
                                  
                                  
                                  202,420
                                  
                                  
                                  
                                  13,451
                                  
                                  
                                  
                                  6.65
                                  %
                                  
                                  
                                  69,508
                                  
                                  
                                  
                                  4,639
                                  
                                  
                                  
                                  6.67
                                  %Total
      interest-earning assets
                                  
                                  $
                                  213,969
                                  
                                  
                                  $
                                  13,834
                                  
                                  
                                  
                                  6.47
                                  %
                                  
                                  
                                  75,566
                                  
                                  
                                  
                                  4,933
                                  
                                  
                                  
                                  6.53
                                  %Liabilities:Public
      offering notes – Alpha Class
                                  
                                  $
                                  34,860
                                  
                                  
                                  $
                                  1,875
                                  
                                  
                                  
                                  5.38
                                  %
                                  
                                  $
                                  26,498
                                  
                                  
                                  $
                                  1,447
                                  
                                  
                                  
                                  5.46
                                  %Public
      offering notes –Class A
                                  
                                  
                                  15,444
                                  
                                  
                                  
                                  761
                                  
                                  
                                  
                                  4.93
                                  %
                                  
                                  
                                  -
      -
                                  
                                  
                                  
                                  -
      -
                                  
                                  
                                  
                                  -
      -Special
      offering notes
                                  
                                  
                                  18,476
                                  
                                  
                                  
                                  968
                                  
                                  
                                  
                                  5.24
                                  %
                                  
                                  
                                  31,689
                                  
                                  
                                  
                                  1,748
                                  
                                  
                                  
                                  5.52
                                  %International
      notes
                                  
                                  
                                  514
                                  
                                  
                                  
                                  28
                                  
                                  
                                  
                                  5.45
                                  %
                                  
                                  
                                  505
                                  
                                  
                                  
                                  29
                                  
                                  
                                  
                                  5.65
                                  %Lines
      of credit and other borrowings
                                  
                                  
                                  133,428
                                  
                                  
                                  
                                  6,123
                                  
                                  
                                  
                                  4.59
                                  %
                                  
                                  
                                  4,456
                                  
                                  
                                  
                                  377
                                  
                                  
                                  
                                  8.46
                                  %Total
      interest-bearing liabilities
                                  
                                  $
                                  202,722
                                  
                                  
                                  $
                                  9,755
                                  
                                  
                                  
                                  4.81
                                  %
                                  
                                  $
                                  63,148
                                  
                                  
                                  $
                                  3,601
                                  
                                  
                                  
                                  5.70
                                  %Net
      interest income
                                  
                                  
                                  
                                  
                                  
                                  $
                                  4,079
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  $
                                  1,332Net
      interest margin [2]
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  1.91
                                  %
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  1.76
                                  %[1]
      Loans are gross of deferred loan fees and the allowance for loan
      losses.[2]
      Net interest margin is equal to net interest income as a percentage of
      average interest-earning assets.


-37-


Average
interest-earning assets increased to $214.0 million during the year ended
December 31, 2008, from $75.6 million, an increase of $138.4 million or 183.1%.
The average yield on these assets increased to 6.47% for the year ended December
31, 2008 from 6.53% for the year ended December 31, 2007. This average yield
increase was related to higher interest rates on loans we or our wholly-owned
subsidiary, MPF, acquired during 2008, particularly on loans we originated.
Average interest-bearing liabilities, consisting primarily of notes payable,
increased to $202.7 million during the year ended December 31, 2008, from $63.1
million during 2007. The average rate paid on these notes decreased to 4.81% for
the year ended December 31, 2008, from 5.70% for 2007. The decrease in the rate
paid on interest-bearing liabilities was primarily the result of our lines of
credit composing a higher percentage of our interest-bearing
liabilities.  Our lines of credit incur interest expense at lower
rates than our investor notes.





Net
interest income for the year ended December 31, 2008 was $4.1 million, which was
an increase of $2.8 million, or 215.4% over the prior year. The net interest
margin increased 15 basis points to 1.91% for the year ended December 31, 2008,
as compared to 1.76% for 2007.  This increase was a result of higher
yield on loans combined with lower rates on lines of credit and other
borrowings, which now comprise a large portion of interest-bearing
liabilities.





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





Rate/Volume
      Analysis of Net Interest IncomeYear Ended December 31, 2008 vs.
      2007Increase (Decrease) Due to Change
      inIncrease
      in Interest Income:
              
              Volume
              
              
              Rate
              
              
              TotalInterest-earning
      account with other financial institutions
              
              $
              203
              
              
              $
              (114
              )
              
              $
              89Total
      loans
              
              
              8,833
              
              
              
              (21
              )
              
              
              8,812$
              9,036
              
              
              $
              (135
              )
              
              $
              8,901Increase
      (Decrease) in Interest Expense:Public
      offering notes – Class A-1
              
              
              -
      -
              
              
              
              -
      -
              
              
              
              -
      -Public
      offering notes – Alpha Class
              
              
              450
              
              
              
              (22
              )
              
              
              428Public
      offering notes – Class A
              
              
              761
              
              
              
              -
      -
              
              
              
              761Special
      offering notes
              
              
              (696
              )
              
              
              (84
              )
              
              
              (780
              )International
      notes
              
              
              1
              
              
              
              (2
              )
              
              
              (1
              )Lines
      of credit and other borrowings
              
              
              5,997
              
              
              
              (251
              )
              
              
              5,746$
              6,513
              
              
              $
              (359
              )
              
              $
              6,154Change
      in net interest income
              
              $
              2,523
              
              
              $
              224
              
              
              $
              2,747


-38-


Rate/Volume
      Analysis of Net Interest IncomeYear Ended December 31, 2007 vs.
      2006Increase (Decrease) Due to Change
      inIncrease  in
      Interest Income:
              
              Volume
              
              
              Rate
              
              
              TotalInterest-earning
      account with other financial institutions
              
              $
              227
              
              
              $
              (24
              )
              
              $
              (203
              )Total
      loans
              
              
              1,599
              
              
              
              (2
              )
              
              
              1,597$
              1,826
              
              
              $
              (26
              )
              
              $
              1,800Increase
      (Decrease) in Interest Expense:Public
      offering notes – Class A-1
              
              
              (2
              )
              
              
              (2
              )
              
              
              (4
              )Public
      offering notes – Alpha Class
              
              
              344
              
              
              
              142
              
              
              
              486Public
      offering notes – Class A
              
              
              --
              
              
              
              --
              
              
              
              --Special
      offering notes
              
              
              109
              
              
              
              237
              
              
              
              346International
      notes
              
              
              8
              
              
              
              3
              
              
              
              11Lines
      of credit
              
              
              377
              
              
              
              --
              
              
              
              377$
              836
              
              
              $
              380
              
              
              $
              1,216Change
      in net interest income
              
              $
              990
              
              
              $
              (406
              )
              
              $
              584





Cash
and Cash Equivalents




We
experienced an increase in our cash during the twelve months ended December 31,
2008 in the amount of $12.6 million, as compared to a net decrease of $5.4
million for the twelve months ended December 31, 2007. This increase was due to
an increase in net cash provided by operating activities and financing
activities.





Net cash
provided by operating activities totaled $1.0 million for the twelve months
ended December 31, 2008, an increase of $1.8 million from $751 thousand used in
operating activities during the twelve months ended December 31,
2007.




Net cash
used in investing activities totaled $141.4 million during the twelve months
ended December 31, 2008, compared to $56.5 million used during the twelve months
ended December 31, 2007, an increase in cash used of $84.9 million. This
difference is attributable to more cash used for the purchase of loans during
the twelve months ended December 31, 2008, as compared to the same period in
2007.




Net cash
provided by financing activities totaled $153.0 million for the twelve-month
period in 2008, an increase of $101.1 million from $51.9 million provided by
financing activities during the twelve months ended December 31, 2007. This
difference is primarily attributable to an increase in our borrowings under our
line of credit facilities.





Liquidity
and Capital Resources





The U.S.
economy is currently in a recession. We are facing substantial obstacles in our
efforts to borrow funds, and we are being forced to de-leverage our balance
sheet until credit conditions stabilize.  We expect to experience
higher costs, and less advantageous financing terms for financing our mortgage
loan portfolio in 2009, as compared to short-term borrowing costs and financing
terms that were available in 2008.  Financing our portfolio of
mortgage loan assets also has become more challenging to us as a result of our
inability to complete a securitization transaction in 2009 and the expressed
desire of both of our facility lenders to reduce their exposure to our mortgage
loan assets.


-39-


We rely
on cash generated from our operations, cash reserves, proceeds from the sale of
investor notes, and borrowings under our lines of credit to meet our obligations
as they arise.  From time to time, we also generate funds from the
sale of mortgage loans and loan participations and raise additional capital
through the sale of debt and equity securities.  We require cash to
originate and acquire new mortgage loans, repay indebtedness, make interest
payments to our note investors and pay expenses related to our general business
operations.  We intend to continue our current liquidity plan which
relies primarily on cash generated by operations, cash reserves, proceeds from
the sale of debt securities, and borrowings under our lines of credit to the
extent available. Our continuing ability to rely on credit facilities to
originate and acquire mortgage loan investments is dependent upon our efforts to
restructure our BMO Facility and the Members United credit facilities in the
first six months of 2009.





Our
management prepared liquidity forecasts which indicate that we have adequate
liquidity to conduct our business.  While we believe that these
expected cash inflows and outflows are reasonable, we cannot assure you that our
forecasts or assumptions will prove to be accurate, particularly in this
volatile credit and financial environment.  While our liquidity
sources that include cash, reserves, borrowings on existing facilities and net
cash from operations are generally available on an immediate basis, our ability
to sell mortgage loan assets, and raise additional debt or equity capital is
less certain and less immediate.  As a result, we can give no
assurances that we will be able to access these additional liquidity sources
quickly enough to meet our needs.





Historically,
we have experienced significant rates of reinvestment or renewal by our debt
security investors upon maturity of their investments. However, should these
sources prove insufficient to fund our operations and obligations, we also have
an existing portfolio of performing mortgage loans and believe that we can
generate additional liquidity through the sale of participation interests and
mortgage loan assets to make payments on our credit facilities, pay interest to
our note investors and pay operating expenses.





We base
this belief on the size and quality of our mortgage loan investments and
management’s belief that we will be able to find purchasers of those loans on a
timely basis.  These sales transactions are dependent on and subject,
however, to market and economic conditions and our ability to consummate an
acceptable purchase commitment.  As we continue to work with our
lenders in our borrowing facilities on acceptable modifications and adjustments
to our loan facilities, we may use the proceeds from these sales transactions to
make principal repayments on our borrowing facilities.





Credit
Facilities Developments





The
ongoing credit and liquidity crisis has adversely affected our ability to
finance the origination of new church mortgages and acquisition of other
profitable church mortgage loans.  When we formed MPF and entered into
the BMO Facility in October, 2007, we anticipated that any mortgage investments
made by our wholly-owned subsidiary, MPF, would be warehoused for future
securitization in a mortgage-backed securities financing
transaction.  Although the BMO Facility provides that up to $150
million in qualifying church mortgage loans may be purchased by MPF, as of
December 31, 2008, it holds $114.0 million in qualifying loans.


-40-


We also
have two credit facilities with Members United that we use to originate, acquire
and finance our mortgage loan investments and for general operating
expenses.  Through 2008, we were unable to securitize any of the loan
assets that are held by MPF in the BMO Facility and we expect the term debt
securitization market to remain inaccessible in 2009.  For further
information on our credit facilities, see Note 5, Lines of Credit, in our
accompanying audited consolidated financial statements for the year ended
December 31, 2008.





As of
December 31, 2008, our credit facilities’ commitments and principal amounts
outstanding were as follows:





Credit Facility
                  Committed Capacity
                  Principal OutstandingMembers
      United Line of Credit
                  $10
      million
                  $10
      millionMembers
      United CUSO Line
                  $100
      million
                  $89.9
      millionBMO
      Capital Markets Corp.
                  $150
      million
                  $85.3
      million





Members
United Facilities





On August
27, 2008, we borrowed the entire $10 million available on our Members United $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.  The loan bears interest payable monthly at a floating rate
based on the one month LIBOR plus 100 basis points.  The interest rate
on the Members United term loan will be reset monthly.  Since the
credit facility expired on September 1, 2008, no new borrowings may be made
under this loan facility.  As of December 31, 2008, there was a $10.0
million outstanding balance on the Members United term loan.





On May
15, 2008, we entered into a CUSO Line of Credit Facility Note and Security
Agreement with Members United Corporate Federal Credit Union.  The
$100 million loan facility replaced the $50 million credit facility that was
entered into with Members United on October 8, 2007.  Funds used on
the $100 million facility may be used to acquire mortgage loan investments that
we or our wholly-owned subsidiary, MPF, acquire.  Under the $100
Million CUSO Line, we may request advances under a “demand loan” or “term
loan”.  A demand loan is a loan with a maximum term of one year and a
variable rate based upon the prime rate quoted by the Wall Street Journal, as
adjusted by a spread as determined by Members United.  A term loan is
a fixed or variable loan that has a set maturity date not to exceed twelve
years.





During
the period when draws may be made, each advance on the $100 Million CUSO Line
will accrue interest at either the offered rate by Members United for a fixed
term draw or the  rate quoted by Bloomberg for the Federal Funds open
rate plus 125 basis points for a variable rate draw.  Once the $100
Million CUSO Line is fully drawn, the total outstanding balance will be termed
out over a five year period with a 30 year amortization payment
schedule.  We are obligated to make interest payments on the
outstanding principal balance of all demand loans and term loan advances at the
applicable demand loan rate or term loan rate on the third Friday of each
month.


-41-


As of
December 31, 2008, the balance on the $100 Million CUSO Line was $89.9 million,
and the weighted average interest rate on our borrowings under this facility was
4.33%.  Pursuant to the terms of our loan documents with Members
United, once the loan is fully drawn, the total outstanding balance will be
termed out over a five year period with a 30 year amortization payment
schedule.  In addition, the term loan interest rate will be repriced
to a market fixed or variable rate to be determined at the time the loan is
restructured.





As
permitted under the $100 Million CUSO Line, we have requested advances for term
loans in the following amounts:





Date of Advance
                        Amount
                        CurrentInterestRate
                        RateAdjustmentDateMay
      2, 2008
                        $  5,400,000
                        3.73%
                        May
      3, 2010May
      21, 2008
                        $11,900,000
                        3.84%
                        May
      20, 2011October
      23, 2008
                        $42,816,455
                        6.50%
                        April
      3, 2009May
      21, 2008
                        $  3,000,000
                        3.47%
                        May
      21, 2010August
      8, 2008
                        $  2,800,000
                        1.46%
                        August
      18, 2009February
      27, 2009
                        $23,961,623
                        1.46%
                        April
      3,
2009





In
September, 2008, Members United decided that it would not advance any additional
funds on the $100 Million CUSO Line and we have entered into discussions with
Members United to convert the line of credit facility to a term loan arrangement
with a mutually acceptable interest rate.  On April 3, 2009, the
interest rate on two tranches of these term loans with a principal balance of
$42,816,455 and $23,961,623 are scheduled to be adjusted.  In
addition, the interest rate on another $2,800,000 tranche will become subject to
an interest rate adjustment on August 18, 2009.





We are
continuing our discussions with Members United regarding the interest rate to be
charged on this facility once the outstanding amounts that become due are termed
out over a five year period with a 30 year amortization schedule.  The
interest rate on the $23,961,623 tranche that is scheduled for adjustment on
April 3, 2009 has been extended on a month-to-month basis at a variable rate
equal to the Federal Funds open rate plus 1.25%.  While we are
optimistic that we will be able to restructure our debt facility arrangements
with Members United in the next few months, no assurances or guarantees can be
given that we will be able to reach an agreement on a mutually acceptable
interest rate, maturity term or other loan modification
terms.  Failure to reach an acceptable debt restructuring agreement
could have a material adverse effect on the Company if the interest rate on the
Members United loan facility exceeds our expected interest income from our
mortgage loan investments.


-42-


BMO
Facility





We have
concluded that current conditions in the global financial and credit markets
will prevent us from completing a securitization transaction for all or a
portion of the mortgage loans that our wholly-owned subsidiary, MPF, holds in
2009.  Under the BMO Facility loan documents, we have agreed to enter
into a term securitization financing transaction, whole loan sale or other
refinancing event in an amount equal to or greater than $50 million for the
purpose of arranging takeout financing for certain mortgage loans held in the
facility.  Failure to meet this takeout financing commitment
constitutes an event of default under the BMO Facility loan
documents.  Given the current disruption in the global credit markets,
including mortgage-backed securities, we will not be able to complete a takeout
financing transaction prior to April 30, 2009.





In
addition to our takeout financing commitment, we were also advised in October,
2008 that the Bank of Montreal chose not to renew its agreement to serve as the
liquidity bank for the BMO Facility.  Because of its decision to
terminate its liquidity arrangement, a “facility termination date” occurred
under the BMO Facility loan documents.  As a result, MPF could make no
new borrowings under the facility.  In addition, all funds held in the
facility collection account that were received from borrowers were required to
be used to pay all outstanding costs and expenses due under the facility, then
to accrued and unpaid interest on the outstanding balance of the facility and
any remaining amounts applied to reduce the loan balance to zero.  By
withdrawing its support of the BMO Facility, all new borrowings under the
facility and cash payments received in the facility collection account remain in
such account, thereby preventing us from gaining access to any excess funds
available in the account for liquidity and cash purposes after all accrued
interest, expenses and facility costs have been paid.





If we are
unsuccessful in obtaining a waiver, extension or modification of our covenant to
complete a takeout financing transaction on or before April 30, 2009, an event
of default will occur under the BMO Facility loan documents.  In that
event, the lender will be entitled to exercise any and all remedies under the
BMO Facility loan documents.  These remedies include, but are not
limited to, seizing collateral, selling assets, or increasing the rate of
interest on the loan to the prime rate, plus 2%.





We have
met with representatives of BMO Capital Markets Corp. in an effort to reach a
mutually acceptable solution to the takeout financing covenant and termination
of the Liquidity Agreement by the Bank of Montreal.  We expect to
complete these negotiations and enter into a modification arrangement on or
before April 30, 2009.  Although we cannot guarantee a successful
outcome in these discussions, we anticipate that we will be able to reach an
agreement that will avoid any declaration of an event of default under the BMO
Facility loan documents.





As a
result of the action taken by BMO Capital Markets Corp. in terminating the
Liquidity Agreement, our ability to fund the origination and acquisition of
church and ministry mortgage loans has been substantially
curtailed.  Due to the lack of borrowing facilities, we currently fund
our loan origination activities solely out of the proceeds of sales of our debt
securities and cash generated by our loan portfolio.  In this current
credit and financial market, lack of access to liquidity markets means that we
have restricted access to funding sources that were previously
available.  Until we are able to gain access to additional liquidity,
we plan to limit our origination and acquisition of mortgage loans and refrain
from making distributions of earnings on our Class A
Units.


-43-


In
summary, we have been adversely affected by the disruption in global credit
markets and economic recession by the following factors: (i) our inability to
complete a securitization transaction for our BMO Facility loans in 2008 or
2009; (ii) the withdrawal of our liquidity bank in the BMO Facility, which has
trapped all payments in such facility, thereby reducing our access to income
generated by the facility; (iii) the higher cost of short-term interest rates we
have to pay on our borrowings as measured by the spread to LIBOR costs; (iv) the
reduced commitments in the amount of funds that we are authorized to borrow on
our credit facilities; and (v) our need to restructure our credit facilities
with BMO Capital Markets Corp. and Members United.  We are currently
in discussions with our credit facility lenders to restructure our credit
facilities and modify our loan agreements, and  we are seeking to
complete these restructuring arrangements in the second quarter of 2009, but we
can give no assurances that we will be able to successfully modify these credit
facilities on favorable terms or at all.





Investor
Notes





We also
rely on our investor notes to make investments in mortgage loan assets and fund
our general operations.  As of December 31, 2008, a total of $75.8
million was owed under these notes.  For further information on our
investor notes, see Notes 8 and 9, “Notes Payable” and “Public Offerings” in our
accompanying audited consolidated financial statements for the year ended
December 31, 2008.  We have offered our investor notes under
registered offerings with the U.S. Securities and Exchange Commission (“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.  As of December 31, 2008, $24.2
million of these notes were outstanding.





In
addition to our Alpha Class Notes, in April, 2008, we registered with the SEC
$80.0 million of new Class A Notes that consists of three series of notes,
including a Fixed Series, Flex Series and Variable Series.  All Class
A Notes are unsecured.  The interest rates we pay 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 we pay 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.


-44-


The Notes
were issued under a Trust Indenture we entered into with U.S. Bank National
Association.  The Notes are part of up to $200 million of Class A
Notes we may issue pursuant to the US Bank Indenture.  The Trust
Indenture covering the Class A Notes contains covenants pertaining to a minimum
fixed charge coverage ratio, maintenance of tangible net worth, limitation on
issuance of additional notes and incurrence of indebtedness.  At
December 31, 2008, $36.5 million of these Class A Notes were
outstanding.





Of the
$75.8 million in investor notes that are outstanding at December 31, 2008, $49.8
million and $10.4 million will mature in 2009 and 2010,
respectively.  Historically, we have a high rate of renewal or
reinvestment by our note holders upon maturity of their notes.  In
2008 and 2007, 76% and 72% of our note investors renewed their investments in
new notes.  While we cannot assure our investors that we will be able
to continue this trend, we have a solid historical record of experience that
supports our investor note program.





Debt
Covenants





Our
investor notes require that we comply with certain financial covenants
including, without limitation, minimum net worth, interest coverage,
restrictions on the distribution of earnings to our equity investors and
incurring other indebtedness that is not permitted under the provisions of our
loan and trust indenture.  If an event of default occurs under our
investor notes, the trustee may declare the principal and accrued interest on
all notes to be due and payable and may exercise other available remedies to
collect payment on such notes.  We believe that we are in compliance
with our debt covenants under the investor notes.





We are
also required to comply with financial and non-financial covenants under our
Members United credit facilities.  The Members United credit
facilities contain certain affirmative covenants that are routine for a credit
facility of this nature, including requiring that we keep the collateral free of
liens and encumbrances, timely pay the amounts due under the facility and
provide Members United with current financial statements and
reports.  Other negative covenants prevent us from selling all of our
assets, from consolidating with or merging into another entity, from impairing
or incurring a lien on the collateral securing the credit facility or creating
new indebtedness incurred outside ordinary borrowings in the sale of debt and
note securities, loans entered into for purchasing or originating mortgage
loans, or borrowings entered into by our wholly-owned subsidiary, MPF, to
acquire eligible mortgage loans.  We believe that we are in compliance
with these covenants.





Our
covenants under the BMO Facility require that we and our wholly-owned
subsidiary, MPF, comply with certain negative and affirmative
covenants.  These include, but are not limited to, the
following:








•
              maintaining
      minimum borrower equity of $20 million or net pool balance of eligible
      mortgage loans that MPF may purchase, whichever is
  less;


•
            completing
      a term securitization of $50 million or more on or before April 30, 2009
      and continuing twelve months
thereafter;


-45-


•
            maintaining
      100% ownership of MPF free and clear of any adverse
  claim;





•
            performing
      and observing all terms, covenants and agreements required under the BMO
      Facility loan documents;





•
            maintaining
      minimum availability on our working capital credit facilities plus cash
      and cash equivalents in an amount not less than $10
    million;





•
            conducting
      its activities as a special bankruptcy-remote limited liability
      company;





•
            undertaking
      its activities and transactions with affiliated entities and persons on an
      arms-length basis; and





•
            making
      all required payments due under the
facility.





If MPF
were to default under the BMO Facility loan documents, the lender could
accelerate payment of all obligations payable, terminate their commitment under
the facility, increase the interest rate charged on the indebtedness and
undertake sale and collection remedies of the mortgage assets in the
facility.  A default under the BMO Facility could also trigger
cross-default provisions in our other debt facilities.





We
believe that MPF is in compliance with its debt covenants under the BMO Facility
subject, however, to our ability to obtain a waiver, extension or restructuring
of our takeout financing covenant.  For further information on the
developments regarding our BMO Facility, see Note 5, Lines of Credit, in our
accompanying audited consolidated financial statements for the year ended
December 31, 2008.





Special
Purpose Entity





In
October, 2007, we entered into the BMO Facility and formed MPF as our
wholly-owned subsidiary.  MPF was formed as a special purpose limited
liability company whose activities are restricted in its organizational and
governing documents to invest in and hold qualifying church mortgage
loans.  We formed this special purpose entity in order to legally
isolate us from loans that we transfer to MPF in the event that a bankruptcy
petition is filed by us or if we are subjected to bankruptcy
proceedings.





Under
generally accepted accounting principles, we are required to evaluate whether
MPF is a variable interest entity, as defined by Interpretation No. 46
(Revised 2003),Consolidation of Variable Interest
Entities — An Interpretation of ARB No. 51,
(“FIN 46(R)”).  If we determine that we are the primary
beneficiary of MPF, we consolidate the assets and liabilities of MPF for
financial statement purposes.  In accordance with the provisions of
FIN 46(R), we determined that we were the primary beneficiary of MPF and,
therefore, consolidated the assets and liabilities of this entity for financial
statement purposes.


-46-


Significant
Accounting Estimates and Critical Accounting Policies





Critical
Accounting Policies





Our
discussion and analysis of our financial condition and results of operations are
based upon our financial statements, which have been prepared in accordance with
accounting principles generally accepted in the United States of America. The
preparation of these financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues and
expenses, and the related disclosures. On an on-going basis, we evaluate these
estimates, including those related the allowance for loan losses, and estimates
are based on historical experience, information received from third parties and
on various other assumptions that are believed to be reasonable under the
circumstances, which form the basis for making judgments about the carrying
values of assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates under conditions
different from our assumptions. We believe the following critical accounting
policies affect our more significant judgments and estimates used in the
preparation of our consolidated financial statements.





Accounting
for Derivative Financial Investments and Hedging Activities





We use
derivatives to hedge, fix and cap interest rate risk and we account for our
derivative and hedging activities using SFAS No. 133, “Accounting for
Derivative Instruments and Hedging Activities,” as amended, which requires all
derivative instruments to be carried at fair value on the balance sheet.
Derivative instruments designated in a hedge relationship to mitigate exposure
to changes in the fair value of an asset, liability, or firm commitment
attributable to a particular risk, are considered fair value hedges. Derivative
instruments designated in a hedge relationship to mitigate exposure to
variability in expected future cash flows, or other types of forecasted
transactions, are considered cash flow hedges. We document all relationships
between hedging instruments and hedged items, as well as our risk-management
objective and strategy for undertaking each hedge transaction.





We use
interest rate swap agreements to hedge our exposure to interest rate risks on
our balance sheet.  Interest rate swaps are contracts in which a
series of interest rate flows are exchanged over a prescribed
period.  Derivative instruments that convert a portion of our variable
debt to a fixed rate are commonly referred to as a cash flow hedge and when we
convert a portion of our fixed rate loans to a variable rate, we refer to that
as a fair value hedge.





When a
cash flow hedge is considered to be effective, we record the fair value of the
derivative instrument on our balance sheet as either an asset or liability, with
a corresponding amount recorded as a component of other comprehensive
income.  Amounts are reclassified from other comprehensive income to
the income statements in the period or periods that the hedged transaction
affects earnings.


-47-


Under a
cash flow hedge, derivative gains and losses that do not offset changes in the
value of hedged asset or liability are recognized immediately in
non-interest income.  For hedges that offset changes in the net value
of the hedged liabilities, we defer the net settlement amount and amortize this
amount into net interest income over the life of the hedged debt.





Valuation
of Loans





We
classify loans that we intend to hold for the foreseeable future at their
outstanding principal balance, less an allowance for loan losses and adjusted
for deferred loan fees and costs.  We defer loan origination fees and
costs and recognize those amounts as an adjustment to the related loan yield on
the asset using the straight line method, which results in an amortization that
is materially the same as the interest method.





Allowance
for Loan Losses





Determining
an appropriate allowance for loan losses involves a significant degree of
estimation and judgment. The process of estimating the allowance for loan losses
may result in either a specific amount representing the impairment estimate or a
range of possible amounts. Statement of Financial Accounting Standards (SFAS)
No. 5, “Accounting for Contingencies,”
provides guidance on accounting for loan losses associated with pools of loans
and requires the accrual of a loss when it is probable that an asset has been
impaired and the amount of the loss can be reasonably estimated.  SFAS
No. 114, “Accounting by Creditors for
Impairment of a Loan,” provides
guidance for accounting for impaired loans, and requires that a loss be recorded
when the outstanding balance of an impaired loan is greater than either 1) the
value of the underlying collateral less estimated selling costs for collateral
dependent loans, or 2) the present value of expected cash flows for other
impaired loans.





When
management confirms that a loan is uncollectible, a loan loss is charged against
our allowance for loan losses.  If there are subsequent recoveries, we
credit such amounts to the allowance.  Financial Accounting Standards
Board Interpretation (FASB) No. 14, “Reasonable
Estimation of the Amount of a Loss—an interpretation of FASB Statement No.
5,” states that a creditor should recognize the amount that is the best
estimate within the estimated range of loan losses. Accordingly, the
determination of an amount within the calculated range of losses is in
recognition of the fact that historical charge-off experience, without
adjustment, may not be representative of current impairment of the current
portfolio of loans because of changed circumstances. Such changes may relate to
changes in the age of loans in the portfolio, changes in the creditor’s
underwriting standards, changes in economic conditions affecting borrowers in a
geographic region, or changes in the business climate in a particular
industry.





Management
regularly evaluates our allowance for loan losses based upon our periodic review
of the collectibility of the loans, historical experience, nature and volume of
our loan portfolio, adverse situations that may affect the borrower’s ability to
repay, value of the collateral and prevailing economic
conditions.  Since an evaluation of this nature is inherently
subjective, we may have to adjust our allowance for loan losses as conditions
change and new information becomes available.


-48-


New
Accounting Pronouncements





In March
2008, FASB issued SFAS No. 161, Disclosures about Derivative
Instruments and Hedging Activities, which is effective for financial
statements issued for fiscal years and interim periods beginning after November
15, 2008.  SFAS No. 161 requires enhanced disclosures about an
entity’s derivatives and hedging activities.  Management does not
expect the adoption of SFAS No. 161 to have a material impact on the
consolidated financial statements.





In 2008,
the Company partially adopted Statement of Financial Accounting Standards (SFAS)
No. 157, Fair Value
Measurements, which defines fair value, establishes a framework for
measuring fair value and expands disclosures about fair value measurements. SFAS
157 applies only to fair value measurements already required or permitted by
other accounting standards and does not impose requirements for additional fair
value measures. SFAS 157 was issued to increase consistency and comparability in
reporting fair values. The Company’s partial adoption of SFAS 157 did not have a
material impact on the Company’s financial condition or results of
operations.





Item
7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK





We are a
“smaller reporting company” as defined by Regulation S-K and as such, are not
providing the information contained in this item pursuant to Regulation
S-K.





Item
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA




Included
herewith are the following financial statements:





Table
of Contents


PageReport
      of Independent Registered Public Accounting Firm
              F-1Financial
      StatementsConsolidated
      Balance Sheets
              F-2Consolidated
      Statements of Operations
              F-3Consolidated
      Statements of Equity
              F-4Consolidated
      Statements of Cash Flows
              F-5Notes
      to Consolidated Financial Statements
              F6-28


-49-


Report
of Independent Registered Public Accounting Firm








To The
Members


Ministry
Partners Investment Company, LLC


Brea,
California








We have
audited the accompanying consolidated balance sheets of Ministry Partners
Investment Company, LLC and subsidiary as of December 31, 2008 and 2007 and the
related consolidated statements of operations, equity and cash flows for the
years then ended. These consolidated financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audits.





We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.





In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of Ministry Partners Investment
Company, LLC and subsidiary as of December 31, 2008 and 2007 and the results of
its operations and its cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States of
America.





/s/
Hutchinson and Bloodgood LLP





March 23,
2009


F-1


Ministry
Partners Investment Company, LLC and Subsidiary


Consolidated
Balance Sheets


December
31, 2008 and 2007


(Dollars
in Thousands)




Assets
                    
                    2008
                    
                    
                    2007Cash
                    
                    $
                    14,889
                    
                    
                    $
                    2,243Loans,
      net of allowance for loan lossesof
      $489 and $126 in 2008 and 2007, respectively
                    
                    
                    257,176
                    
                    
                    
                    116,310Accrued
      interest receivable
                    
                    
                    1,374
                    
                    
                    
                    518Property
      and equipment, net
                    
                    
                    262
                    
                    
                    
                    24Debt
      issuance costs
                    
                    
                    979
                    
                    
                    
                    1,340Other
      assets
                    
                    
                    415
                    
                    
                    
                    649Total
      assets
                    
                    $
                    275,095
                    
                    
                    $
                    121,084Liabilities
      and EquityLiabilitiesLines
      of credit and other borrowings
                    
                    $
                    185,146
                    
                    
                    $
                    46,300Notes
      payable
                    
                    
                    75,774
                    
                    
                    
                    62,057Accrued
      interest payable
                    
                    
                    292
                    
                    
                    
                    180Other
      liabilities
                    
                    
                    1,132
                    
                    
                    
                    638Total
      liabilities
                    
                    
                    262,344
                    
                    
                    
                    109,175Commitments and
      contingencies (Note 7)Stockholders'
      equityClass
      I preferred stock, 200,000 shares authorized,-0-
      and 88,922 shares issued and outstandingat
      December 31, 2008 and 2007, respectively; no parvalue
      (liquidation preference value of $100 per share)
                    
                    
                    --
                    
                    
                    
                    8,892Class
      II preferred stock, 75,000 shares authorized, -0- and
    19,000shares
      issued and outstanding at December 31, 2008 and2007,
      respectively; no par value (liquidation preferencevalue
      of $100 per share)
                    
                    
                    --
                    
                    
                    
                    1,900Common
      stock, 10,000,000 shares authorized; -0- and 146,522
      shares
                      issued
      and outstanding at December 31, 2008and
      2007, respectively; no par value
                    
                    
                    --
                    
                    
                    
                    1,809Accumulated
      deficit
                    
                    
                    --
                    
                    
                    
                    (579
                    )Accumulated
      other comprehensive loss
                    
                    
                    --
                    
                    
                    
                    (113
                    )Members'
      equitySeries
      A preferred units, 1,000,000 units authorized, 117,600
    unitsissued
      and outstanding at December 31, 2008 (liquidation
    preferenceof
      $100 per unit)
                    
                    
                    11,760
                    
                    
                    
                    --Class
      A common units, 1,000,000 units authorized, 146,522 units issued
      and
                    
                    
                    1,509
                    
                    
                    
                    --outstanding
      at December 31, 2008Accumulated
      other comprehensive loss
                    
                    
                    (518
                    )
                    
                    
                    --Total
      equity
                    
                    
                    12,751
                    
                    
                    
                    11,909Total
      liabilities and equity
                    
                    $
                    275,095
                    
                    
                    $
                    121,084




The Notes
to Consolidated Financial Statements are an integral part of these
statements.


F-2


Ministry
Partners Investment Company, LLC and Subsidiary


Consolidated
Statements of Operations


Years
Ended December 31, 2008 and 2007


(Dollars
in Thousands)








2008
                
                
                2007Interest
      incomeLoans
                
                $
                13,451
                
                
                $
                4,639Interest
      on interest-bearing accounts
                
                
                383
                
                
                
                294Total
      interest income
                
                
                13,834
                
                
                
                4,933Interest
      expenseLines
      of credit and other borrowings
                
                
                6,123
                
                
                
                377Notes
      payable
                
                
                3,632
                
                
                
                3,224Total
      Interest expense
                
                
                9,755
                
                
                
                3,601Net
      interest income
                
                
                4,079
                
                
                
                1,332Provision
      for loan losses
                
                
                363
                
                
                
                --Net
      interest income after provision for loan losses
                
                
                3,716
                
                
                
                1,332Non-interest
      income
                
                
                39
                
                
                
                8Non-interest
      expensesSalaries
      and benefits
                
                
                1,097
                
                
                
                886Marketing
      and promotion
                
                
                21
                
                
                
                76Office
      occupancy
                
                
                62
                
                
                
                24Office
      operations and other expenses
                
                
                1,304
                
                
                
                495Legal
      and accounting
                
                
                550
                
                
                
                313Ministry
      support
                
                
                --
                
                
                
                2Total
      non-interest expenses
                
                
                3,034
                
                
                
                1,796Income
      (loss) before benefit from income taxes
                
                
                721
                
                
                
                (456
                )Benefit
      from income taxes
                
                
                (23
                )
                
                
                (157
                )Net
      income (loss)
                
                $
                744
                
                
                $
                (299
                )


The Notes
to Consolidated Financial Statements are an integral part of these
statements.


F-3


Ministry
Partners Investment Company, LLC and Subsidiary


Consolidated
Statements of Equity


Years
Ended December 31, 2008 and 2007


(Dollars
in Thousands)


Series A Preferred Units
                                      
                                      
                                      Class A Common Units
                                      
                                      
                                      Preferred Stock
                                      
                                      
                                      Common StockNumber
                                        of
                                        Units
                                      
                                      
                                      Amount
                                      
                                      
                                      Number
                                        of
                                        Units
                                      
                                      
                                      Amount
                                      
                                      
                                      Number
                                        of
                                        Shares
                                      
                                      
                                      Amount
                                      
                                      
                                      Number
                                        of
                                        Shares
                                      
                                      
                                      Amount
                                      
                                      
                                      Retained
                                        Earnings
                                        (Accumulated
                                        Deficit)
                                      
                                      
                                      Accumulated
                                        Other
                                        Comprehensive
                                        Loss
                                      
                                      
                                      TotalBalance,
      December 31, 2006
                                      
                                      --
                                      
                                      
                                      $
                                      --
                                      
                                      
                                      
                                      --
                                      
                                      
                                      $
                                      --
                                      
                                      
                                      
                                      109,022
                                      
                                      
                                      $
                                      10,902
                                      
                                      
                                      
                                      146,522
                                      
                                      
                                      $
                                      1,809
                                      
                                      
                                      $
                                      350
                                      
                                      
                                      $
                                      --
                                      
                                      
                                      $
                                      13,061Purchase
      of Class I
                                        preferred stock
                                      
                                      --
                                      
                                      
                                      
                                      --
                                      
                                      
                                      
                                      --
                                      
                                      
                                      
                                      --
                                      
                                      
                                      
                                      (1,100
                                      )
                                      
                                      
                                      (110
                                      )
                                      
                                      
                                      --
                                      
                                      
                                      
                                      --
                                      
                                      
                                      
                                      --
                                      
                                      
                                      
                                      --
                                      
                                      
                                      
                                      (110
                                      )Comprehensive
      loss:Net
      loss
                                      
                                      --
                                      
                                      
                                      
                                      --
                                      
                                      
                                      
                                      --
                                      
                                      
                                      
                                      --
                                      
                                      
                                      
                                      --
                                      
                                      
                                      
                                      --
                                      
                                      
                                      
                                      --
                                      
                                      
                                      
                                      --
                                      
                                      
                                      
                                      (299
                                      )
                                      
                                      
                                      --
                                      
                                      
                                      
                                      (299
                                      )Change
      in value of
                                        interest rate swap
                                      
                                      --
                                      
                                      
                                      
                                      --
                                      
                                      
                                      
                                      --
                                      
                                      
                                      
                                      --
                                      
                                      
                                      
                                      --
                                      
                                      
                                      
                                      --
                                      
                                      
                                      
                                      --
                                      
                                      
                                      
                                      --
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      (113
                                      )
                                      
                                      
                                      (113
                                      )Total
      comprehensive loss
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      (412
                                      )Dividends
      on preferred stock
                                      
                                      --
                                      
                                      
                                      
                                      --
                                      
                                      
                                      
                                      --
                                      
                                      
                                      
                                      --
                                      
                                      
                                      
                                      --
                                      
                                      
                                      
                                      --
                                      
                                      
                                      
                                      --
                                      
                                      
                                      
                                      --
                                      
                                      
                                      
                                      (630
                                      )
                                      
                                      
                                      --
                                      
                                      
                                      
                                      (630
                                      )Balance,
      December 31, 2007
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      107,922
                                      
                                      
                                      
                                      10,792
                                      
                                      
                                      
                                      146,522
                                      
                                      
                                      
                                      1,809
                                      
                                      
                                      
                                      (579
                                      )
                                      
                                      
                                      (113
                                      )
                                      
                                      
                                      11,909Purchase
      of Class I
                                        preferred stock
                                      
                                      --
                                      
                                      
                                      
                                      --
                                      
                                      
                                      
                                      --
                                      
                                      
                                      
                                      --
                                      
                                      
                                      
                                      (1,900
                                      )
                                      
                                      
                                      (190
                                      )
                                      
                                      
                                      --
                                      
                                      
                                      
                                      --
                                      
                                      
                                      
                                      --
                                      
                                      
                                      
                                      --
                                      
                                      
                                      
                                      (190
                                      )Sale
      of Class I
                                        preferred stock
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      11,578
                                      
                                      
                                      
                                      1,158
                                      
                                      
                                      
                                      --
                                      
                                      
                                      
                                      --
                                      
                                      
                                      
                                      --
                                      
                                      
                                      
                                      --
                                      
                                      
                                      
                                      1,158Comprehensive
      income:Net
      income
                                      
                                      --
                                      
                                      
                                      
                                      --
                                      
                                      
                                      
                                      --
                                      
                                      
                                      
                                      --
                                      
                                      
                                      
                                      --
                                      
                                      
                                      
                                      --
                                      
                                      
                                      
                                      --
                                      
                                      
                                      
                                      --
                                      
                                      
                                      
                                      744
                                      
                                      
                                      
                                      --
                                      
                                      
                                      
                                      744Change
      in value of interest rate swap
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      --
                                      
                                      
                                      
                                      --
                                      
                                      
                                      
                                      --
                                      
                                      
                                      
                                      --
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      (405
                                      )
                                      
                                      
                                      (405
                                      )Total
      comprehensive
                                        income
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      339Dividends
      on preferred stock
                                      
                                      --
                                      
                                      
                                      
                                      --
                                      
                                      
                                      
                                      --
                                      
                                      
                                      
                                      --
                                      
                                      
                                      
                                      --
                                      
                                      
                                      
                                      --
                                      
                                      
                                      
                                      --
                                      
                                      
                                      
                                      --
                                      
                                      
                                      
                                      (465
                                      )
                                      
                                      
                                      --
                                      
                                      
                                      
                                      (465
                                      )Conversion
      of preferred
                                        stock into Series A
                                        preferred units
                                      
                                      117,600
                                      
                                      
                                      
                                      11,760
                                      
                                      
                                      
                                      --
                                      
                                      
                                      
                                      --
                                      
                                      
                                      
                                      (117,600
                                      )
                                      
                                      
                                      (11,760
                                      )
                                      
                                      
                                      --
                                      
                                      
                                      
                                      --
                                      
                                      
                                      
                                      --
                                      
                                      
                                      
                                      --
                                      
                                      
                                      
                                      --Conversion
      of common
                                        stock  into Class A
                                        Units
                                      
                                      --
                                      
                                      
                                      
                                      --
                                      
                                      
                                      
                                      146,522
                                      
                                      
                                      
                                      1,509
                                      
                                      
                                      
                                      --
                                      
                                      
                                      
                                      --
                                      
                                      
                                      
                                      (146,522
                                      )
                                      
                                      
                                      (1,809
                                      )
                                      
                                      
                                      300
                                      
                                      
                                      
                                      --
                                      
                                      
                                      
                                      --Balance,
      December 31, 2008
                                      
                                      117,600
                                      
                                      
                                      $
                                      11,760
                                      
                                      
                                      
                                      146,522
                                      
                                      
                                      $
                                      1,509
                                      
                                      
                                      
                                      --
                                      
                                      
                                      $
                                      --
                                      
                                      
                                      
                                      --
                                      
                                      
                                      $
                                      --
                                      
                                      
                                      $
                                      --
                                      
                                      
                                      $
                                      (518
                                      )
                                      
                                      $
                                      12,751


The Notes
to Consolidated Financial Statements are an integral part of these
statements.
 
 F-4


Ministry
Partners Investment Company, LLC and Subsidiary


Consolidated
Statements of Cash Flows


Years
Ended December 31, 2008 and 2007


(Dollars
in Thousands)





2008
                        
                        
                        2007Cash
      Flows from Operating ActivitiesNet
      income (loss)
                        
                        $
                        744
                        
                        
                        $
                        (299
                        )Adjustments
      to reconcile net income (loss)to
      net cash provided by (used in) operating activitiesDepreciation
                        
                        
                        14
                        
                        
                        
                        2Provision
      for loan losses
                        
                        
                        363
                        
                        
                        
                        --Amortization
      of deferred loan fees
                        
                        
                        (94
                        )
                        
                        
                        (100
                        )Amortization
      of debt issuance costs
                        
                        
                        401
                        
                        
                        
                        73Net
      change in:Deferred
      income tax benefit
                        
                        
                        116
                        
                        
                        
                        (86
                        )Accrued
      interest receivable
                        
                        
                        (856
                        )
                        
                        
                        (242
                        )Other
      assets
                        
                        
                        118
                        
                        
                        
                        (546
                        )Other
      liabilities
                        
                        
                        241
                        
                        
                        
                        447Net
      cash provided by (used in) operating activities
                        
                        
                        1,047
                        
                        
                        
                        (751
                        )Cash
      Flows from Investing ActivitiesLoan
      purchases
                        
                        
                        (156,731
                        )
                        
                        
                        (73,295
                        )Loan
      originations
                        
                        
                        (19,309
                        )
                        
                        
                        (12,471
                        )Loan
      sales
                        
                        
                        843
                        
                        
                        
                        24,606Loan
      principal collections, net
                        
                        
                        34,064
                        
                        
                        
                        4,663Purchase
      of property and equipment
                        
                        
                        (252
                        )
                        
                        
                        (16
                        )Net
      cash used in investing activities
                        
                        
                        (141,385
                        )
                        
                        
                        (56,513
                        )Cash
      Flows from Financing ActivitiesNet
      change in lines of credit and other borrowings
                        
                        
                        138,846
                        
                        
                        
                        46,300Net
      change in notes payable
                        
                        
                        13,717
                        
                        
                        
                        7,726Debt
      issuance costs
                        
                        
                        (41
                        )
                        
                        
                        (1,413
                        )Net
      proceeds from issuance of preferred stock
                        
                        
                        1,158
                        
                        
                        
                        --Purchase
      of preferred stock
                        
                        
                        (190
                        )
                        
                        
                        (110
                        )Dividends
      paid on preferred stock
                        
                        
                        (506
                        )
                        
                        
                        (629
                        )Net
      cash provided by financing activities
                        
                        
                        152,984
                        
                        
                        
                        51,874Net
      increase (decrease) in cash
                        
                        
                        12,646
                        
                        
                        
                        (5,390
                        )Cash
      at beginning of year
                        
                        
                        2,243
                        
                        
                        
                        7,633Cash
      at end of year
                        
                        $
                        14,889
                        
                        
                        $
                        2,243Supplemental
      Disclosures of Cash Flow InformationInterest
      paid
                        
                        $
                        9,642
                        
                        
                        $
                        3,840Income
      taxes paid
                        
                        
                        140
                        
                        
                        
                        56Change
      in value of interest rate swap
                        
                        
                        405
                        
                        
                        
                        113


The Notes
to Consolidated Financial Statements are an integral part of these
statements.


F-5




Note
      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 13 federal and state chartered credit unions, none of
      which owns a majority of the voting common stock of the
      Company.  Two of
      the credit unions own 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
      are concentrated in California.





In 2007
the Company created a wholly owned special purpose subsidiary, Ministry Partners
Funding, LLC ("MPF"), which warehouses church and ministry mortgages purchased
from ECCU or originated by the Company for later securitization.  MPF
has not yet securitized any of its loans.  MPF was formed to serve as
a financing vehicle that will purchase qualifying church mortgage loans pending
the consummation of a securitization transaction that will enable such loans to
be accumulated and sold to investors through the purchase of an interest in a
securities instrument.





Principles
      of Consolidation





The
      consolidated financial statements include the accounts of Ministry
      Partners Investment Company, LLC and its wholly-owned subsidiary,
      MPF. 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. The allowance for loan losses
      represents a significant estimate by
management.





Cash





The
      Company maintains deposit accounts with other institutions with balances
      that may exceed federally insured limits.  The Company has not
      experienced any losses in such
accounts.





The
      Company is required to maintain certain balances on hand in conjunction
      with its borrowing arrangement with BMO Capital as disclosed in Note
      5.


F-6


Note
      1.
              Summary
      of Significant Accounting Policies
(Continued)


Loans
      Receivable





Loans
      that management has the intent and ability to hold for the foreseeable
      future are reported at their outstanding unpaid principal balance less an
      allowance for loan losses, and adjusted for deferred loan fees and costs.
      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.





The
      accrual of interest is discontinued at the time the loan is 90 days past
      due unless the credit is well-secured and in the process of collection.
      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 the provision for loan losses. Loan losses are charged
      against the allowance when management believes the uncollectibility of a
      loan balance is confirmed. Subsequent recoveries, if any, are credited to
      the allowance.





The
      allowance for loan losses is evaluated on a regular basis by management
      and is based upon management’s periodic review of the collectibility of
      the loans in light of historical experience, the nature and volume of the
      loan portfolio, adverse situations that may affect the borrower’s ability
      to repay, estimated value of any underlying collateral and prevailing
      economic conditions. This evaluation is inherently subjective as it
      requires estimates that are susceptible to significant revision as more
      information becomes available.





The
      allowance consists of general and unallocated components. The general
      component covers non-classified loans and is based on historical loss
      experience adjusted for qualitative factors. An unallocated component is
      maintained to cover uncertainties that could affect management's estimate
      of probable losses. The unallocated component of the allowance reflects
      the margin of imprecision inherent in the underlying assumptions used in
      the methodologies for estimating general losses in the
      portfolio.  A specific component of the allowance also is
      considered in the event a loan becomes
impaired.


F-7


Note
      1.
              Summary
      of Significant Accounting Policies
(Continued)
  Allowance
for Loan Losses (Continued)


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.  Impairment is measured on a loan-by-loan basis by
      either the present value of expected future cash flows discounted at the
      loan's effective interest rate, the obtainable market price, or the fair
      value of the collateral if the loan is collateral
    dependent.





Interest
      Rate Swap Agreements





For
      asset/liability management purposes, the Company uses interest rate swap
      agreements to hedge various exposures or to modify interest rate
      characteristics of various balance sheet accounts.  Interest
      rate swaps are contracts in which a series of interest rate flows are
      exchanged over a prescribed period.  The notional amount on
      which the interest payments are based is not exchanged.  These
      swap agreements are derivative instruments that convert a portion of the
      Company’s variable-rate debt to a fixed rate (cash flow
      hedge).





The
      effective portion of the gain or loss on a derivative designated and
      qualifying as a cash flow hedging instrument is initially reported as a
      component of other comprehensive income and subsequently reclassified into
      earnings in the same period or periods during which the hedged transaction
      affects earnings.  The ineffective portion of the gain or loss
      on the derivative instrument, if any, is recognized currently in
      earnings.





For
      cash flow hedges, the net settlement (upon close-out or termination) that
      offsets changes in the value of the hedged debt is deferred and amortized
      into net interest income over the life of the hedged debt.  The
      portion, if any, of the net settlement amount that did not offset changes
      in the value of the hedged asset or liability is recognized immediately in
      non-interest income.





Interest
      rate derivative financial instruments receive hedge accounting treatment
      only if they are designated as a hedge and are expected to be, and are,
      effective in substantially reducing interest rate risk arising from the
      assets and liabilities identified as exposing us to risk.  Those
      derivative financial instruments that do not meet specified hedging
      criteria would be recorded at fair value with changes in fair value
      recorded in income.  If periodic assessment indicates
      derivatives no longer provide an effective hedge, the derivative contracts
      would be closed out and settled, or classified as a trading
      activity.





Cash
      flows resulting from the derivative financial instruments that are
      accounted for as hedges of assets and liabilities are classified in the
      cash flow statement in the same category as the cash flows of the items
      being hedged.


F-8


Note
      1.
              Summary
      of Significant Accounting Policies
(Continued)


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 be 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.





Property
      and Equipment





Furniture,
      fixtures, and equipment are stated at cost, less accumulated depreciation.
      Depreciation is computed on a straight-line basis over the estimated
      useful lives of the assets, which range from three to five
      years.





Debt
      Issuance Costs





Debt
issuance costs are related to the lines of credit as well as to a public
offering of unsecured notes, and are amortized into interest expense over the
contractual terms of the debt.





Income
      Taxes





Through
      December 30, 2008, the Company was a C corporation, and thus recorded all
      current and deferred income taxes arising from its operations through that
      date. Deferred income tax assets and liabilities were determined based on
      the tax effects of temporary differences between the book and tax bases of
      the various assets and liabilities of the
  Company.





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
      will be treated as a partnership for income tax purposes; therefore, the
      Company will no longer be a tax-paying entity for federal or state income
      tax purposes, and thus no federal or state income tax will be recorded in
      the financial statements after the date of conversion. Income and expenses
      of the Company will be passed through to the members of the LLC for tax
      reporting purposes. The Company will become subject to a California gross
      receipts fee of approximately $12,000 per year for years ending on and
      after December 31, 2009.


F-9


Note
      1.
              Summary
      of Significant Accounting Policies
(Continued)
  Income Taxes (Continued)


Although
      the Company will no longer be an income tax-paying entity beginning in
      2009, it is nonetheless subject to FASB Interpretation No. 48, Accounting for Uncertainty in
      Income Taxes, an interpretation of FASB Statement 109, for all
      “open” tax periods for which the statute of limitations has not yet run.
      FASB Interpretation No. 48, which the Company adopted as of
      January 1, 2007, prescribes a recognition threshold and a measurement
      attribute for the 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
      March 2008, FASB issued SFAS No. 161, Disclosures about Derivative
      Instruments and Hedging Activities, which is effective for
      financial statements issued for fiscal years and interim periods beginning
      after November 15, 2008.  SFAS No. 161 requires enhanced
      disclosures about an entity’s derivatives and hedging
      activities.  Management does not expect the adoption of SFAS No.
      161 to have a material impact on the Company’s consolidated financial
      statements.





Note
      2.
            Related
      Party Transactions





The
      Company maintains most of its cash at ECCU. Total funds held with ECCU
      were $12.0 million and $1.5 million at December 31, 2008 and 2007,
      respectively. Interest earned on these funds totaled approximately $310.9
      thousand and $88.7 thousand for the years ended December 31, 2008 and
      2007, respectively.





The
      Company leases physical facilities from ECCU pursuant to an Office Lease
      dated November 4, 2008, and purchases other services from ECCU. Charges of
      approximately $164.2 thousand and $177.0 thousand for the years ended
      December 31, 2008 and 2007, respectively, were made 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. Management believes that such method is
    reasonable.





During
      the year ended December 31, 2007, the Company leased its employees from
      ECCU. The Company paid $861.7 thousand for the employee costs during the
      year ended December 31, 2007. Effective January 1, 2008, the Company
      entered into a staffing agreement with Administaff Companies II, L.P.,
      covering all employees pursuant to a client services agreement and
      terminated the leasing arrangement with
ECCU.


F-10


Note
      2.
              Related
      Party Transactions (Continued)


In
      accordance with a mortgage loan purchase arrangement between the Company
      and ECCU, the Company purchased $156.7 million and $73.3 million of loans
      from ECCU during the years ended December 31, 2008 and 2007,
      respectively.  This includes $60.3 and $40.8 million purchased
      by MPF during the years ended December 31, 2008 and 2007,
      respectively.  The Company recognized $11.8 million and $4.1
      million of interest income on loans purchased from ECCU during the years
      ended December 31, 2008 and 2007, respectively.  ECCU retains
      the servicing rights on loans it sells to the Company.  The
      Company paid loan servicing fees to ECCU of $732.5 thousand and $61.4
      thousand in the years ended December 31, 2008 and 2007,
      respectively.  For liquidity management purposes, from time to
      time the Company has asked ECCU to repurchase some of the mortgage loan
      investments in order to provide short-term liquidity. Although ECCU has
      from time to time accommodated the Company in responding to such requests,
      ECCU is under no obligation to continue this practice. During the years
      ended December 31, 2008 and 2007, loans in the amount of $843.3 thousand
      and $24.6 million, respectively, were sold back to ECCU. No gain or loss
      was incurred on these sales.





On
      December 14, 2007, the Board of Directors appointed R. Michael Lee to
      serve as a Company director.  Mr. Lee serves as President,
      Midwest Region, of Members United Corporate Federal Credit Union (Members
      United).  See Note 5 for information regarding the Company’s
      borrowings from Members United.





On July
11, 2007, the Company’s Board of Directors approved by written consent an
agreement pursuant to which the Company purchased a residence owned by the
Company’s President and his wife for $450 thousand plus reasonable closing costs
incurred in completing the purchase transaction.  The Board of
Directors approved this purchase transaction as part of a relocation incentive
arrangement.  On August 7, 2007, the Company completed the purchase of
this property, and in January of 2008, the Company sold this property. The
Company realized a loss of approximately $106 thousand from this
transaction.





Note
3.           Loans





A
      summary of loans as of December 31
follows:




2008
                    
                    
                    2007Loans
      to evangelical churches andrelated
      organizations:Real
      estate secured
                    
                    $
                    254,869
                    
                    
                    $
                    111,390Construction
                    
                    
                    1,042
                    
                    
                    
                    5,174Unsecured
                    
                    
                    2,000
                    
                    
                    
                    --Total
      Loans
                    
                    $
                    257,911
                    
                    
                    $
                    116,564Deferred
      loan fees, net
                    
                    
                    (210
                    )
                    
                    
                    (128
                    )Loan
      discount
                    
                    
                    (36
                    )
                    
                    
                    --Allowance
      for loan losses
                    
                    
                    (489
                    )
                    
                    
                    (126
                    )Loans,
      net
                    
                    $
                    257,176
                    
                    
                    $
                    116,310


F-11


Note
      3.
              Loans
      (Continued)


The
      loans fall into three categories:  loans purchased in whole from
      ECCU, loan participations purchased from ECCU, and loans originated
      directly by the Company.  All of the loans are made to various
      evangelical churches and related organizations, primarily to purchase,
      construct or improve facilities. Loan maturities extend through 2018. The
      loans earn interest at rates between 4.50% and 8.75%, with a weighted
      average yield of 6.60% as of December 31,
2008.





The
allowance for loan losses was $489 thousand and $126 thousand as of December 31,
2008 and 2007, respectively. The Company has had no experience of loan loss.
Management believes that the allowance for loan losses as of December 31, 2008
and 2007 is appropriate.





The
Company holds one mortgage loan that is more than 90 days delinquent as of
December 31, 2008 with a balance of $2.7 million. In accordance with the
Company’s loan policy, this loan was placed on a non-accrual status, and $92
thousand of interest income was reversed. Management believes that this loan is
adequately secured.





The
following is a summary of information on impaired and non-accrual loans at
December 31:




2008
                    
                    
                    2007Impaired
      loans without a valuation allowance
                    
                    $        4,025
                    
                    
                    
                    --Impaired
      loans with a valuation allowance
                    
                    
                    --
                    
                    
                    
                    --Total
      impaired loans
                    
                    $
                    4,025
                    
                    
                    $
                    --Valuation
      allowance for impaired loans
                    
                    $
                    --
                    
                    
                    $
                    --Total
      non-accrual loans
                    
                    $
                    2,700
                    
                    
                    $
                    --Total
      loans past due 90 days or moreand
      still accruing
                    
                    $
                    --
                    
                    
                    $
                    --Average
      investment in impaired loans during the year
                    
                    $
                    1,216
                    
                    
                    $
                    --Interest
      income recognized on impaired loans
                    
                    $
                    --
                    
                    
                    $
                    --






No
additional funds were committed to be advanced in connection with impaired
loans.


F-12


Note
4.           Premises and
Equipment




Premises and equipment consisted of the
following at December 31:




2008
                    
                    
                    2007Furniture
      and office equipment
                    
                    $
                    237
                    
                    
                    $
                    24Computer
      system
                    
                    
                    17
                    
                    
                    
                    17Leasehold
      improvements
                    
                    
                    25
                    
                    
                    
                    --279
                    
                    
                    
                    41Less
      accumulated depreciation and amortization
                    
                    
                    (17
                    )
                    
                    
                    (17
                    )$
                    262
                    
                    
                    $
                    24




Depreciation
      and amortization expense for the years ended December 31, 2008 and 2007
      amounted to $14 thousand and $2 thousand,
  respectively.





Note
      5.
            Lines
      of Credit





Members
      United Facilities





On
      October 12, 2007, the Company entered into two note and security
      agreements with Members United. Members United is a federally chartered
      credit union located in Warrenville, Illinois, which provides financial
      services to member credit unions. One note and security agreement is for a
      secured $10 million revolving line of credit, which is referred to as the
      “$10 Million LOC,” and the other is for a secured $50 million revolving
      line of credit.  The latter was amended on May 8, 2008 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 are secured by certain mortgage loans. The Company
      intends to use the $10 Million LOC for short-term liquidity purposes and
      the $100 Million CUSO Line for mortgage loan investments.  The
      Company may use proceeds from either loan to service other debt
      securities.





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.  The loan bears interest
      payable monthly at a floating rate based on the one month LIBOR plus 100
      basis points.  The interest rate on the Members United term loan
      will be reset monthly.  Since the credit facility expired on
      September 1, 2008, no new borrowings may be made under this loan
      facility.  As of December 31, 2008, there was a $10.0 million
      outstanding balance on the Members United term loan.  The $10
      Million LOC was not drawn upon in
2007.





Under the
$100 Million CUSO Line, the Company may request advances under a “demand loan”
or “term loan”.  A demand loan is a loan with a maximum term of one
year and a variable rate based upon the prime rate quoted by the Wall Street
Journal, as adjusted by a spread as determined by Members United.  A
term loan is a fixed or variable loan that has a set maturity date not to exceed
twelve years.


F-13


Note
      5.
              Lines
      of Credit (Continued)
  Members United Facilities
(Continued)


During
the period when draws may be made, each advance on the $100 Million CUSO Line
will accrue interest at either the offered rate by Members United for a fixed
term draw or the  rate quoted by Bloomberg for the Federal Funds open
rate plus 125 basis points for a variable rate draw.  Once the $100
Million CUSO Line is fully drawn, the total outstanding balance will be termed
out over a five year period with a 30 year amortization payment
schedule.  The Company is obligated to make interest payments on the
outstanding principal balance of all demand loans and term loan advances at the
applicable demand loan rate or term loan rate on the third Friday of each
month.





As of
December 31, 2008 and 2007, the balance on the $100 Million CUSO Line was $89.9
million and $4.7 million, respectively, and the weighted average interest rate
on the Company’s borrowings under this facility was 4.33% and 4.87%,
respectively.  Pursuant to the terms of the Company’s promissory note
with Members United, once the loan is fully drawn, the total outstanding balance
will be termed out over a five year period with a 30 year amortization payment
schedule.  In addition, the term loan interest rate will be specified
by Members United and will be repriced to a market fixed or variable rate to be
determined at the time the loan is restructured.





In
September, 2008, Members United decided that it would not advance any additional
funds on the $100 Million CUSO Line and the Company entered into negotiations
with Members United to convert the line of credit facility to a term loan
arrangement with a mutually acceptable interest rate.  On
April 3, 2009, the interest rates on two tranches of these term loans in
the amounts of $42,816,455 and $23,961,623 are scheduled to be
adjusted.  In addition, the interest rate on another $2,800,000
tranche will become subject to an interest rate adjustment on August 18,
2009.





The
Company is continuing to negotiate with Members United regarding the interest
rate to be charged on this facility once the outstanding amounts that become due
are termed out over a five year period with a 30 year amortization
schedule.  The interest rate on the $23,961,623 tranche that is
scheduled for adjustment on April 3, 2009 has been extended on a month-to-month
basis at a variable rate equal to the Federal Funds open rate plus
1.25%.  While the Company is optimistic that it will be able to
restructure its debt facility arrangements with Members United in the next few
months, no assurances or guarantees can be given that the Company will be able
to reach an agreement on a mutually acceptable interest rate, maturity term or
other loan modification terms.  Failure to reach an acceptable debt
restructuring agreement could have a material adverse effect on the Company if
the interest rate on the Members United loan facility exceeds the Company’s
expected interest income from its mortgage loan investments.





Both
      credit facilities are recourse obligations secured by designated mortgage
      loans. The Company must maintain collateral in the form of eligible
      mortgage loans, as defined in Member United line of credit agreements, of
      at least 111% of the outstanding balance on the lines, after the initial
      pledge of $5 million of mortgage loans. As of December 31, 2008 and
      December 31, 2007, approximately $111.4 million and $5.2 million of
      loans, respectively, were pledged as collateral for the $100 Million CUSO
      Line and the $10 Million Members United term loan. The Company has the
      right to substitute or replace one or more of the mortgage loans serving
      as collateral for these credit
facilities.





Both
      credit facilities contain a number of standard borrower covenants,
      including affirmative covenants to maintain the collateral free of liens
      and encumbrances, to timely pay the credit facilities and the Company’s
      other debt, and to provide Members United with current financial
      statements and reports.


F-14


Note
      5.
              Lines
      of Credit (Continued)


BMO
Facility





On
      October 30, 2007, MPF entered into a Loan Sale, Security, and Servicing
      agreement with BMO Capital Markets Group, as agent (“BMO Capital”) and
      Fairway Finance Company ("Fairway"), its subsidiary, as
      lender.  The agreement provides for, among other things, a
      $150,000,000 line of credit for the purpose of purchasing and warehousing
      loans for later securitization.  As of December 31, 2008 and
      December 31, 2007, the balance on the BMO Capital line of credit was $85.3
      million and $41.6 million, respectively. Interest is calculated at the
      rate at which the lender issues commercial paper plus
      0.90%.  The interest rate on the amount outstanding as of
      December 31, 2008 and December 31, 2007 was 2.09% and 5.64%, respectively.
      The principal balance is due on October 30, 2010, subject to annual
      renewal. However, the due date may be accelerated to April 30, 2009 if the
      Company is unsuccessful in renegotiating the loan terms – see
      below.





The line
is secured by a first priority interest in eligible receivables of MPF, as
defined in the loan agreement.  Under the terms of this facility, MPF
must maintain the greater of (i) a minimum borrowing equity of $20 million, or
(ii) a 75% maximum loan to asset ratio relative to the balance of eligible
mortgage loans, as adjusted for certain concentration limits. At December 31,
2008 and 2007, the Company was in compliance with this requirement. At December
31, 2008 and December 31, 2007, all of MPF’s $114.0 million and $62.8 million of
loans receivable, respectively, were pledged as collateral for the BMO Capital
line. The restricted cash maintained by MPF related to this line was $10.4
million at December 31, 2008 and $84 thousand at December 31, 2007.





The BMO
Facility contains standard borrower representations, covenants and events of
default, including failing to make required payments on the credit facility,
failing to timely cure a borrowing base deficit, incurrence of a default under
MPF’s mortgage loan purchase agreements, the occurrence of an event causing
termination of the servicing agreement, the occurrence of a material adverse
event that affects MPF's ability to collect on its mortgage loan investments,
and other default provisions typical of warehouse financing agreements. The
agreements also contain customary borrower affirmative and negative covenants
that require MPF to operate its activities as a special purpose bankruptcy
remote entity, and to conduct its affairs and operations with the Company and
any other affiliated entities on an arms-length basis.





Management
has concluded that current conditions in the global financial and credit markets
will prevent the Company from completing a securitization transaction for all or
a portion of the mortgage loans that its wholly-owned subsidiary, MPF, holds in
2009.  Under the BMO Facility loan documents, the Company has agreed
to enter into a term securitization financing transaction, whole loan sale or
other refinancing event in an amount equal to or greater than $50 million for
the purpose of arranging takeout financing for certain mortgage loans held in
the facility.  Failure to meet this takeout financing commitment
constitutes an event of default under the BMO Facility loan
documents.  Given the current disruption in the global credit markets,
including mortgage-backed securities, the Company will not be able to complete a
takeout financing transaction prior to April 30, 2009.


F-15


Note
      5.
              Lines
      of Credit (Continued)
  BMO
Facility(Continued)


In
addition to the Company’s takeout financing commitment,  the Company
was also advised in October, 2008 that the Bank of Montreal, which provided
Fairway Finance Company, LLC with a liquidity guarantee, chose not to renew its
agreement to serve as the liquidity bank for the BMO
Facility.  Because of its decision to terminate its liquidity
arrangement, a “facility termination date” occurred under the BMO Facility loan
documents.  As a result, MPF could make no new borrowings under the
facility.  In addition, all funds held in the facility collection
account that were received from borrowers were required to be used to pay all
outstanding costs and expenses due under the facility, then to accrued and
unpaid interest on the outstanding balance of the facility and any remaining
amounts applied to reduce the loan balance to zero.  Since all
interest and principal repayments generated by MPF are reserved and applied to
the BMO Facility, any excess earnings generated from the Company’s investment in
MPF remain trapped and unavailable to the Company for liquidity and
cash flow purposes.





If the
Company is unsuccessful in obtaining a waiver, extension or modification of its
covenant to complete a takeout financing transaction on or before April 30,
2009, an event of default will occur under the BMO Facility loan
documents.  In that event, the lender will be entitled to exercise any
and all remedies under the BMO Facility loan documents.  These
remedies include, but are not limited to, seizing collateral, selling assets, or
increasing the rate of interest on the loan to the prime rate, plus
2%.  Such events could have a material adverse effect on the
Company.





The
Company has met with representatives of BMO Capital Markets Corp. in an effort
to reach a mutually acceptable solution to the takeout financing covenant and
termination of the Liquidity Agreement by the Bank of Montreal.  The
Company expects to complete these negotiations and enter into a modification
arrangement on or before April 30, 2009.  Although the Company cannot
guarantee a successful outcome in these discussions, the Company anticipates
that it will be able to reach an agreement that will avoid any declaration of an
event of default under the BMO Facility loan documents.





ECCU
Facility





Until
October 12, 2007, the Company maintained a $5,000,000 unsecured line of credit
with ECCU.  The line of credit expired on October 12, 2007, and the
Company did not seek to renew it. There were no outstanding borrowings on this
line as of December 31, 2007.





Note
      6.
            Interest
      Rate Swap Agreements





The
      Company has stand-alone derivative financial instruments in the form of
      interest rate swap agreements, which derive their value from underlying
      interest rates.  These transactions involve both credit and
      market risk.  The notional amounts are amounts on which
      calculations, payments, and the value of the derivative are
      based.  Notional amounts do not represent direct credit
      exposures.  Direct credit exposure is limited to the net
      difference between the calculated amounts to be received and paid, if
      any.  Such differences, which represent the fair value of the
      derivative instruments, are reflected on the Company’s balance sheet as
      other assets and other liabilities.


F-16


Note
      6.
              Interest
      Rate Swap Agreements (Continued)


The
      Company is exposed to credit-related losses in the event of nonperformance
      by the counterparties to these agreements.  The Company controls
      the credit risk of its financial contracts through credit approvals,
      limits and monitoring procedures, and does not expect any counterparties
      to fail their obligations.  The Company deals only with primary
      dealers.




Derivative
      instruments are generally either negotiated over-the-counter (OTC)
      contracts or standardized contracts executed on a recognized
      exchange.  Negotiated OTC derivative contracts are generally
      entered into between two counterparties that negotiate specific agreement
      terms, including the underlying instrument, amount, exercise prices and
      maturity.





Risk
      Management Policies – Hedging
Instruments





The
      primary focus of the asset/liability management program is to monitor the
      sensitivity of the Company’s net portfolio value and net income under
      varying interest rate scenarios to take steps to control the Company’s
      risks.  The Company evaluates the effectiveness of entering into
      any derivative instrument agreement by measuring the cost of such an
      agreement in relation to the reduction in net portfolio value and net
      income volatility within an assumed range of interest
    rates.





Interest
      Rate Risk Management – Cash Flow Hedging
  Instruments





The
      Company uses long-term variable rate debt as a source of funds for use in
      its lending and investment activities and other general business
      purposes.  These debt obligations expose the Company to
      variability in interest payments due to changes in interest
      rates.  If interest rates increase, interest expense
      increases.  Conversely, if interest rates decrease, interest
      expense decreases.  Management believes it is prudent to limit
      the variability of a portion of the Company’s interest payments and,
      therefore, generally hedges a portion of the Company’s variable-rate
      interest payments.  To meet this objective, the Company enters
      into interest rate swap agreements whereby it receives variable interest
      rate payments and makes fixed interest rate payments during the contract
      period.





The
information pertaining to outstanding interest rate swap agreements used to
hedge variable rate debt is as follows at December 31:


2008
                                        
                                        
                                        2007Notional
      amount (in thousands)
                                        
                                        $
                                        85,760
                                        
                                        
                                        $
                                        41,505Weighted
      average pay rate
                                        
                                        
                                        3.17%
                                        
                                        
                                        
                                        4.46%Weighted
      average receive rate
                                        
                                        
                                        .96%
                                        
                                        
                                        
                                        4.93%Weighted
      average maturity in years
                                        
                                        
                                        .28
                                        
                                        
                                        
                                        .83Unrealized
      loss relating to interest rate swaps (in thousands)
                                        
                                        $
                                        (518)
                                        
                                        
                                        $
                                        (113
                                        )





These
      agreements provide for the Company to receive payments at a variable rate
      determined by a specified index (one month LIBOR) in exchange for making
      payments at a fixed rate. This rate was 0.44% at December 31,
      2008.


F-17


Note
      6.
              Interest
      Rate Swap Agreements (Continued)
  Interest
Rate Risk Management - Cash Flows Hedging Instruments (Continued)


At
      December 31, 2008 and 2007, the unrealized loss relating to interest rate
      swaps was recorded in other liabilities.  Changes in the fair
      value of interest rate swaps designed as hedging instruments of the
      variability of cash flows associated with long-term debt are reported in
      other comprehensive income.  These amounts subsequently are
      reclassified into interest expense as a yield adjustment in the same
      period in which the related interest on the long-term debt affects
      earnings.  The net amount of other comprehensive income
      reclassified into interest expense during the years ended December 31,
      2008 and 2007 was $785.1 thousand and $5.9 thousand,
      respectively.




Risk
      management results for the years ended December 31, 2008 and 2007 related
      to the balance sheet hedging of long-term debt indicate that the hedges
      were nearly 100% effective and that there was no component of the
      derivative instruments’ gain or loss which was excluded from the
      assessment of hedge effectiveness.





As
      of December 31, 2008, approximately $518 thousand of losses reported in
      other comprehensive income related to the interest rate swaps were
      expected to be reclassified into interest expense as a yield adjustment of
      the hedged borrowings during the year ending December 31,
      2009.





Note
      7.
            Commitments
      and Contingencies





Unfunded
      Commitments





Unfunded
      commitments are commitments for possible future extensions of credit to
      existing customers of us or ECCU. Unfunded commitments totaled $3.7
      million at December 31, 2008 and $13 million at December 31,
      2007.





Standby
      Letters of Credit





Standby
      letters of credit are conditional lending commitments issued by us to
      guarantee the performance of a customer to a third party. Standby letters
      of credit are primarily issued to support borrowing arrangements. The risk
      involved in issuing letters of credit is essentially the same as that
      involved in extending loans to customers. The letters of credit, if drawn
      upon, will be secured by first lien deeds of trust on real property. There
      was no liability related to letters of credit at December 31, 2008 and
      2007.





The
      Company entered into a Non-recourse Letter of Credit Participation
      Agreement with ECCU on September 8, 2005 which expired on September 7,
      2007.  The Company was committed to 27.72% of a $65.6 million letter
      of credit for a Christian university in Riverside, California.  This
      commitment was fulfilled as of June 28, 2007 and the Company no longer has
      an outstanding commitment.


F-18


Note
      8.
            Notes
      Payable





A
      summary of notes payable at December 31 is as
  follows:




Weighted
                      Average
                      Interest
      Rate
                      at
      December 31,2008
                    
                    
                    2007
                    
                    
                    2008
                    
                    2007National
      Alpha Offering (Note 9)
                    
                    $
                    24,208
                    
                    
                    $
                    33,807
                    
                    
                    
                    5.38%
                    
                    
                    5.46%Class
      A Offering (Note 9)
                    
                    
                    36,480
                    
                    
                    
                    --
                    
                    
                    
                    4.57%
                    
                    
                    --Special
      offering notes
                    
                    
                    14,508
                    
                    
                    
                    27,730
                    
                    
                    
                    4.88%
                    
                    
                    5.52%International
      notes
                    
                    
                    578
                    
                    
                    
                    520
                    
                    
                    
                    5.40%
                    
                    
                    5.65%$
                    75,774
                    
                    
                    $
                    62,057





The
following are maturities of notes payable for each of the next five
years:





Year Ending December
31,




2009
                      
                      $
                      49,7812010
                      
                      
                      10,4972011
                      
                      
                      5,4532012
                      
                      
                      2,6942013
                      
                      
                      5,344Thereafter
                      
                      
                      2,005$
                      75,774




Notes
      are payable to investors who have purchased the securities, including
      individuals, churches, and Christian ministries, many of whom are members
      of ECCU. All notes payable are unsecured. 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 notes at any time at its sole discretion, and may
      allow investors to redeem their notes prior to maturity at its sole
      discretion.





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 is not permitted to issue
      any Alpha Class 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 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 December 31, 2008 and December
      31, 2007.  Effective April 18, 2008, the Company has
      discontinued the sale of Alpha Class
Notes.


F-19


Note
      8.
              Notes
      Payable (Continued)


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 Alpha Class Note is
      outstanding.  The Company was in compliance with these covenants as
      of December 31, 2008.





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 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 (see
      Note 9 below).  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.





Note
      9.
            Public
      Offerings





In
      July 2001, the Company registered with the Securities and Exchange
      Commission (the SEC) the sale of $25.0 million of Alpha Class Notes issued
      pursuant to a Loan and Standby Trust Agreement authorizing the issuance of
      up to $50.0 million of such notes.  In April 2003, the Company
      registered with the SEC the sale of an additional $25.0 million of Alpha
      Class Notes.  In April 2005, the Company registered with the SEC
      the sale of up to $50.0 million of a new Alpha Class Notes issued pursuant
      to a Trust Indenture authorizing the issuance of up to $200.0 million of
      such notes.  In May 2007, the Company registered with the SEC
      the sale of an additional $75.0 million of the new Alpha Class Notes. With
      the registration of its Class A Notes, the Company has discontinued the
      sale of the Alpha Class Notes effective as of April 18,
      2008.  At December 31, 2008 and December 31, 2007, $24.2 million
      and $33.8 million of these notes were outstanding,
      respectively.





In
      April 2008, the Company registered with the SEC $80.0 million of new Class
      A Notes in three series, including a Fixed Series, Flex Series and
      Variable Series.  This is a "best efforts" offering and is
      expected to continue through April 30, 2010.  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 Notes were issued under a
      Trust Indenture between the Company and U.S. Bank National Association (US
      Bank).  The Notes are part of up to $200 million of Class A
      Notes the Company may issue pursuant to the US Bank
      Indenture.  The Trust Indenture covering the Class A Notes
      contains covenants pertaining to a minimum fixed charge coverage ratio,
      maintenance of tangible net worth, limitation on issuance of additional
      notes and incurrence of indebtedness.  At December 31, 2008,
      $36.5 million of these Class A Notes were
  outstanding.


F-20


Note
      10.
            Preferred StockUnder C Corporation
Structure





The
      Class I Preferred Stock was entitled to annual cumulative dividends,
      payable quarterly, 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 dividend was declared.  The
      Class I Preferred Stock had a liquidation preference of $100 per share;
      had no voting rights except as required under California law; and was
      subject to redemption for an amount equal to the liquidation preference of
      each share, plus any accrued and unpaid dividends on such shares, in whole
      or in part, at the Company’s election. The resale of the Company’s common
      stock and preferred stock was subject to the Company’s first right of
      refusal to purchase shares proposed to be transferred.  During 2007,
      the Company purchased 1,100 shares of Class I Preferred stock from a
      shareholder, resulting in 88,922 shares of that class of stock outstanding
      at December 31, 2007.  During 2008, the Company purchased 1,900
      shares of Class I Preferred stock from two different
      shareholders.  The Company also sold 11,578 shares of Class I
      Preferred stock to ECCU, resulting in 98,600 shares of that class of stock
      outstanding just prior to December 31,
2008.





The
      Class II Preferred Stock had right preferences and privileges identical to
      the Class I Preferred Stock, except it was entitled to dividends equal to
      the liquidation preference of $100 per share times a dividend rate of one
      percent (1%) per annum, and the holders of the Class I Preferred Stock did
      not have the right to appoint directors upon the Company’s failure to pay
      dividends.





Note
      11.
            Preferred
      and Common Units Under LLC
Structure





On
      December 31, 2008, the Company’s Class I Preferred Stock and Class II
      Preferred Stock were converted into Series A Preferred Units. 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.  In
      addition, the Series A Preferred Units are entitled to an annual Preferred
      Distribution, payable in arrears, equal to 10% of the Company’s
      profits less the Preferred Return.





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 the Company’s 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 Preferred
      Units have priority as to earnings and distributions over the Common
      Units. The resale of the Company’s Preferred Units and Common Units are
      subject to the Company’s first right of refusal to purchase units proposed
      to be transferred.  Upon the Company’s failure 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, the Company’s Common Stock was converted into the Class
      A Common Units. The Class A Common Units have voting
    rights.





Note
      12.
            Income
      Taxes





Effective
      December 31, 2008, the Company converted from a C corporation to a
      California limited liability company (LLC). The conversion gave rise to a
      loss for the year ended December 31, 2008 for income tax purposes only.
      The Company will be able to recover $140 thousand of federal taxes paid in
      prior years through the carryback of the tax loss. The deferred tax asset
      has been eliminated as of December 31, 2008 since the Company is no
      longer an income tax-paying entity.


F-21


The
components of the benefit from income taxes at December 31 are as
follows:





2008
                
                
                2007Current:Federal
                
                $
                --
                
                
                $
                --State
                
                
                1
                
                
                
                1Federal
      tax carryback
                
                
                (140
                )
                
                
                (72
                )139
                
                
                
                (71
                )Deferred:Federal
                
                
                90
                
                
                
                (81
                )State
                
                
                26
                
                
                
                (54
                )Change
      in valuation allowance
                
                
                --
                
                
                
                49116
                
                
                
                (86
                )Benefit
      from income taxes
                
                $
                (23
                )
                
                $
                (157
                )


The
      tax effects of the temporary differences in income and expense items that
      gave rise to deferred taxes at December 31 are as
  follows:




2008
                  
                  
                  2007Deferred
      tax assets:Allowance
      for loan losses
                  
                  $
                  --
                  
                  
                  $
                  52Net
      operating loss carryforward
                  
                  
                  --
                  
                  
                  
                  130Contribution
      carryforward due to tax limitation
                  
                  
                  --
                  
                  
                  
                  29Interest
      rate swap
                  
                  
                  --
                  
                  
                  
                  46257Valuation
      allowance
                  
                  
                  --
                  
                  
                  
                  (141
                  )--
                  
                  
                  
                  117Deferred
      tax liabilities:Depreciation
                  
                  
                  --
                  
                  
                  
                  (1
                  )Net
      deferred tax asset
                  
                  $
                  --
                  
                  
                  $
                  116




The
      reason for the differences between the statutory federal income tax rate
      and the effective tax rates are summarized as
  follows:




2008
                    
                    
                    2007Statutory
      tax rate
                    
                    
                    34.0
                    %
                    
                    
                    34.0
                    %Increase
      (decrease) resulting from:State
      taxes, net of federal tax benefit
                    
                    
                    --
                    
                    
                    
                    7.1Loss
      on conversion to LLC
                    
                    
                    (53.3
                    )
                    
                    
                    --Elimination
      of net deferred tax asset
                    
                    
                    16.1Valuation
      allowance
                    
                    
                    --
                    
                    
                    
                    (6.8
                    )Other,
      net
                    
                    
                    --
                    
                    
                    
                    0.2Effective
      tax rate
                    
                    
                    (3.2
                    )%
                    
                    
                    34.5
                    %


F-22


Note
      13.
            Comprehensive
      Income





Comprehensive
income consists of income and other comprehensive income or loss. Other
comprehensive loss consisted of unrealized losses on interest rate swaps, which
are cash flow hedges, of $405 thousand and $113 thousand for years ended
December 31, 2008 and 2007, respectively.  The accumulated other
comprehensive loss from cash flow hedges, which is recognized as a separate
component of equity, was $518 thousand and $113 thousand at December 31, 2008
and 2007, respectively.  No tax effect is recognized on other
comprehensive losses since the Company is no longer a taxpaying
entity.





Note
      14.
            Retirement
      Plans





The
      Company’s employees participate in ECCU's defined contribution plan that
      includes two components: a 401(k) plan and a profit sharing plan. In
      addition, until December 31, 2007, certain officers participated in a long
      term incentive program through the leased employee arrangement with
      ECCU.  Effective January 1, 2008, the Company terminated its
      employee leasing arrangement with ECCU and the Company’s officers no
      longer participate in ECCU’s defined contribution plan and incentive
      program.  However, some of the benefits related to the long-term
      incentive program carried over into 2008.  Employee benefits
      related to the long-term incentive program totaled $43.2 and $80.7
      thousand for the years ended December 31, 2008 and 2007,
      respectively.





401(k)





Employees
      who are at least 21 years of age are eligible to participate in the 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 percent of which is annually determined
      by the managers. Matching contributions for the plan years ended December
      31, 2008 and 2007 were $39.3 and $18.5 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 Company’s annual contribution.
      Contributions for the plan years ended December 31, 2008 and 2007
      were $8.8 thousand and $24.0 thousand,
  respectively.





Note
      15.
            Fair
      Value Measurements





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.


F-23


Note
      15.
              Fair
      Value Measurements (Continued)


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.





Lines
      of Credit





The
      fair values of the Company’s lines of credit are estimated using
      discounted cash flows analyses based on its current incremental borrowing
      rates for similar types of borrowing arrangements.


Derivative
      Financial Instruments





The fair
values for interest rate swap agreements are based upon the amounts required to
settle the contracts.





Off-Balance
Sheet Instruments





The fair
value for the Company's loan commitments is based on fees currently charged to
enter into similar agreements, taking into account the remaining terms of the
agreements and the counterparties' credit standing.





The fair
value of the Company’s financial instruments at December 31, are as
follows:





2008
              
              
              2007Carrying
                Amount
              
              
              Fair
                Value
              
              
              Carrying
                Amount
              
              
              Fair
                ValueFinancial
      assets:Cash
              
              $
              14,889
              
              
              $
              14,889
              
              
              $
              2,243
              
              
              $
              2,243Loans
              
              
              257,176
              
              
              
              252,192
              
              
              
              116,310
              
              
              
              117,905Accrued interest
      receivable
              
              
              1,374
              
              
              
              1,374
              
              
              
              518
              
              
              
              518Financial
      liabilities:Notes payable
              
              
              75,774
              
              
              
              76,748
              
              
              
              62,057
              
              
              
              62,055Lines of credit and other
      borrowings
              
              
              185,146
              
              
              
              186,303
              
              
              
              46,300
              
              
              
              46,300Accrued interest
      payable
              
              
              292
              
              
              
              292
              
              
              
              179
              
              
              
              179Dividends payable
              
              
              103
              
              
              
              103
              
              
              
              144
              
              
              
              144On-balance
      sheet derivative financial instruments:Interest rate swap
      agreements
              
              
              518
              
              
              
              518
              
              
              
              113
              
              
              
              113





Effective
      January 1, 2008, the Company partially adopted SFAS No. 157, Fair Value
      Measurements, which defines fair value, establishes a framework for
      measuring fair value and expands disclosures about fair value
      measurements. SFAS No. 157 applies only to fair value measurements already
      required or permitted by other accounting standards and does not impose
      requirements for additional fair value measures. SFAS No. 157 was issued
      to increase consistency and comparability in reporting fair values. The
      Company’s adoption of SFAS No. 157 did not have a material impact on its
      financial condition or results of
operations.


F-24


Note
      15.
              Fair
      Value Measurements (Continued)
 Off-Balance
Sheet Instruments (Continued)


In
February 2008, FASB issued Staff Position No. FAS 157-2, or FSP 157-2,
which delays the effective date of SFAS No. 157 for certain nonfinancial assets
and nonfinancial liabilities, such as foreclosed assets, to fiscal years
beginning after November 15, 2008, and interim periods within those fiscal
years. The delay is intended to allow additional time to consider the effect of
various implementation issues that have arisen, or that may arise, from the
application of SFAS No. 157. The Company has elected to apply the deferral
provisions in FSP 157-2 and therefore has only partially applied the provisions
of SFAS No. 157. The Company will fully adopt SFAS No. 157 with respect to
nonfinancial assets and nonfinancial liabilities effective January 1, 2009.
The Company does not believe that such adoption will have a material impact on
the financial statements, but will result in additional disclosures related to
the fair value of nonfinancial assets.





The
application of SFAS No. 157 in situations where the market for a financial
asset is not active was clarified by the issuance of FSP 157-3, Determining the Fair Value of a
Financial Asset When the Market for That Asset Is Not Active, in
October 2008. FSP 157-3 became effective immediately and did not
significantly impact the methods by which the Company determines the fair values
of its financial assets.





SFAS No.
157 establishes a fair value hierarchy for valuation inputs that gives the
highest priority to quoted prices in active markets for identical assets or
liabilities and the lowest priority tounobservable inputs. The
fair value hierarchy is as follows:





§
            Level 1 Inputs -
      Unadjusted quoted prices in active markets for identical assets or
      liabilities that the reporting entity has the ability to access at the
      measurement date.





§
            Level 2 Inputs -
      Inputs other than quoted prices included in Level 1 that are
      observable for the asset or liability, either directly or indirectly.
      These might include quoted prices for similar assets or liabilities in
      active markets, quoted prices for identical or similar assets or
      liabilities in markets that are not active, inputs other than quoted
      prices that are observable for the asset or liability (such as interest
      rates, volatilities, prepayment speeds, credit risks, etc.) or inputs that
      are derived principally from or corroborated by market data by correlation
      or other means.





§
            Level 3 Inputs -
      Unobservable inputs for determining the fair values of assets or
      liabilities that reflect an entity’s own assumptions about the assumptions
      that market participants would use in pricing the assets or
      liabilities.





The
Company had one financial liability, the interest rate swap agreement, that is
measured at fair value on a recurring basis.  This agreement, recorded
at $518,000 at December 31, 2008, is measured at fair value based on an estimate
provided by the counterparty using Level 2 inputs. The Company had no financial
assets measured at fair value on a recurring basis. The Company had the
following financial assets for which fair value measurements are performed
on a nonrecurring basis:





Impaired Loans. The Company
had impaired loans totaling $4.0 million as of December 31, 2008. Management
used Level 3 inputs to estimate the current values of underlying collateral for
collateral-dependent loans, and Level 3 inputs to estimate the present value of
expected cash flows for other impaired loans. Based on these fair value
measurements, management concluded that no valuation allowance was required for
impaired loans as of December 31, 2008.


F-25


Note
      16.
              Condensed
      Financial Statements of Parent
Company


Financial
      information pertaining only to the parent company, Ministry Partners
      Investment Company, LLC, is as
follows:




Balance
      Sheets
                                                
                                                December 31,2008
                                                
                                                
                                                2007AssetsCash
                                                
                                                $
                                                11,829
                                                
                                                
                                                $
                                                1,575Loans,
      net of allowance for loan losses
                                                
                                                
                                                143,206
                                                
                                                
                                                
                                                54,410Accrued
      interest receivable
                                                
                                                
                                                664
                                                
                                                
                                                
                                                294Property
      and equipment, net
                                                
                                                
                                                262
                                                
                                                
                                                
                                                24Investment
      in MPF
                                                
                                                
                                                32,027
                                                
                                                
                                                
                                                21,596Debt
      issuance costs
                                                
                                                
                                                532
                                                
                                                
                                                
                                                667Other
      assets
                                                
                                                
                                                423
                                                
                                                
                                                
                                                615Total
      assets
                                                
                                                $
                                                188,943
                                                
                                                
                                                $
                                                79,181December 31,2008
                                                
                                                
                                                2007Liabilities
      and equityLines
      of credit and other borrowings
                                                
                                                $
                                                99,875
                                                
                                                
                                                $
                                                4,716Notes
      payable
                                                
                                                
                                                75,774
                                                
                                                
                                                
                                                62,057Accrued
      interest payable
                                                
                                                
                                                141
                                                
                                                
                                                
                                                15Other
      liabilities
                                                
                                                
                                                402
                                                
                                                
                                                
                                                484Total
      liabilities
                                                
                                                
                                                176,192
                                                
                                                
                                                
                                                67,272Equity
                                                
                                                
                                                12,751
                                                
                                                
                                                
                                                11,909Total
      liabilities and equity
                                                
                                                $
                                                188,943
                                                
                                                
                                                $
                                                79,181Statements
      of Operations
                                                
                                                Years Ended December 31,2008
                                                
                                                
                                                2007Income:Interest
      income
                                                
                                                $
                                                7,008
                                                
                                                
                                                $
                                                4,408Other
      income
                                                
                                                
                                                33
                                                
                                                
                                                
                                                8Total
      income
                                                
                                                
                                                7,041
                                                
                                                
                                                
                                                4,416Interest
      expense:Interest
      on lines of credit
                                                
                                                
                                                2,434
                                                
                                                
                                                
                                                48Interest
      on notes payable
                                                
                                                
                                                3,632
                                                
                                                
                                                
                                                3,224Total
      interest expense
                                                
                                                
                                                6,066
                                                
                                                
                                                
                                                3,272
 
 Provision
      for loan losses
                
                
                328
                
                
                
                --Other
      operating expenses
                
                
                1,468
                
                
                
                1,725
 F-26
 Note
      16.
                  Condensed
      Financial Statements of Parent Company
  (Continued)
 Loss
      before benefit from income taxes
                          
                          
                          (821
                          )
                          
                          
                          (581
                          )Benefit
      from income taxes
                          
                          
                          (23
                          )
                          
                          
                          (208
                          )(798
                          )
                          
                          
                          (373
                          )Equity
      in undistributed net income of MPF
                          
                          
                          1,542
                          
                          
                          
                          74Net
      income (loss)
                          
                          $
                          744
                          
                          
                          $
                          (299
                          )Statements
      of Cash Flows
                          
                          Years Ended December 31,2008
                          
                          
                          2007Cash
      Flows from Operating ActivitiesNet
      income (loss)
                          
                          $
                          744
                          
                          
                          $
                          (299
                          )Adjustments
      to reconcile net income (loss)to
      net cash provided by (used in) operating activities:Equity
      in undistributed net income of MPF
                          
                          
                          (1,542
                          )
                          
                          
                          (74
                          )Depreciation
                          
                          
                          14
                          
                          
                          
                          2Provision
      for loan losses
                          
                          
                          328
                          
                          
                          
                          --Amortization
      of deferred loan (fees) costs
                          
                          
                          (94
                          )
                          
                          
                          (100
                          )Amortization
      of debt issuance costs
                          
                          
                          176
                          
                          
                          
                          33Net
      change in:Interest
      receivable
                          
                          
                          (370
                          )
                          
                          
                          (19
                          )Other
      assets
                          
                          
                          (192
                          )
                          
                          
                          (597
                          )Other
      liabilities
                          
                          
                          (319
                          )
                          
                          
                          241Net
      cash provided by (used in) operating activities
                          
                          
                          (1,255
                          )
                          
                          
                          (813
                          )Cash
      Flows from Investing ActivitiesLoan
      purchases
                          
                          
                          (96,427
                          )
                          
                          
                          (32,495
                          )Loan
      originations
                          
                          
                          (19,309
                          )
                          
                          
                          (12,471
                          )Loan
      sales
                          
                          
                          --
                          
                          
                          
                          24,606Loan
      principal collections, net
                          
                          
                          26,706
                          
                          
                          
                          4,128Investment
      in MPF
                          
                          
                          (8,506
                          )
                          
                          
                          --Purchase
      of property and equipment
                          
                          
                          (252
                          )
                          
                          
                          (17
                          )Net
      cash used in investing activities
                          
                          
                          (97,788
                          )
                          
                          
                          (16,248
                          )Cash
      Flows from Financing ActivitiesNet
      borrowing on line of credit
                          
                          
                          95,159
                          
                          
                          
                          4,716Net
      change in notes payable
                          
                          
                          13,717
                          
                          
                          
                          7,726Debt
      issuance costs
                          
                          
                          (41
                          )
                          
                          
                          (700
                          )Net
      proceeds from issuance of preferred stock
                          
                          
                          1,158
                          
                          
                          
                          --Purchase
      of preferred stock
                          
                          
                          (190
                          )
                          
                          
                          (110
                          )Dividends
      paid on preferred stock
                          
                          
                          (506
                          )
                          
                          
                          (629
                          )Net
      cash provided by financing activities
                          
                          
                          109,297
                          
                          
                          
                          11,003Net
      increase (decrease) in cash
                          
                          
                          10,254
                          
                          
                          
                          (6,058
                          )Cash
      at beginning of year
                          
                          
                          1,575
                          
                          
                          
                          7,633Cash
      at end of year
                          
                          $
                          11,829
                          
                          
                          $
                          1,575Supplemental
      Disclosures of Cash Flow InformationTransfer
      of loans to MPF
                          
                          $
                          --
                          
                          
                          $
                          21,659


F-27


Item
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE




None.





Item
9A. CONTROLS AND PROCEDURES




Evaluation
of Disclosure Controls and Procedures





Our
Principal Executive Officer and Principal Financial Officer have evaluated the
effectiveness of our disclosure controls and procedures (as defined in Rules
13a-15(e) and 15d-15(e) under the Exchange Act) as of the fiscal period ending
December 31, 2008 covered by this Annual Report on Form 10-K. Based upon such
evaluation, our Principal  Executive Officer and Principal Financial
Officer have concluded that our disclosure controls and procedures were
effective as of December 31, 2008. This conclusion by our Principal Executive
Officer and Principal Financial Officer does not relate to reporting periods
after December 31, 2008.





Changes
in Internal Control Over Financial Reporting





There
have been no changes in our internal controls over financial reporting during
the quarter ended December 31, 2008, that have materially affected, or are
reasonably likely to materially affect, our internal controls over financial
reporting.





Management’s
Report on Internal Control Over Financial Reporting





Management
is responsible for establishing and maintaining adequate internal control over
our financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the
Exchange Act). Internal control over financial reporting is a process designed
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with accounting principles generally accepted in the United States of
America.





Our
internal controls over financial reporting include those policies and procedures
that (i) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of our assets;
(ii) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with accounting
principles generally accepted in the United States of America, and that our
receipts and expenditures are being made only in accordance with authorizations
of management and directors of the Company; and (iii) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition,
use or disposition our assets that could have a material effect on our financial
statements.





Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.


-50-


Management
assessed the effectiveness of our internal control over financial reporting as
of December 31, 2008.  In making this assessment, management used the
criteria set forth by the Committee of Sponsoring Organizations of the Treadway
Commission Internal Control-Integrated Framework. Based on this assessment,
management believes that, as of December 31, 2008, our internal control over
financial reporting is effective.





This
annual report does not include an attestation report of our registered public
accounting firm regarding internal control over financial reporting.
Management’s report was not subject to attestation by our registered public
accounting firm pursuant to temporary rules of the SEC that permit us to provide
only management’s report in this Annual Report on Form 10-K.





Item
9B. OTHER INFORMATION





None.




PART
III




Item
10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT





Set forth
below are our Managers and Executive officers:




Name
                  Age
                  ManagersMark
      G. Holbrook
                  58
                  Chairman
      of the Managers, Chief Executive OfficerBilly
      M. Dodson
                  48
                  President,
      Assistant SecretaryVan
      C. Elliott
                  71
                  Secretary,
      ManagerSusan
      B. Reilly
                  52
                  Vice
      President of Finance and Principal Accounting OfficerMark
      A. Johnson
                  51
                  ManagerArthur
      G. Black
                  70
                  ManagerShirley
      M. Bracken
                  57
                  ManagerJuli
      Anne S. Callis
                  56
                  ManagerJeffrey
      T. Lauridsen
                  59
                  ManagerR.
      Michael Lee
                  50
                  ManagerRandolph
      P. Shepard
                  52
                  ManagerScott
      T. Vandeventer
                  52
                  Manager





The
following is a summary of the business experience of our officers and managers
during the past five years.  Commencing on December 31, 2008, we are
governed by a group of managers that will continue to supervise our
affairs.


-51-


MARK G. HOLBROOK has served as
our Chairman since our inception. Mr. Holbrook also serves as President and
Chief Executive Officer of ECCU. He began his career with ECCU in 1975 and has
served as its President since 1984. ECCU currently has assets under management
of over $3.4 billion and more than 10,000 members in 50 states and 100 foreign
countries. Mr. Holbrook serves on the boards of Christian Leadership Alliance
and Evangelical Council for Financial Accountability. He received his Bachelor
of Arts degree from Biola University in 1973 and has completed post-graduate
studies at Chapman College.





BILLY (BILL) M. DODSON became
our President on May 8, 2006, and was elected Assistant Secretary in October
2007. Before joining us, he served as Vice President of Sales for California
Plan of Church Finance, Inc., a registered broker-dealer starting in
August, 2000. While at that company, he managed all aspects of a brokerage
operation, which annually distributed to investors between $125 and $175 million
of church mortgage bonds. Prior to joining California Plan of Church Finance,
Inc., Mr. Dodson served as Pastor for the West Valley Church in Sherwood,
Oregon. Mr. Dodson received his Bachelor of Journalism degree from the
University of Texas and a Master of Divinity degree from Southwestern Baptist
Theological Seminary.  In the past, Mr. Dodson has held numerous
securities and insurance licenses, and is a graduate of the Securities Industry
Institute at the Wharton School, University of Pennsylvania.





VAN C. ELLIOTT has served as a
director since 1991.  He has served as director for ECCU, from April,
1991 until the present (except from March, 1997 to March, 1998 and March, 2004
to March, 2005).  He has served as a director of Vanguard Global
Network since April, 2008. Mr. Elliott served as associate director of the
Conservative Baptist Association of Southern California from 1980 to 1994, where
he was responsible for the general administrative oversight of the association's
activities. Since that time, he has been self-employed as a
consultant.  He received his Bachelor's and Master's degrees in
mathematics and speech from Purdue University and spent seven years in the
computer industry.  Mr. Elliott holds a Master of Divinity from Denver
Seminary and has spent fourteen years in local church ministries serving in the
area of Christian education and administration.  He has completed
post-graduate instruction at the College for Financial Planning.  Mr.
Elliott is a member of the Financial Planning Association and holds the
professional designation of Certified Financial Planner.®





SUSAN B. REILLY has served as
our Vice President of Finance and Principal Accounting Officer since December,
2007. Prior to joining us, Ms. Reilly served as Controller for Pacific Rim
Capital, a private equity investment firm. Before joining that firm in 2007, she
was Senior Vice President and Treasurer for East West Bank. Prior to joining
East West Bank in 2004, Ms. Reilly served as Treasurer for Catalina Restaurant
Group. Before joining that company in 2003, she worked for Parson Consulting
Group.





MARK A. JOHNSON has served as
a director since our inception. Mr. Johnson also serves as Executive Vice
President of ECCU, a position he has held since June, 1993. Prior to joining
ECCU, Mr. Johnson served as vice president of a multi-company commercial
warehousing/distribution organization and for six years served as president and
chief executive officer of a subsidiary of that company. Prior to that,
Mr. Johnson served as vice president/branch manager of a Southern
California independent bank. Mr. Johnson has a Bachelor of Science degree
in Business Administration from Biola University.





ARTHUR G. BLACK has served as
a director since 1997. He also currently serves as Chairman of the Board of
Directors for Haven Ministries. Mr. Black previously served as Director of
Ministry Support for Ambassador Advertising Agency from 1998 to 2007. Prior to
joining that firm, he had served as a ministry development officer at ECCU. Mr.
Black served as executive vice president of Truth For Life from 1994 to
1996. Truth For Life is a nationally-syndicated radio Bible teaching
ministry. He held similar positions with the Biola Hour from 1981 to 1991 and
Solid Rock Radio from 1991 to 1993, and he served as director of U.S.
broadcasting for Insight For Living from 1993 to 1994. Mr. Black has been in
Christian ministry management since 1974. Prior to that, he served in various
corporate sales and marketing management positions and was for six years
owner/President of two consumer product/service companies. He is a General
Partner for Rancho Sierra Acres, Christian Investors, P/L Properties and Ocean
View Investors.


-52-


SHIRLEY M. BRACKEN has served
as a director since June, 2003. Ms. Bracken has since 1997 owned and operated
Shirley Bracken Consulting Services, a consulting firm providing services in the
areas of communications, funding, development and marketing for non-profit
organizations, including schools. Until she resigned to start her consulting
business, Ms. Bracken worked for Carl Karcher Enterprises, Inc. of Anaheim,
California, which she first joined in 1983. At the time she left, Ms. Bracken
served as that Company's Vice-President, Communications/Human Resources. Ms.
Bracken holds a BA in Sociology from California State University, Fullerton, and
a Masters in Organizational Leadership from Biola University.





JULI ANNE S. CALLIS has served
as a director since 2007. She is currently Chief Executive Officer of the
National Institute of Health Federal Credit Union.  Prior to her
current engagement, she was Executive Vice President and Chief Operating Officer
of KeyPoint Credit Union and the President of its subsidiary, KeyPoint Financial
Services. Before joining KeyPoint Credit Union, Ms. Callis served as Vice
President for Business Development, Marketing and Legislative Affairs from
1988-1995 at Langley Federal Credit Union. Prior to joining the credit union
industry, Ms. Callis served as the Director of Sales for the US Navy Mid
Atlantic Region which included the direct responsibility for public relations
and sales for all Navy Exchange and Commissary Operations in the Mid Atlantic
States, Europe, Iceland and Bermuda. Ms. Callis received her Bachelor of Science
degree in Community Health and Education from East Carolina University and
received a Master's degree in Organizational Development from the University of
San Francisco, where she is pursuing a Ph.D. She also serves as Chair for the
Executive Committee of the Open Solutions, Inc. Client Association, and as a
Trustee of the International Mission Board of the Southern Baptist
Convention.





JEFFREY T. LAURIDSEN has
served as a director since October, 2007.  He is an attorney in
private practice in Orange, California. Before establishing his current
practice, Mr. Lauridsen served with several other law firms in the Orange
County area, as partner and senior associate. Mr. Lauridsen's 19 years of law
practice have focused on corporate law, and encompassed both trial and appellate
work in diverse areas of law, including Business Litigation, Construction
Defect, General Liability, Premises Liability, Products, Medical Malpractice,
ERISA, Insurance Coverage, Automobile Liability, Insurance Bad Faith, Employment
and Labor Law, Sexual Harassment, Sexual Molestation and others. Prior to
entering into the practice of law, Mr. Lauridsen worked as a claim
representative in the insurance industry for 19 years. Mr. Lauridsen received
his Associate of Arts degree in Political Science from Fullerton College. He
received his Bachelor of Science in Law and Juris Doctorate degrees from
California Southern Law School. He has served as Elder at Grace Church in
Orange, California for 18 years.


-53-


R. MICHAEL LEE has served as a
director since January, 2008. Mr. Lee currently serves as President, Midwest
Region, for Members United Corporate Federal Credit Union. Mr. Lee joined
Mid-States Corporate Federal Credit Union in 2005, prior to the merger that
created Members United. He has served as Senior Vice President of Sales for
Corporate Network eCom, Senior Vice President of Marketing and Member Services
at U.S. Central Credit Union, and Senior Vice President, Marketing and Member
Services at Corporate One Credit Union, Inc.  Prior to this, he spent
15 years in the insurance industry, serving the needs of business owners. Mr.
Lee attended Southern Illinois University, CUNA's Financial Management School,
and has completed numerous industry training sessions throughout his
career.





RANDOLPH (RANDY) P. SHEPARD
has served as a director since January, 2008. Mr. Shepard is currently the
Senior Vice President/Investments and Subsidiary Companies of Western Federal
Credit Union. Prior to assuming this position in 2003, Mr. Shepard was the Vice
President and Chief Financial Officer of Western Federal Credit Union. He
attended the University of Redlands and has a Certificate of Executive
Management from Claremont Graduate School.





SCOTT T. VANDEVENTER has
served as a director since 1992. Mr. Vandeventer has been employed by ECCU since
1988 and is currently serving as its Executive Vice President and Chief
Operating Officer. Prior to joining ECCU, Mr. Vandeventer provided consulting
services to ECCU and others through AM Business Communications, Inc., a
marketing communication company he founded in 1980. Mr. Vandeventer
received his Bachelors Degree from Biola University and has completed graduate
work in finance and marketing at California State University Fullerton School of
Business Administration.





Code
of Ethics





We have
not adopted a code of ethics which applies to our principal executive officer,
principal accounting officer or controller, or persons performing similar
functions.  Our managers are currently reviewing our Related Party
Transaction Policy and committee charters and plans to adopt a Code of Ethics
for our principal officers in 2009.





Audit
Committee





Our
managers, acting as a Board of Directors prior to the conversion of the Company
to a limited liability company, established a standing audit committee in May,
2005, which is comprised of Randolph P. Shepard; Scott T. Vandeventer; and
Shirley M. Bracken.  With the exception of Mr. Vandeventer, each
member of the Audit Committee is an independent director as defined in our
Related Party Transaction Policy.  Mr. Randolph P. Shepard serves as
chairman of  the Committee.





Our
managers have also adopted a formal charter for our Audit
Committee.  Our Audit committee oversees our corporate accountancy,
financial reporting practices and audits of our financial
statements.





Audit
Committee Financial Expert





Our
managers have determined that Mr. Shepard is an “audit committee financial
expert” as defined in Item 401(e) of Regulation S-B.


-54-


Item
11. EXECUTIVE COMPENSATION




None of
our managers currently receives compensation for services rendered as a manager.
Each, however, is entitled to be reimbursed for expenses incurred in performing
duties on our behalf.




The
following table sets forth certain information regarding compensation we paid
for services rendered to us during the years ended December 31, 2008 and 2007 by
our Principal Executive Officer and President. Mr. Dodson was appointed
President by the Board of Directors effective May 8, 2006.




Summary
Compensation Table


Annual
Compensation





Name
      and Principal Position
                                                                      Year
      Ended
                                                                      Salary
                                                                      Bonus
                                                                      Non-Equity
      Incentive Plan Compensation
                                                                      All
      Other CompensationMark
      G. Holbrook, Chairman,
      CEO (1)
                                                                      2008
                                                                      -0-
                                                                      -0-
                                                                      -0-
                                                                      -0-2007
                                                                      -0-
                                                                      -0-
                                                                      -0-
                                                                      -0-Billy
      M. Dodson, President
                                                                      2008
                                                                      $183,500
                                                                      $73,217(2)
                                                                      $43,229(3)
                                                                      $21,943(4)2007
                                                                      173,460
                                                                      68,300
                                                                      39,655(3)
                                                                      63,088(5)Susan
      B. Reilly, Vice
      President Finance
                                                                      2008
                                                                      135,000
                                                                      30,375
                                                                      -0-
                                                                      14,704(4)2007
                                                                      10,904
                                                                      2,100
                                                                      -0-
                                                                      -0-Harold
      Woodall, Vice President Lending
                                                                      2008
                                                                      120,000
                                                                      18,159
                                                                      -0-
                                                                      15,046(4)2007
                                                                      84,923
                                                                      500
                                                                      -0-
                                                                      12,672(6)




(1) Mr.
Holbrook is a full-time employee of ECCU. Since December 1, 1994, Mr. Holbrook
has expended, on the average, approximately 2% of his time as an officer and
director of the Company.  We reimburse ECCU for that portion of Mr.
Holbrook's time devoted to service to us as an officer (but not director). Mr.
Holbrook currently devotes less than 1% of his time serving the Company as an
officer.




(2) An
aggregate bonus amount of $73,217 and  $68,300 was paid to Mr. Dodson
for the fiscal years 2008 and  2007, respectively.





(3) In
2008, Mr. Dodson received a long-term incentive award that he earned as a
participant in the ECCU Long-Term Incentive Plan. Mr. Dodson’s award was
earned for the year ending December 31, 2006, but did not vest until his service
as an ECCU leased employee was terminated effective as of December 31,
2007.  With the restructuring of our employee leasing arrangements
with ECCU, Mr. Dodson became fully vested in his long-term incentive award and
entitled to receive this payment.  As provided under our leasing and
administrative services agreement with ECCU, we were responsible for making this
payment.




(4) We
contributed an aggregate amount of $21,943 for Mr. Dodson's 401(k) retirement
plan, medical benefits and life and disability insurance for 2008.  We
also contributed $5,400 as a matching contribution under our 401(k) plan and
paid benefits in the amount of $9,304 in 2008 for Ms.
Reilly.  Finally, we contributed $4,800 as a matching contribution
under our 401(k) plan and paid $10,246 in benefits for Mr. Woodall in
2008.





(5) For
fiscal year 2007, we contributed $23,433 for Mr. Dodson’s 401(k) retirement
plan, medical benefits, and life and disability insurance.  In
addition, Mr. Dodson received sales compensation of $26,384, a retirement
benefit of $9,114 and other benefit allowances of $4,155.





(6) We
paid $3,397 in retirement plan contributions and $9,275 in employee benefits for
Mr. Woodall in 2007.




No
options, warrants or other rights to purchase our securities have been issued to
our officers.


-55-


Item
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS




The
following table sets forth information available to us, as of December 31, 2008,
with respect to our common equity units owned by each of our executive officers
and managers, and by our managers and executive officers as a group, and by each
person who is known to us to be the beneficial owner of more than 5.0% of our
Class A Common Units.





Name
            
            Beneficial
              Ownership
            Percentage
              Owned(1)Billy
      M. Dodson
              915
      W. Imperial Hwy., Suite 120
              Brea,
      CA 92821
            
            --
            --%Mark
      G. Holbrook
              955
      W. Imperial Hwy.
              Brea,
      CA 92821
            
            --
            --%Mark
      A. Johnson
              955
      W. Imperial Hwy.
              Brea,
      CA 92821
            
            --
            --%Van
      C. Elliott
              955
      W. Imperial Hwy.
              Brea,
      CA 92821
            
            --
            --%Arthur
      G. Black
              955
      W. Imperial Hwy.
              Brea,
      CA 92821
            
            --
            --%Shirley
      M. Bracken
              955
      W. Imperial Hwy.
              Brea,
      CA 92821
            
            --
            --%Juli
      Anne S. Callis
              955
      W. Imperial Hwy.
              Brea,
      CA 92821
            
            --
            --%Jeffrey
      T. Lauridsen
              955
      W. Imperial Hwy.
              Brea,
      CA 92821
            
            --
            --%Scott
      T. Vandeventer
              955
      W. Imperial Hwy.
              Brea,
      CA 92821
            
            --
            --%




-56-




Name
              
              Beneficial
                Ownership
              Percentage
                Owned(1)


All
      officers and directors as a group
            
            --
            --%Other
      5% or greater beneficial owners (seven):
              
              Evangelical
      Christian Credit Union
            
            62,000
            42.31%Financial
      Partners Credit Union
            
            12,000
            8.19%USA
      Federal Credit Union
            
            11,905
            8.13%Western
      Federal Credit Union
            
            11,905
            8.13%Wescom
      Credit Union
            
            11,905
            8.13%Credit
      Union of Southern California
            
            11,900
            8.12%Keypoint
      Credit Union
            
            8,000
            5.46%





(1) 
Based on 146,522 Class A common equity units outstanding.




Item
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE




From time
to time, we purchase participation interests in mortgage loans from ECCU, our
largest shareholder.  During the years ended December 31, 2008 and
2007, we or our wholly-owned subsidiary, MPF, purchased $156.7 million and $73.3
million, respectively, of loans from ECCU.  We recognized interest
income on loans purchased from ECCU of $11.8 million and $4.1 million during the
years ended December 31, 2008 and 2007, respectively.





From time
to time, ECCU has repurchased mortgage loans from us as part of our liquidity
management practices. Although ECCU has accommodated us in responding to such
repurchase requests, ECCU is under no contractual obligation to do
so.  During the years ended December 31, 2008 and 2007, loans in
the amount of $843.3 thousand and $24.6 million, respectively, were sold back to
ECCU.  No gain or loss was recognized on these sales.





We
maintain most of our cash balances with ECCU.  Total funds held with
ECCU at December 31, 2008 and 2007 were $12.0 million and $1.5 million,
respectively.  We earned interest on these cash balances for the years
ended December 31, 2008 and 2007 in the amount of $310.9 thousand and $88.7
thousand.


-57-


Pursuant
to an administrative services agreement, we purchase certain professional
services from ECCU and we rent our administrative offices from ECCU pursuant to
an Office Lease entered into on November 4, 2008.  We paid ECCU
$164.2 thousand and $177.0 thousand for the years ended December 31, 2008
and 2007, respectively, for these services and facilities.  We
negotiated these charges and terms of the Office Lease with ECCU based upon the
fair market value of such services and rental rates for comparable office space
in Brea, California.





For the
year ended December 31, 2007, we leased all of our employees from
ECCU.  We paid ECCU $885.7 thousand for these personnel expenses in
2007.  Effective as of January 1, 2008, we terminated our employee
leasing arrangement with ECCU and now lease our staff and employees from
Administaff Companies II, L.P.





On
December 14, 2007, the Board of Directors appointed R. Michael Lee to serve as a
director.  Mr. Lee serves as President, Midwest Region, of Members
United Corporate Federal Credit Union (Members United), which is one of our
lenders.  See Note 5 of the accompanying audited consolidated
financial statements for December 31, 2008.  In addition, Mark G.
Holbrook, our Chairman and Chief Executive Officer, is a full time employee of
ECCU and two of our managers, Mark A. Johnson and Scott T. Vandeventer, are
employees of ECCU.




From time to time, our
managers and members of our executive management team have purchased Alpha Class
and Class A Notes from us. One of our managers, Mr. Art Black, is the beneficial
owner of a living trust that holds $126,525 of our Class A Notes and $110,710 of
our Alpha Class Notes.




On
October 30, 2007, we completed the BMO Facility as our first warehouse mortgage
financing facility.  Our wholly-owned subsidiary, MPF, was formed to
acquire mortgage loans from us or ECCU.  As part of the BMO Facility,
MPF entered into a Mortgage Loan Purchase Agreement with ECCU.  For
the years ended December 31, 2008 and 2007, MPF acquired $60.3 million and 40.8
million in mortgage loans from ECCU, respectively.  ECCU continues to
service all mortgage loans that it sells to us or MPF under a servicing
agreement.  For the year ended December 31, 2008, we paid ECCU a total
of $732.5 thousand in servicing fees.





As a
relocation incentive, on July 11, 2007, our Board of Directors approved the
purchase of a residence owned by our President and his wife for $450,000, plus
reasonable closing costs incurred in completing the purchase
transaction.  On August 7, 2007, we completed the purchase of the
residential property.  In January, 2008, we sold the residence and
realized a loss of approximately $105,755, including closing costs, for this
transaction.





Our
managers have adopted a Related Party Transaction Policy.  Under this
policy, a majority of our managers and majority of our independent managers 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
managers.


-58-


Item
14. PRINCIPAL ACCOUNTANT FEES AND SERVICES




The
aggregate fees billed by our accounting firm, Hutchinson and Bloodgood LLP, for
the years ended December 31, 2008 and December 31, 2007 were as
follows:





2008
                    
                    
                    
                    2007Audit
      and audit-related fees
                    
                    $
                    97,400
                    
                    
                    $
                    74,000Tax
      fees
                    
                    
                    28,600
                    
                    
                    
                    16,000All
      other fees
                    
                    
                    2,300
                    
                    
                    
                    11,000Total
                    
                    $
                    128,300
                    
                    
                    $
                    101,000




-59-


Item
15. EXHIBITS




Exhibit No.
                                                                                                          Description3.1
                                                                                                          Articles
      of Organization - Conversion of Ministry Partners Investment Company, LLC,
      dated as of December 31, 2008 (1)3.2
                                                                                                          Operating
      Agreement of Ministry Partners Investment Company, dated as of December
      31, 2008 (1)3.3
                                                                                                          Plan
      of Conversion of Ministry Partners Investment Corporation, dated September
      18, 2008 (1)3.4
                                                                                                          Series
      A Preferred Unit Certificate of Ministry Partners Investment Company, LLC,
      dated as of December 31, 2008 (1)4.1
                                                                                                          Supplemental
      Agreement with Consent of Holders to Loan and Trust Agreement, dated
      September 30, 2008, by and between Ministry Partners Investment
      Corporation and U.S. Bank National Association (2)4.2
                                                                                                          Agreement
      of Resignation, Appointment and Acceptance, dated as of August 7, 2008,
      among Ministry Partners Investment Corporation, King Trust Company, N.A.
      and U.S. Bank National Association (2)10.1
                                                                                                          $10
      Million Committed Line of Credit Facility and Security Agreement, dated
      October 8, 2007 (3)10.2
                                                                                                          $50
      Million CUSO Committed Line of Credit Facility and Security Agreement,
      dated October 8, 2007 (3)10.3
                                                                                                          Mortgage
      Loan Purchase Agreement, dated October 30, 2007, between Evangelical
      Christian Credit Union and Ministry Partners Funding, LLC
    (4)10.4
                                                                                                          Mortgage
      Loan Purchase Agreement, dated October 30, 2007, between Ministry Partners
      Investment Corporation and Ministry Partners Funding, LLC
    (4)10.5
                                                                                                          Loan,
      Security and Servicing Agreement, dated October 30, 2007, by and among
      Ministry Partners Funding, LLC, as Borrower, Fairway Finance Company, LLC,
      as Lender, Evangelical Christian Credit Union, as Servicer, BMO Capital
      Markets Corp., as Agent, U.S. Bank National Association, as Custodian and
      Account Bank, and Lyon Financial Services, Inc., as Back up Servicer (4)
      (*)10.6
                                                                                                          Promissory
      Note, dated October 30, 2007, in the amount of $150,000,000 executed by
      Ministry Partners Funding, LLC to and in favor of Fairway Finance Company,
      LLC (4)10.7
                                                                                                          Custodial
      Agreement, dated as of October 30, 2007, by and among Ministry Partners
      Funding, LLC, as Borrower, Evangelical Christian Credit Union, as
      Servicer, BMO Capital Markets Corp., as Agent, Lyon Financial Services,
      Inc., as Back-Up Servicer, and U.S. Bank National Association, as
      Custodian (4)10.8
                                                                                                          Collection
      Account Control Agreement, dated as of October 30, 2007, by and among
      Ministry Partners Funding, LLC, as Borrower, Evangelical Christian Credit
      Union, as Servicer, BMO Capital Markets Corp., as Agent, and U.S. Bank
      National Association, as Account Bank (4)  -60-
  10.9
                                                                                                          Reserve
      Account Control Agreement, dated as of October 30, 2007, by and among
      Ministry Partners Funding, LLC, as Borrower, BMO Capital Markets Corp., as
      Agent, and U.S. Bank National Association, as Account Bank
    (4)10.10
                                                                                                          Residential
      Purchase Agreement, dated July 1, 2007 by and between Ministry Partners
      Investment Corporation and Billy M. Dodson (5)10.11
                                                                                                          Employee
      Lease and Professional Services Agreement, dated January 1, 2007, between
      Ministry Partners Investment Corporation and Evangelical Christian Credit
      Union (4)10.12
                                                                                                          Lease
      Agreement for Office Space, dated as of September 1, 2007, between
      Ministry Partners Investment Corporation and Evangelical Christian Credit
      Union (4)10.13
                                                                                                          Equipment
      Lease, dated as of January 1, 2007, between Evangelical Christian Credit
      Union and Ministry Partners Investment Corporation (4)10.14
                                                                                                          ISDA
      Master Agreement, dated as of October 22, 2007, between Ministry Partners
      Funding, LLC and Bank of Montreal (4)10.15
                                                                                                          CUSO
      Line of Credit Facility Note and Security Agreement, dated May 14, 2008,
      executed by Ministry Partners Investment Company in favor of Members
      United Corporate Federal Credit Union (6)10.16
                                                                                                          Office
      Lease, dated November 4, 2008, by and between Ministry Partners Investment
      Corporation and ECCU (6)10.17
                                                                                                          Equipment
      Lease, dated as of January 1, 2009 by and between Ministry Partners
      Investment Company, LLC and ECCU (6)10.18
                                                                                                          Professional
      Services Agreement, dated as of January 1, 2009 by and between Ministry
      Partners Investment Company, LLC and ECCU (6)21.1
                                                                                                          List
      of Subsidiaries (4)23.1
                                                                                                          Consent
      of Hutchinson and Bloodgood LLP (6)31.1
                                                                                                          Certification
      of Principal Executive Officer pursuant to Rule 13a-14(a) or Rule
      15(d)-14(a)  (6)31.2
                                                                                                          Certification
      of Principal Financial and Accounting Officer pursuant to
      Rule 13a-14(a) or Rule 15(d)-14(a) (6)32.1
                                                                                                          Certification
      of Principal Executive Officer and Principal Accounting Officer pursuant
      to 18 U.S.C. §1350 as adopted pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002
(6)





(1)
                            Incorporated
      by reference to the Current Report on Form 8-K filed by the Company on
      December 22, 2008(2)
                            Incorporated
      by reference to the Definitive Schedule 14C Information Statement filed by
      the Company on September 8, 2008(3)
                            Incorporated
      by reference to the Report on Form 8-K filed by the Company on October 15,
      2007 (Accession No. 0000944130-07-000031), as amended(4)
                            Incorporated
      by reference to the Report on Form 10-KSB filed by the Company on April
      11, 2008(5)
                            Incorporated
      by reference to the Report on Form 10-QSB filed by the Company on November
      16, 2007 (Accession No. 0001408651-07-000170), as
  amended(6)
                            Filed
      herewith*
                            Confidential
      treatment requested for certain portions of this exhibit, which portions
      are omitted and filed separately with the Securities and Exchange
      Commission.


-61-


SIGNATURES




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




Dated:  April
13, 2009





MINISTRY
      PARTNERS INVESTMENT COMPANY, LLCBy:
      /s/Billy
      M. DodsonBilly
      M. Dodson,President


-62-


Pursuant
to the requirements of the Securities Exchange Act of 1934, this Report has been
signed by the following persons on behalf of the Company and in the capacities
indicated on April 13, 2009.





Each of
the undersigned hereby constitutes and appoints Billy M. Dodson and Susan B.
Reilly as the undersigned’s true and lawful attorneys-in-fact and agents, each
acting alone, with full power of substitution and resubstitution, for the
undersigned and in the undersigned’s name, place and stead, in any and all
capacities, to sign any of all amendments to this Annual Report on
Form 10-K and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, each acting alone, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as the undersigned might or could do in person, hereby ratifying and
confirming all said attorneys-in-fact and agents, each acting alone, or may
lawfully do or cause to be done by virtue thereof.





Signature
                                      Title/s/Billy M.
      Dodson
                                      President/s/Susan B.
      Reilly
                                      Principal
      Accounting Officer/s/Mark G.
      Holbrook
                                      Chairman
      of the Managers, Chief     Executive
      Officer/s/Van C.
      Elliott
                                      Secretary,
      Manager/s/Mark A.
      Johnson
                                      Manager/s/Arthur G.
      Black
                                      Manager/s/Shirley M.
      Bracken
                                      Manager/s/Juli Anne S.
      Callis
                                      Manager/s/Jeffrey T.
      Lauridsen
                                      Manager/s/R. Michael
      Lee
                                      Manager/s/Randolph P.
      Shepard
                                      Manager


-63-