10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended 09/30/2018

or

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

For the transition period from ___________ to ___________

Commission file number 000-25919

AMERICAN CHURCH MORTGAGE COMPANY

(Exact Name of Registrant as Specified in its Charter)

Minnesota	41-1793975
State or Other Jurisdiction of Incorporation or Organization	I.R.S. Employer Identification No.
10400 Yellow Circle Drive, Suite 102, Minnetonka, MN	55343
Address of Principal Executive Offices	Zip Code

(952) 945-9455

Registrant’s Telephone Number, Including Area Code

Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x No o

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

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

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☐  (Do not check if a smaller reporting company)	Smaller reporting company ☒
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   ☐

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

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.   Yes ☐    No ☐ 

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class	Outstanding at November 14, 2018
Common Stock, $0.01 par value per share	1,677,798 shares

AMERICAN CHURCH MORTGAGE COMPANY
INDEX
Page No.
PART I.  FINANCIAL INFORMATION
Item 1.  Financial Statements:
Balance Sheets.…………………………………………………………….…………	F-2 - F-3
Statements of Operations…….………………………………………………………	F-4- F-5
Statements of Cash Flows……..……………………………………………………..	F-6 - F-7
Notes to Financial Statements ………………………………………………………….	F-8 -F-19
Item 2.  Management’s Discussion and Analysis of Financial
Condition and Results of Operations…………………………………………………..	20 – 24
Item 3.  Quantitative and Qualitative Disclosures About Market Risk………………..	25
Items 4.  Controls and Procedures…………..…………………………………………	25
PART II.  OTHER INFORMATION
Item 1.  Legal Proceedings…………………………………………………………….	26
Item 1A.  Risk Factors…………………………………………………………………...	26
Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds………………..	26
Item 3.  Defaults Upon Senior Securities………………………………………..…….	26
Item 4.  Mine Safety Disclosures……………………..…………………………..……	26
Item 5.  Other Information…………………………………………………………….	26
Item 6.  Exhibits……………………………………………….……………………….	26 -27
Signatures………………………………………………….…………………..………	28

AMERICAN CHURCH MORTGAGE COMPANY

Minnetonka, Minnesota

Financial Statements

September 30, 2018

AMERICAN CHURCH MORTGAGE COMPANY
Balance Sheets
ASSETS	September 30, 2018	December 31, 2017
	(unaudited)
Current Assets
Cash and cash equivalents	$            2,675,119	$               502,490
Accounts receivable	268,670	260,785
Interest receivable	184,218	176,365
Investments	2,410	2,410
Current maturities of mortgage loans receivable, net of
allowance for loan losses of $84,838 and $88,113 and deferred
origination fees of $20,642 and $28,956 at September 30, 2018
and December 31, 2017, respectively	1,057,362	1,373,463
Current maturities of bond portfolio	154,000	139,000
Prepaid expenses	15,121	2,598
Total current assets	4,356,900	2,457,111
Mortgage Loans Receivable, net of current maturities,
allowance of $1,561,045 and $1,340,042 and deferred
origination fees of $264,892 and $256,578 at September 30, 2018
and December 31, 2017, respectively	19,570,699	21,071,635
Bond Portfolio, net of current maturities	15,211,807	14,090,755
Real Estate Held for Sale	225,872	225,872
Deferred Offering Costs, net of accumulated amortization
of  $1,032,371 and $1,222,243 at September 30, 2018 and
December 31, 2017, respectively	871,926	839,377
Total Assets	$          40,237,204	$          38,684,750
Notes to Financial Statements are an integral part of this Statement.

F-2

AMERICAN CHURCH MORTGAGE COMPANY
Balance Sheets
LIABILITIES AND STOCKHOLDERS’ EQUITY	September 30, 2018	December 31, 2017
	(unaudited)
Current Liabilities
Current maturities of secured investor certificates	$            4,259,000	$            4,116,000
Accounts payable	92,262	30,216
Management fee payable	25,548	26,631
Dividends payable	67,112	117,446
Total current liabilities	4,443,922	4,290,293
Secured Investor Certificates, Series B, net of current maturities	8,281,000	8,825,000
Secured Investor Certificates, Series C, net of current maturities	6,126,000	6,148,000
Secured Investor Certificates, Series D	8,234,000	8,234,000
Secured Investor Certificates, Series E	2,320,000	-
Total liabilities	29,404,922	27,497,293
Stockholders’ Equity
Common stock, par value $.01 per share
authorized, 30,000,000 shares,
issued and outstanding, 1,677,798 shares at
September 30, 2018 and December 31, 2017, respectively	16,778	16,778
Additional paid-in capital	19,113,458	19,113,458
Accumulated deficit	(8,297,954)	(7,942,779)
Total stockholders’ equity	10,832,282	11,187,457
Total liabilities and stockholders' equity	$          40,237,204	$          38,684,750
Notes to Financial Statements are an integral part of this Statement.

F-3

AMERICAN CHURCH MORTGAGE COMPANY
Statements of Operations
	For the Nine Months Ended
	September 30, 2018	September 30, 2017
	(unaudited)
Interest and Other Income	$             1,942,501	$             2,059,857
Interest Expense	1,467,597	1,436,104
Net Interest Income	474,904	623,753
Provision for losses on mortgage loans receivable	217,728	80,323
Net Interest Income after Provision for Mortgage Losses	257,176	543,430
Operating Expenses	394,237	449,921
Net (Loss) Income	$              (137,061)	$                  93,509
Basic and Diluted (Loss) Income Per Share	$                    (0.08)	$                      0.06
Dividends Declared Per Share	$                      0.13	$                      0.21
Weighted Average Common Shares Outstanding -
Basic and Diluted	1,677,798	1,677,798
Notes to Financial Statements are an integral part of this Statement.

F-4

AMERICAN CHURCH MORTGAGE COMPANY
Statements of Operations
	For the Three Months Ended
	September 30, 2018	September 30, 2017
	(unaudited)
Interest and Other Income	$                637,133	$                677,065
Interest Expense	498,619	480,351
Net Interest Income	138,514	196,714
Provision for losses on mortgage loans receivable	60,994	28,524
Net Interest Income after Provision for Mortgage Losses	77,520	168,190
Operating Expenses	113,322	106,616
Net (Loss) Income	$                (35,802)	$                  61,574
Basic and Diluted (Loss) Income Per Share	$                    (0.02)	$                      0.04
Dividends Declared Per Share	$                      0.04	$                      0.07
Weighted Average Common Shares Outstanding -
Basic and Diluted	1,677,798	1,677,798
Notes to Financial Statements are an integral part of this Statement.

F-5

AMERICAN CHURCH MORTGAGE COMPANY
Statements of Cash Flows
	For the Nine Months Ended
	September 30, 2018	September 30, 2017
	(unaudited)
Cash Flows from Operating Activities
Net (loss) income	$              (137,061)	$                  93,509
Adjustments to reconcile net (loss) income to net cash
from operating activities:
Net loss on sales and impairment on real estate held for sale	-	66,971
Provision for losses on mortgage loans receivable	217,728	80,323
Accretion of deferred loan origination fees	-	18,562
Amortization of deferred offering costs	83,188	90,460
Change in assets and liabilities
Accounts receivable	(7,885)	(51,124)
Interest receivable	(7,853)	(2,181)
Prepaid expenses	(12,523)	(5,364)
Accounts payable	62,046	43,184
Management fee payable	(1,083)	-
Net cash provided by operating activities	196,557	334,340
Cash Flows from Investing Activities
Investment in mortgage loans	-	(3,110,103)
Collections of mortgage loans	1,599,309	2,895,195
Investments purchased	-	48,029
Investment in bonds	(1,238,052)	(1,702,000)
Proceeds from bonds	102,000	143,000
Net cash provided by (used for) investing activities	463,257	(1,725,879)
Cash Flows from Financing Activities
Proceeds from secured investor certificates	2,320,000	930,000
Payments on secured investor certificate maturities	(423,000)	(1,320,000)
Payments for deferred costs	(115,737)	(65,041)
Dividends paid	(268,448)	(335,560)
Net cash provided by (used for) financing activities	1,512,815	(790,601)
Net Increase (Decrease) in Cash and Cash Equivalents	2,172,629	(2,182,140)
Cash and Cash Equivalents - Beginning of Period	502,490	3,382,994
Cash and Cash Equivalents - End of Period	$             2,675,119	$             1,200,854
Notes to Financial Statements are an integral part of this Statement.

F-6

AMERICAN CHURCH MORTGAGE COMPANY
Statements of Cash Flows - Continued
	For the Nine Months Ended
	September 30, 2018	September 30, 2017
	(unaudited)
Supplemental Cash Flow Information
Dividends payable	$                  67,112	$                    117,446
Interest paid	$             1,467,597	$                 1,345,644
Notes to Financial Statements are an integral part of this Statement.

F-7

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited financial statements have been prepared in accordance with the instructions for interim statements and, therefore, do not include all information and disclosures necessary for fair presentation of results of operations, financial position, and changes in cash flow in conformity with generally accepted accounting principles in the United States of America. However, in the opinion of management, such statements reflect all adjustments (which include only normal recurring adjustments) necessary for fair presentation of financial position, results of operations, and cash flows for the period presented.

The unaudited financial statements of the Company should be read in conjunction with the December 31, 2017 audited financial statements included in the Company’s Annual Report on Form 10-K, as filed with the Securities and Exchange Commission for the year ended December 31, 2017. Operating results for the periods presented are not necessarily indicative of the results that may be expected for the year ending December 31, 2018.

Nature of Business

American Church Mortgage Company, a Minnesota corporation, was incorporated on May 27, 1994. The Company was organized to engage primarily in the business of making mortgage loans to churches and other nonprofit religious organizations throughout the United States, on terms established for individual organizations.

Accounting Estimates

Management uses estimates and assumptions in preparing these financial statements in accordance with accounting principles generally accepted in the United States of America. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could differ from those estimates. The most sensitive estimates relate to the realizability of the mortgage loans receivable, the valuation of the bond portfolio and real estate held for sale. It is at least reasonably possible that these estimates could change in the near term and that the effect of the change, if any, may be material to the financial statements.

Concentration of Credit Risk

The Company's loans have been granted to churches and other non-profit religious organizations. The ability of the Company’s debtors to honor their contracts is dependent on member contributions and the involvement in the church or organization of its senior pastor.

F-8

Cash and Equivalents

The Company considers all highly liquid debt instruments purchased with maturities of three months or less to be cash equivalents.

The Company maintains accounts primarily at two financial institutions. At times throughout the year, the Company’s cash and equivalents balances may exceed amounts insured by the Federal Deposit Insurance Corporation. Cash in money market funds is not federally insured. The Company had $628,048 and $15,428 in money market fund accounts at September 30, 2018 and December 31, 2017, respectively. The Company has not experienced any losses in such accounts.

Bond Portfolio

The Company accounts for the bond portfolio under the Accounting Standards Codification (ASC) 320. The Company classifies the bond portfolio as “available-for-sale” and measures the portfolio at fair value. While the bonds are generally held until contractual maturity, the Company classifies them as available-for-sale as the bonds may be used to repay secured investor certificates or provide additional liquidity or working capital in the short term. The Company has classified $154,000 and $139,000 in bonds as current assets as of September 30, 2018 and December 31, 2017, respectively, based on management’s estimates for liquidity requirements and contractual maturities of certain bonds maturing in 2018 and 2017, respectively.

Allowance for Mortgage Loans Receivable

The Company records mortgage loans receivable at estimated net realizable value, which is the unpaid principal balances of the mortgage loans receivable, less the allowance for mortgage loans. The Company’s loan loss policy provides an allowance for estimated uncollectible loans based on an evaluation of the current status of the loan portfolio. This policy provides for principal amounts outstanding on a particular loan if cumulative interruptions occur in the normal payment schedule of a loan; therefore, the Company recognizes a provision for losses and an allowance for the outstanding principal amount of a loan in the Company’s portfolio if the amount is in doubt of collection. Additionally, no additional interest income is recognized on impaired loans that are declared to be in default and are in the foreclosure process. At September 30, 2018, the Company provided $1,645,883 for eighteen mortgage loans, of which eight totaling approximately $3,998,000 are three or more mortgage payments in arrears, three loans totaling approximately $810,000 are declared to be in default and three loans totaling approximately $801,000 are in the foreclosure process. At December 31, 2017, the Company provided approximately $1,428,000 for nineteen mortgage loans, of which seven totaling approximately $3,364,000 were three or more mortgage payments in arrears, five loans totaling approximately $1,403,000 were declared to be in default and two loans totaling approximately $641,000 were in the foreclosure process.

F-9

A summary of transactions in the allowance for credit losses for the nine months ended September 30, 2018 is as follows:

Balance at December 31, 2017	$  1,428,155
Provision for additional losses	217,728
Balance at September 30, 2018	$  1,645,883

The total impaired loans, which are loans that are in the foreclosure process or are declared to be in default, were approximately $1,611,000 and $2,044,000 at September 30, 2018 and December 31, 2017, respectively, which the Company believes are adequately secured by the underlying collateral and the allowance for mortgage loans. Approximately $827,000 and $723,000 of the Company’s allowance for mortgage loans was allocated to impaired loans at September 30, 2018 and December 31, 2017, respectively.

The Company will declare a loan to be in default and will place the loan on non-accrual status when the following thresholds have been met: (i) the borrower has missed three consecutive mortgage payments; (ii) the borrower has not communicated to the Company any legitimate reason for delinquency in its payments to the Company and has not arranged for the re-continuance of payments; (iii) lines of communication to the borrower have broken down such that any reasonable prospect of rehabilitating the loan and return of regular payments is gone.

The Company’s policies on payments received and interest accrued on non-accrual loans are as follows: (i) The Company will accept payments on loans that are currently on non-accrual status when a borrower has communicated to us that they intend to meet their mortgage obligations. A payment made on a non-accrual loan is considered a good faith deposit as to the intent to resume their mortgage payment obligation. This good faith deposit is credited back to interest first then principal as stated in the mortgage loan documentation. (ii) A letter outlining the re-payment terms or the restructure terms (if any) of the loan is provided to the borrower. This letter will be signed by the Senior Pastor and all board members of the borrower. This letter resumes the obligation to make payments on non-accrual loans. (iii) The borrower must meet all its payment obligations for the next 120 days without interruption in order to be removed from non-accrual status.

When a loan is declared in default according to the Company’s policy or deemed to be doubtful of collection, the loan committee of the Advisor to the Company will direct the staff to charge-off the uncollectable receivables.

Loans totaling approximately $3,998,000 and $3,364,000 exceeded 90 days past due but continued to accrue interest at September 30, 2018 and December 31, 2017, respectively. The Company believes that the loans are well secured, not deemed to be in default and the Company is actively pursuing collection of past due payments.

F-10

Real Estate Held for Sale

As of September 30, 2018, the Company had one property located in Pine Bluff, Arkansas acquired via deed in lieu of foreclosure, with an outstanding loan balance totaling $225,872. The Church is still occupying this property and paying rent while trying to either sell the building or obtain refinancing. The Company records real estate held for sale at the estimated fair value, which is net of the expected expenses related to the sale of the real estate. The fair value of our real estate held for sale, which represents the carrying value, is $225,872 both at September 30, 2018 and December 31, 2017.

Carrying Value of Long-Lived Assets

The Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that the carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed of significantly before the end of the estimated useful life.

Recoverability is assessed based on the carrying amount of the asset compared to the sum of the undiscounted cash flows expected to result from the use and the eventual disposal of the asset, as well as specific appraisal in certain instances. An allowance for losses is recognized when the carrying amount is deemed not recoverable and exceeds fair value as determined through various valuation techniques including, but not limited to, discounted cash flow models, quoted market values, and third party independent appraisals.

Revenue Recognition

Interest income on mortgage loans receivable and the bond portfolio is recognized as earned. Other income included with interest represents cash received for loan origination fees, which are recognized over the life of the loan as an adjustment to the yield on the loan.

As of January 1, 2018, the Company adopted ASU 2014-09 Revenue from Contracts with Customers - Topic 606 and all subsequent ASUs that modified ASC 606. The Company has elected to apply the ASU and all related ASUs using the modified retrospective implementation method. The implementation of the guidance had no material impact on the measurement or recognition of revenue of prior periods, however, additional disclosures have been added in accordance with the ASU.

The Company generally fully satisfies its performance obligations on its contracts with customers as services are rendered and the transaction prices are typically fixed; charged either on a periodic basis or based on activity. Because performance obligations are satisfied as services are rendered and the

F-11

transaction prices are fixed, there is little judgment involved in applying Topic 606 that significantly affects the determination of the amount and timing of revenue from contracts with customers. The main types of revenue contracts included in non-interest income within the consolidated statements of operations are as follows:

Gain Losses on Sale of OREO

The Company records a gain or loss from the sale of OREO when control of the property transfers to the buyer, which generally occurs at the time of an executed deed. When the Company finances the sale of OREO to the buyer, the Company assesses whether the buyer is committed to perform their obligations under the contract and whether collectability of the transaction price is probable. Once these criteria are met, the OREO asset is derecognized and the gain or loss on sale is recorded upon the transfer of control of the property to the buyer. In determine the gain or loss on the sale, the Company adjusts the transaction prices and related gain (loss) on sale if a significant financing component is present.

Deferred Financing Costs

The Company defers the costs related to obtaining financing. These costs are amortized over the life of the financing using the straight line method, which approximates the effective interest method.

Income (Loss) Per Common Share

No adjustments were made to income for the purpose of calculating income (loss) per share, as there were no potential dilutive shares outstanding.

Recent Accounting Pronouncements

In June, 2016 the FASB issued ASU 2016-13, “Financial Instruments-Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments.” ASU 2016-13 is intended to provide financial statement users with more decision-useful information about the excepted credit losses on financial instruments and other commitments to extend credit. For public entities, ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company has not yet fully evaluated the potential effects of adopting ASU 2016-13 on the Company’s results of operations, financial position or cash flows.

Recent Accounting Pronouncements – Adopted

In the first quarter of 2018, the Company adopted Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606).  Under the ASU, revenue is recognized when a customer obtains control of promised services in an amount that reflects the consideration the entity expects to receive in exchange for those services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers.  The Company applied the five-step method outlined in the ASU to all revenue streams scoped-in by the ASU and elected the modified retrospective implementation method. Substantially all

F-12

of the Company’s interest income and certain non-interest income were not impacted by the adoption of this ASU because either the revenue from those contracts with customers is covered by other guidance in U.S. GAAP or the revenue recognition outcomes were similar to our current revenue recognition practices. We reviewed non-interest sources of income and related contracts to document the impact of the new standard on our service offerings that are in the scope of the ASU including gains (losses) on sale of OREOs. Upon our analysis we concluded that the adoption of the ASC 606 did not change the timing and pattern of revenue recognition related to scoped in non-interest income source and only required additional disclosures. In addition, we reviewed, and where necessary, enhanced our business processes, systems and controls to support recognition and disclosures under the new standard. The additional disclosures required by the ASU have been included above.

2. FAIR VALUE MEASUREMENTS

The Company measures certain financial instruments at fair value in our balance sheets. The fair value of these instruments is based on valuations that include inputs that can be classified within one of the three levels of a hierarchy. Level 1 inputs include quoted market prices in an active market for identical assets or liabilities. Level 2 inputs are market data, other than Level 1, that are observable either directly or indirectly. Level 2 inputs include quoted market prices for similar assets or liabilities, quoted market prices in an inactive market, and other observable information that can be corroborated by market data. Level 3 inputs are unobservable and corroborated by little or no market data.

Except for the bond portfolio, which is required by authoritative accounting guidance to be recorded at fair value in our Balance Sheets, the Company elected not to record any other financial assets or liabilities at fair value on a recurring basis. We recorded an aggregate allowance for losses on our Agape bonds (see Note 3), which totaled $458,000 for both periods ended September 30, 2018 and December 31, 2017.

The following table summarizes the Company’s financial instruments that were measured at fair value on a recurring basis:

		Fair Value Measurement
September 30, 2018	Fair Value	Level 3
Bond portfolio	$15,365,807	$15,365,807

		Fair Value Measurement
December 31, 2017	Fair Value	Level 3
Bond portfolio	$14,229,755	$14,229,755

We determine the fair value of the bond portfolio shown in the table above by comparing it with similar instruments in inactive markets. The analysis reflects the contractual terms of the bonds, which

F-13

are callable at par by the issuer at any time, and the anticipated cash flows of the bonds, and uses observable and unobservable market-based inputs. Unobservable inputs include our internal credit rating and selection of similar bonds for valuation.

The change in Level 3 assets measured at fair value on a recurring basis is summarized as follows:

		Bond Portfolio
Balance at December 31, 2017	$	14,229,755
Purchases		1,238,052
Proceeds		(102,000	)
Balance at September 30, 2018	$	15,365,807

Real estate held for sale and impaired loans are recorded at fair value on a nonrecurring basis. The fair value of real estate held for sale was based upon the listed sales price less expected selling costs, which is a Level 3 input. The resulting impairment charges were $0 for both the periods ended September 30, 2018 and December 31, 2017.

The following table summarizes the Company’s financial instruments that were measured at fair value on a nonrecurring basis:

	September 30, 2018
	Level 1		Level 2		Level 3		Fair Value at September 30, 2018
Impaired Loans	$	—	$	—	$	784,602	$	784,602
Real estate held for resale		—		—		225,872		225,872
	$	—	$	—	$	1,010,474	$	1,010,474

	December 31, 2017
	Level 1		Level 2		Level 3		Fair Value at December 31, 2017
Impaired Loans	$	—	$	—	$	1,321,500	$	1,321,500
Real estate held for resale		—		—		225,872		225,872
	$	—	$	—	$	1,547,372	$	1,547,372

F-14

The change in Level 3 assets measured at fair value on a nonrecurring basis is summarized as follows:

	Impaired Loans	Real Estate Held for Sale
Balance at December 31, 2017	$1,321,500	$  225,872
Dispositions/Proceeds	(432,961)	-
Impairment	(103,937)	-
Balance at September 30, 2018	$  784,602	$  225,872

3. MORTGAGE LOANS RECEIVABLE AND BOND PORTFOLIO

At September 30, 2018, the Company had mortgage loans receivable totaling $22,559,478. The loans bear interest ranging from 0% to 10.25% with a weighted average of approximately 8.22% at September 30, 2018. The Company had mortgage loans receivable totaling $24,158,787 that bore interest ranging from 0% to 10.25% with a weighted average of approximately 8.19% at December 31, 2017.

The Company has a portfolio of secured church bonds at September 30, 2018 and December 31, 2017, which are carried at fair value. The bonds pay quarterly interest ranging from 3.25% to 9.75%. The aggregate value of secured church bonds equaled approximately $15,842,000 at September 30, 2018 with a weighted average interest rate of 6.82% and approximately $14,688,000 at December 31, 2017 with a weighted average interest rate of 6.82%. These bonds are due at various maturity dates through May 2046.

The contractual maturity schedule for mortgage loans receivable and the bond portfolio as of September 30, 2018, is as follows:

	Mortgage Loans	Bond Portfolio
October 1, 2018 through September 30, 2019	$     1,162,842	$  154,000
October 1, 2019 through December 31, 2019	179,555	59,000
2020	875,857	228,000
2021	756,395	254,000
2022	1,554,461	176,000
Thereafter	18,030,368	14,952,807
	22,559,478	15,823,807
Less loan and bond loss other than temporary impairment	(1,645,883)	(458,000)
Less deferred origination income	(285,534)	______-__
Totals	$20,628,061	$ 15,365,807

F-15

The Company currently owns $529,000 First Mortgage Bonds and $497,000 Second Mortgage Bonds issued by Agape Assembly Baptist Church located in Orlando, Florida. The total principal amount of First Mortgage Bonds issued by Agape is $7,200,000, and the total principal amount of Second Mortgage Bonds issued is $715,000. Agape defaulted on its payment obligations to bondholders in September 2010. The church subsequently commenced a Chapter 11 bankruptcy reorganization proceeding regarding the property that secures the First Mortgage Bonds in December 2010. In October 2014, a minimum of 80% of the bondholders of Agape agreed to a modification in the terms of their bonds which resulted in the temporary resumption of both principal and interest payments to both the first and second mortgage bond holders. Both the First Mortgage Bonds and Second Mortgage Bonds were modified to a fully amortized fixed rate, quarterly interest payment of 6.25% with a new maturity date of September 2037 for all the issued and outstanding bonds. The Company, along with all other bondholders, has a superior lien over all other creditors. The Company has an aggregate other than temporary impairment of $458,000 for the First and Second Mortgage Bonds at September 30, 2018 and December 31, 2017, which effectively reduces the bonds to the fair value amount management believes will be recovered. The Church subsequently defaulted on their modification agreement in 2016 and no interest payments were made to bondholders during the period ended September 30, 2018. However, the trustee made a distribution to bondholders during 2017 of $18.75 per $1,000 bond as a repayment of principal only, effectively reducing the outstanding balance of each $1,000 bond to approximately $826.

The Company restructured one mortgage loan during the nine month period ended September 30, 2018. The restructured loan was a $669,544 first mortgage loan located in Indianapolis, Indiana. The Church was unable to meet its monthly debt obligations. The Company reduced the Church’s monthly mortgage obligation to interest only payments for a period of three years. After the three year period, the Church will resume its regular monthly mortgage payments. The Church accepted the restructured loan terms. The modification had no effect on the Company’s financial statements.

4. SECURED INVESTOR CERTIFICATES

Secured investor certificates are collateralized by certain mortgage loan receivables or secured church bonds of approximately the same value as the certificates. The weighted average interest rate on the certificates was 6.43% and 6.45% at September 30, 2018 and December 31, 2017, respectively. Holders of the secured investor certificates may renew certificates at the current rates and terms upon maturity at the Company’s discretion. Renewals upon maturity are considered neither proceeds from nor issuance of secured investor certificates. Renewals totaled approximately $136,000 and $656,000 for the three months ended September 30, 2018 and December 31, 2017, respectively. The secured investor certificates have certain financial and non-financial covenants identified in the respective series’ trust indentures.

F-16

The estimated maturity schedule for the secured investor certificates at September 30, 2018 is as follows:

October 1, 2018 through September 30, 2019	$    4,259,000
October 1, 2019 through December 31, 2019	1,291,000
2020	4,167,000
2021	2,056,000
2022	952,000
Thereafter	16,495,000
Totals	$29,220,000

In July 2014, the Company filed a registration statement with the Securities and Exchange Commission to offer $10,000,000 worth of Series D secured investor certificates. The offering was declared effective by the SEC on August 12, 2014. The offering was renewed with an effective date of September 23, 2016. The certificates were offered in multiples of $1,000 with interest rates ranging from 4.00% to 6.50%, subject to changing market rates and maturities from 5 and 7 to 15 years. The certificates are collateralized by certain mortgage loans receivables and church bonds of approximately the same value. At September 30, 2018, approximately 8,234 Series D certificates had been issued and were outstanding for $8,234,000. The offering terminated in August 2017.

In September 2017, the Company filed a registration statement with the Securities and Exchange Commission to offer $10,000,000 worth of Series E secured investor certificates. The offering was declared effective by the SEC on November 6, 2017. The certificates are being offered in multiples of $1,000 with interest rates ranging from 4.00% to 6.50%, subject to changing market rates, and maturities from 5 to 15 years. The certificates are collateralized by certain mortgage loan receivables and church bonds of approximately the same value. At September 30, 2018, approximately 2,320 Series E certificates had been issued and were outstanding for $2,320,000.

5. TRANSACTIONS WITH AFFILIATES

The Company has an Advisory Agreement with Church Loan Advisors, Inc. (the “Advisor”). The Advisor is responsible for the day-to-day operations of the Company and provides office space and administrative services. The Advisor and the Company are related through common ownership and common management. A majority of the independent board members approve the advisory agreement on an annual basis. The Company paid the Advisor management fees of approximately $242,000 and $162,000 during the nine months ended September 30, 2018 and 2017, respectively.

F-17

6. LINE OF CREDIT

On April 9, 2018, the Company entered into a Loan and Security agreement (the “Loan Agreement”) with Alerus Financial, N.A., as lender (the “Lender”), and a Revolving Note (the “Note”) evidencing a $4,000,000 revolving loan (the “Revolving Loan”). The Lender agrees to make loans to the Company from time to time and after the date of the loan agreement and the Company may repay and reborrow pursuant to the terms and conditions of the Revolving Loan as long as no borrowing causes that dollar limit to be exceeded and the Company is not otherwise in default on the Revolving Loan. The Revolving Loan is secured by a first priority security interest in substantially all of the Company’s assets other than collateral pledged to secure the Company’s secured investor certificates, both those currently issued and any potentially issued in the future. The Company has not yet borrowed against the line of credit as of September 30, 2018. The maturity date of the Note is April 9, 2019 and the interest rate is the prevailing London Interbank Offering Rate (LIBOR) plus 2.70% adjusted monthly.

7. FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company is required to disclose the fair value information about financial instruments, where it is practicable to estimate that value. Because assumptions used in these valuation techniques are inherently subjective in nature, the estimated fair values cannot always be substantiated by comparison to independent market quotes and, in many cases, the estimated fair values could not necessarily be realized in an immediate sale or settlement of the instrument.

The fair value estimates presented herein are based on relevant information available to management as of September 30, 2018 and December 31, 2017, respectively. Management is not aware of any factors that would significantly affect these estimated fair value amounts. As these reporting requirements exclude certain financial instruments and all non-financial instruments, the aggregate fair value amounts presented herein do not represent management’s estimate of the underlying value of the Company.

The estimated fair values of the Company’s financial instruments, none of which are held for trading purposes, are as follows:

	September 30, 2018				December 31, 2017
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
Cash and equivalents	$	2,675,119	$	2,675,119	$	502,490	$	502,490
Accounts receivable		268,670		268,670		260,785		260,785
Interest receivable		184,218		184,218		176,365		176,365
Mortgage loans receivable		22,559,478		21,943,917		24,158,787		25,353,731
Bond portfolio		15,823,807		15,823,807		14,687,775		14,687,775
Secured investor certificates		29,220,000		36,201,383		27,323,000		34,811,519

F-18

The following methods and assumptions were used by the Company to estimate the fair value of each class of financial instrument for which it is practicable to estimate that value:

Cash and equivalents

Due to their short-term nature, the carrying amount of cash and cash equivalents approximates fair value.

Accounts receivable

Due to the short term nature, the carrying amount of accounts receivable approximates fair value.

Interest receivable

Due to the short term nature, the carrying amount of interest receivable approximates fair value.

Mortgage loans receivable

The fair value of the mortgage loans receivable is currently less than the carrying value as the portfolio is currently yielding less than similar mortgages with similar terms for borrowers with similar credit quality.

Bond portfolio

We determine the fair value of the bond portfolio shown in the table above by comparing with similar instruments in inactive markets. The analysis reflects the contractual terms of the bonds, which are callable at par by the issuer at any time, and the anticipated cash flows of the bonds and uses observable and unobservable market-based inputs. Unobservable inputs include our internal credit rating and selection of similar bonds for valuation.

Secured investor certificates

The fair value of the secured investor certificates is currently greater than the carrying value due to higher interest rates than current market rates.

F-19

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

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995

Certain statements contained in this section and elsewhere in this Form 10-Q constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve a number of known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, but are not limited to, (i) trends affecting our financial condition or results of operations; (ii) our business and growth strategies; (iii) the mortgage loan industry and the financial status of religious organizations; (iv) our financing plans; and other risks detailed in the Company’s other periodic reports filed with the Securities and Exchange Commission. The words “believe”, “expect”, “anticipate”, “may”, “plan”, “should”, and similar expressions identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date the statements were made and are not guarantees of future performance.

A detailed statement of risks and uncertainties is contained in our reports to the SEC, including, in particular, our Annual Report on Form 10-K for the year ended December 31, 2017 and other public filings and disclosures.  Investors and shareholders are urged to read these documents carefully.

Plan of Operation

We were founded in May 1994 and commenced active business operations on April 15, 1996 after the completion of our initial public offering.

We currently have fifty-seven first mortgage loans aggregating $22,376,945 in principal amount, three second mortgage loans totaling $222,533 in principal amount and a first mortgage bond portfolio with par values aggregating $15,823,807. Funding of additional first mortgage loans and purchase of first mortgage bonds issued by churches is expected to continue on an on-going basis as more investable assets become available through: (i) future sales of securities; (ii) prepayment and repayment at maturity of existing loans and bonds; and (iii) borrowed funds. These capital sources and interest received on loans and bonds provide general working capital to the Company.

Results of Operations

Fiscal 2018 Nine Months Ended September 30, 2018 Compared to Fiscal 2017 Nine Months Ended September 30, 2017

Our net (loss) income for the nine months ended September 30, 2018 and 2017 was $(137,061) and $93,509, respectively, on total interest and other income of $1,942,501 and $2,059,857, respectively. Interest and other income is comprised of interest from loans, interest from bonds, amortization of bond discounts and amortization of loan origination fees. As of September 30, 2018, our loans receivables have interest rates ranging from 0% to 10.25%, with an average, principal-adjusted interest rate of 8.22%. Our bond portfolio has an average current yield of 6.82% as of September 30, 2018. As of September 30, 2017, the average, principal-adjusted interest rate on our portfolio of loans was 8.20% and our portfolio of bonds had an average current yield of 6.80%. The decrease in interest and other income during the nine months ended September 30, 2018 versus the nine months ended September 30, 2017 was due to a decrease in interest income on our loan portfolio.

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Interest expense was $1,467,597 and $1,436,104 for the nine months ended September 30, 2018 and 2017, respectively. The increase in interest expense was due to an increase in Secured Investor Certificates outstanding during the nine month period ended September 30, 2018. Net interest margin decreased from 30.28% to 24.45% resulting primarily from an decrease in interest and other income of approximately 6.04% and an increase in interest expense of approximately 2.19%.

We follow a loan loss allowance policy on our portfolio of loans outstanding. This critical policy requires complex judgments and estimates. We record mortgage loans receivable at their estimated net realizable value, which is the unpaid principal balance less the allowance for mortgage loans. Our loan policy provides an allowance for estimated uncollectible loans based on an evaluation of the current status of the loan portfolio. This policy provides for principal amounts outstanding on a particular loan if cumulative interruptions occur in the normal payment schedule of a loan. Our policy will provide for the outstanding principal amount of a loan in our portfolio if the amount is in doubt of being collected. Additionally, no interest income is recognized on impaired loans or loans that are in the foreclosure process.

We will declare a loan to be in default and will place the loan on non-accrual status when the following thresholds have been met: (i) the borrower has missed three consecutive mortgage payments; (ii) the borrower has not communicated to the Company any legitimate reason for delinquency in its payments to the Company and has not arranged for the re-continuance of payments; (iii) lines of communication to the borrower have broken down such that any reasonable prospect of rehabilitating the loan and return of regular payments is gone.

Our policies on payments received and interest accrued on non-accrual loans are as follows: (i) We will accept payments on loans that are currently on non-accrual status when a borrower has communicated to us that they intend to meet their mortgage obligations. A payment made on a non-accrual loan is considered a good faith deposit as to the intent to resume their mortgage payment obligation. This good faith deposit is credited back to interest first then principal as stated in the mortgage loan documentation. (ii) A letter outlining the re-payment terms or the restructure terms (if any) of the loan is provided to the borrower. This letter will be signed by the Senior Pastor and all board members of the borrower. This letter resumes the obligation to make payments on non-accrual loans. (iii) The borrower must meet all its payment obligations for the next 120 days without interruption in order to be removed from non-accrual status.

When a loan is declared in default according to our policy or deemed to be doubtful of collection, the loan committee of our Advisor will direct the staff to charge-off the uncollectable receivables.

Allowance for losses on mortgage loans receivable increased during the nine months ended September 30, 2018 as we recorded additional provisions against the mortgage loans. We recorded an additional provision for losses on loans during the nine months ended September 30, 2018 of approximately $217,728 compared to approximately $80,323 for the nine months ended September 30, 2017. At September 30, 2018, we provided approximately $1,646,000 for eighteen mortgage loans, of which eight are three or more mortgage payments in arrears, three loans are declared to be in default and three were in the foreclosure process. At September 30, 2017, we provided approximately $1,392,000 for seventeen mortgage loans, of which eight were three or more mortgage payments in arrears, three were declared to be in default and two were in the foreclosure process.

Our lending practices limit deployment of our capital to churches and other non-profit religious organizations. The total principal amount of our second mortgage loans is limited to 20% of our average invested assets. We currently have three second mortgage loans totaling approximately $223,000 in principal amount outstanding. We do not loan to any borrower who has been in operation for less than two years and the borrower must demonstrate they can service the debt outstanding for the prior three

21

years based on historical financial statements. We do not loan money based on projections or pledge programs. The loan amount to any borrower cannot exceed 75% loan to appraised value. Typically, we do not loan over 70% loan to value except in extenuating circumstances. In addition, the borrower’s long-term debt (including the proposed loan) cannot exceed four times the borrower’s gross income for the previous twelve month period.

Historically, loans in our portfolio are outstanding for an average of eight years. Our borrowers are typically small independent churches with little or no borrowing history. Once a church establishes a payment history with us, they look to refinance their loan with a local bank, credit union or other financial institution which is willing to provide financing since the borrower has established a payment history and have demonstrated they can meet their mortgage debt obligations.

Operating expenses for the nine months ended September 30, 2018 decreased approximately $56,000 to $394,000 compared to $450,000 at September 30, 2017. The decrease was primarily the result of a decrease in realized loan losses.

Fiscal 2018 Third Quarter Compared to Fiscal 2017 Third Quarter

The Company had a net loss of approximately $(35,802) for the three months ended September 30, 2018 compared to net income of $197,000 for the three months ended September 30, 2017, on total interest and other income of approximately $637,000 and $677,000 three months ended September 30, 2018 and 2017, respectively. Interest expense was approximately $499,000 and $480,000 for the three months ended September 30, 2018 and 2017, respectively. The decrease in net interest income was approximately $58,000 due to a decrease in interest income on our loan portfolio and an increase in our interest expense on our Secured Investor Certificates.

Operating expenses for the three months ended September 30, 2018 increased to approximately $113,000 compared to $107,000 at September 30, 2017. The increase in operating expenses was due to an increase in the recognition of our accounting expenses.

Mortgage Loans and Bond Portfolio

No new loans were funded during the nine months ended September 30, 2018.

We currently own $529,000 First Mortgage Bonds and $497,000 Second Mortgage Bonds issued by Agape Assembly Baptist Church located in Orlando, Florida. Agape defaulted on its payment obligations to bondholders in September 2010. The aggregate amount of the defaulted bonds equals $7,915,000; the total principal amount of First Mortgage Bonds issued by Agape is $7,200,000 and the total principal amount of Second Mortgage Bonds issued is $715,000. The church commenced a Chapter 11 bankruptcy reorganization proceeding regarding the property that secures the First Mortgage Bonds in December 2010. In October 2014, Agape bondholders agreed to a modification in the terms of their bonds which resulted in the temporary resumption of both principal and interest payments to both the first and second mortgage bond holders. Both the First Mortgage Bonds and Second Mortgage Bonds were modified to a fully amortized fixed rate, quarterly interest payment of 6.25% with a new maturity date of September 2037 for all the issued and outstanding bonds. We, along with all other bondholders, have a superior lien over all other creditors. We recorded an aggregate other than temporary impairment of $458,000 for the First and Second Mortgage Bonds at September 30, 2018, which effectively reduces the bonds to the fair value amount management believes will be recovered. The Church subsequently defaulted on their modification agreement in 2016 and no interest payments were made to bondholders during the six month period ended September 30, 2018. However, the trustee made a distribution to bondholders during the twelve month period ended December 31, 2017 of $18.54 per

22

$1,000 bond as a repayment of principal only, effectively reducing the outstanding balance of each $1,000 bond to approximately $826.

Real Estate Held for Sale

We record real estate held for sale at the estimated fair value, which is net of the expected expenses related to the sale of the real estate. We did not record any additional impairment on our real estate held for sale for the nine month period ended September 30, 2018 and 2017.

Dividends

We have elected to operate as a real estate investment trust (REIT), therefore we are required, among other things, to distribute to shareholders at least 90% of “Taxable Income” in order to maintain our REIT status. The dividends declared and paid to shareholders may include cash from origination fees even though they are not recognized as income in their entirety for the period under generally accepted accounting principles in the United States. We earned $0 and $40,772 in origination fees for the nine months ended September 30, 2018 and 2017, respectively.

We paid a dividend of $.07 for each share held of record on April 30, 2018. The dividend was paid May 1, 2018.

We paid a dividend of $.02 for each share held of record on July 30, 2018. The dividend was paid July 31, 2018.

We paid a dividend of $.04 for each share held of record on October 29, 2018. The dividend was paid October 31, 2018.

Liquidity and Capital Resources

We generate revenue through implementation of our business plan of making mortgage loans to, and acquiring first mortgage bonds issued by, churches and other non-profit religious organizations. Our revenue is derived principally from interest income, and secondarily through the origination fees and renewal fees generated by the mortgage loans we make. We also earn income through interest on funds that are invested pending their use in funding mortgage loans and on income generated on church bonds. Our principal recurring expenses are advisory fees, legal and accounting fees and interest payments on secured investor certificates. Our liabilities as of September 30, 2018 are primarily comprised of accounts payable, management fee payable and dividends declared as of September 30, 2018 but not yet paid and our secured investor certificates.

Our current funding sources are expected to provide adequate cash for our operations for the next twelve months. Future capital needs are expected to be met by: (i) the additional sale of securities; (ii) prepayment and repayment at maturity of mortgage loans we make; and (iii) bonds that mature or we sell from our bond portfolio. We believe that the “rolling” effect of mortgage loans maturing and bond repayments will provide a supplemental source of capital to fund our business operations in future years. We continually review the market for other sources of capital. There can be no assurance we will be able to raise additional capital on terms acceptable for such purposes.

During the nine months ended September 30, 2018, total assets increased by approximately $1,552,000 due to an increase in our cash position from the sale of our Secured Investor Certificates. Current liabilities increased by approximately $153,000 for the nine months ended September 30, 2018 due to an increase in current maturities of our secured investor certificates. Non-current liabilities also increased by

23

approximately $1,754,000 for the nine months ended September 30, 2018 due to an increase of secured investor certificates outstanding.

For the nine months ended September 30, 2018, net cash provided by operating activities decreased to approximately $197,000 from $334,000 from the comparative period ended September 30, 2017, primarily due to an increase in our provision for losses on our loan portfolio.

For the nine months ended September 30, 2018, net cash provided by (used for) investing activities was approximately $463,000 compared to $(1,726,000) from the comparative nine months ended September 30, 2017, due to a decrease in both investment in mortgage loans and in bonds.

For the nine months ended September 30, 2018, net cash provided by (used for) financing activities decreased to approximately $1,513,000 from $(791,000) for the comparative nine months ended September 30, 2017, primarily due to the sale of our secured investor certificates.

Critical Accounting Estimates

Preparation of our financial statements requires estimates and judgments to be made that affect the amounts of assets, liabilities, revenues and expenses reported. Such decisions include the selection of the appropriate accounting principles to be applied and the assumptions on which to base accounting estimates. We evaluate these estimates based on assumptions we believe to be reasonable under the circumstances.

The difficulty in applying these policies arises from the assumptions, estimates and judgments that have to be made currently about matters that are inherently uncertain, such as future economic conditions, operating results and valuations as well as management intentions. As the difficulty increases, the level of precision decreases, meaning that actual results can and probably will be different from those currently estimated.

Management uses estimates and assumptions in preparing these financial statements in accordance with generally accepted accounting principles. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could differ from those estimates. The most sensitive estimates relate to the realizability of the mortgage loans receivable and the valuation of the bond portfolio and real estate held for sale. It is at least reasonably possible that these estimates could change in the near term and that the effect of the change, if any, may be material to the financial statements.

We estimate the value of real estate we hold pending re-sale based on a number of factors. We look at the current condition of the property as well as current market conditions in determining a fair value, which will determine the listing price of each property. Each property is valued based on its current listing price less any anticipated selling costs, including for example, realtor commissions. Since churches are single use facilities the listing price of the property may be lower than the total amount owed to us. Attorney fees, taxes, utilities along with real estate commission fees will also reduce the amount we collect from the sale of a property we have acquired through foreclosure. The fair value of the real estate held for sale includes estimates of expenses related to the sale of the real estate.

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Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

N/A

Item 4. Controls and Procedures

Disclosure Controls and Procedures

An evaluation was carried out under the supervision and with the participation of the Company’s management, including the principal executive officer and the principal accounting officer, of the effectiveness of the Company’s disclosure controls and procedures as of the end of the quarter ended September 30, 2018. Based on that evaluation, the principal executive officer and the principal accounting officer concluded that the Company’s disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by the Company in reports that it files or submits under the Securities and Exchange Commission is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and that information required to be disclosed in reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal accounting officer, to allow timely decisions regarding required disclosure.

Changes in Internal Controls Over Financial Reporting

During the three months ended September 30, 2018, there were no changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.

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PART II

OTHER INFORMATION

Item 1.  Legal Proceedings.

None.

Item 1A.  Risk Factors.

Not applicable.

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

(a) Not Applicable

(b) Not Applicable

(c) Not Applicable

Item 3. Defaults Upon Senior Securities. 

None.

Item 4. Mine Safety Disclosures.

Not Applicable

Item 5. Other Information.

None.

Item 6. Exhibits

Exhibit

Number Title of Document

31.1 Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2 Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1 Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the of the Sarbanes-Oxley Act of 2002.

32.2 Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the of the Sarbanes-Oxley Act of 2002.

26

101 The following financial information from our Quarterly Report on Form 10-Q for the third quarter of fiscal year 2018 filed with the Securities and Exchange Commission on November 14, 2018, is formatted in eXtensible Business Reporting Language (XBRL): (i) the Consolidated Balance Sheets at September 30, 2018 and December 31, 2017; (ii) Consolidated Statements of Operations for the nine and three months ended September 30, 2018 and 2017; (iii) the Consolidated Statements of Cash Flows for the nine months ended September 30, 2018 and 2017; and (iv) the Notes to Financial Statements (Unaudited).

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused the report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated:       November 14, 2018

	AMERICAN CHURCH MORTGAGE COMPANY
By:	/s/ Philip J. Myers
	Philip J. Myers
	Chief Executive Officer
	(Principal Executive Officer)
By:	/s/ Scott J. Marquis
	Scott J. Marquis
	Chief Financial Officer and Treasurer
	(Principal Financial and Accounting Officer)

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EX-31.1

Exhibit 31.1

OFFICER'S CERTIFICATE

PURSUANT TO SECTION 302

I, Philip J. Myers, certify that:

1. I have reviewed this annual report on Form 10-Q of American Church Mortgage Company.

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements and other financial information included in this report fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-5(e) and 15d-15 (e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

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

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

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

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

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

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

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

Dated:   November 14, 2018	By:    /s/ Philip J. Myers
	Philip J. Myers
	Chief Executive Officer
	(Principal Executive Officer)

EX-31.2

Exhibit 31.2

OFFICER'S CERTIFICATE

PURSUANT TO SECTION 302

I, Scott J. Marquis, certify that:

1. I have reviewed this annual report on Form 10-Q of American Church Mortgage Company.

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements and other financial information included in this report fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-5(e) and 15d-15 (e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

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

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

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

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

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

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

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

Dated:   November 14, 2018	By:    /s/ Scott J. Marquis
	Scott J. Marquis
	Chief Financial Officer and Treasurer
	(Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of American Church Mortgage Company (the “Company”) on Form 10-Q for the period ended September 30, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, in the capacities and on the dates indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

Dated:   November 14, 2018	By:  /s/ Philip J. Myers
	Chief Executive Officer
	(Principal Executive Officer)

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of American Church Mortgage Company (the “Company”) on Form 10-Q for the period ended September 30, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, in the capacities and on the dates indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

Dated:   November 14, 2018	By:  /s/ Scott J. Marquis
	Chief Financial Officer and Treasurer
	(Principal Financial Officer)

XML

Document and Entity Information - USD ($)	9 Months Ended
	Sep. 30, 2018	Nov. 14, 2018
Document And Entity Information
Entity Registrant Name	American Church Mortgage Company
Entity Central Index Key	0000934543
Document Type	10-Q
Document Period End Date	Sep. 30, 2018
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Is Entity's Reporting Status Current?	Yes
Is Entity Emerging Growth Company?	false
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Public Float		$ 1,677,798
Entity Common Stock, Shares Outstanding		1,677,798
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2018

XML

Balance Sheets - USD ($)	Sep. 30, 2018	Dec. 31, 2017
Statement of Financial Position [Abstract]
Cash and cash equivalents	$ 2,675,119	$ 502,490
Accounts receivable	268,670	260,785
Interest receivable	184,218	176,365
Investments	2,410	2,410
Current maturities of mortgage loans receivable, net of allowance for loan losses of $84,838 and $88,113 and deferred origination fees of $20,642 and $28,956 at September 30, 2018 and December 31, 2017, respectively	1,057,362	1,373,463
Current maturities of bond portfolio, at fair value	154,000	139,000
Prepaid expenses	15,121	2,598
Total current assets	4,356,900	2,457,111
Mortgage Loans Receivable, net of current maturities, allowance of $1,561,045 and $1,340,042 and deferred origination fess of $264,892 and $256,578 at September 30, 2018 and December 31, 2017, respectively	19,570,699	21,071,635
Bond Portfolio, at fair value, net of current maturities	15,211,807	14,090,755
Real Estate Held for Sale	225,872	225,872
Deferred Offering Costs, net of accumulated amortization of $1,032,371 and $1,222,243 at September 30, 2018 and December 31, 2017, respectively	871,926	839,377
Total Assets	40,237,204	38,684,750
Current Liabilities
Current maturities of secured investor certificates	4,259,000	4,116,000
Accounts payable	92,262	30,216
Management fee payable	25,548	26,631
Dividends payable	67,112	117,446
Total current liabilities	4,443,922	4,290,293
Secured Investor Certificates, Series B, net of current maturities	8,281,000	8,825,000
Secured Investor Certificates, Series C, net of current maturities	6,126,000	6,148,000
Secured Investor Certificates, Series D	8,234,000	8,234,000
Secured Investor Certificates, Series E	2,320,000
Total liabilities	29,404,922	27,497,293
Stockholders' Equity
Common stock, par value $.01 per share, Authorized, 30,000,000 shares, Issued and outstanding, 1,677,798 shares at September 30, 2018 and December 31, 2017, respectively	16,778	16,778
Additional paid-in capital	19,113,458	19,113,458
Accumulated deficit	(8,297,954)	(7,942,779)
Total stockholders' equity	10,832,282	11,187,457
Total Liabilities and Stockholders' Equity	$ 40,237,204	$ 38,684,750

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Balance Sheets (Parenthetical) - USD ($)	Sep. 30, 2018	Dec. 31, 2017
Current Assets
Current allowance for current maturities of mortgage loans recievable	$ (1,584,889)	$ (1,428,155)
Current deferred origination fees for current mortgage loans recievable	20,642	28,956
Allowance for mortgage loans recievable	1,561,045	1,340,042
Deferred origination fees for mortgage loans recievable	264,892	256,578
Accumulated amortization deferred offering costs	$ 1,032,371	$ 1,222,243
Stockholders' Equity
Common Stock, par value	$ 0.01	$ 0.01
Common Stock, Authorized	30,000,000	30,000,000
Common Stock, Issued	1,677,798	1,677,798
Common Stock, Outstanding	1,677,798	1,677,798

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Statements of Operations - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Income Statement [Abstract]
Interest and Other Income	$ 637,133	$ 677,065	$ 1,942,501	$ 2,059,857
Interest Expense	498,619	480,351	1,467,597	1,436,104
Net Interest Income	138,514	196,714	474,904	623,753
Provision for losses on mortgage loans receivable	60,994	28,524	217,728	80,323
Net Interest Income after Provision for Mortgage Losses	77,520	168,190	257,175	543,430
Operating expenses	113,322	106,616	394,237	449,921
Net (loss) Income	$ (35,802)	$ 61,574	$ (137,061)	$ 93,509
Basic and Diluted (Loss) Income Per Share	$ (.02)	$ .04	$ (.08)	$ .06
Dividends Declared Per Share	$ .04	$ .07	$ .13	$ .21
Weighted Average Common Shares Outstanding - Basic and Diluted	1,677,798	1,677,798	1,677,798	1,677,798

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Statements of Cash Flows - USD ($)	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Cash Flows from Operating Activities
Net (loss) income	$ (137,061)	$ 93,509
Adjustments to reconcile net (loss) income to net cash from operating activites:
Net loss on sales and impairment on real estate held for sale		66,971
Provision for losses on mortgage loans receivable	217,728	80,323
Accretion of deferred origination fees		18,562
Amortization of deferred offering costs	83,188	90,460
Accounts receivable	(7,885)	(51,124)
Interest receivable	(7,853)	(2,181)
Prepaid expenses	(15,523)	(5,364)
Accounts payable	60,963	43,184
Net cash provided by operating activities	196,577	334,340
Cash Flows from Investing Activities
Investment in mortgage loans		(3,110,103)
Collections of mortgage loans	1,599,309	2,895,195
Investment purchased		48,029
Investment in bonds	(1,238,052)	(1,702,000)
Proceeds from bonds	102,000	143,000
Net cash provided by (used for) investing activities	463,257	(1,725,879)
Cash Flows from Financing Activities
Proceeds from the sale of secured investor certificates	2,320,000	930,000
Payments on secured investor certificate maturities	(423,000)	(1,320,000)
Payments for deferred costs	(115,737)	(65,041)
Dividends paid	(268,448)	(335,560)
Net cash provided by (used for) financing activities	1,512,815	(790,601)
Net Increase (Decrease) in Cash and Cash Equivalents	2,172,629	(2,182,140)
Cash and Cash Equivalents - Beginning Period	502,490	3,382,994
Cash and Equivalents - Ending Period	$ 2,675,119	$ 1,200,854

XML

Statements of Cash Flows (Parenthetical) - USD ($)	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Statement of Cash Flows [Abstract]
Dividends payable	$ 33,556	$ 117,446
Interest paid	$ 911,946	$ 896,108

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Summary Of Significant Accounting Policies

9 Months Ended

Sep. 30, 2018

Accounting Policies [Abstract]

Summary Of Significant Accounting Policies

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited financial statements have been prepared in accordance with the instructions for interim statements and, therefore, do not include all information and disclosures necessary for fair presentation of results of operations, financial position, and changes in cash flow in conformity with generally accepted accounting principles in the United States of America. However, in the opinion of management, such statements reflect all adjustments (which include only normal recurring adjustments) necessary for fair presentation of financial position, results of operations, and cash flows for the period presented.

The unaudited financial statements of the Company should be read in conjunction with the December 31, 2017 audited financial statements included in the Company’s Annual Report on Form 10-K, as filed with the Securities and Exchange Commission for the year ended December 31, 2017. Operating results for the periods presented are not necessarily indicative of the results that may be expected for the year ending December 31, 2018.

Nature of Business

American Church Mortgage Company, a Minnesota corporation, was incorporated on May 27, 1994. The Company was organized to engage primarily in the business of making mortgage loans to churches and other nonprofit religious organizations throughout the United States, on terms established for individual organizations.

Accounting Estimates

Management uses estimates and assumptions in preparing these financial statements in accordance with accounting principles generally accepted in the United States of America. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could differ from those estimates. The most sensitive estimates relate to the realizability of the mortgage loans receivable, the valuation of the bond portfolio and real estate held for sale. It is at least reasonably possible that these estimates could change in the near term and that the effect of the change, if any, may be material to the financial statements.

Concentration of Credit Risk

The Company's loans have been granted to churches and other non-profit religious organizations. The ability of the Company’s debtors to honor their contracts is dependent on member contributions and the involvement in the church or organization of its senior pastor.

Cash and Equivalents

The Company considers all highly liquid debt instruments purchased with maturities of three months or less to be cash equivalents.

The Company maintains accounts primarily at two financial institutions. At times throughout the year, the Company’s cash and equivalents balances may exceed amounts insured by the Federal Deposit Insurance Corporation. Cash in money market funds is not federally insured. The Company had $628,048 and $15,428 in money market fund accounts at September 30, 2018 and December 31, 2017, respectively. The Company has not experienced any losses in such accounts.

Bond Portfolio

The Company accounts for the bond portfolio under the Accounting Standards Codification (ASC) 320. The Company classifies the bond portfolio as “available-for-sale” and measures the portfolio at fair value. While the bonds are generally held until contractual maturity, the Company classifies them as available-for-sale as the bonds may be used to repay secured investor certificates or provide additional liquidity or working capital in the short term. The Company has classified $154,000 and $139,000 in bonds as current assets as of September 30, 2018 and December 31, 2017, respectively, based on management’s estimates for liquidity requirements and contractual maturities of certain bonds maturing in 2018 and 2017, respectively.

Allowance for Mortgage Loans Receivable

The Company records mortgage loans receivable at estimated net realizable value, which is the unpaid principal balances of the mortgage loans receivable, less the allowance for mortgage loans. The Company’s loan loss policy provides an allowance for estimated uncollectible loans based on an evaluation of the current status of the loan portfolio. This policy provides for principal amounts outstanding on a particular loan if cumulative interruptions occur in the normal payment schedule of a loan; therefore, the Company recognizes a provision for losses and an allowance for the outstanding principal amount of a loan in the Company’s portfolio if the amount is in doubt of collection. Additionally, no additional interest income is recognized on impaired loans that are declared to be in default and are in the foreclosure process. At September 30, 2018, the Company provided $1,645,883 for eighteen mortgage loans, of which eight totaling approximately $3,998,000 are three or more mortgage payments in arrears, three loans totaling approximately $810,000 are declared to be in default and three loans totaling approximately $801,000 are in the foreclosure process. At December 31, 2017, the Company provided approximately $1,428,000 for nineteen mortgage loans, of which seven totaling approximately $3,364,000 were three or more mortgage payments in arrears, five loans totaling approximately $1,403,000 were declared to be in default and two loans totaling approximately $641,000 were in the foreclosure process.

A summary of transactions in the allowance for credit losses for the nine months ended September 30, 2018 is as follows:

Balance at December 31, 2017	$  1,428,155
Provision for additional losses	217,728
Balance at September 30, 2018	$  1,645,883

The total impaired loans, which are loans that are in the foreclosure process or are declared to be in default, were approximately $1,611,000 and $2,044,000 at September 30, 2018 and December 31, 2017, respectively, which the Company believes are adequately secured by the underlying collateral and the allowance for mortgage loans. Approximately $827,000 and $723,000 of the Company’s allowance for mortgage loans was allocated to impaired loans at September 30, 2018 and December 31, 2017, respectively.

The Company will declare a loan to be in default and will place the loan on non-accrual status when the following thresholds have been met: (i) the borrower has missed three consecutive mortgage payments; (ii) the borrower has not communicated to the Company any legitimate reason for delinquency in its payments to the Company and has not arranged for the re-continuance of payments; (iii) lines of communication to the borrower have broken down such that any reasonable prospect of rehabilitating the loan and return of regular payments is gone.

The Company’s policies on payments received and interest accrued on non-accrual loans are as follows: (i) The Company will accept payments on loans that are currently on non-accrual status when a borrower has communicated to us that they intend to meet their mortgage obligations. A payment made on a non-accrual loan is considered a good faith deposit as to the intent to resume their mortgage payment obligation. This good faith deposit is credited back to interest first then principal as stated in the mortgage loan documentation. (ii) A letter outlining the re-payment terms or the restructure terms (if any) of the loan is provided to the borrower. This letter will be signed by the Senior Pastor and all board members of the borrower. This letter resumes the obligation to make payments on non-accrual loans. (iii) The borrower must meet all its payment obligations for the next 120 days without interruption in order to be removed from non-accrual status.

When a loan is declared in default according to the Company’s policy or deemed to be doubtful of collection, the loan committee of the Advisor to the Company will direct the staff to charge-off the uncollectable receivables.

Loans totaling approximately $3,998,000 and $3,364,000 exceeded 90 days past due but continued to accrue interest at September 30, 2018 and December 31, 2017, respectively. The Company believes that the loans are well secured, not deemed to be in default and the Company is actively pursuing collection of past due payments.

Real Estate Held for Sale

As of September 30, 2018, the Company had one property located in Pine Bluff, Arkansas acquired via deed in lieu of foreclosure, with an outstanding loan balance totaling $225,872. The Church is still occupying this property and paying rent while trying to either sell the building or obtain refinancing. The Company records real estate held for sale at the estimated fair value, which is net of the expected expenses related to the sale of the real estate. The fair value of our real estate held for sale, which represents the carrying value, is $225,872 both at September 30, 2018 and December 31, 2017.

Carrying Value of Long-Lived Assets

The Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that the carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed of significantly before the end of the estimated useful life.

Recoverability is assessed based on the carrying amount of the asset compared to the sum of the undiscounted cash flows expected to result from the use and the eventual disposal of the asset, as well as specific appraisal in certain instances. An allowance for losses is recognized when the carrying amount is deemed not recoverable and exceeds fair value as determined through various valuation techniques including, but not limited to, discounted cash flow models, quoted market values, and third party independent appraisals.

Revenue Recognition

Interest income on mortgage loans receivable and the bond portfolio is recognized as earned. Other income included with interest represents cash received for loan origination fees, which are recognized over the life of the loan as an adjustment to the yield on the loan.

As of January 1, 2018, the Company adopted ASU 2014-09 Revenue from Contracts with Customers- Topic 606 and all subsequent ASUs that modified ASC 606. The Company has elected to apply the ASU and all related ASUs using the modified retrospective implementation method. The implementation of the guidance had no material impact on the measurement or recognition of revenue of prior periods, however, additional disclosures have been added in accordance with the ASU.

The Company generally fully satisfies its performance obligations on its contracts with customers as services are rendered and the transaction prices are typically fixed; charged either on a periodic basis or based on activity. Because performance obligations are satisfied as services are rendered and the transaction prices are fixed, there is little judgment involved in applying Topic 606 that significantly affects the determination of the amount and timing of revenue from contracts with customers. The main types of revenue contracts included in non-interest income within the consolidated statements of operations are as follows:

Gain/Losses on Sale of OREO

The Company records a gain or loss from the sale of OREO when control of the property transfers to the buyer, which generally occurs at the time of an executed deed. When the Company finances the sale of OREO to the buyer, the Company assesses whether the buyer is committed to perform their obligations under the contract and whether collectability of the transaction price is probable. Once these criteria are met, the OREO asset is derecognized and the gain or loss on sale is recorded upon the transfer of control of the property to the buyer. In determine the gain or loss on the sale, the Company adjusts the transaction prices and related gain (loss) on sale if a significant financing component is present.

Deferred Financing Costs

The Company defers the costs related to obtaining financing. These costs are amortized over the life of the financing using the straight line method, which approximates the effective interest method.

Income (Loss) Per Common Share

No adjustments were made to income for the purpose of calculating income (loss) per share, as there were no potential dilutive shares outstanding.

Recent Accounting Pronouncements

In June, 2016 the FASB issued ASU 2016-13, “Financial Instruments-Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments.” ASU 2016-13 is intended to provide financial statement users with more decision-useful information about the excepted credit losses on financial instruments and other commitments to extend credit. For public entities, ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company has not yet fully evaluated the potential effects of adopting ASU 2016-13 on the Company’s results of operations, financial position or cash flows.

Recent Accounting Pronouncements-Adopted

In the first quarter of 2018, the Company adopted Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606).  Under the ASU, revenue is recognized when a customer obtains control of promised services in an amount that reflects the consideration the entity expects to receive in exchange for those services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers.  The Company applied the five-step method outlined in the ASU to all revenue streams scoped-in by the ASU and elected the modified retrospective implementation method. Substantially all of the Company’s interest income and certain non-interest income were not impacted by the adoption of this ASU because either the revenue from those contracts with customers is covered by other guidance in U.S. GAAP or the revenue recognition outcomes were similar to our current revenue recognition practices. We reviewed non-interest sources of income and related contracts to document the impact of the new standard on our service offerings that are in the scope of the ASU including gains (losses) on sale of OREOs. Upon our analysis we concluded that the adoption of the ASC 606 did not change the timing and pattern of revenue recognition related to scoped in non-interest income source and only required additional disclosures. In addition, we reviewed, and where necessary, enhanced our business processes, systems and controls to support recognition and disclosures under the new standard. The additional disclosures required by the ASU have been included above.

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Fair Value Measurements

9 Months Ended

Sep. 30, 2018

Fair Value Disclosures [Abstract]

Fair Value Measurements

2. FAIR VALUE MEASUREMENTS

The Company measures certain financial instruments at fair value in our balance sheets. The fair value of these instruments is based on valuations that include inputs that can be classified within one of the three levels of a hierarchy. Level 1 inputs include quoted market prices in an active market for identical assets or liabilities. Level 2 inputs are market data, other than Level 1, that are observable either directly or indirectly. Level 2 inputs include quoted market prices for similar assets or liabilities, quoted market prices in an inactive market, and other observable information that can be corroborated by market data. Level 3 inputs are unobservable and corroborated by little or no market data.

Except for the bond portfolio, which is required by authoritative accounting guidance to be recorded at fair value in our Balance Sheets, the Company elected not to record any other financial assets or liabilities at fair value on a recurring basis. We recorded an aggregate allowance for losses on our Agape bonds (see Note 3), which totaled $458,000 for both periods ended September 30, 2018 and December 31, 2017.

The following table summarizes the Company’s financial instruments that were measured at fair value on a recurring basis:

		Fair Value Measurement
September 30, 2018	Fair Value	Level 3
Bond portfolio	$15,365,807	$15,365,807

		Fair Value Measurement
December 31, 2017	Fair Value	Level 3
Bond portfolio	$14,229,755	$14,229,755

We determine the fair value of the bond portfolio shown in the table above by comparing it with similar instruments in inactive markets. The analysis reflects the contractual terms of the bonds, which are callable at par by the issuer at any time, and the anticipated cash flows of the bonds, and uses observable and unobservable market-based inputs. Unobservable inputs include our internal credit rating and selection of similar bonds for valuation.

The change in Level 3 assets measured at fair value on a recurring basis is summarized as follows:

		Bond Portfolio
Balance at December 31, 2017	$	14,229,755
Purchases		1,238,052
Proceeds		(102,000	)
Balance at September 30, 2018	$	15,365,807

Real estate held for sale and impaired loans are recorded at fair value on a nonrecurring basis. The fair value of real estate held for sale was based upon the listed sales price less expected selling costs, which is a Level 3 input. The resulting impairment charges were $0 for both the periods ended September 30, 2018 and December 31, 2017.

The following table summarizes the Company’s financial instruments that were measured at fair value on a nonrecurring basis:

	September 30, 2018
	Level 1		Level 2		Level 3		Fair Value at September 30, 2018
Impaired Loans	$	—	$	—	$	784,602	$	784,602
Real estate held for resale		—		—		225,872		225,872
	$	—	$	—	$	1,010,474	$	1,010,474

	December 31, 2017
	Level 1		Level 2		Level 3		Fair Value at December 31, 2017
Impaired Loans	$	—	$	—	$	1,321,500	$	1,321,500
Real estate held for resale		—		—		225,872		225,872
	$	—	$	—	$	1,547,372	$	1,547,372

The change in Level 3 assets measured at fair value on a nonrecurring basis is summarized as follows:

		Impaired Loans			Real Estate Held for Sale
Balance at December 31, 2017	$	1,321,500		$	225,872
Dispositions/Proceeds		(432,961	)		—
Impairment		(103,937	)		—
Balance at September 30, 2018	$	784,602		$	225,872

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Mortgage Loans Receivable And Bond Portfolio

9 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Mortgage Loans Receivable And Bond Portfolio

3. MORTGAGE LOANS RECEIVABLE AND BOND PORTFOLIO

At September 30, 2018, the Company had mortgage loans receivable totaling $22,559,478. The loans bear interest ranging from 0% to 10.25% with a weighted average of approximately 8.22% at September 30, 2018. The Company had mortgage loans receivable totaling $24,158,787 that bore interest ranging from 0% to 10.25% with a weighted average of approximately 8.19% at December 31, 2017.

The Company has a portfolio of secured church bonds at September 30, 2018 and December 31, 2017, which are carried at fair value. The bonds pay quarterly interest ranging from 3.25% to 9.75%. The aggregate value of secured church bonds equaled approximately $15,842,000 at September 30, 2018 with a weighted average interest rate of 6.82% and approximately $14,688,000 at December 31, 2017 with a weighted average interest rate of 6.82%. These bonds are due at various maturity dates through May 2046.

The contractual maturity schedule for mortgage loans receivable and the bond portfolio as of September 30, 2018, is as follows:

	Mortgage Loans	Bond Portfolio
October 1, 2018 through September 30, 2019	$     1,162,842	$  154,000
October 1, 2019 through December 31, 2019	179,555	59,000
2020	875,857	228,000
2021	756,395	254,000
2022	1,554,461	176,000
Thereafter	18,030,368	14,952,807
	22,559,478	15,823,807
Less loan and bond loss other than temporary impairment	(1,645,883)	(458,000)
Less deferred origination income	(285,534)	______-__
Totals	$20,628,061	$ 15,365,807

The Company currently owns $529,000 First Mortgage Bonds and $497,000 Second Mortgage Bonds issued by Agape Assembly Baptist Church located in Orlando, Florida. The total principal amount of First Mortgage Bonds issued by Agape is $7,200,000, and the total principal amount of Second Mortgage Bonds issued is $715,000. Agape defaulted on its payment obligations to bondholders in September 2010. The church subsequently commenced a Chapter 11 bankruptcy reorganization proceeding regarding the property that secures the First Mortgage Bonds in December 2010. In October 2014, a minimum of 80% of the bondholders of Agape agreed to a modification in the terms of their bonds which resulted in the temporary resumption of both principal and interest payments to both the first and second mortgage bond holders. Both the First Mortgage Bonds and Second Mortgage Bonds were modified to a fully amortized fixed rate, quarterly interest payment of 6.25% with a new maturity date of September 2037 for all the issued and outstanding bonds. The Company, along with all other bondholders, has a superior lien over all other creditors. The Company has an aggregate other than temporary impairment of $458,000 for the First and Second Mortgage Bonds at September 30, 2018 and December 31, 2017, which effectively reduces the bonds to the fair value amount management believes will be recovered. The Church subsequently defaulted on their modification agreement in 2016 and no interest payments were made to bondholders during the period ended September 30, 2018. However, the trustee made a distribution to bondholders during 2017 of $18.75 per $1,000 bond as a repayment of principal only, effectively reducing the outstanding balance of each $1,000 bond to approximately $826.

The Company restructured one mortgage loan during the nine month period ended September 30, 2018. The restructured loan was a $669,544 first mortgage loan located in Indianapolis, Indiana. The Church was unable to meet its monthly debt obligations. The Company reduced the Church’s monthly mortgage obligation to interest only payments for a period of three years. After the three year period, the Church will resume its regular monthly mortgage payments. The Church accepted the restructured loan terms. The modification had no effect on the Company’s financial statements.

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Secured Investor Certificates

9 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Secured Investor Certificates

4. SECURED INVESTOR CERTIFICATES

Secured investor certificates are collateralized by certain mortgage loan receivables or secured church bonds of approximately the same value as the certificates. The weighted average interest rate on the certificates was 6.43% and 6.45% at September 30, 2018 and December 31, 2017, respectively. Holders of the secured investor certificates may renew certificates at the current rates and terms upon maturity at the Company’s discretion. Renewals upon maturity are considered neither proceeds from nor issuance of secured investor certificates. Renewals totaled approximately $136,000 and $656,000 for the three months ended September 30, 2018 and December 31, 2017, respectively. The secured investor certificates have certain financial and non-financial covenants identified in the respective series’ trust indentures.

The estimated maturity schedule for the secured investor certificates at September 30, 2018 is as follows:

October 1, 2018 through September 30, 2019	$    4,259,000
October 1, 2019 through December 31, 2019	1,291,000
2020	4,167,000
2021	2,056,000
2022	952,000
Thereafter	16,495,000
Totals	$29,220,000

In July 2014, the Company filed a registration statement with the Securities and Exchange Commission to offer $10,000,000 worth of Series D secured investor certificates. The offering was declared effective by the SEC on August 12, 2014. The offering was renewed with an effective date of September 23, 2016. The certificates were offered in multiples of $1,000 with interest rates ranging from 4.00% to 6.50%, subject to changing market rates and maturities from 5 and 7 to 15 years. The certificates are collateralized by certain mortgage loans receivables and church bonds of approximately the same value. At September 30, 2018, approximately 8,234 Series D certificates had been issued and were outstanding for $8,234,000. The offering terminated in August 2017.

In September 2017, the Company filed a registration statement with the Securities and Exchange Commission to offer $10,000,000 worth of Series E secured investor certificates. The offering was declared effective by the SEC on November 6, 2017. The certificates are being offered in multiples of $1,000 with interest rates ranging from 4.00% to 6.50%, subject to changing market rates, and maturities from 5 to 15 years. The certificates are collateralized by certain mortgage loan receivables and church bonds of approximately the same value. At September 30, 2018, approximately 2,320 Series E certificates had been issued and were outstanding for $2,320,000.

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Transactions With Affiliates

9 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Transactions With Affiliates

5. TRANSACTIONS WITH AFFILIATES

The Company has an Advisory Agreement with Church Loan Advisors, Inc. (the “Advisor”). The Advisor is responsible for the day-to-day operations of the Company and provides office space and administrative services. The Advisor and the Company are related through common ownership and common management. A majority of the independent board members approve the advisory agreement on an annual basis. The Company paid the Advisor management fees of approximately $242,000 and $162,000 during the nine months ended September 30, 2018 and 2017, respectively.

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Line of Credit

9 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Line of Credit

6. LINE OF CREDIT

On April 9, 2018, the Company entered into a Loan and Security agreement (the “Loan Agreement”) with Alerus Financial, N.A., as lender (the “Lender”), and a Revolving Note (the “Note”) evidencing a $4,000,000 revolving loan (the “Revolving Loan”). The Lender agrees to make loans to the Company from time to time and after the date of the loan agreement and the Company may repay and reborrow pursuant to the terms and conditions of the Revolving Loan as long as no borrowing causes that dollar limit to be exceeded and the Company is not otherwise in default on the Revolving Loan. The Revolving Loan is secured by a first priority security interest in substantially all of the Company’s assets other than collateral pledged to secure the Company’s secured investor certificates, both those currently issued and any potentially issued in the future. The Company has not yet borrowed against the line of credit as of September 30, 2018. The maturity date of the Note is April 9, 2019 and the interest rate is the prevailing London Interbank Offering Rate (LIBOR) plus 2.70% adjusted monthly.

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Fair Value Of Financial Instruments

9 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Fair Value Of Financial Instruments

7. FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company is required to disclose the fair value information about financial instruments, where it is practicable to estimate that value. Because assumptions used in these valuation techniques are inherently subjective in nature, the estimated fair values cannot always be substantiated by comparison to independent market quotes and, in many cases, the estimated fair values could not necessarily be realized in an immediate sale or settlement of the instrument.

The fair value estimates presented herein are based on relevant information available to management as of September 30, 2018 and December 31, 2017, respectively. Management is not aware of any factors that would significantly affect these estimated fair value amounts. As these reporting requirements exclude certain financial instruments and all non-financial instruments, the aggregate fair value amounts presented herein do not represent management’s estimate of the underlying value of the Company.

The estimated fair values of the Company’s financial instruments, none of which are held for trading purposes, are as follows:

	September 30, 2018				December 31, 2017
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
Cash and equivalents	$	2,675,119	$	2,675,119	$	502,490	$	502,490
Accounts receivable		268,670		268,670		260,785		260,785
Interest receivable		184,218		184,218		176,365		176,365
Mortgage loans receivable		22,559,478		21,943,917		24,158,787		25,353,731
Bond portfolio		15,823,807		15,823,807		14,687,775		14,687,775
Secured investor certificates		29,220,000		36,201,383		27,323,000		34,811,519

The following methods and assumptions were used by the Company to estimate the fair value of each class of financial instrument for which it is practicable to estimate that value:

Cash and equivalents

Due to their short-term nature, the carrying amount of cash and cash equivalents approximates fair value.

Accounts receivable

Due to the short term nature, the carrying amount of accounts receivable approximates fair value.

Interest receivable

Due to the short term nature, the carrying amount of interest receivable approximates fair value.

Mortgage loans receivable

The fair value of the mortgage loans receivable is currently less than the carrying value as the portfolio is currently yielding less than similar mortgages with similar terms for borrowers with similar credit quality.

Bond portfolio

We determine the fair value of the bond portfolio shown in the table above by comparing with similar instruments in inactive markets. The analysis reflects the contractual terms of the bonds, which are callable at par by the issuer at any time, and the anticipated cash flows of the bonds and uses observable and unobservable market-based inputs. Unobservable inputs include our internal credit rating and selection of similar bonds for valuation.

Secured investor certificates

The fair value of the secured investor certificates is currently greater than the carrying value due to higher interest rates than current market rates.

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Summary Of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2018

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying unaudited financial statements have been prepared in accordance with the instructions for interim statements and, therefore, do not include all information and disclosures necessary for fair presentation of results of operations, financial position, and changes in cash flow in conformity with generally accepted accounting principles in the United States of America. However, in the opinion of management, such statements reflect all adjustments (which include only normal recurring adjustments) necessary for fair presentation of financial position, results of operations, and cash flows for the period presented.

The unaudited financial statements of the Company should be read in conjunction with the December 31, 2017 audited financial statements included in the Company’s Annual Report on Form 10-K, as filed with the Securities and Exchange Commission for the year ended December 31, 2017. Operating results for the periods presented are not necessarily indicative of the results that may be expected for the year ending December 31, 2018.

Nature of Business

Nature of Business

American Church Mortgage Company, a Minnesota corporation, was incorporated on May 27, 1994. The Company was organized to engage primarily in the business of making mortgage loans to churches and other nonprofit religious organizations throughout the United States, on terms established for individual organizations.

Accounting Estimates

Accounting Estimates

Management uses estimates and assumptions in preparing these financial statements in accordance with accounting principles generally accepted in the United States of America. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could differ from those estimates. The most sensitive estimates relate to the realizability of the mortgage loans receivable, the valuation of the bond portfolio and real estate held for sale. It is at least reasonably possible that these estimates could change in the near term and that the effect of the change, if any, may be material to the financial statements.

Concentration of Credit Risk

Concentration of Credit Risk

The Company's loans have been granted to churches and other non-profit religious organizations. The ability of the Company’s debtors to honor their contracts is dependent on member contributions and the involvement in the church or organization of its senior pastor.

Cash and Equivalents

Cash and Equivalents

The Company considers all highly liquid debt instruments purchased with maturities of three months or less to be cash equivalents.

The Company maintains accounts primarily at two financial institutions. At times throughout the year, the Company’s cash and equivalents balances may exceed amounts insured by the Federal Deposit Insurance Corporation. Cash in money market funds is not federally insured. The Company had $628,048 and $15,428 in money market fund accounts at September 30, 2018 and December 31, 2017, respectively. The Company has not experienced any losses in such accounts.

Bond Portfolio

Bond Portfolio

The Company accounts for the bond portfolio under the Accounting Standards Codification (ASC) 320. The Company classifies the bond portfolio as “available-for-sale” and measures the portfolio at fair value. While the bonds are generally held until contractual maturity, the Company classifies them as available-for-sale as the bonds may be used to repay secured investor certificates or provide additional liquidity or working capital in the short term. The Company has classified $154,000 and $139,000 in bonds as current assets as of September 30, 2018 and December 31, 2017, respectively, based on management’s estimates for liquidity requirements and contractual maturities of certain bonds maturing in 2018 and 2017, respectively.

Allowance for Mortgage Loans Receivable

Allowance for Mortgage Loans Receivable

The Company records mortgage loans receivable at estimated net realizable value, which is the unpaid principal balances of the mortgage loans receivable, less the allowance for mortgage loans. The Company’s loan loss policy provides an allowance for estimated uncollectible loans based on an evaluation of the current status of the loan portfolio. This policy provides for principal amounts outstanding on a particular loan if cumulative interruptions occur in the normal payment schedule of a loan; therefore, the Company recognizes a provision for losses and an allowance for the outstanding principal amount of a loan in the Company’s portfolio if the amount is in doubt of collection. Additionally, no additional interest income is recognized on impaired loans that are declared to be in default and are in the foreclosure process. At September 30, 2018, the Company provided $1,645,883 for eighteen mortgage loans, of which eight totaling approximately $3,998,000 are three or more mortgage payments in arrears, three loans totaling approximately $810,000 are declared to be in default and three loans totaling approximately $801,000 are in the foreclosure process. At December 31, 2017, the Company provided approximately $1,428,000 for nineteen mortgage loans, of which seven totaling approximately $3,364,000 were three or more mortgage payments in arrears, five loans totaling approximately $1,403,000 were declared to be in default and two loans totaling approximately $641,000 were in the foreclosure process.

A summary of transactions in the allowance for credit losses for the nine months ended September 30, 2018 is as follows:

Balance at December 31, 2017	$  1,428,155
Provision for additional losses	217,728
Balance at September 30, 2018	$  1,645,883

The total impaired loans, which are loans that are in the foreclosure process or are declared to be in default, were approximately $1,611,000 and $2,044,000 at September 30, 2018 and December 31, 2017, respectively, which the Company believes are adequately secured by the underlying collateral and the allowance for mortgage loans. Approximately $827,000 and $723,000 of the Company’s allowance for mortgage loans was allocated to impaired loans at September 30, 2018 and December 31, 2017, respectively.

The Company will declare a loan to be in default and will place the loan on non-accrual status when the following thresholds have been met: (i) the borrower has missed three consecutive mortgage payments; (ii) the borrower has not communicated to the Company any legitimate reason for delinquency in its payments to the Company and has not arranged for the re-continuance of payments; (iii) lines of communication to the borrower have broken down such that any reasonable prospect of rehabilitating the loan and return of regular payments is gone.

The Company’s policies on payments received and interest accrued on non-accrual loans are as follows: (i) The Company will accept payments on loans that are currently on non-accrual status when a borrower has communicated to us that they intend to meet their mortgage obligations. A payment made on a non-accrual loan is considered a good faith deposit as to the intent to resume their mortgage payment obligation. This good faith deposit is credited back to interest first then principal as stated in the mortgage loan documentation. (ii) A letter outlining the re-payment terms or the restructure terms (if any) of the loan is provided to the borrower. This letter will be signed by the Senior Pastor and all board members of the borrower. This letter resumes the obligation to make payments on non-accrual loans. (iii) The borrower must meet all its payment obligations for the next 120 days without interruption in order to be removed from non-accrual status.

When a loan is declared in default according to the Company’s policy or deemed to be doubtful of collection, the loan committee of the Advisor to the Company will direct the staff to charge-off the uncollectable receivables.

Loans totaling approximately $3,998,000 and $3,364,000 exceeded 90 days past due but continued to accrue interest at September 30, 2018 and December 31, 2017, respectively. The Company believes that the loans are well secured, not deemed to be in default and the Company is actively pursuing collection of past due payments.

Real Estate Held for Sale

Real Estate Held for Sale

As of September 30, 2018, the Company had one property located in Pine Bluff, Arkansas acquired via deed in lieu of foreclosure, with an outstanding loan balance totaling $225,872. The Church is still occupying this property and paying rent while trying to either sell the building or obtain refinancing. The Company records real estate held for sale at the estimated fair value, which is net of the expected expenses related to the sale of the real estate. The fair value of our real estate held for sale, which represents the carrying value, is $225,872 both at September 30, 2018 and December 31, 2017.

Carrying Value of Long-Lived Assets

Carrying Value of Long-Lived Assets

The Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that the carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed of significantly before the end of the estimated useful life.

Recoverability is assessed based on the carrying amount of the asset compared to the sum of the undiscounted cash flows expected to result from the use and the eventual disposal of the asset, as well as specific appraisal in certain instances. An allowance for losses is recognized when the carrying amount is deemed not recoverable and exceeds fair value as determined through various valuation techniques including, but not limited to, discounted cash flow models, quoted market values, and third party independent appraisals.

Revenue Recognition

Revenue Recognition

Interest income on mortgage loans receivable and the bond portfolio is recognized as earned. Other income included with interest represents cash received for loan origination fees, which are recognized over the life of the loan as an adjustment to the yield on the loan.

As of January 1, 2018, the Company adopted ASU 2014-09 Revenue from Contracts with Customers- Topic 606 and all subsequent ASUs that modified ASC 606. The Company has elected to apply the ASU and all related ASUs using the modified retrospective implementation method. The implementation of the guidance had no material impact on the measurement or recognition of revenue of prior periods, however, additional disclosures have been added in accordance with the ASU.

The Company generally fully satisfies its performance obligations on its contracts with customers as services are rendered and the transaction prices are typically fixed; charged either on a periodic basis or based on activity. Because performance obligations are satisfied as services are rendered and the transaction prices are fixed, there is little judgment involved in applying Topic 606 that significantly affects the determination of the amount and timing of revenue from contracts with customers. The main types of revenue contracts included in non-interest income within the consolidated statements of operations are as follows:

Gain/Losses on Sale of OREO

Gain/Losses on Sale of OREO

The Company records a gain or loss from the sale of OREO when control of the property transfers to the buyer, which generally occurs at the time of an executed deed. When the Company finances the sale of OREO to the buyer, the Company assesses whether the buyer is committed to perform their obligations under the contract and whether collectability of the transaction price is probable. Once these criteria are met, the OREO asset is derecognized and the gain or loss on sale is recorded upon the transfer of control of the property to the buyer. In determine the gain or loss on the sale, the Company adjusts the transaction prices and related gain (loss) on sale if a significant financing component is present.

Deferred Financing Costs

Deferred Financing Costs

The Company defers the costs related to obtaining financing. These costs are amortized over the life of the financing using the straight line method, which approximates the effective interest method.

Income (Loss) Per Common Share

Income (Loss) Per Common Share

No adjustments were made to income for the purpose of calculating income (loss) per share, as there were no potential dilutive shares outstanding.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In June, 2016 the FASB issued ASU 2016-13, “Financial Instruments-Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments.” ASU 2016-13 is intended to provide financial statement users with more decision-useful information about the excepted credit losses on financial instruments and other commitments to extend credit. For public entities, ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company has not yet fully evaluated the potential effects of adopting ASU 2016-13 on the Company’s results of operations, financial position or cash flows.

Recent Accounting Pronouncements-Adopted

Recent Accounting Pronouncements-Adopted

In the first quarter of 2018, the Company adopted Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606).  Under the ASU, revenue is recognized when a customer obtains control of promised services in an amount that reflects the consideration the entity expects to receive in exchange for those services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers.  The Company applied the five-step method outlined in the ASU to all revenue streams scoped-in by the ASU and elected the modified retrospective implementation method. Substantially all of the Company’s interest income and certain non-interest income were not impacted by the adoption of this ASU because either the revenue from those contracts with customers is covered by other guidance in U.S. GAAP or the revenue recognition outcomes were similar to our current revenue recognition practices. We reviewed non-interest sources of income and related contracts to document the impact of the new standard on our service offerings that are in the scope of the ASU including gains (losses) on sale of OREOs. Upon our analysis we concluded that the adoption of the ASC 606 did not change the timing and pattern of revenue recognition related to scoped in non-interest income source and only required additional disclosures. In addition, we reviewed, and where necessary, enhanced our business processes, systems and controls to support recognition and disclosures under the new standard. The additional disclosures required by the ASU have been included above.

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Summary Of Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2018

Accounting Policies [Abstract]

Allowance for Credit Losses

Balance at December 31, 2017	$  1,428,155
Provision for additional losses	217,728
Balance at September 30, 2018	$  1,645,883

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Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2018

Fair Value Disclosures [Abstract]

Fair Value Measurement Bond Portfolio

		Fair Value Measurement
September 30, 2018	Fair Value	Level 3
Bond portfolio	$15,365,807	$15,365,807

		Fair Value Measurement
December 31, 2017	Fair Value	Level 3
Bond portfolio	$14,229,755	$14,229,755

Fair Value Bond Portfolio

		Bond Portfolio
Balance at December 31, 2017	$	14,229,755
Purchases		1,238,052
Proceeds		(102,000	)
Balance at September 30, 2018	$	15,365,807

Fair Value Impaired Loans and Real Estate Held For Sale

	September 30, 2018
	Level 1		Level 2		Level 3		Fair Value at September 30, 2018
Impaired Loans	$	—	$	—	$	784,602	$	784,602
Real estate held for resale		—		—		225,872		225,872
	$	—	$	—	$	1,010,474	$	1,010,474

	December 31, 2017
	Level 1		Level 2		Level 3		Fair Value at December 31, 2017
Impaired Loans	$	—	$	—	$	1,321,500	$	1,321,500
Real estate held for resale		—		—		225,872		225,872
	$	—	$	—	$	1,547,372	$	1,547,372

Change in Fair Value Impaired Loans & Real Estate Held for Sale

		Impaired Loans			Real Estate Held for Sale
Balance at December 31, 2017	$	1,321,500		$	225,872
Dispositions/Proceeds		(432,961	)		—
Impairment		(103,937	)		—
Balance at September 30, 2018	$	784,602		$	225,872

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Mortgage Loans Receivable And Bond Portfolio (Tables)

9 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Mortgage Loans Receivable And Bond Portfolio

	Mortgage Loans	Bond Portfolio
October 1, 2018 through September 30, 2019	$     1,162,842	$  154,000
October 1, 2019 through December 31, 2019	179,555	59,000
2020	875,857	228,000
2021	756,395	254,000
2022	1,554,461	176,000
Thereafter	18,030,368	14,952,807
	22,559,478	15,823,807
Less loan and bond loss other than temporary impairment	(1,645,883)	(458,000)
Less deferred origination income	(285,534)	______-__
Totals	$20,628,061	$ 15,365,807

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Secured Investor Certificates (Tables)

9 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Maturity Schedule Secured Investor Certificates

October 1, 2018 through September 30, 2019	$    4,259,000
October 1, 2019 through December 31, 2019	1,291,000
2020	4,167,000
2021	2,056,000
2022	952,000
Thereafter	16,495,000
Totals	$29,220,000

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Fair Value Of Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Fair Value and Carrying Value Of Financial Instruments

	September 30, 2018				December 31, 2017
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
Cash and equivalents	$	2,675,119	$	2,675,119	$	502,490	$	502,490
Accounts receivable		268,670		268,670		260,785		260,785
Interest receivable		184,218		184,218		176,365		176,365
Mortgage loans receivable		22,559,478		21,943,917		24,158,787		25,353,731
Bond portfolio		15,823,807		15,823,807		14,687,775		14,687,775
Secured investor certificates		29,220,000		36,201,383		27,323,000		34,811,519

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Summary Of Significant Accounting Policies - Allowance for Credit Losses (Details)	9 Months Ended
	Sep. 30, 2018 USD ($)
Accounting Policies [Abstract]
Balance at December 31, 2017	$ 1,428,155
Provision for additional losses	156,734
Balance at September 30, 2018	$ 1,584,889

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Fair Value Measurements - Fair Value Measurement Bond Portfolio (Details) - USD ($)	Sep. 30, 2018	Dec. 31, 2017
Gross Bond portfolio	$ 15,365,807	$ 14,229,755
Impaired Loans
Gross Bond portfolio	$ 15,365,807	$ 14,229,755

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Fair Value Measurements - Fair Value Bond Portfolio (Details)	9 Months Ended
	Sep. 30, 2018 USD ($)
Fair Value Disclosures [Abstract]
Balance at December 31, 2017	$ 14,229,755
Bond Purchases	1,238,052
Bond Proceeds	(102,000)
Balance at September 30, 2018	$ 15,365,807

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Fair Value Measurements - Fair Value Impaired Loans and Real Estate Held For Sale (Details) - USD ($)	Sep. 30, 2018	Dec. 31, 2017
Impaired Loans	$ 784,602	$ 1,321,500
Real estate held for resale	225,872	225,872
Total Fair Value Measurement	1,010,474	1,547,372
Fair Value Impaired Loans & Real Estate Held For Sale Level 1
Impaired Loans
Real estate held for resale
Total Fair Value Measurement
Fair Value Impaired Loans & Real Estate Held For Sale Level 2
Impaired Loans
Real estate held for resale
Total Fair Value Measurement
Impaired Loans
Impaired Loans	784,602	1,321,500
Real estate held for resale	225,872	225,872
Total Fair Value Measurement	$ 1,010,474	$ 1,547,372

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Fair Value Measurements - Change in Fair Value Impaired Loans & Real Estate Held for Sale (Details)	9 Months Ended
	Sep. 30, 2018 USD ($)
Impaired Loans
Balance at December 31, 2017	$ 1,321,500
Dispositions/Proceeds	(432,961)
Impairment	(103,937)
Balance at September 30, 2018	784,602
Real Estate Held For Sale
Balance at December 31, 2017	225,872
Dispositions/Proceeds
Impairment
Balance at September 30, 2018	$ 225,872

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Mortgage Loans Receivable And Bond Portfolio - Mortgage Loans Receivable And Bond Portfolio (Details)	Sep. 30, 2018 USD ($)
Mortgage Loans
October 1, 2018 through September 30, 2019	$ 1,162,842
October 1, 2019 through December 31, 2019	179,555
2020	875,857
2021	756,395
2022	1,554,461
Thereafter	18,030,368
Subtotal	22,559,478
Less loan and bond loss other than temporary impairment	(1,645,883)
Less deferred origination income	(285,534)
Totals	20,628,061
Bond Portfolio
October 1, 2018 through September 30, 2019	154,000
October 1, 2019 through December 31, 2019	59,000
2020	228,000
2021	254,000
2022	176,000
Thereafter	14,952,807
Subtotal	15,823,807
Less loan and bond loss other than temporary impairment	(458,000)
Less deferred origination income
Totals	$ 15,365,807

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Secured Investor Certificates - Maturity Schedule Secured Investor Certificates (Details) - USD ($)	3 Months Ended	9 Months Ended	12 Months Ended				126 Months Ended
	Dec. 31, 2019	Sep. 30, 2018	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020	Sep. 30, 2019	Jun. 30, 2033
Secured Investor Certificate Maturity Schedule		$ 29,220,000
Secured Investor Certificates
Secured Investor Certificate Maturity Schedule	$ 1,291,000		$ 952,000	$ 2,056,000	$ 4,167,000	$ 4,259,000	$ 16,945,000

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Summary Of Significant Accounting Policies (Details Narrative) - USD ($)	Sep. 30, 2018	Dec. 31, 2017
Accounting Policies [Abstract]
Money Market Funds	$ 628,048	$ 15,428
Bond Portfolio	154,000	139,000
Allowance for Mortgage Loans Receivable	1,645,883	1,428,000
Loans Exceeding 90 Days Past Due	3,998,000	3,364,000
Real Estate Held for Sale Carrying Value	225,872	225,872
Allowance Allocated to Impaired Loans	827,000	723,000
Total Loans On Nonaccrual Status	1,611,000	2,044,000
Loans In Default	1,271,000	1,403,000
Loans In Foreclosure	773,000	641,000
Impaired Loans	$ 827,000	$ 723,000

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Fair Value Measurements (Details Narrative) - USD ($)	Sep. 30, 2018	Dec. 31, 2017
Fair Value Disclosures [Abstract]
Loan Loss Reserve Church Bonds	$ 458,000	$ 458,000
Real Estate Impairement Charge

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Mortgage Loans Receivable And Bond Portfolio (Details Narrative) - USD ($)	Sep. 30, 2018	Dec. 31, 2017
Notes to Financial Statements
Mortgage Loans Receivable Gross	$ 22,559,478	$ 24,158,787
Church Bonds Owned Gross	15,842,000	14,688,000
Bond Reserve Fund	458,000	458,000
Agape First Mortgage Bonds	429,000	429,000
Agape Second Mortgage Bonds	497,000	497,000
Agape First Mortgage Bonds Gross	7,200,000	7,200,000
Agape Second Mortgage Bonds Gross	715,000	715,000
Agape Distribution to Bondholders	19	19
Principal Balance Agape Bonds	$ 826	$ 826

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Secured Investor Certificates (Details Narrative) - USD ($)	Sep. 30, 2018	Dec. 31, 2017
Notes to Financial Statements
Renewals Secured Investor Certificates	$ 136,000	$ 656,000
Secured Investor Certificatee Offering	10,000,000
Certificate Offering Minimal Investment	1,000
Total Secured Investor Certificates Issued Series D	8,234
Outstanding Debt Secured Investor Certificates Issued Series D	8,234,000
Total Secured Investor Certificates Series E	2,320
Outstanding Debt Secured Investor Certificates Issued Series E	$ 2,320,000

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Transactions With Affiliates (Details Narrative) - USD ($)	3 Months Ended	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Notes to Financial Statements
Advisor Managment Fees	$ 242,000	$ 162,000

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Line of Credit (Details Narrative) - USD ($)	Sep. 30, 2018	Apr. 09, 2018
Notes to Financial Statements
Line Of Credit	$ 4,000,000	$ 4,000,000

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Fair Value Of Financial Instruments - Fair Value and Carrying Value Of Financial Instruments (Details) - USD ($)	Sep. 30, 2018	Dec. 31, 2017	Dec. 30, 2017
Interest receivable	$ 184,218	$ 176,365
Fair Value
Cash and equivalents	2,675,119	502,490
Accounts receivable	268,670	260,785
Interest receivable	184,218	176,365
Mortgage loans receivable	21,943,917	25,353,731
Bond portfolio	15,823,807	14,687,775
Secured investor certificates	36,201,383	$ 34,811,519
Carrying Amount
Cash and equivalents	2,675,119		$ 502,490
Accounts receivable	268,670		260,785
Interest receivable	184,218		176,365
Mortgage loans receivable	22,559,478		24,158,787
Bond portfolio	15,823,807		14,687,775
Secured investor certificates	$ 29,220,000		$ 27,323,000