Mortgage Loans Receivable and Bond Portfolio

6 Months Ended

Jun. 30, 2020

Notes to Financial Statements

Mortgage Loans Receivable and Bond Portfolio

4. MORTGAGE LOANS RECEIVABLE AND BOND PORTFOLIO

At June 30, 2020, the Company had mortgage loans receivable totaling $19,436,425. The loans bear interest ranging from 0% to 10.25% with a weighted average of approximately 7.69% at June 30, 2020. At December 31, 2019, the Company had mortgage loans receivable totaling $22,425,178. The loans bear interest ranging from 0% to 10.25% with a weighted average of approximately 7.86% at December 31, 2019.

The Company has a portfolio of secured church bonds at June 30, 2020 and December 31, 2019, which are carried at fair value. The bonds pay either semi-annual or quarterly interest ranging from 3.75% to 9.75%. The aggregate par value of secured church bonds equaled approximately $18,312,937 at June 30, 2020 with a weighted average interest rate of 6.83% and approximately $16,713,937 at December 31, 2019 with a weighted average interest rate of 6.43%. These bonds are due at various maturity dates through February 2047. The Company has recorded an aggregate other than temporary impairment of $693,000 and $658,000 for the periods ended June 30, 2020 and December 31, 2019, respectively for the First Mortgage Bonds issued by Agape Assembly Baptist Church and Soul Reapers Worship Center. These bond series in the aggregate constitute approximately 10.51% and 6.13% of the bond portfolio at June 30, 2020 and December 31, 2019, respectively. The Company had maturities and redemptions of bonds of approximately $122,000 and $1,137,000 for the periods ended June 30, 2020 and December 31, 2019, respectively.

The contractual maturity schedule for mortgage loans receivable and the bond portfolio as of June 30, 2020, is as follows:

	Mortgage Loans	Bond Portfolio
July 1, 2020 through December 31, 2020	$     1,302,687	$      80,000
2021	645,876	224,000
2022	1,440,414	139,000
2023	797,511	263,000
2024	1,731,671	455,000
Thereafter	13,518,267	17,151,937
	19,436,426	18,312,937
Less loan loss and other than temporary impairment on bonds allowance	(1,477,195)	(693,000)
Less deferred origination fees	(266,033)	___-____
Totals	$17,693,198	$17,619,937

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, 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 Church subsequently defaulted on their modification agreement in 2016 and no interest payments were made to bondholders during the period ended June 30, 2020. However, the trustee made a distribution to bondholders during 2017 of $18.54 per $1,000 bond as a repayment of principal only, effectively reducing the outstanding balance of each $1,000 bond to approximately $826.

The trustee again initiated foreclosure action against the Church and prevailed in its pursuit to foreclose on the Church’s property on November 1, 2019. However, on the eve of the foreclosure sale, the Church again filed for bankruptcy protection. The trustee is monitoring the bankruptcy proceedings and will keep the bondholder informed when a material event transpires.

The Company currently owns $900,000 First Mortgage Bonds issued by Soul Reapers Worship Center International located in Raleigh, North Carolina. The total principal amount of First Mortgage Bonds issued by Soul Reapers is $1,920,000. The Church has failed to make payments as required under the terms of the Trust Indenture. As a Bondholder, the Company expected to receive interest and principal payment(s) on time and according to the terms of the Bonds. The Company has not received two consecutive quarterly interest payments from the issuer as of June 30, 2020.

The Company has an aggregate other than temporary impairment of $693,000 and $658,000 for the First and Second Mortgage Bonds at June 30, 2020 and December 31, 2019, respectively, which effectively reduces the bonds to the fair value amount management believes will be recovered.

The Company did not restructure any loans during the periods ended June 30, 2020 and December 31, 2019, respectively. A summary of loans re-structured or modified for the periods ended June 30, 2020 and December 31, 2019 are shown below. All of the loans, except two, shown are currently performing under the terms of the modifications for their mortgage obligations. The first non-performing loan is a second mortgage loan with a current unpaid principal balance of approximately $45,000. This loan has been declared to be in default. The second non-performing loan is a first mortgage loan with current unpaid principal balance of approximately $1,283,000. This loan is located in the boroughs of New York City and the Church has not been able to meet due to the Coronavirus (COVID-19) shelter in place requirements.

	June 30, 2020
Type of Loan	Number of Loans	Original Principal Balance	Original Average Interest Rate	Unpaid Principal Balance	Modified Average Interest Rate
Mortgage Loans	6	$4,100,544	7.892%	$3,164,006	5.58%

	December 31, 2019
Type of Loan	Number of Loans	Original Principal Balance	Original Average Interest Rate	Unpaid Principal Balance	Modified Average Interest Rate
Mortgage Loans	6	$4,100,544	7.892%	$3,185,720	5.58%