10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended 09/30/2020

or

☐ 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

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of exchange on which registered
Common Stock, $0.01 par value per share	N/A	N/A

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 every Interactive Data File required to be submitted 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 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 ☒	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	At November 13, 2020
Common Stock, $0.01 par value per share	1,676,598 shares

AMERICAN CHURCH MORTGAGE COMPANY
INDEX
Page No.
PART I.  FINANCIAL INFORMATION
Item 1.  Financial Statements:
Balance Sheets.…………………………………………………………….…………	F-2 - F- 3
Statement of Operations.…………………………………… ………………………	F-4 – F-5
Statement of Stockholders’ Equity………………………………………………………	F-6
Statements of Cash Flows……..……………………………………………………..	F-7 - F-8
Notes to Financial Statements ………………………………………………………….	F-9 - F-21
Item 2.  Management’s Discussion and Analysis of Financial
Condition and Results of Operations…………………………………………………..	22 – 26
Item 3.  Quantitative and Qualitative Disclosures About Market Risk………………..	27
Items 4.  Controls and Procedures…………..…………………………………………	27
PART II.  OTHER INFORMATION
Item 1.  Legal Proceedings…………………………………………………………….	28
Item 1A.  Risk Factors…………………………………………………………………...	28
Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds………………..	28
Item 3.  Defaults Upon Senior Securities………………………………………..…….	28
Item 4.  Mine Safety Disclosures……………………..…………………………..……	28
Item 5.  Other Information…………………………………………………………….	28
Item 6.  Exhibits……………………………………………….……………………….	28 - 29
Signatures………………………………………………….…………………..………	30

AMERICAN CHURCH MORTGAGE COMPANY

Minnetonka, Minnesota

Unaudited Financial Statements

September 30, 2020

AMERICAN CHURCH MORTGAGE COMPANY
Balance Sheets
ASSETS	September 30, 2020	December 31, 2019
	(unaudited)
Assets
Cash and cash equivalents	$              269,401	$              191,987
Accounts receivable	109,612	125,539
Interest receivable	179,747	185,190
Investments	-	2,410
Prepaid expenses	8,718	13,121
Total current assets	567,478	518,247
Mortgage Loans Receivable, net of allowance of $1,477,644 and $1,429,487
at September 30, 2020 and December 31, 2019 and deferred origination fees
of $217,091 and $278,633 at September 30, 2020 and December 31, 2019, respectively	16,767,386	20,717,058
Bond Portfolio	18,284,135	16,055,937
Real Estate Held for Sale	550,045	651,398
Total Assets	$         36,169,044	$         37,942,640
Notes to Financial Statements are an integral part of this Statement.

AMERICAN CHURCH MORTGAGE COMPANY
Balance Sheets
LIABILITIES AND STOCKHOLDERS’ EQUITY	September 30, 2020	December 31, 2019
	(unaudited)
Liabilities
Accounts payable	137	12,311
Management fee payable	23,122	27,255
Line of Credit	2,491,000	1,445,000
Dividends payable	33,532	125,835
Secured Investor Certificates, Series B	6,136,250	8,855,000
Secured Investor Certificates, Series C	6,245,000	6,324,000
Secured Investor Certificates, Series D	8,039,000	8,109,000
Secured Investor Certificates, Series E	3,738,000	3,562,000
(Less) Deferred Offering Costs, net of accumulated amortization
of  $1,042,143 and $956,811 at September 30, 2020 and
December 31, 2019, respectively	(793,103)	(865,533)
Total liabilities	25,912,938	27,594,868
Stockholders’ Equity
Common stock, par value $.01 per share
authorized, 30,000,000 shares,
issued and outstanding, 1,676,598 shares at September 30, 2020 and
1,677,798 at December 31, 2019, respectively	16,766	16,778
Additional paid-in capital	19,111,060	19,113,458
Accumulated deficit	(8,871,720)	(8,782,464)
Total stockholders’ equity	10,256,106	10,347,772
Total liabilities and stockholders' equity	$          36,169,044	$         37,942,640
Notes to Financial Statements are an integral part of this Statement.

AMERICAN CHURCH MORTGAGE COMPANY
Statements of Operations
	For the Nine Months Ended
	September 30, 2020	September 30, 2019
	(unaudited)
Interest and Other Income	$            1,943,845	$            2,058,680
Interest Expense	1,342,338	1,397,537
Net Interest Income	601,507	661,143
Provision for losses on mortgage loans receivable	48,157	73,105
Net Interest Income after Provision for Mortgage	553,350	588,038
Operating Expenses
Other than temporary impairment on bond portfolio	112,802	150,000
Other operating expenses	412,394	443,431
	525,196	593,431
Net Income (Loss)	$                 28,154	$                  (5,393)
Basic and Diluted Earnings (Loss) Per Share	$                     0.02	$                    (0.00)
Dividends Declared Per Share	$                     0.07	$                     0.22
Weighted Average Common Shares Outstanding -
Basic and Diluted	1,676,997	1,677,798
Notes to Financial Statements are an integral part of this Statement.

AMERICAN CHURCH MORTGAGE COMPANY
Statements of Operations
	For the Three Months Ended
	September 30, 2020	September 30, 2019
	(unaudited)
Interest and Other Income	$               711,621	$               712,657
Interest Expense	440,013	476,734
Net Interest Income	271,608	235,923
Provision for losses on mortgage loans receivable	450	24,364
Net Interest Income after Provision for Mortgage	271,158	211,559
Operating Expenses
Other than temporary impairment on bond portfolio	77,802	50,000
Other operating expenses	103,060	132,672
	180,862	182,672
Net Income	$                 90,296	$                 28,887
Basic and Diluted Earnings (Loss) Per Share	$                     0.05	$                     0.02
Dividends Declared Per Share	$                     0.02	$                     0.10
Weighted Average Common Shares Outstanding -
Basic and Diluted	1,676,598	1,677,798
Notes to Financial Statements are an integral part of this Statement.

AMERICAN CHURCH MORTGAGE COMPANY
Statements of Stockholders’ Equity
Unaudited
							Additional
	Common Stock						Paid-In			Accumulated
	Shares			Amount			Capital			Deficit			Totals
Balance, December 31, 2018		1,677,798		$	16,778		$	19,113,458		$	(8,353,688	)	$	10,776,548
Net loss		—			—			—			(3,594	)		(3,594	)
Dividends declared		—			—			—			(92,279	)		(92,279	)
Balance, March 31, 2019		1,677,798			16,778			19,113,458			(8,449,561	)	$	10,680,675
Net loss		—			—			—			(30,486	)		(30,486	)
Dividends declared		—			—			—			(100,668	)		(100,668	)
Balance, June 30, 2019		1,677,798		$	16,778		$	19,113,458		$	(8,580,715	)	$	10,549,521
Net income		—			—			—			28,687			28,687
Dividends declared		—			—			—			(167,779	)		(167,779	)
Balance, September 30, 2019		1,677,798		$	16,778		$	19,113,458		$	(8,719,807	)	$	10,410,429
Net income		—			—			—			63,179			63,179
Dividends declared		—			—			—			(125,836	)		(125,836	)
Balance, December 31, 2019		1,677,798		$	16,778		$	19,113,458		$	(8,782,464	)	$	10,347,772
Net income		—			—			—			68,402			68,402
Dividends declared		—			—			—			(67,112	)		(67,112	)
Balance, March 31, 2020		1,677,798			16,778			19,113,458			(8,781,174	)	$	10,349,062
Re-purchase 1,200 shares		(1,200	)		(12	)		(2,398	)		—			(2,410	)
Net loss		—			—			—			(130,544	)		(130,544	)
Dividends declared		—			—			—			(16,766	)		(16,766	)
Balance, June 30, 2020		1,676,598			16,766			19,111,060			(8,928,484	)		10,199,342
Net income		—			—			—			90,296			90,296
Dividends declared		—			—			—			(33,532	)		(33,532	)
Balance, September 30, 2020		1,676,598			16,766			19,111,060			(8,871,720	)	$	10,256,106
Notes to Financial Statements are an integral part of this Statement.

AMERICAN CHURCH MORTGAGE COMPANY
Statements of Cash Flows
	For the Nine Months Ended
	September 30, 2020	September 30, 2019
	(unaudited)
Cash Flows from Operating Activities
Net income (loss)	$                 28,154	$                  (5,393)
Adjustments to reconcile net (loss) income to net cash
from operating activities:
Net loss on sales and impairment on real estate held for sale	101,353	12,734
Provision for losses on mortgage loans receivable	48,157	73,105
Other than temporary impairment on bond portfolio	112,802	150,000
Net (accreation) amortization of loan origination fees	(61,542)	68,000
Amortization of deferred offering costs	85,332	82,600
Change in assets and liabilities
Accounts receivable	15,927	(12,175)
Interest receivable	5,443	(11,365)
Prepaid expenses	4,403	(16,033)
Accounts payable	(12,174)	(556,317)
Management fee payable	(4,133)	807
Net cash provided by (used for) operating activities	323,722	(214,037)
Cash Flows from Investing Activities
Net (increase) decrease in loans	3,963,057	(664,997)
Investment in bonds	(2,472,000)	(895,000)
Proceeds from bonds	131,000	110,870
Proceeds from real estate held for sale	-	(100,537)
Net cash provided by (used for) investing activities	1,622,057	(1,549,664)
Cash Flows from Financing Activities
Net decrease in secured investor certificates	(2,691,750)	(2,102,000)
Payments for deferred costs	(12,902)	(61,587)
Net change in short term borrowings	1,046,000	2,200,000
Dividends paid	(209,713)	(335,560)
Net cash (used for) financing activities	(1,868,365)	(299,147)
Net Increase (Decrease) in Cash and Cash Equivalents	77,414	(2,062,848)
Cash and Cash Equivalents - Beginning of Year	191,987	2,183,441
Cash and Cash Equivalents - End of Year	$               269,401	$               120,593
Notes to Financial Statements are an integral part of this Statement.

AMERICAN CHURCH MORTGAGE COMPANY
Statements of Cash Flows - Continued
	For the Nine Months Ended
	September 30, 2020	September 30, 2019
	(unaudited)
Supplemental Cash Flow Information
Interest paid	$            1,342,338	$                1,397,537
Notes to Financial Statements are an integral part of this Statement.

1. BASIS OF PRESENTATION

The accompanying unaudited interim financial statements and the notes thereto have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). In the opinion of management, the accompanying unaudited interim financial statements contain all normal recurring adjustments necessary to present fairly the financial positions result of operations, changes in equity and cash flows for the periods presented.

The accompanying unaudited financial statements and related notes should be read in conjunction with the audited financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, as filed with the Securities and Exchange Commission on May 8, 2020.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business

American Church Mortgage Company, a Minnesota corporation, was incorporated on May 27, 1994. The Company is engaged 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 the valuation of 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 Cash 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. Management believes these financial institutions have strong credit ratings and that the credit related to these deposits is minimal. 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, Investments-Debt and Equity Securities. 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.

Allowance for Loan Losses on 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 loan losses on mortgage loans receivable and less deferred loan origination fees. The Company’s loan policy provides an allowance for estimated uncollectible loans based on an evaluation of the current status of the loan portfolio with application of reserve percentages to specific loans based on payment status. This policy reserves for principal amounts outstanding on a specific loan if cumulative interruptions occur in the normal payment schedule of the loan, therefore, the Company recognizes a provision for losses and an allowance for the outstanding principal amount of the loan in the Company’s portfolio if the amount is in doubt of collection. Additionally, no interest income is recognized on impaired loans that are declared to be in default and are in the foreclosure process. At September 30, 2020, the Company reserved $1,477,644 for fourteen mortgage loans. Nine of these loans are three or more mortgage payments in arrears of which two are declared to be in default. The total principal amount of these fourteen loans totaled approximately $6,504,000 at September 30, 2020. At December 31, 2019, the Company reserved $1,429,487 for fourteen mortgage loans. Ten of these loans are three or more mortgage payments in arrears of which three are declared to be in default. The total principal amount of these fourteen loans totaled approximately $5,987,000 at December 31, 2019.

A summary of transactions in the allowance for mortgage loans for the period ended September 30, 2020 and 2019 is as follows:

Balance at December 31, 2019	$                1,429,487
Provisions for loan losses	48,157
Loan charge-offs	-
Balance at September 30, 2020	$                1,477,644

Balance at December 31, 2018	$                1,672,003
Provisions for loan losses	73,105
Loan charge-offs	(100,537)
Balance at September 30, 2019	$                1,644,571

The total impaired loans, which are loans that are in the foreclosure process or are declared to be in default, were approximately $589,000 and $810,000 at September 30, 2020 and December 31, 2019, respectively, which the Company believes are adequately secured by the underlying collateral and the allowance for mortgage loans. Approximately $551,000 of the Company’s allowance for mortgage loans was allocated to these loans for the period ended September 30, 2020. Approximately $555,000 of the Company’s allowance for mortgage loans was allocated to impaired loans for the year ended December 31, 2019.

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 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. The accrual of interest on a loan is discontinued when the loan becomes 90 consecutive days delinquent or whenever management believes the borrower will be unable to make payments as they become due. The interest on these loans is subsequently accounted for on the cash basis or using the cost-recovery method until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current or restructured and future payments are reasonably assured. No interest income was recognized on non-accrual loans for the periods ended September 30, 2020 and 2019, respectively.

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 $2,802,000 and $3,263,000 exceeded 90 days past due but continued to accrue interest for the period ended September 30, 2020 and December 31, 2019, respectively. The Company believes that continued interest accruals are appropriate because the loans are well secured, not deemed to be in technical default and the Company is actively pursuing collection of past due payments.

Real Estate Held for Sale

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, totaled $550,045 and $651,398 for the periods ended September 30, 2020 and December 31, 2019, respectively.

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 impairment loss 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 per the terms of the specific asset. 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.

Gain (Losses) on Real Estate Held For Sale

The Company records a gain or loss from real estate held for sale when control of the property transfers to the buyer, which generally occurs at the time of an executed deed. When the Company finances real estate held for sale 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, real estate held for sale is derecognized and the gain or loss on sale is recorded upon the transfer of control of the property to the buyer. In determining 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

There were no dilutive shares for the periods ended September 30, 2020 and December 31, 2019, respectively.

Recent Accounting Pronouncements

In 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 expected credit losses on financial instruments and other commitments to extend credit. For public entities, deemed smaller reporting companies, ASU 2016-13 is effective for fiscal years beginning after December 15, 2022, 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.

Income Taxes

The Company elected to be taxed as a Real Estate Investment Trust (REIT). Accordingly, the Company is not subject to Federal income tax to the extent of distributions to its shareholders if the Company meets all the requirements under the REIT provisions of the Internal Revenue Code.

The Company evaluated its recognition of income tax benefits using a two-step approach to recognizing and measuring tax benefits when realization of the benefits is uncertain. The first step is to determine whether the benefit meets the more-likely-than-not condition for recognition and the second step is to determine the amount to be recognized based on the cumulative probability that exceeds 50%. Primarily due to the Company’s tax status as a REIT, the Company does not have any significant tax uncertainties that would require recognition or disclosure.

Subsequent Events

The Company has evaluated events and transactions through November 13, 2020, the date the financial statements were available to be issued. The outbreak of the coronavirus (COVID-19) pandemic has

affected churches due to shelter-in-place directives which has ceased or greatly curtailed social gatherings such as church worship services. The Company’s borrowers have experienced financial duress during the Covid-19 shelter in place restrictions, amplified by the financial setbacks for many of the church members who have lost their jobs, been furloughed, or had their incomes diminished. The Company has provided some temporary relief by allowing its borrower’s to either make interest only payments for a period of ninety days or forgo one monthly mortgage payment (forbearance). We provided nine churches totaling approximately $3,244,000, in principal outstanding, ninety days interest only payments and five churches totaling approximately $2,632,000, in principal outstanding, one-month forbearance of its mortgage payments. As of September 30, 2020, all churches, except two, have returned to full monthly amortization payments. Two churches totaling approximately $544,000, in principal outstanding, have remained on interest only payments. This relief will impact the Company’s revenue and the Company will experience declines in payments due from borrowers and missed bond payments on the bonds owned by the Company which will impact operating income and may potentially impact future distributions and the ability to make payments due on the Company’s certificates and dividends to its shareholders.

The Company’s current certificate offering terminated November 6, 2020. As a result, secured investor certificates are not being re-issued and instead the Company is financing loan requests and liquidity needs through loan and bond payments received and its line of credit.

3. FAIR VALUE MEASUREMENT

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 other than temporary impairment for losses on our bond portfolio (Note 4), which totaled $770,802 and $658,000 for the periods ended September 30, 2020 and December 31, 2019, respectively. The following table summarizes the Company’s financial instruments that were measured at fair value on a recurring basis:

		Fair Value Measurement
September 30, 2020	Fair Value	Level 3
Bond portfolio	$18,284,135	$18,284,135

		Fair Value Measurement
December 31, 2019	Fair Value	Level 3
Bond portfolio	$16,055,937	$16,055,937

We determine the fair value of the bond portfolio shown in the table above by comparing the bonds 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, 2019	$16,055,937
Other than temporary impairment losses on bond portfolio	(112,802)
Purchases	2,472,000
Proceeds	(131,000)
Balance at September 30, 2020	$18,284,135

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 periods ended September 30, 2020 and December 31, 2019, respectively.

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

	September 30, 2020
	Level 1		Level 2		Level 3		Fair Value at September 30, 2020
Impaired Loans	$	—	$	—	$	5,026,828	$	5,026,828
Real estate held for resale		—		—		550,045		550,045
Totals	$	—	$	—	$	5,576,873	$	5,576,873

	December 31, 2019
	Level 1		Level 2		Level 3		Fair Value at December 31, 2019
Impaired Loans	$	—	$	—	$	4,557,326	$	4,557,326

Real estate held for resale		—		—		651,398		651,398
Totals	$	—	$	—	$	5,208,724	$	5,208,724

Loans with a carrying amount of $6,504,472 were considered impaired and written down to their fair market value of $5,026,828 as of September 30, 2020. As a result, the Company recognized a specific valuation allowance against these impaired loans totaling $1,477,644 as of September 30, 2020. Loans with a carrying amount of $5,986,813 were considered impaired and written down to their fair market value of $4,557,326 as of December 31, 2019. As a result, the Company recognized a specific valuation allowance against these impaired loans totaling $1,429,487 as of December 31, 2019.

The Company held real estate for sale which was acquired through foreclosure or via deed in lieu of foreclosure with a fair value less costs to sell of $550,045 and $651,398 for the periods ended September 30, 2020 and December 31, 2019, respectively.

	Fair Value	Valuation Technique	Significant Unobservable Inputs(s)	Range/Weighted
September 30, 2020
Impaired Loans	$5,026,828	Market or Income Approach	Discount to Appraised Values	10-20%
Real Estate Held for Sale	$550,045	Market or Income Approach	Discount to Appraised Values	10-20%
December 31, 2019
Impaired Loans	$4,557,326	Market or Income Approach	Discount to Appraised Values	10-20%
Real Estate Held for Sale	$651,398	Market or Income Approach	Discount to Appraised Values	10-20%

The fair value of impaired loans referenced above was determined by obtaining independent third-party appraisals and/or internally developed collateral valuations to support the Company’s estimates and judgments in determining the fair value of the underlying collateral supporting impaired loans.

The fair value of real estate held for resale referenced above was determined by obtaining market price valuations from independent third parties wherever such quotes were available for the other collateral owned. The Company utilized independent third party appraisals to support the Company’s estimates and judgments in determining fair value for other real estate owned.

4. MORTGAGE LOANS RECEIVABLE AND BOND PORTFOLIO

At September 30, 2020, the Company had mortgage loans receivable totaling $18,462,121. The loans bear interest ranging from 0% to 10.25% with a weighted average of approximately 7.69% at September 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 September 30, 2020 and December 31, 2019, which are carried at fair value. The bonds pay either semi-annual or quarterly interest ranging from 3.50% to 9.75%. The aggregate par value of secured church bonds equaled $19,054,937 at September 30, 2020 with a weighted average interest rate of 6.69% and $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 $770,802 and $658,000 for the periods ended September 30, 2020 and December 31, 2019, respectively primarily for the First Mortgage Bonds issued by Agape Assembly Baptist Church and Soul Reapers Worship Center. These bond series in the aggregate constitute approximately 10.12% and 6.13% of the bond portfolio at September 30, 2020 and December 31, 2019, respectively. The Company had maturities and redemptions of bonds of approximately $131,000 and $1,137,000 for the periods ended September 30, 2020 and December 31, 2019, respectively.

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

	Mortgage Loans	Bond Portfolio
October 1, 2020 through December 31, 2020	$     328,383	$      70,000
2021	645,876	228,000
2022	1,440,414	150,000
2023	797,511	278,000
2024	1,731,671	484,000
Thereafter	13,518,266	17,844,937
	18,462,121	19,054,937
Less loan loss and other than temporary impairment on bonds allowance	(1,477,644)	(770,802)
Less deferred origination fees	(217,091)	___-____
Totals	$16,767,386	$18,284,135

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 September 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. In October 2020, bondholders were asked by the trustee to accept or reject a plan of reorganization. The trustee is recommending bondholders accept the reorganization plan. The Company accepted the reorganization plan. Acceptance of the plan by bondholders could result in a return of approximately 67% of the original principal investment outstanding.

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 any quarterly interest payments from the issuer for the nine-month period ended September 30, 2020.

The Company has an aggregate other than temporary impairment of $770,802 and $658,000 for its bond portfolio at September 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 restructure one loan during the period ended September 30, 2020 and none for the period ended December 31, 2019, respectively. A summary of loans re-structured or modified for the periods ended September 30, 2020 and December 31, 2019 are shown below. All of the loans, except one, 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.

	September 30, 2020
Type of Loan	Number of Loans	Original Principal Balance	Original Average Interest Rate	Unpaid Principal Balance	Modified Average Interest Rate
Mortgage Loans	7	$4,696,544	8.193%	$3,544,635	6.059%

	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%

5. SECURED INVESTOR CERTIFICATES

Secured investor certificates are collateralized by certain mortgage loans receivable or secured church bonds of approximately the same value as the certificates. The weighted average interest rate on the certificates was 6.18% and 6.33% for the periods ended September 30, 2020 and December 31, 2019, 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 $915,000 and $793,000 for the periods ended September 30, 2020 and December 31, 2019, 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, 2020 is as follows:

October 1, 2020 through December 31, 2020	$    334,000
2021	2,168,000
2022	1,042,000
2023	3,404,000
2024	1,335,000
Thereafter	15,875,250
	$24,158,250
Less deferred offering costs	(793,103)
Totals	$23,365,147

6. 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. For its services, the Advisor is entitled to receive a management fee equal to 1.25% annually of the Company's Average Invested Assets, plus one-half of any origination fee charged to borrowers on mortgage loans made by the Company. A majority of the independent board members approve the Advisory Agreement on an annual basis. The Company paid the Advisor management and origination fees of approximately $215,000 and $240,000 for the nine-month periods ended September 30, 2020 and September 30, 2019, respectively. The Company paid the Advisor management and origination fees of approximately $70,000 and $82,000 for the three-month periods ended September 30, 2020 and September 30, 2019, respectively. Advisory and origination fees are included in other operating expenses.

7. 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 re-borrow 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 borrowed against the line of credit and has an outstanding balance of $2,491,000 and $1,145,000 for the periods ended September 30, 2020 and December 31, 2019, respectively. The interest rate on the Note is the prevailing London Interbank Offering Rate (LIBOR) plus 2.70%. The Note is set to mature January 19, 2021.

8. 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 for the periods ended September 30, 2020 and December 31, 2019, 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, 2020				December 31, 2019
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
Cash and equivalents	$	269,401	$	269,401	$	191,987	$	191,987
Accounts receivable		109,612		109,612		125,539		125,539
Interest receivable		179,747		179,747		185,190		185,190
Mortgage loans receivable		18,462,121		23,108,195		22,425,177		24,573,176
Bond portfolio		18,284,135		18,284,135		16,055,937		16,055,937
Secured investor certificates		24,158,250		29,896,202		26,850,000		32,389,253

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) The uncertainty and economic slowdown caused by the Covid-19 pandemic; (v) 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, 2019 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 forty-nine mortgage loans aggregating $18,462,121 in principal amount and a first and second mortgage bond portfolio with par values aggregating $19,054,937. 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.

Impact of Covid-19

The outbreak of the coronavirus (Covid-19) pandemic has affected churches due to shelter-in-place directives which has ceased or curtailed social gatherings such as church worship services. The Company’s borrowers have and may continue to experience severe financial duress during the Covid-19 shelter in place restrictions, amplified by the financial setbacks for many of the church members who have lost their jobs, been furloughed, or had their incomes diminished. The Company has provided some temporary relief by allowing its borrower’s to either make interest only payments for a period of ninety days or forgo one monthly mortgage payment (forbearance). This relief has impacted the Company’s revenue and will continue impact the Company’s operations. The Company may continue to experience declines in payments due from borrowers and missed bond payments on the bonds owned by the Company which will impact operating income and may potentially impact future distributions and the ability to make payments due on the Company’s certificates and dividends to its shareholders.

Results of Operations

Fiscal 2020 Nine Months Ended September 30, 2020 Compared to Fiscal 2019 Nine Months Ended September 30, 2019

Our net income (loss) for the nine months ended September 30, 2020 and 2019 was $28,154 and $(5,393), respectively, on total interest and other income of $1,943,845 and $2,058,680, 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, 2020, our loans receivable have interest rates ranging from 0% to 10.25%, with an average, principal-adjusted interest rate of 7.69%. Our bond portfolio has an average current yield of 6.69% as of September 30, 2020. As of September 30, 2019, the average, principal-adjusted interest rate on our portfolio of loans was 7.98% and our portfolio of bonds had an average current yield of 6.87%. The decrease in interest income was due to a decrease in assets under management.

Interest expense was approximately $1,342,000 and $1,398,000 for the nine months ended September 30, 2020 and 2019, respectively. The decrease in interest expense was due to the decrease in interest paid on our secured investor certificates outstanding resulting from a decrease in the amount of secured investor certificates outstanding. Net interest margin decreased from 32.11% to 30.94% resulting primarily from a decrease in interest income of approximately 5.58% along with a decrease in interest expense of approximately 3.95%.

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.

Typically, the accrual of interest on a loan is discontinued when the loan becomes 90 consecutive days delinquent and management believes the borrower will be unable to make payments as they become due. When loans are placed on nonaccrual status or charged off, all unpaid accrued interest is reversed against interest income. The interest on these loans is subsequently accounted for on the cash basis or using the cost-recovery method until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

Allowance for losses on mortgage loans receivable increased during the nine months ended September 30, 2020 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, 2020 of approximately $48,000 compared to approximately $73,000 for the nine months ended September 30, 2019. At September 30, 2020, we provided approximately $1,478,000 in loan loss reserves for fourteen mortgage loans, of which nine are three or more mortgage payments in arrears and two loans are declared to be in default. At December 31, 2019, we provided approximately $1,429,000 in loan loss reserves for fourteen mortgage loans, of which ten were three or more mortgage payments in arrears of which three were declared to be in default.

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 $218,000 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 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 seven 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, 2020 decreased to approximately $525,000 compared to $593,000 for the nine months ended September 30, 2019. The decrease was the result of a decrease in other than temporary impairment on our bond portfolio.

Fiscal 2020 Third Quarter Compared to Fiscal 2019 Third Quarter

The Company had a net income of approximately $90,000 for the three months ended September 30, 2020 compared to a net income of approximately $29,000 for the three months ended September 30, 2019, on total interest and other income of approximately $712,000 and $713,000, respectively. Interest expense was approximately $440,000 and $477,000 for the three months ended September 30, 2020 and 2019, respectively. The increase in net interest income was approximately $36,000 due to a decrease in our interest expense paid on our secured investor certificates.

Operating expenses for the three months ended September 30, 2020 decreased to approximately $181,000 compared to $183,000 for the three months ended September 30, 2019. The decrease in operating expenses was due to a decrease in legal fees and advisory fees.

Mortgage Loans and Bond Portfolio

Two new bridge loans were funded during the nine months ended September 30, 2020 for approximately $737,000. A bridge loan typically has a maturity of one year or less. Both bridge loans have been repaid for the period ended September 30, 2020.

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, 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. We, along with all other bondholders, have 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 nine-month period ended September 30, 2020. In October 2020, bondholders were asked by the trustee to accept or reject a plan of reorganization. The

trustee is recommending bondholders accept the reorganization plan. Ballots must be received no later than November 6, 2020. We have accepted the reorganization plan and have returned our ballot indicating our acceptance of the plan. If the majority of bondholders accept the reorganization plan, bondholders could receive approximately 67% of their original principal investment in Agape Assembly Baptist Church.

We currently own $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 did not receive any interest payments from the issuer during the nine-month period ended of September 30, 2020.

We have an aggregate other than temporary impairment of $771,000 and $658,000 for our bond portfolio at September 30, 2020 and December 31, 2019, respectively, which effectively reduces the bonds to the fair value amount management believes will be recovered.

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 realized an additional loss of $0 and $12,734 on our real estate held for sale for the nine-month periods ended September 30, 2020 and 2019, respectively.

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.

We paid a dividend of $.04 for each share held of record on April 28, 2020. The dividend, which was paid April 30, 2020.

We paid a dividend of $.01 for each share held of record on July 29, 2020. The dividend, which was paid July 31, 2020.

We paid a dividend of $.02 for each share held of record on October 30, 2020. The dividend, which was paid November 2, 2020.

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, 2020 are primarily comprised of dividends declared as of September 30, 2020 but not yet paid, our line of credit 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) prepayment and repayment at maturity of mortgage loans we make; (ii) bonds that mature; and (iii) funds available from our line of credit. 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. Our current certificate offering terminated November 6, 2020 and are evaluating our options with respect to this capital raising option. We continue to 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, 2020, total assets decreased by approximately $1,774,000 due to a decrease in our loan portfolio outstanding. Liabilities decreased by approximately $1,682,000 for the nine months ended September 30, 2020 due to a decrease in our secured investor certificates.

For the nine months ended September 30, 2020, net cash provided by (used for) operating activities increased to $323,722 from $(214,037) from the comparative period ended September 30, 2019, primarily due to an decrease in our accounts payable and an increase in our sale of real estate held for sale.

For the nine months ended September 30, 2020, net cash provided by (used for) investing activities was $1,622,057 compared to $(1,549,664) from the comparative nine months ended September 30, 2019, due to a decrease in investments in our mortgage loans.

For the nine months ended September 30, 2020, net cash (used for) financing activities increased to $(1,868,365) from $(299,147) for the comparative nine months ended September 30, 2019, primarily due to an increase in our line of credit.

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.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

N/A

Items 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, 2020. Based on that evaluation, the principal executive officer and the principal accounting officer concluded that the Company’s disclosure controls and procedures were not 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. We have a limited number of personnel performing finance and accounting functions. Were there a larger staff, it would be possible to provide for enhanced disclosure of financial reporting matters. Management is required to apply its judgment in evaluating the cost benefit relationship of possible controls and procedures. Management realizes this is a material weakness.

Changes in Internal Controls Over Financial Reporting

During the three months ended September 30, 2020, 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.

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) On June 30, 2020, the Company repurchased 1,200 shares of its common stock from a shareholder for an aggregate price of $2.00 per share. This transaction was privately negotiated.

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

10.1 Line of Credit Extension Agreement with Alerus Financial, N.A. dated July 22, 2020 and October 21, 2020

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 302 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 302 of the Sarbanes-Oxley Act of 2002.

101 The following financial information from our Quarterly Report on Form 10-Q for the third quarter of fiscal year 2020 filed with the Securities and Exchange Commission on November 13, 2020, is formatted in eXtensible Business Reporting Language (XBRL): (i) the Balance Sheets at September 30, 2020 and December 31, 2019; (ii) Statements of Operations for the nine months and three months ended September 30, 2020 and 2019; (iii) the Statements of Cash Flows for the nine months ended September 30, 2020 and 2019; and (iv) the Notes to Financial Statements (Unaudited).

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 13, 2020

	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)

EX-31.1

Exhibit 31.1

OFFICER'S CERTIFICATE

PURSUANT TO SECTION 302

I, Philip J. Myers, certify that:

1. I have reviewed this quarterly 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 13, 2020	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 quarterly 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 13, 2020	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 Quarterly Report of American Church Mortgage Company (the “Company”) on Form 10-Q for the period ended September 30, 2020 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, to the best of my knowledge, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, with the exception of not complying with the requirements of Rule 11-01(d) of Regulation S-X 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 13, 2020	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 Quarterly Report of American Church Mortgage Company (the “Company”) on Form 10-Q for the period ended September 30, 2020 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, to the best of my knowledge, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, with the exception of not complying with the requirements of Rule 11-01(d) of Regulation S-X 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 13, 2020	By:  /s/ Scott J. Marquis
	Chief Financial Officer and Treasurer
	(Principal Financial Officer)

XML

Cover - shares	9 Months Ended
	Sep. 30, 2020	Nov. 13, 2020
Cover [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2020
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2020
Current Fiscal Year End Date	--12-31
Entity File Number	000-25919
Entity Registrant Name	American Church Mortgage Co
Entity Central Index Key	0000934543
Entity Incorporation, State or Country Code	MN
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		1,676,598

XML

Balance Sheets - USD ($)	Sep. 30, 2020	Dec. 31, 2019
Statement of Financial Position [Abstract]
Cash and cash equivalents	$ 269,401	$ 191,987
Accounts receivable	109,612	125,539
Interest receivable	179,747	185,190
Investments		2,410
Prepaid expenses	8,718	13,121
Mortgage Loans Receivable, net of allowance of $1,477,644 and $1,429,487 at September 30, 2020 and December 31, 2019, repsectively and deferred origination fees of $217,091 and $278,633 at September 30, 2020 and December 31, 2019, respectively	16,767,386	20,717,058
Bond Portfolio	18,284,135	16,055,937
Real Estate Held for Sale	550,045	651,398
Total Assets	36,169,044	37,942,640
LIABILITIES
Accounts payable	137	12,311
Management fee payable	23,122	27,255
Line of credit	2,491,000	1,445,000
Dividends payable	33,532	125,835
Secured Investor Certificates, Series B	6,136,250	8,855,000
Secured Investor Certificates, Series C	6,245,000	6,324,000
Secured Investor Certificates, Series D	8,039,000	8,109,000
Secured Investor Certificates, Series E	3,738,000	3,562,000
(Less) Deferred Offering Costs, net of accumulated amortization of $1,042,143 and $956,811 at September 30, 2020 and December 31, 2019, respectively	793,103	865,533
Total liabilities	25,912,938	27,594,868
Stockholders' Equity
Common Stock, par value $.01 per share authorized, 30,000,000 shares, issued and outstanding, 1,676,598 shares at September 30, 2020 and 1,677,798 shares at December 31, 2019, respectively	16,766	16,778
Additional paid-in capital	19,111,060	19,113,458
Accumulated deficit	(8,871,720)	(8,782,464)
Total stockholders equity	10,256,106	10,347,772
Total liabilities and stockholders equity	$ 36,169,044	$ 37,942,640

XML

Balance Sheets (Parenthetical) - USD ($)	Sep. 30, 2020	Dec. 31, 2019
ASSETS
Allowance for mortgage loans recievable	$ 1,477,795	$ 1,429,487
Deferred origination fees for mortgage loans recievable	217,091	278,633
LIABILITIES AND STOCKHOLDERS' EQUITY
Accumulated amortization deferred offering costs	$ (1,042,143)	$ (956,811)
Stockholders' Equity
Common Stock, par value	$ 0.01	$ 0.01
Common Stock, Authorized	30,000,000	30,000,000
Common Stock, Issued	1,676,598	1,677,798
Common Stock, Outstanding	1,676,598	1,677,798

XML

Statements of Operations (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Income Statement [Abstract]
Interest and Other Income	$ 711,621	$ 712,657	$ 1,943,845	$ 2,058,680
Interest Expense	440,013	476,734	1,342,338	1,397,537
Net Interest Income	271,608	235,923	601,507	661,143
Provision for losses on mortgage loans receivable	450	24,364	48,157	73,105
Net Interest Income after Provision for Mortgage Losses	271,158	211,559	553,350	588,038
Operating Expenses
Other than temporary impairment on bond portfolio	77,802	50,000	112,802	150,000
Other operating expenses	103,060	132,672	412,394	443,431
Operating expenses	180,862	182,672	525,196	593,431
Net Income (Loss)	$ 90,296	$ 28,887	$ 28,154	$ (5,393)
Basic and Diluted (Loss) Income Per Share	$ 0.05	$ 0.02	$ 0.02	$ 0.00
Dividends Declared Per Share	$ (33,532)	$ (167,779)	$ (0.07)	$ (.22)
Weighted Average Common Shares Outstanding - Basic and Diluted	1,676,598	1,677,798	1,676,997	1,677,798

XML

Statements of Cash Flows (Unaudited) - USD ($)	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Cash Flows from Operating Activities
Net (loss)	$ 28,154	$ (5,393)
Adjustments to reconcile net (loss) income to net cash from operating activites:
Net loss on sales and impairment on real estate held for sale	101,353	12,734
Provision for losses on mortgage loans receivable	48,157	73,105
Other than temporary investements on bond portfolio	112,802	150,000
Net (accreation) amortization of loan origination fees	(61,542)	68,000
Amortization of deferred offering costs	85,332	82,600
Accounts receivable	15,927	(12,175)
Interest receivable	5,443	(11,365)
Prepaid expenses	4,403	(16,033)
Accounts payable	(12,174)	(556,317)
Management Fee payable	(4,133)	807
Net cash provided by (used for) operating activities	323,722	(214,037)
Cash Flows from Investing Activities
Net increase in loans	3,963,057	(664,997)
Investment in bonds	(2,472,000)	(895,000)
Proceeds from bonds	131,000	110,870
Proceeds from real estate held for sale		(100,537)
Net cash provided by (used for) investing activities	1,622,057	(1,549,664)
Cash Flows from Financing Activities
Net increase in secured investor certificates	(2,691,750)	(2,102,000)
Payments for deferred costs	(12,902)	(61,587)
Net change in short term borrowings	1,046,000	2,200,000
Dividends paid	(209,713)	(335,560)
Net cash (used for) financing activities	(1,868,365)	(299,147)
Net Increase (Decrease) in Cash and Cash Equivalents	77,414	(2,062,848)
Cash and Cash Equivalents - Beginning Period	191,987	2,183,441
Cash and Equivalents - Ending Period	$ 269,401	$ 120,593

XML

Statements of Cash Flows (Parenthetical) - USD ($)	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Statement of Cash Flows [Abstract]
Interest paid	$ 1,342,338	$ 1,397,537

XML

Shareholders Equity (Unaudited) - USD ($)	Common Stock	Additional Paid-In Capital	Retained Earnings / Accumulated Deficit	Total
Beginning balance, shares at Dec. 30, 2018	1,677,798
Beginning balance, value at Dec. 30, 2018	$ 16,778	$ 19,113,458	$ (8,353,688)	$ 10,766,548
Net Income			$ (3,594)	$ (3,594)
Dividends declared			$ (92,279)	$ (92,279)
Ending balance, shares at Mar. 31, 2019	1,677,798
Ending balance, value at Mar. 31, 2019	$ 16,778	19,113,458	$ (8,449,561)	$ 10,680,675
Net Income			$ (30,486)	$ (30,486)
Dividends declared			$ (100,668)	$ (100,668)
Ending balance, shares at Jun. 30, 2019	1,677,798
Ending balance, value at Jun. 30, 2019	$ 16,778	19,113,458	$ (8,580,715)	$ 10,549,521
Net Income			$ 28,687	$ 28,887
Dividends declared			$ 167,779	$ (167,779)
Ending balance, shares at Sep. 30, 2019	1,677,798
Ending balance, value at Sep. 30, 2019	$ 16,778	19,113,458	$ (8,719,807)	$ 10,410,429
Net Income			$ 63,179	$ 63,179
Dividends declared			$ (125,836)	$ (125,836)
Ending balance, shares at Dec. 31, 2019	1,677,798
Ending balance, value at Dec. 31, 2019	$ 16,778	19,113,458	$ (8,782,464)	$ 10,347,772
Net Income			$ 68,402	$ 68,402
Dividends declared			$ (67,112)	$ (67,112)
Ending balance, shares at Mar. 31, 2020	1,677,798
Ending balance, value at Mar. 31, 2020	$ 16,778	19,113,458	$ (8,781,174)	$ 10,349,062
Beginning balance, shares at Dec. 31, 2019	1,677,798
Beginning balance, value at Dec. 31, 2019	$ 16,778	19,113,458	(8,782,464)	$ 10,347,772
Re-purchase 1,200 shares				1,200
Re-purchase, value				$ 2,410
Net Income				$ 28,154
Dividends declared				$ (0.07)
Ending balance, shares at Sep. 30, 2020	1,676,598
Ending balance, value at Sep. 30, 2020	$ 16,766	19,111,060	(8,781,720)	$ 10,256,106
Beginning balance, shares at Mar. 31, 2020	1,677,798
Beginning balance, value at Mar. 31, 2020	$ 16,778	19,113,458	(8,781,174)	10,349,062
Re-purchase 1,200 shares	(1,200)
Re-purchase, value	$ (12)	(2,398)
Net Income			$ (130,544)	$ (130,544)
Dividends declared			$ (16,766)	$ (16,766)
Ending balance, shares at Jun. 30, 2020	1,676,598
Ending balance, value at Jun. 30, 2020	$ 16,766	19,111,060	$ (8,928,484)	$ 10,199,342
Net Income			$ 90,296	$ 90,296
Dividends declared			$ 33,532	$ (33,532)
Ending balance, shares at Sep. 30, 2020	1,676,598
Ending balance, value at Sep. 30, 2020	$ 16,766	$ 19,111,060	$ (8,781,720)	$ 10,256,106

XML

Shareholders Equity (Parenthetical)	9 Months Ended
	Sep. 30, 2020 USD ($) shares
Statement of Stockholders' Equity [Abstract]
Re-Purchase 1,200 shares | shares	1,200
Re-Purchase Value | $	$ (2,410)

XML

Basis of Presentation

9 Months Ended

Sep. 30, 2020

Notes to Financial Statements

Basis of Presentation

1. BASIS OF PRESENTATION

The accompanying unaudited interim financial statements and the notes thereto have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). In the opinion of management, the accompanying unaudited interim financial statements contain all normal recurring adjustments necessary to present fairly the financial positions result of operations, changes in equity and cash flows for the periods presented.

The accompanying unaudited financial statements and related notes should be read in conjunction with the audited financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, as filed with the Securities and Exchange Commission on May 8, 2020.

XML

Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2020

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business

American Church Mortgage Company, a Minnesota corporation, was incorporated on May 27, 1994. The Company is engaged 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 the valuation of 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 Cash 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. Management believes these financial institutions have strong credit ratings and that the credit related to these deposits is minimal. 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, Investments-Debt and Equity Securities. 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.

Allowance for Loan Losses on 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 loan losses on mortgage loans receivable and less deferred loan origination fees. The Company’s loan policy provides an allowance for estimated uncollectible loans based on an evaluation of the current status of the loan portfolio with application of reserve percentages to specific loans based on payment status. This policy reserves for principal amounts outstanding on a specific loan if cumulative interruptions occur in the normal payment schedule of the loan, therefore, the Company recognizes a provision for losses and an allowance for the outstanding principal amount of the loan in the Company’s portfolio if the amount is in doubt of collection. Additionally, no interest income is recognized on impaired loans that are declared to be in default and are in the foreclosure process. At September 30, 2020, the Company reserved $1,477,644 for fourteen mortgage loans. Nine of these loans are three or more mortgage payments in arrears of which two are declared to be in default. The total principal amount of these fourteen loans totaled approximately $6,504,000 at September 30, 2020. At December 31, 2019, the Company reserved $1,429,487 for fourteen mortgage loans. Ten of these loans are three or more mortgage payments in arrears of which three are declared to be in default. The total principal amount of these fourteen loans totaled approximately $5,987,000 at December 31, 2019.

A summary of transactions in the allowance for mortgage loans for the period ended September 30, 2020 and 2019 is as follows:

Balance at December 31, 2019	$                1,429,487
Provisions for loan losses	48,157
Loan charge-offs	-
Balance at September 30, 2020	$                1,477,644

Balance at December 31, 2018	$                1,672,003
Provisions for loan losses	73,105
Loan charge-offs	(100,537)
Balance at September 30, 2019	$                1,644,571

The total impaired loans, which are loans that are in the foreclosure process or are declared to be in default, were approximately $589,000 and $810,000 at September 30, 2020 and December 31, 2019, respectively, which the Company believes are adequately secured by the underlying collateral and the allowance for mortgage loans. Approximately $551,000 of the Company’s allowance for mortgage loans was allocated to these loans for the period ended September 30, 2020. Approximately $555,000 of the Company’s allowance for mortgage loans was allocated to impaired loans for the year ended December 31, 2019.

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 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. The accrual of interest on a loan is discontinued when the loan becomes 90 consecutive days delinquent or whenever management believes the borrower will be unable to make payments as they become due. The interest on these loans is subsequently accounted for on the cash basis or using the cost-recovery method until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current or restructured and future payments are reasonably assured. No interest income was recognized on non-accrual loans for the periods ended September 30, 2020 and 2019, respectively.

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 $2,802,000 and $3,263,000 exceeded 90 days past due but continued to accrue interest for the period ended September 30, 2020 and December 31, 2019, respectively. The Company believes that continued interest accruals are appropriate because the loans are well secured, not deemed to be in technical default and the Company is actively pursuing collection of past due payments.

Real Estate Held for Sale

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, totaled $550,045 and $651,398 for the periods ended September 30, 2020 and December 31, 2019, respectively.

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 impairment loss 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 per the terms of the specific asset. 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.

Gain (Losses) on Real Estate Held For Sale

The Company records a gain or loss from real estate held for sale when control of the property transfers to the buyer, which generally occurs at the time of an executed deed. When the Company finances real estate held for sale 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, real estate held for sale is derecognized and the gain or loss on sale is recorded upon the transfer of control of the property to the buyer. In determining 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

There were no dilutive shares for the periods ended September 30, 2020 and December 31, 2019, respectively.

Recent Accounting Pronouncements

In 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 expected credit losses on financial instruments and other commitments to extend credit. For public entities, deemed smaller reporting companies, ASU 2016-13 is effective for fiscal years beginning after December 15, 2022, 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.

Income Taxes

The Company elected to be taxed as a Real Estate Investment Trust (REIT). Accordingly, the Company is not subject to Federal income tax to the extent of distributions to its shareholders if the Company meets all the requirements under the REIT provisions of the Internal Revenue Code.

The Company evaluated its recognition of income tax benefits using a two-step approach to recognizing and measuring tax benefits when realization of the benefits is uncertain. The first step is to determine whether the benefit meets the more-likely-than-not condition for recognition and the second step is to determine the amount to be recognized based on the cumulative probability that exceeds 50%. Primarily due to the Company’s tax status as a REIT, the Company does not have any significant tax uncertainties that would require recognition or disclosure.

Subsequent Events

The Company has evaluated events and transactions through November 13, 2020, the date the financial statements were available to be issued. The outbreak of the coronavirus (COVID-19) pandemic has affected churches due to shelter-in-place directives which has ceased or greatly curtailed social gatherings such as church worship services. The Company’s borrowers have experienced financial duress during the Covid-19 shelter in place restrictions, amplified by the financial setbacks for many of the church members who have lost their jobs, been furloughed, or had their incomes diminished. The Company has provided some temporary relief by allowing its borrower’s to either make interest only payments for a period of ninety days or forgo one monthly mortgage payment (forbearance). We provided nine churches totaling approximately $3,244,000, in principal outstanding, ninety days interest only payments and five churches totaling approximately $2,632,000, in principal outstanding, one-month forbearance of its mortgage payments. As of September 30, 2020, all churches, except two, have returned to full monthly amortization payments. Two churches totaling approximately $544,000, in principal outstanding, have remained on interest only payments. This relief will impact the Company’s revenue and the Company will experience declines in payments due from borrowers and missed bond payments on the bonds owned by the Company which will impact operating income and may potentially impact future distributions and the ability to make payments due on the Company’s certificates and dividends to its shareholders.

The Company’s current certificate offering terminated November 6, 2020. As a result, secured investor certificates are not being re-issued and instead the Company is financing loan requests and liquidity needs through loan and bond payments received and its line of credit.

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Fair Value Measurements

9 Months Ended

Sep. 30, 2020

Fair Value Disclosures [Abstract]

Fair Value Measurements

3. FAIR VALUE MEASUREMENT

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 other than temporary impairment for losses on our bond portfolio (Note 4), which totaled $770,802 and $658,000 for the periods ended September 30, 2020 and December 31, 2019, respectively. The following table summarizes the Company’s financial instruments that were measured at fair value on a recurring basis:

		Fair Value Measurement
September 30, 2020	Fair Value	Level 3
Bond portfolio	$18,284,135	$18,284,135

		Fair Value Measurement
December 31, 2019	Fair Value	Level 3
Bond portfolio	$16,055,937	$16,055,937

We determine the fair value of the bond portfolio shown in the table above by comparing the bonds 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, 2019	$16,055,937
Other than temporary impairment losses on bond portfolio	(112,802)
Purchases	2,472,000
Proceeds	(131,000)
Balance at September 30, 2020	$18,284,135

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 periods ended September 30, 2020 and December 31, 2019, respectively.

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

	September 30, 2020
	Level 1		Level 2		Level 3		Fair Value at September 30, 2020
Impaired Loans	$	—	$	—	$	5,026,828	$	5,026,828
Real estate held for resale		—		—		550,045		550,045
Totals	$	—	$	—	$	5,576,873	$	5,576,873

	December 31, 2019
	Level 1		Level 2		Level 3		Fair Value at December 31, 2019
Impaired Loans	$	—	$	—	$	4,557,326	$	4,557,326
Real estate held for resale		—		—		651,398		651,398
Totals	$	—	$	—	$	5,208,724	$	5,208,724

Loans with a carrying amount of $6,504,472 were considered impaired and written down to their fair market value of $5,026,828 as of September 30, 2020. As a result, the Company recognized a specific valuation allowance against these impaired loans totaling $1,477,644 as of September 30, 2020. Loans with a carrying amount of $5,986,813 were considered impaired and written down to their fair market value of $4,557,326 as of December 31, 2019. As a result, the Company recognized a specific valuation allowance against these impaired loans totaling $1,429,487 as of December 31, 2019.

The Company held real estate for sale which was acquired through foreclosure or via deed in lieu of foreclosure with a fair value less costs to sell of $550,045 and $651,398 for the periods ended September 30, 2020 and December 31, 2019, respectively.

	Fair Value	Valuation Technique	Significant Unobservable Inputs(s)	Range/Weighted
September 30, 2020
Impaired Loans	$5,026,828	Market or Income Approach	Discount to Appraised Values	10-20%
Real Estate Held for Sale	$550,045	Market or Income Approach	Discount to Appraised Values	10-20%
December 31, 2019
Impaired Loans	$4,557,326	Market or Income Approach	Discount to Appraised Values	10-20%
Real Estate Held for Sale	$651,398	Market or Income Approach	Discount to Appraised Values	10-20%

The fair value of impaired loans referenced above was determined by obtaining independent third-party appraisals and/or internally developed collateral valuations to support the Company’s estimates and judgments in determining the fair value of the underlying collateral supporting impaired loans.

The fair value of real estate held for resale referenced above was determined by obtaining market price valuations from independent third parties wherever such quotes were available for the other collateral owned. The Company utilized independent third party appraisals to support the Company’s estimates and judgments in determining fair value for other real estate owned.

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Mortgage Loans Receivable and Bond Portfolio

9 Months Ended

Sep. 30, 2020

Notes to Financial Statements

Mortgage Loans Receivable and Bond Portfolio

4. MORTGAGE LOANS RECEIVABLE AND BOND PORTFOLIO

At September 30, 2020, the Company had mortgage loans receivable totaling $18,462,121. The loans bear interest ranging from 0% to 10.25% with a weighted average of approximately 7.69% at September 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 September 30, 2020 and December 31, 2019, which are carried at fair value. The bonds pay either semi-annual or quarterly interest ranging from 3.50% to 9.75%. The aggregate par value of secured church bonds equaled $19,054,937 at September 30, 2020 with a weighted average interest rate of 6.69% and $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 $770,802 and $658,000 for the periods ended September 30, 2020 and December 31, 2019, respectively primarily for the First Mortgage Bonds issued by Agape Assembly Baptist Church and Soul Reapers Worship Center. These bond series in the aggregate constitute approximately 10.12% and 6.13% of the bond portfolio at September 30, 2020 and December 31, 2019, respectively. The Company had maturities and redemptions of bonds of approximately $131,000 and $1,137,000 for the periods ended September 30, 2020 and December 31, 2019, respectively.

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

	Mortgage Loans	Bond Portfolio
October 1, 2020 through December 31, 2020	$     328,383	$      70,000
2021	645,876	228,000
2022	1,440,414	150,000
2023	797,511	278,000
2024	1,731,671	484,000
Thereafter	13,518,266	17,844,937
	18,462,121	19,054,937
Less loan loss and other than temporary impairment on bonds allowance	(1,477,644)	(770,802)
Less deferred origination fees	(217,091)	___-____
Totals	$16,767,386	$18,284,135

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 September 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. In October 2020, bondholders were asked by the trustee to accept or reject a plan of reorganization. The trustee is recommending bondholders accept the reorganization plan. The Company accepted the reorganization plan. Acceptance of the plan by bondholders could result in a return of approximately 67% of the original principal investment outstanding.

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 any quarterly interest payments from the issuer for the nine-month period ended September 30, 2020.

The Company has an aggregate other than temporary impairment of $770,802 and $658,000 for its bond portfolio at September 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 restructure one loan during the period ended September 30, 2020 and none for the period ended December 31, 2019, respectively. A summary of loans re-structured or modified for the periods ended September 30, 2020 and December 31, 2019 are shown below. All of the loans, except one, 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.

	September 30, 2020
Type of Loan	Number of Loans	Original Principal Balance	Original Average Interest Rate	Unpaid Principal Balance	Modified Average Interest Rate
Mortgage Loans	7	$4,696,544	8.193%	$3,544,635	6.059%

	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%

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Secured Investor Certificates

9 Months Ended

Sep. 30, 2020

Notes to Financial Statements

Secured Investor Certificates

5. SECURED INVESTOR CERTIFICATES

Secured investor certificates are collateralized by certain mortgage loans receivable or secured church bonds of approximately the same value as the certificates. The weighted average interest rate on the certificates was 6.18% and 6.33% for the periods ended September 30, 2020 and December 31, 2019, 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 $915,000 and $793,000 for the periods ended September 30, 2020 and December 31, 2019, 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, 2020 is as follows:

October 1, 2020 through December 31, 2020	$    334,000
2021	2,168,000
2022	1,042,000
2023	3,404,000
2024	1,335,000
Thereafter	15,875,250
	$24,158,250
Less deferred offering costs	(793,103)
Totals	$23,365,147

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Transactions With Affiliates

9 Months Ended

Sep. 30, 2020

Notes to Financial Statements

Transactions With Affiliates

6. 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. For its services, the Advisor is entitled to receive a management fee equal to 1.25% annually of the Company's Average Invested Assets, plus one-half of any origination fee charged to borrowers on mortgage loans made by the Company. A majority of the independent board members approve the Advisory Agreement on an annual basis. The Company paid the Advisor management and origination fees of approximately $215,000 and $240,000 for the nine-month periods ended September 30, 2020 and September 30, 2019, respectively. The Company paid the Advisor management and origination fees of approximately $70,000 and $82,000 for the three-month periods ended September 30, 2020 and September 30, 2019, respectively. Advisory and origination fees are included in other operating expenses.

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Line_of_Credit

9 Months Ended

Sep. 30, 2020

Notes to Financial Statements

Line_of_Credit

7. 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 re-borrow 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 borrowed against the line of credit and has an outstanding balance of $2,491,000 and $1,145,000 for the periods ended September 30, 2020 and December 31, 2019, respectively. The interest rate on the Note is the prevailing London Interbank Offering Rate (LIBOR) plus 2.70%. The Note is set to mature January 19, 2021.

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Fair Value Financial Instruments

9 Months Ended

Sep. 30, 2020

Notes to Financial Statements

Fair Value Financial Instruments

8. 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 for the periods ended September 30, 2020 and December 31, 2019, 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, 2020		December 31, 2019
	Carrying	Fair	Carrying	Fair
	Amount	Value	Amount	Value
Cash and equivalents	$     269,401	$    269,401	$     191,987	$    191,987
Accounts receivable	109,612	109,612	125,539	125,539
Interest receivable	179,747	179,747	185,190	185,190
Mortgage loans receivable	18,462,121	23,108,195	22,425,177	24,573,176
Bond portfolio	18,284,135	18,284,135	16,055,937	16,055,937
Secured investor certificates	24,158,250	29,896,202	26,850,000	32,389,253

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Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2020

Accounting Policies [Abstract]

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 the valuation of 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.

Cash and Cash Equivalents

Cash and Cash 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. Management believes these financial institutions have strong credit ratings and that the credit related to these deposits is minimal. 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, Investments-Debt and Equity Securities. 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.

Allowance for Loan Losses on Mortgage Loans Receivable

Allowance for Loan Losses on 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 loan losses on mortgage loans receivable and less deferred loan origination fees. The Company’s loan policy provides an allowance for estimated uncollectible loans based on an evaluation of the current status of the loan portfolio with application of reserve percentages to specific loans based on payment status. This policy reserves for principal amounts outstanding on a specific loan if cumulative interruptions occur in the normal payment schedule of the loan, therefore, the Company recognizes a provision for losses and an allowance for the outstanding principal amount of the loan in the Company’s portfolio if the amount is in doubt of collection. Additionally, no interest income is recognized on impaired loans that are declared to be in default and are in the foreclosure process. At September 30, 2020, the Company reserved $1,477,644 for fourteen mortgage loans. Nine of these loans are three or more mortgage payments in arrears of which two are declared to be in default. The total principal amount of these fourteen loans totaled approximately $6,504,000 at September 30, 2020. At December 31, 2019, the Company reserved $1,429,487 for fourteen mortgage loans. Ten of these loans are three or more mortgage payments in arrears of which three are declared to be in default. The total principal amount of these fourteen loans totaled approximately $5,987,000 at December 31, 2019.

A summary of transactions in the allowance for mortgage loans for the period ended September 30, 2020 and 2019 is as follows:

Balance at December 31, 2019	$                1,429,487
Provisions for loan losses	48,157
Loan charge-offs	-
Balance at September 30, 2020	$                1,477,644

Balance at December 31, 2018	$                1,672,003
Provisions for loan losses	73,105
Loan charge-offs	(100,537)
Balance at September 30, 2019	$                1,644,571

The total impaired loans, which are loans that are in the foreclosure process or are declared to be in default, were approximately $589,000 and $810,000 at September 30, 2020 and December 31, 2019, respectively, which the Company believes are adequately secured by the underlying collateral and the allowance for mortgage loans. Approximately $551,000 of the Company’s allowance for mortgage loans was allocated to these loans for the period ended September 30, 2020. Approximately $555,000 of the Company’s allowance for mortgage loans was allocated to impaired loans for the year ended December 31, 2019.

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. The accrual of interest on a loan is discontinued when the loan becomes 90 consecutive days delinquent or whenever management believes the borrower will be unable to make payments as they become due. The interest on these loans is subsequently accounted for on the cash basis or using the cost-recovery method until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current or restructured and future payments are reasonably assured. No interest income was recognized on non-accrual loans for the periods ended September 30, 2020 and 2019, respectively.

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 $2,802,000 and $3,263,000 exceeded 90 days past due but continued to accrue interest for the period ended September 30, 2020 and December 31, 2019, respectively. The Company believes that continued interest accruals are appropriate because the loans are well secured, not deemed to be in technical default and the Company is actively pursuing collection of past due payments.

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 impairment loss 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 per the terms of the specific asset. 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.

Gain (Losses) on Real Estate Held For Sale

Gain (Losses) on Real Estate Held For Sale

The Company records a gain or loss from real estate held for sale when control of the property transfers to the buyer, which generally occurs at the time of an executed deed. When the Company finances real estate held for sale 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, real estate held for sale is derecognized and the gain or loss on sale is recorded upon the transfer of control of the property to the buyer. In determining 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 Taxes

Income Taxes

The Company elected to be taxed as a Real Estate Investment Trust (REIT). Accordingly, the Company is not subject to Federal income tax to the extent of distributions to its shareholders if the Company meets all the requirements under the REIT provisions of the Internal Revenue Code.

The Company evaluated its recognition of income tax benefits using a two-step approach to recognizing and measuring tax benefits when realization of the benefits is uncertain. The first step is to determine whether the benefit meets the more-likely-than-not condition for recognition and the second step is to determine the amount to be recognized based on the cumulative probability that exceeds 50%. Primarily due to the Company’s tax status as a REIT, the Company does not have any significant tax uncertainties that would require recognition or disclosure.

Subsequent Events

Subsequent Events

The Company has evaluated events and transactions through November 13, 2020, the date the financial statements were available to be issued. The outbreak of the coronavirus (COVID-19) pandemic has affected churches due to shelter-in-place directives which has ceased or greatly curtailed social gatherings such as church worship services. The Company’s borrowers have experienced financial duress during the Covid-19 shelter in place restrictions, amplified by the financial setbacks for many of the church members who have lost their jobs, been furloughed, or had their incomes diminished. The Company has provided some temporary relief by allowing its borrower’s to either make interest only payments for a period of ninety days or forgo one monthly mortgage payment (forbearance). We provided nine churches totaling approximately $3,244,000, in principal outstanding, ninety days interest only payments and five churches totaling approximately $2,632,000, in principal outstanding, one-month forbearance of its mortgage payments. As of September 30, 2020, all churches, except two, have returned to full monthly amortization payments. Two churches totaling approximately $544,000, in principal outstanding, have remained on interest only payments. This relief will impact the Company’s revenue and the Company will experience declines in payments due from borrowers and missed bond payments on the bonds owned by the Company which will impact operating income and may potentially impact future distributions and the ability to make payments due on the Company’s certificates and dividends to its shareholders.

The (COVID-19) has severely exacerbated challenges related to deal procurement since churches, who cannot meet and worship at previous attendance levels. This situation caused American Investors Group, Inc. to withdraw as a broker-dealer and the firm is no longer qualified to conduct securities transactions. The subsequent closing of American Investors Group, Inc. has not had an immediate effect on the Company. However, the Company will no longer be able to utilize this resource for interim loan financings or new church bond product in the foreseeable future. In addition, the Company’s current certificate offering terminated November 6, 2020. The Company is evaluating its options given this occurrence.

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Summary of Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2020

Accounting Policies [Abstract]

Allowance For Mortgage Loans Receivable

Balance at December 31, 2019	$                1,429,487
Provisions for loan losses	48,157
Loan charge-offs	-
Balance at September 30, 2020	$                1,477,644

Balance at December 31, 2018	$                1,672,003
Provisions for loan losses	73,105
Loan charge-offs	(100,537)
Balance at September 30, 2019	$                1,644,571

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Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2020

Fair Value Disclosures [Abstract]

Fair Value Measurement Bond Portfolio

		Fair Value Measurement
September 30, 2020	Fair Value	Level 3
Bond portfolio	$18,284,135	$18,284,135

		Fair Value Measurement
December 31, 2019	Fair Value	Level 3
Bond portfolio	$16,055,937	$16,055,937

Change in Fair Value Bond Portfolio

	Bond Portfolio
Balance at December 31, 2019	$16,055,937
Other than temporary impairment losses on bond portfolio	(112,802)
Purchases	2,472,000
Proceeds	(131,000)
Balance at September 30, 2020	$18,284,135

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 periods ended September 30, 2020 and December 31, 2019, respectively.

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

	September 30, 2020
	Level 1	Level 2	Level 3	Fair Value at September 30, 2020
Impaired Loans	$                 -	$             -	$5,026,828	$5,026,828
Real estate held for resale	-	-	550,045	550,045
Totals	$                 -	$             -	$5,576,873	$5,576,873

	December 31, 2019
	Level 1	Level 2	Level 3	Fair Value at December 31, 2019
Impaired Loans	$                 -	$             -	$4,557,326	$4,557,326
Real estate held for resale	-	-	651,398	651,398
Totals	$                 -	$             -	$5,208,724	$5,208,724

Loans with a carrying amount of $6,504,472 were considered impaired and written down to their fair market value of $5,026,828 as of September 30, 2020. As a result, the Company recognized a specific valuation allowance against these impaired loans totaling $1,477,644 as of September 30, 2020. Loans with a carrying amount of $5,986,813 were considered impaired and written down to their fair market value of $4,557,326 as of December 31, 2019. As a result, the Company recognized a specific valuation allowance against these impaired loans totaling $1,429,487 as of December 31, 2019.

The Company held real estate for sale which was acquired through foreclosure or via deed in lieu of foreclosure with a fair value less costs to sell of $550,045 and $651,398 for the periods ended September 30, 2020 and December 31, 2019, respectively.

	Fair Value	Valuation Technique	Significant Unobservable Inputs(s)	Range/Weighted
September 30, 2020
Impaired Loans	$5,026,828	Market or Income Approach	Discount to Appraised Values	10-20%
Real Estate Held for Sale	$550,045	Market or Income Approach	Discount to Appraised Values	10-20%
December 31, 2019
Impaired Loans	$4,557,326	Market or Income Approach	Discount to Appraised Values	10-20%
Real Estate Held for Sale	$651,398	Market or Income Approach	Discount to Appraised Values	10-20%

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Mortgage Loans Receivable and Bond Portfolio (Tables)

9 Months Ended

Sep. 30, 2020

Notes to Financial Statements

Mortgage Loans Receivable and Bond Portfolio

	Mortgage Loans	Bond Portfolio
October 1, 2020 through December 31, 2020	$     328,383	$      70,000
2021	645,876	228,000
2022	1,440,414	150,000
2023	797,511	278,000
2024	1,731,671	484,000
Thereafter	13,518,266	17,844,937
	18,462,121	19,054,937
Less loan loss and other than temporary impairment on bonds allowance	(1,477,644)	(770,802)
Less deferred origination fees	(217,091)	___-____
Totals	$16,767,386	$18,284,135

Restructured Loans

	September 30, 2020
Type of Loan	Number of Loans	Original Principal Balance	Original Average Interest Rate	Unpaid Principal Balance	Modified Average Interest Rate
Mortgage Loans	7	$4,696,544	8.193%	$3,544,635	6.059%

	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%

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Secured Investor Certificates (Tables)

9 Months Ended

Sep. 30, 2020

Notes to Financial Statements

Maturity Schedule Secured Investor Certificates

October 1, 2020 through December 31, 2020	$    334,000
2021	2,168,000
2022	1,042,000
2023	3,404,000
2024	1,335,000
Thereafter	15,875,250
	$24,158,250
Less deferred offering costs	(793,103)
Totals	$23,365,147

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Fair Value Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2020

Notes to Financial Statements

Fair Value Company's Financial Instruments

	September 30, 2020		December 31, 2019
	Carrying	Fair	Carrying	Fair
	Amount	Value	Amount	Value
Cash and equivalents	$     269,401	$    269,401	$     191,987	$    191,987
Accounts receivable	109,612	109,612	125,539	125,539
Interest receivable	179,747	179,747	185,190	185,190
Mortgage loans receivable	18,462,121	23,108,195	22,425,177	24,573,176
Bond portfolio	18,284,135	18,284,135	16,055,937	16,055,937
Secured investor certificates	24,158,250	29,896,202	26,850,000	32,389,253

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Summary of Significant Accounting Policies - Allowance For Mortgage Loans Receivable (Details) - USD ($)	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Accounting Policies [Abstract]
Balance at beginning of the period	$ 1,429,487
Provisions for loan losses	48,157	$ 73,105
Loan charge-offs		(100,537)
Balance the end of the period	$ 1,477,644	$ 1,644,571

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Fair Value Measurements - Fair Value Measurement Bond Portfolio (Details) - USD ($)	Sep. 30, 2020	Dec. 31, 2019
Gross Bond portfolio	$ 18,284,135	$ 16,055,937
Fair Value Measurement Level 3
Gross Bond portfolio	$ 18,284,135	$ 16,055,937

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Fair Value Measurements - Change in Fair Value Bond Portfolio (Details) - USD ($)	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Fair Value Disclosures [Abstract]
Balance at December 31, 2019	$ 16,055,937
Other than temporary investements on bond portfolio	(112,802)	$ (150,000)
Purchases	1,721,000
Proceeds	(122,000)
Balance at June 30, 2020	$ 18,284,135

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Fair Value Measurement - Fair Value Measurement Nonrecurring Basis (Details) - USD ($)	Sep. 30, 2020	Dec. 31, 2019
Impaired Loans	$ 5,026,828	$ 4,557,326
Real estate held for resale	550,045	651,398
Total Fair Value Measurement	5,576,873	5,208,724
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
Fair Value Measurement Level 3
Impaired Loans	5,026,828	4,557,326
Real estate held for resale	550,045	651,398
Total Fair Value Measurement	$ 5,576,873	$ 5,208,724

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Mortgage Loans Receivable and Bond Portfolio - Mortgage Loans Receivable and Bond Portfolio (Details)	Sep. 30, 2020 USD ($)
Mortgage Loans
October 1, 2020 through December 31, 2020	$ 328,383
2021	645,876
2022	1,440,414
2023	797,511
2024	1,731,671
Thereafter	13,518,266
Subtotal	18,462,121
Less loan loss and other than temporary impairment on bonds allowance	(1,477,644)
Less deferred origination fees	(217,091)
Totals	16,767,386
Bond Portfolio
October 1, 2020 through December 31, 2020	70,000
2021	228,000
2022	150,000
2023	278,000
2024	484,000
Thereafter	17,844,937
Subtotal	19,054,937
Less loan loss and other than temporary impairment on bonds allowance	(770,802)
Less deferred origination fees
Totals	$ 18,284,135

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Mortgage Loans Receivable and Bond Portfolio - Restructured Loans (Details) - USD ($)	Sep. 30, 2020	Dec. 31, 2019
Notes to Financial Statements
Number of Loans	$ 7	$ 6
Original Principal Balance	4,696,544	4,100,544
Original Average Interest Rate	8	8
Unpaid Principal Balance	3,544,635	3,185,720
Modified Average Interest Rate	$ 6	$ 6

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Secured Investor Certificates - Maturity Schedule Secured Investor Certificates (Details) - USD ($)	3 Months Ended	9 Months Ended	12 Months Ended				129 Months Ended
	Dec. 31, 2020	Sep. 30, 2020	Dec. 31, 2024	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021	Sep. 30, 2035
Secured Investor Certificate Maturity Schedule		$ 24,158,250
Certificates Deferred Offering Costs		(793,103)
Secured Investor Certificates Net		$ 23,365,147
Secured Investor Certificates
Secured Investor Certificate Maturity Schedule	$ 334,000		$ 1,335,000	$ 3,404,000	$ 1,042,000	$ 2,168,000	$ 15,875,250

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Fair Value Financial Instruments - Fair Value Company's Financial Instruments (Details) - USD ($)	Sep. 30, 2020	Dec. 31, 2019
Cash and equivalents	$ 269,401	$ 191,987
Fair Value
Cash and equivalents	191,987	191,987
Accounts receivable	125,539	125,539
Interest receivable	185,190	185,190
Mortgage loans receivable	22,425,177	24,573,176
Bond portfolio	16,055,937	16,055,937
Secured investor certificates	26,850,000	32,389,253
Carrying Amount
Cash and equivalents	269,401	269,401
Accounts receivable	109,612	109,612
Interest receivable	179,747	179,747
Mortgage loans receivable	18,462,121	23,108,195
Bond portfolio	18,284,135	18,284,135
Secured investor certificates	$ 24,158,250	$ 29,896,202

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Summary of Significant Accounting Policies (Details Narrative) - USD ($)	Sep. 30, 2020	Dec. 31, 2019
Accounting Policies [Abstract]
Principal Balance Loans Receivable Allowance	$ 6,504,000	$ 5,987,000
Allowance for Mortgage Loans Receivable	1,477,644	1,429,487
Loans Exceeding 90 Days Past Due	2,802,000	3,263,000
Real Estate Held for Sale Carrying Value	550,045	651,398
Allowance Allocated to Impaired Loans	551,000	555,000
Loans In Default	589,000	$ 810,000
Interest Only 90 Day Period	3,244,000
Forbearance of Payments	2,632,000
Interest Only Over 90 Day Period	$ 544,000

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Fair Value Measurements (Details Narrative) - USD ($)	Sep. 30, 2020	Dec. 31, 2019
Fair Value Disclosures [Abstract]
Loan Loss Reserve Church Bonds	$ 770,802	$ 658,000
Real Estate Impairement Charge
Impaired Loans	6,504,472	5,986,813
Fair Value Impaired Loans	5,026,828	4,557,326
Valuation Allowance Imparied Loans	1,477,194	1,429,487
Real estate held for resale	$ 550,045	$ 651,398

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Mortgage Loans Receivable and Bond Portfolio (Details Narrative) - USD ($)	Sep. 30, 2020	Dec. 31, 2019
Notes to Financial Statements
Mortgage Loans Receivable Gross	$ 18,462,121	$ 22,425,178
Church Bonds Owned Gross	19,054,937	16,713,937
Bond Reserve Fund	770,802	658,000
Agape First Mortgage Bonds	529,000	529,000
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
Soul Reapers First Mortgage Bonds	900,000
Soul Reapers First Mortgage Bonds Gross	1,920,000
Maturities and Redemption of Bonds	131,000	1,137,000
Restructured Mortgage Loans
Non-performing restuctured loans	$ 45,000

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Secured Investor Certificates (Details Narrative) - USD ($)	Sep. 30, 2020	Dec. 31, 2019
Notes to Financial Statements
Renewals Secured Investor Certificates	$ 915,000	$ 793,000

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Transactions With Affiliates (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Notes to Financial Statements
Advisor Managment Fees	$ 70,000	$ 82,000	$ 215,000	$ 240,000

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Line_of_Credit (Details Narrative) - USD ($)	Sep. 30, 2020	Dec. 31, 2019
Notes to Financial Statements
Line Of Credit	$ 4,000,000
Outstanding Line of Credit	$ 2,491,000	$ 1,145,000