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American Church Mortgage (ACMC)

Filed: 14 Nov 14, 12:00am

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

 

x Quarterly Report Under Section 13 or 15(d) of

the Securities Exchange Act of 1934

For the Quarterly Period Ended September 30, 2014

 

or

 

o Transition Report Under 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)

 

Minnesota41-1793975
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
  
10237 Yellow Circle Drive Minnetonka, MN55343
(Address of principal executive offices) (Zip Code)

(952) 945-9455

(Registrant’s telephone number, including area code)

 

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

 

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

 

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

 

Large accelerated filer oAccelerated filer   o

Non-accelerated filer o

(Do not check if a smaller reporting company)

Smaller reporting company x

 

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

 

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

Class Outstanding at November 14, 2014
Common Stock, $0.01 par value per share 1,677,798 shares
 
 

 

AMERICAN CHURCH MORTGAGE COMPANY
  
INDEX
 

Page

No.

  
  
PART I.  FINANCIAL INFORMATION
  
  
Item 1.  Financial Statements: 
  
Balance Sheets.…………………………………………………………………..…………2 - 3
  
Statements of Operations…….………………………….…………………………………4 - 5
  
Statements of Cash Flows……..…………………………………………………………..6 - 7
  
Notes to Financial Statements…..…………………………………………….……………8 - 18
  
Item 2.  Management’s Discussion and Analysis of Financial 
Condition and Results of Operations………….…………………………………………….19 – 24
  
Items 4.  Controls and Procedures……………..…………………………………………..24
  
  
PART II.  OTHER INFORMATION
  
Item 1.  Legal Proceedings…………………………………………………………….…….25
  
Item 1A.  Risk Factors………………………………….…………………………...……...25
  
Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds……………...………..25
  
Item 3.  Defaults Upon Senior Securities……………………………………….……..…….25
  
Item 4.  Mine Safety Disclosures……………………………..………………..……………25
  
Item 5.  Other Information………………………………………………….....………...….25
  
Item 6.  Exhibits………………………………………………….………...……………….25 - 26
  
Signatures………………………………………………………….………………..………27
  
   

 

 
 

AMERICAN CHURCH MORTGAGE COMPANY

 

Minnetonka, Minnesota

 

Financial Statements

 

September 30, 2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1
 

 

AMERICAN CHURCH MORTGAGE COMPANY
    
Balance Sheets
  
ASSETSSeptember 30, 2014 December 31, 2013
 (Unaudited)  
Current Assets   
    Cash and equivalents $           3,591,461  $           3,143,377
    Accounts receivable                 267,695                  197,687
    Interest receivable                 137,348                  129,972
    Current maturities of mortgage loans receivable, net of   
          allowance of $31,394 and $25,269 and deferred    
          origination fees of $41,542 and $24,007 at September    
          30, 2014 and December 31, 2013, respectively                 681,316                  660,490
 Current maturities of bond portfolio                 897,250                  796,000
    Prepaid expenses                     9,076                      6,638
            Total current assets              5,584,146               4,934,164
    
    
Mortgage Loans Receivable, net of current maturities,   
    allowance of $1,101,616 and $924,424 and deferred   
    origination fees of $334,770 and $324,861 at September 30,   
    2014 and December 31, 2013, respectively            23,190,559             24,716,310
    
Bond Portfolio, net of current maturities              9,086,749               8,283,442
    
Real Estate Held for Sale                 517,422                  562,722
    
Deferred Offering Costs,   
    net of accumulated amortization of $805,131 and $728,012   
    at September 30, 2014 and December 31, 2013, respectively                 776,029                  709,919
            Total Assets $         39,154,905  $         39,206,557
    
    
Notes to Unaudited Financial Statements are an integral part of this Statement.  

 

2
 

 

AMERICAN CHURCH MORTGAGE COMPANY
    
Balance Sheets
    
LIABILITIES AND STOCKHOLDERS’ EQUITY                         September 30, 2014 December 31, 2013
 (Unaudited)  
Current Liabilities   
    Current maturities of secured investor certificates $            2,236,000  $           1,876,000
    Accounts payable                    25,303                    21,565
    Dividends payable                  167,780                  167,780
            Total current liabilities               2,429,083               2,065,345
    
Deposit on real estate held for sale                    61,600                    61,600
    
Secured Investor Certificates, Series B, net of current maturities              15,562,000             15,887,000
Secured Investor Certificates, Series C, net of current maturities               6,821,000               7,932,000
Secured Investor Certificates, Series D, net of current maturities               1,361,000                            -   
           Total liabilities             26,234,683             25,945,945
    
Stockholders’ Equity   
    Common stock, par value $.01 per share    
        Authorized, 30,000,000 shares   
        Issued and outstanding, 1,677,798 shares at   
          September 30, 2014 and December 31, 2013                    16,778                    16,778
    Additional paid-in capital             19,113,458             19,113,458
    Accumulated deficit              (6,210,014)              (5,869,624)
         ��  Total stockholders’ equity             12,920,222             13,260,612
    
            Total liabilities and stockholders' equity $          39,154,905  $         39,206,557
    
    
Notes to Financial Statements are an integral part of this Statement. 

 

3
 

 

AMERICAN CHURCH MORTGAGE COMPANY
    
Statements of Operations
    
 For the Nine Months Ended
 September 30, 2014 September 30, 2013
 (Unaudited) (Unaudited)
    
Interest and Other Income $            2,116,967  $            2,276,024
    
Interest Expense               1,326,705                1,386,022
    
Net Interest Income                  790,262                   890,002
    
Provision for Losses on Mortgage Loans Receivable                  183,317                     60,634
    
Net Interest Income after Provision for Mortgage Losses                  606,945                   829,368
    
Operating Expenses   
  Other operating expenses                  458,536                   470,588
  Real estate impairment                    45,000                   149,775
                   503,536                   620,363
    
Operating Income                  103,409                   209,005
    
Other Income                      9,206                          268
    
Net Income $               112,615  $               209,273
    
Basic and Diluted Income Per Share $                     0.07  $                     0.12
    
Dividends Declared Per Share $                     0.10  $                     0.30
    
Weighted Average Common Shares Outstanding -   
    Basic and Diluted               1,677,798                1,677,798
    
    
Notes to Unaudited Financial Statements are an integral part of these Statements.

 

 

4
 

 

 

AMERICAN CHURCH MORTGAGE COMPANY
    
Statements of Operations
    
 For the Three Months Ended
 September 30, 2014 September 30, 2013
 (Unaudited) (Unaudited)
    
Interest and Other Income $               680,645  $               744,229
    
Interest Expense                  438,620                   466,965
    
Net Interest Income                  242,025                   277,264
    
Provision for Losses on Mortgage Loans Receivable                  110,872                     41,453
    
Net Interest Income after Provision for Mortgage and Bond Losses                  131,153                   235,811
    
Operating Expenses                  145,615                   148,045
    
Operating Income                   (14,462)                     87,766
    
Other Income                         380                            75
    
Net (Loss) Income $                (14,082)  $                 87,841
    
Basic and Diluted Income Per Share $                    (0.01)  $                     0.05
    
Dividends Declared Per Share $                     0.10  $                     0.10
    
Weighted Average Common Shares Outstanding -   
    Basic and Diluted               1,677,798                1,677,798
    
    
Notes to Unaudited Financial Statements are an integral part of this Statement.

 

5
 

 

AMERICAN CHURCH MORTGAGE COMPANY
    
Statements of Cash Flows
    
 For the Nine Months Ended
 September 30, 2014 September 30, 2013
 (Unaudited) (Unaudited)
Cash Flows from Operating Activities   
    Net income $               112,615  $               209,273
    Adjustments to reconcile net income to net cash   
        from operating activities:   
        Impairment on real estate held for sale                    45,000                   149,775
        Provision for losses on mortgage loans receivable                  183,317                     60,634
        Amortization of loan origination discounts                    27,444                    (20,555)
        Amortization of deferred costs                    77,120                     89,339
        Change in assets and liabilities   
            Accounts receivable                   (70,008)                  (154,766)
            Interest receivable                     (7,376)                          831
            Prepaid expenses                     (2,438)                      (4,946)
            Accounts payable                      3,738                       6,364
            Net cash provided by operating activities                  369,412                   335,949
    
Cash Flows from Investing Activities   
    Investment in mortgage loans              (1,234,841)                  (911,942)
    Collections of mortgage loans               2,529,305                2,764,417
    Investment in bonds              (1,983,250)               (1,036,000)
    Proceeds from bonds               1,078,693                   164,974
            Net cash provided by investing activities                  389,907                   981,449
    
Cash Flows from Financing Activities   
     Proceeds from the sale of secured investor certificates               1,361,000                               -
    Payments on secured investor certificate maturities              (1,076,000)                  (321,000)
    Payments for deferred costs                 (143,230)                      (7,665)
    Dividends paid                 (453,005)                  (553,674)
            Net cash used for financing activities                 (311,235)                  (882,339)
    
Net Increase in Cash and Equivalents                  448,084                   435,059
    
Cash and Equivalents - Beginning of Period               3,143,377                1,183,787
    
Cash and Equivalents - End of Period $            3,591,461  $            1,618,846
    
Notes to Unaudited Financial Statements are an integral part of this Statement.  

 

6
 

 

 

AMERICAN CHURCH MORTGAGE COMPANY
    
Statements of Cash Flows - Continued
    
 For the Six Months Ended
 September 30, 2014 September 30, 2013
 (Unaudited) (Unaudited)
Supplemental Cash Flow Information   
    
    Dividends payable $               167,780  $                   167,780
    
    Loan origination fees $                 70,145  $                     13,293
    
    Interest paid $            1,326,705  $                1,386,022
    
    
    
Notes to Unaudited Financial Statements are an integral part of this Statement. 

 

7
 

 

AMERICAN CHURCH MORTGAGE COMPANY

 

Notes to Financial Statements - Unaudited

 

September 30, 2014

 

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

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

 

The unaudited financial statements of the Company should be read in conjunction with the December 31, 2013 audited financial statements included in the Company’s Annual Report on Form 10-K, as filed with the Securities and Exchange Commission for the year ended December 31, 2013. Operating results for the periods presented are not necessarily indicative of the results that may be expected for the year ending December 31, 2014.

 

Nature of Business

 

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

 

Accounting Estimates

 

Management uses estimates and assumptions in preparing these financial statements in accordance with accounting principles generally accepted in the United States of America. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could differ from those estimates. The most sensitive estimates relate to the realizability of the mortgage loans receivable, 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.

 

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.

 

8
 

 

AMERICAN CHURCH MORTGAGE COMPANY

 

Notes to Financial Statements - Unaudited

 

September 30, 2014

 

 

Cash and Equivalents

 

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

 

The Company maintains accounts primarily at two financial institutions. At times throughout the year, the Company’s cash and equivalents balances may exceed amounts insured by the Federal Deposit Insurance Corporation. Cash in money market funds is not federally insured. The Company had $61,580 and $160,808 in money market fund accounts at September 30, 2014 and December 31, 2013, respectively. The Company has not experienced any losses in such accounts.

 

Bond Portfolio

The Company accounts for the bond portfolio under Accounting Standards Codification (ASC) Section 320. The Company classifies the bond portfolio as “available-for-sale” and measures the portfolio at fair value. While the bonds are generally held until contractual maturity, the Company classifies them as available-for-sale as the bonds may be used to repay secured investor certificates or provide additional liquidity or working capital in the short term. The Company has classified $897,250 and $796,000 in bonds as current assets as of September 30, 2014 and December 31, 2013, respectively, based on management’s estimates for liquidity requirements and contractual maturities of certain bonds maturing in 2014 and 2013, respectively.

 

Allowance for Mortgage Loans Receivable

 

The Company records mortgage loans receivable at estimated net realizable value, which is the unpaid principal balances of the mortgage loans receivable, less the allowance for mortgage loans. The Company’s loan loss policy provides an allowance for estimated uncollectible loans based on an evaluation of the current status of the loan portfolio. This policy provides for principal amounts outstanding on a particular loan if cumulative interruptions occur in the normal payment schedule of a loan; therefore, the Company recognizes a provision for losses and an allowance for the outstanding principal amount of a loan in the Company’s portfolio if the amount is in doubt of collection. Additionally, no additional interest income is recognized on impaired loans that are declared to be in default and are in the foreclosure process. At September 30, 2014, the Company provided $1,133,010 for seventeen mortgage loans, of which eleven are three or more mortgage payments in arrears, two loans are declared to be in default and one loan is in the foreclosure process. At December 31, 2013, the Company provided $949,693 for fourteen mortgage loans, of which six were three or more mortgage payments in arrears, two loans declared to be in default and one loan is in the foreclosure process.

 

9
 

 

AMERICAN CHURCH MORTGAGE COMPANY

 

Notes to Financial Statements - Unaudited

 

September 30, 2014

 

 

A summary of transactions in the allowance for credit losses for the nine months ended September 30, 2014 is as follows:

 

Balance at December 31, 2013 $    949,693
Provision for additional losses 183,317
Charge-offs             -          
Balance at September 30, 2014 $1,133,010

 

The total impaired loans, which are loans that are in the foreclosure process or are declared to be in default, were approximately $1,524,000 and $1,543,000 at September 30, 2014 and December 31, 2013, respectively, which the Company believes are adequately secured by the underlying collateral and the allowance for mortgage loans.

 

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

 

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

 

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

 

Loans totaling approximately $5,470,000 and $3,237,000 exceeded 90 days past due but continued to accrue interest at September 30, 2014 and December 31, 2013, respectively. The Company believes that continued interest accruals are appropriate because the loans are well secured, not deemed to be in default and the Company is actively pursuing collection of past due payments.

10
 

 

AMERICAN CHURCH MORTGAGE COMPANY

 

Notes to Financial Statements - Unaudited

 

September 30, 2014

 

 Real Estate Held for Sale

 

As of September 30, 2014, the Company had five properties acquired through foreclosure, and one via deed in lieu of foreclosure, with outstanding loan balances totaling approximately $1,406,000. The Company has listed the properties for sale through local realtors except for the property for which we received a deed in lieu of foreclosure. The Church is still occupying the property and paying rent while trying to either sell the building or obtain refinancing. Each property is valued based on its current listing price less any anticipated selling costs, including, for example, realtor commissions. The Company records real estate held for sale at the estimated fair value, which is net of the expected expenses related to the sale of the real estate. The fair value of our real estate held for sale, which represents the carrying value, is approximately $517,000 as of September 30, 2014 after an impairment of approximately $889,000. There was no increase in impairment on real estate held for sale during the quarter ended September 30, 2014.

 

Carrying Value of Long-Lived Assets

 

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

 

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

 

Revenue Recognition

 

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

 

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.

 

11
 

 

AMERICAN CHURCH MORTGAGE COMPANY

 

Notes to Financial Statements - Unaudited

 

September 30, 2014

 

Income Per Common Share

 

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

 

Off-Balance Sheet Liabilities

 

The Company had an off-balance sheet risk concerning unfunded commitments. As of September 30, 2014, the Company had approximately $1,840,000 in unused commitments. These unused commitments represent funding for a construction loan which is being drawn upon as funds for payments are requested.

 

Recently Issued Accounting Pronouncements

 

In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers (Topic 606)." Under the amended guidance, an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This guidance is effective prospectively, for annual and interim periods, beginning after December 15, 2016. Management is currently evaluating this guidance and does not expect this guidance to have a material impact on the Company’s Consolidated Financial Statements, but significant disclosures to the Notes thereto will be required. 

 

2. FAIR VALUE MEASUREMENTS

 

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

 

Except for the bond portfolio, which is required by authoritative accounting guidance to be recorded at fair value in our Balance Sheets, the Company elected not to record any other financial assets or liabilities at fair value on a recurring basis. We recorded impairment for losses on our Agape bonds (see Note 3), which totaled $200,000 at both September 30, 2014 and December 31, 2013.

 

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

12
 

 

AMERICAN CHURCH MORTGAGE COMPANY

 

Notes to Financial Statements - Unaudited

 

September 30, 2014

       

Fair Value

Measurement

 
September 30, 2014  Fair Value   Level 3 
         
Bond portfolio $9,983,999  $9,983,999 

 

       

Fair Value

Measurement

 
December 31, 2013  Fair Value   Level 3 
         
Bond portfolio $9,079,442  $9,079,442 

 

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

 

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

 Bond Portfolio
  
Balance at December 31, 2013$9,079,442
Purchases1,983,250
Proceeds    (1,078,693)
Balance at September 30, 2014$9,983,999

 

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 2 input. The impairment for losses on real estate held for sale were $45,000 and $149,775 for the nine months ended September 30, 2014 and 2013, respectively. The fair value of impaired loans is based upon the Company’s loan loss policy, which is a Level 3 input. The Company provided an additional impairment of $183,317 and $60,634 for loan losses at September 30, 2014 and 2013, respectively.

 

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

13
 

 

AMERICAN CHURCH MORTGAGE COMPANY

 

Notes to Financial Statements - Unaudited

 

September 30, 2014

  September 30, 2014
  Level 1 Level 2 Level 3 Fair Value at September 30,
2014
Impaired Loans $—    $—    $1,001,885  $1,001,885 
Real estate held for resale  —     517,422   —     517,422 
  $—    $517,422  $1,001,885  $1,519,307 

 

 

  December 31, 2013
  Level 1 Level 2 Level 3 Fair Value at December 31,
2013
Impaired Loans $—    $—    $1,049,673  $1,049,673 
Real estate held for resale  —     562,722   —     562,722 
  $—    $562,722  $1,049,673  $1,612,395 

 

The change in Level 2 and Level 3 assets measured at fair value on a nonrecurring basis is summarized as follows:

 
  

Fair Value

Measurement

Level 3

   

Fair Value

Measurement

Level 2

 
         
   Impaired Loans   Real Estate Held for Sale 
         
Balance at December 31, 2013 $1,049,673  $562,722 
Dispositions/Proceeds  (19,230)  (300)
Provision for other than temporary losses  (28,558)  (45,000)
Balance at September 30, 2014 $1,001,885  $517,422 

 

3. MORTGAGE LOANS RECEIVABLE AND BOND PORTFOLIO

 

At September 30, 2014, the Company had mortgage loans receivable totaling $25,381,197. The loans bear interest ranging from 1.00% to 10.25% with a weighted average of approximately 8.41% at September 30, 2014. The Company had mortgage loans receivable totaling $26,675,361 that bore interest ranging from 1.00% to 10.25% with a weighted average of approximately 8.44% at December 31, 2013.

 

The Company has a portfolio of secured church bonds at September 30, 2014 and December 31, 2013, which are carried at fair value. The bonds pay either semi-annual or quarterly interest ranging from 2.25% to 9.75%. The aggregate value of secured church bonds equaled approximately $10,184,000 at

14
 

 

AMERICAN CHURCH MORTGAGE COMPANY

 

Notes to Financial Statements - Unaudited

 

September 30, 2014

 

September 30, 2014 with a weighted average interest rate of 7.24% and approximately $9,279,000 at December 31, 2013 with a weighted average interest rate of 7.54%. These bonds are due at various maturity dates through July 2039.

 

The contractual maturity schedule for mortgage loans receivable and the bond portfolio as of September 30, 2014, is as follows:

 

 Mortgage LoansBond Portfolio
   
October 1, 2014 through September 30, 2015$     754,252$  897,250
October 1, 2015 through December 31, 20151,096,094-
20161,362,023133,500
20171,727,964151,000
20182,100,262266,000
Thereafter18,340,6028,736,249
            25,381,197 10,183,999
Less loan loss and bond loss allowances(1,133,010)  (200,000)
Less deferred origination income    (376,312)______-__
            Totals$23,871,875$9,983,999

 

 

During the year ended December 31, 2013 the Company owned $2,035,000 First Mortgage Bonds issued by St. Agnes Missionary Baptist Church located in Houston, Texas. The total principal amount of First Mortgage Bonds issued by St. Agnes was $13,375,000. St. Agnes defaulted on its payment obligations to bondholders in June 2007. The church subsequently commenced a Chapter 11 bankruptcy reorganization proceeding regarding the three properties that secure the First Mortgage Bonds in November 2007, which was dismissed in September 2008, and the church was subsequently foreclosed upon. In March 2009, a lease was signed with St. Agnes to permit it to remain in the property while submitting lease payments to bondholders as partial interest payments. Lease payments began in the second quarter of 2009, however St. Agnes failed to make all required lease payments and was evicted from the property in the first quarter of 2010. The Company, along with all other bondholders, had a superior lien over all other creditors. No accrual for interest receivable from the First Mortgage Bonds was recorded by the Company. In September 2011, one of the parcels was sold for $1,300,000. In June 2013 the second of three properties was sold for $335,000 and in November 2013 the main Sanctuary Dome and Fellowship Center was sold for $3,500,000. The liquidation of the collateral serving as security for the bonds was completed and all final funds were distributed (after costs) to the bondholders. This final payment was a return of $71.90 of principal on each original $1,000 bond investment. The Company received a final payment of approximately $160,000. This payment represents a realized loss of $1,875,000 on $2,035,000 original principal amount. The Company had a $1,800,000 aggregate allowance for losses previously recorded against the bonds. A final loss, included in other operating expenses, of $75,000 was recorded as of December 31, 2013. The $160,000 received by the Company represents the final payment on St. Agnes.

 

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AMERICAN CHURCH MORTGAGE COMPANY

 

Notes to Financial Statements - Unaudited

 

September 30, 2014

 

The Company currently owns $637,000 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. Agape is currently performing under a loan modification agreement. In October 2013, a minimum of 80% of the bondholders of Agape agreed to a modification in the terms of their bonds which has resulted in the 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 have been modified to a fully amortized fixed rate, quarterly interest payment of 6.25% with a new maturity date of September 2037 for all the issued and outstanding bonds. The Company, along with all other bondholders, has a superior lien over all other creditors. The Company has an aggregate allowance for losses of $200,000 for the First and Second Mortgage Bonds both at September 30, 2014 and December 31, 2013, which effectively reduces the bonds to the fair value amount management believes will be recovered.

 

4. 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 6.60% and 6.63% at September 30, 2014 and December 31, 2013, 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 $740,000 and $511,000 for the nine months ended September 30, 2014 and 2013, 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, 2014 is as follows:

 

   
October 1, 2014 through September 30, 2015$    2,236,000 
October 1, 2015 through December 31, 2015625,000 
20163,129,000 
20172,803,000 
20183,887,000 
Thereafter 13,300,000 
   
           Totals$25,980,000 

 

 

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AMERICAN CHURCH MORTGAGE COMPANY

 

Notes to Financial Statements - Unaudited

 

September 30, 2014

 

5. TRANSACTIONS WITH AFFILIATES

 

The Company has an Advisory Agreement with Church Loan Advisors, Inc. (the “Advisor”). The Advisor is responsible for the day-to-day operations of the Company and provides office space and administrative services. The Advisor and the Company are related through common ownership and common management. A majority of the independent board members approve the advisory agreement on an annual basis. The Company paid the Advisor management fees and origination fees of approximately $144,000 and $93,000 for the three months ended September 30, 2014 and 2013, respectively. The Company paid the Advisor $321,000 and $285,000 for the nine months ended September 30, 2014 and 2013, respectively

 

6. FAIR VALUE OF FINANCIAL INSTRUMENTS

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

 

The fair value estimates presented herein are based on relevant information available to management as of September 30, 2014 and December 31, 2013, 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, 2014 December 31, 2013
   Carrying   Fair   Carrying   Fair 
   Amount   Value   Amount   Value 
                 
Cash and equivalents $3,591,461  $3,591,461  $3,143,377  $3,143,377 
Accounts receivable  267,695   267,695   197,687   197,687 
Interest receivable  137,348   137,348   129,972   129,972 
Mortgage loans receivable  25,381,197   29,424,143   26,675,361   28,950,766 
Bond portfolio  10,183,999   10,183,999   9,279,442   9,279,442 
Secured investor certificates  25,980,000   33,578,404   25,695,000   36,312,309 

 

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

 

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AMERICAN CHURCH MORTGAGE COMPANY

 

Notes to Financial Statements - Unaudited

 

September 30, 2014

 

Cash and equivalents

 

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

 

Accounts receivable

 

The carrying amount of accounts receivable approximates fair value.

 

Interest receivable

 

The carrying amount of interest receivable approximates fair value.

 

Mortgage loans receivable

 

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

 

Bond portfolio

 

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

 

Secured investor certificates

 

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

 

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

 

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

 

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

 

A detailed statement of risks and uncertainties is contained in our reports to the SEC, including, in particular, our Annual Report on Form 10-K for the year ended December 31, 2013 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 operate as a real estate investment trust.

 

We currently have sixty-three first mortgage loans aggregating $25,381,197 in principal amount, two second mortgage loans totaling $62,293 in principal amount and a first mortgage bond portfolio with par values aggregating $10,183,999. Funding of additional first mortgage loans and purchase of first mortgage bonds issued by churches is expected to continue on an on-going basis as more investable assets become available through: (i) future sales of securities; (ii) prepayment and repayment at maturity of existing loans and bonds; and (iii) borrowed funds. These capital sources and interest received on loans and bonds provide general working capital to the Company.

 

Results of Operations

 

Fiscal 2014 Nine Months Compared to Fiscal 2013 Nine Months

 

Our net income for the nine months ended September 30, 2014 and 2013 was approximately $113,000 and $209,000, respectively, on total interest and other income of approximately $2,117,000 and $2,276,000, 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, 2014, our loans receivable have interest rates ranging from 1.00% to 10.25%, with an average, principal-adjusted interest rate of 8.41%. Our bond portfolio has an average current yield of 7.24% as of September 30, 2014. As of September 30, 2013, the average, principal-adjusted interest rate on our portfolio of loans was 8.44% and our portfolio of bonds had an average current yield of 7.56%. The decrease in interest income was due to the scheduled repayment of mortgage loans and the maturation and redemption of some of the bonds in our portfolio.

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Interest expense was approximately $1,327,000 and $1,386,000 for the nine months ended September 30, 2014 and 2013, respectively. The decrease in interest expense was due to the maturity of some of our secured investor certificates. Net interest margin decreased from 39.10% to 37.33% resulting primarily from a decrease in interest and other income of approximately 6.99% which was offset by a decrease in interest expense of approximately 4.28%.

 

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 loans declared to be in default or loans that are in the foreclosure process.

 

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

 

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

 

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

 

Allowance for losses on mortgage loans receivable increased during the nine months ended September 30, 2014 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, 2014 of approximately $183,000 compared to approximately $61,000 for the nine months ended September 30, 2013. At September 30, 2014, we provided approximately $1,133,010 for seventeen mortgage loans, of which eleven are three or more mortgage payments in arrears, two loans have been declared to be in default and one was in the foreclosure process. At December 31, 2013, we provided approximately $950,000 for fourteen mortgage loans, of which six were three or more mortgage payments in arrears, two loans have been declared to be in default and one was in the foreclosure process.

 

Our lending practices limit deployment of our capital to churches and other non-profit religious organizations. The total principal amount of our second mortgage loans is limited to 20% of our average invested assets. We currently have two second mortgage loans totaling approximately $62,000 in principal amount outstanding. We do not loan to any borrower who has been in operation for less than

 

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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 six 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, 2014 decreased to approximately $504,000 compared to $620,000 at September 30, 2013. The decrease is the result of a reduction in our interest expense on our secured investor certificates.

 

Mortgage Loans and Real Estate Held for Sale

 

Two mortgage loans were paid in full during the nine months ended September 30, 2014. Three new loans were funded during the nine months ended September 30, 2014. Two loans were for $634,840 and one was a refinancing which resulted in the borrower paying down it mortgage indebtedness from approximately $1,200,000 to $600,000.

 

During the year ended December 31, 2013 we owned $2,035,000 First Mortgage Bonds issued by St. Agnes Missionary Baptist Church located in Houston, Texas. The total principal amount of First Mortgage Bonds issued by St. Agnes was $13,375,000. St. Agnes defaulted on its payment obligations to bondholders in June 2007. The church subsequently commenced a Chapter 11 bankruptcy reorganization proceeding regarding the three properties that secured the First Mortgage Bonds in November 2007, which was dismissed in September 2008, and the church was subsequently foreclosed upon. In March 2009, a lease was signed with St. Agnes to permit it to remain in the property while submitting lease payments to bondholders as partial interest payments. Lease payments began in the second quarter of 2009, however St. Agnes failed to make all required lease payments and was evicted from the property in the first quarter of 2010. We, along with all other bondholders, had a superior lien over all other creditors. No accrual for interest receivable from the First Mortgage Bonds was recorded by the Company. In September 2011, one of the parcels was sold for $1,300,000. In June 2013 the second of three properties was sold for $335,000 and in November 2013 the main Sanctuary Dome and Fellowship Center was sold for $3,500,000. The liquidation of the collateral serving as security for the bonds was completed and all final funds were distributed (after costs) to the bondholders. This final payment was a return of $71.90 of principal on each original $1,000 bond investment. We received a final payment of approximately $160,000. This payment represents a realized loss of $1,875,000 on $2,035,000 original principal amount. We had a $1,800,000 aggregate allowance for losses previously recorded against the bonds. A final loss, included in other operating expenses, of $75,000 was recorded as of December 31, 2013. The $160,000 received by the Company represents the final payment on St. Agnes.

 

We currently own $637,000 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. Agape is currently

 

21
 

 

performing under a loan modification agreement. In October 2013, a minimum of 80% of the bondholders of Agape agreed to a modification in the terms of their bonds which has resulted in the 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 have been modified to a fully amortized fixed rate, quarterly interest payment of 6.25% with a new maturity date of September 2037 for all the issued and outstanding bonds. We, along with all other bondholders, have a superior lien over all other creditors. We have an aggregate allowance for losses of $200,000 for the First and Second Mortgage Bonds both at September 30, 2014 and December 31, 2013, which effectively reduces the bonds to the fair value amount management believes will be recovered.

 

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 recorded an additional impairment on our real estate held for sale of $45,000 and $149,775 for the nine month period ended September 30, 2014 and 2013, respectively. This additional impairment was to properly reflect the value of two of our properties we believe we will recover in a sale.

 

Dividends

 

We have elected to operate as a real estate investment trust (REIT), therefore we are required, among other things, to distribute to shareholders at least 90% of “Taxable Income” in order to maintain our REIT status. The dividends declared and paid to shareholders may include cash from origination fees even though they are not recognized as income in their entirety for the period under generally accepted accounting principles in the United States. We earned approximately $70,000 and $13,000 in origination fees for the nine months ended September 30, 2014 and 2013, respectively.

 

We paid a dividend of $.10 for each share held of record on January 28, 2014. The dividend, which was paid January 30, 2014, represents a 4.00% annual rate of return on each share of common stock owned, assuming a purchase price of $10 per share.

 

Our Board of Directors declared a dividend of $.09 for each share held of record on April 28, 2014. The dividend, which was paid April 30, 2014, represents a 3.60% annual rate of return on each share of common stock owned, assuming a purchase price of $10 per share.

 

Our Board of Directors declared a dividend of $.08 for each share held of record on July 31, 2014. The dividend, which was paid August 1, 2014, represents a 3.20% annual rate of return on each share of common stock owned, assuming a purchase price of $10 per share.

 

Our Board of Directors declared a dividend of $.10 for each share held of record on October 28, 2014. The dividend, which was paid October 31, 2014, represents a 4.00% annual rate of return on each share of common stock owned, assuming a purchase price of $10 per share.

 

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

 

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secured investor certificates. Our liabilities at September 30, 2014 are primarily comprised of dividends declared as of June 30, 2014 but not yet paid and our secured investor certificates.

 

Our future capital needs are expected to be met by: (i) the additional sale of securities; (ii) prepayment and repayment at maturity of mortgage loans we make; (iii) borrowed funds; and (iv) bonds that mature or we sell from our bond portfolio. We believe that the “rolling” effect of mortgage loans maturing and bond repayments will provide a supplemental source of capital to fund our business operations in future years. Nevertheless, we believe that it may be desirable, if not necessary, to sell additional securities in order to enhance our capacity to make mortgage loans on a continuous basis. There can be no assurance we will be able to raise additional capital on terms acceptable for such purposes.

 

In July 2014, we filed with the Securities and Exchange Commission a registration statement to offer $10,000,000 worth of Series D Secured Investor Certificates to qualified investors. The offering was declared effective August 12, 2014. At September 30, 2014, approximately $1,361,000 has been collected from the issuance of 1,361 Series D certificates (less underwriting fees). The proceeds are being used to fund new mortgage loans and pay down maturing certificates. We may also use proceeds from the sale of secured investor certificates to pay dividends, if needed.

 

During the nine months ended September 30, 2014, total assets increased by approximately $52,000 due to a decrease in loans outstanding. Current liabilities increased by approximately $364,000 for the nine months ended September 30, 2014 due to an increase in current maturities of our secured investor certificates. Non-current liabilities decreased by $75,000 for the nine months ended September 30, 2014 due to a decrease of secured investor certificates outstanding.

 

For the nine months ended September 30, 2014, net cash provided by operating activities increased to approximately $369,000 from $336,000 from the comparative period ended September 30, 2013, primarily due to an decrease in accounts receivable.

 

For the nine months ended September 30, 2014, net cash provided by investing activities was approximately $390,000 compared to cash provided by investing activities of approximately $981,000 from the comparative nine months ended September 30, 2013. This decrease was due to an increase in proceeds from bonds of approximately $1,079,000.

 

For the nine months ended September 30, 2014, net cash (used for) financing activities decreased to approximately ($311,000) from ($882,000) for the comparative nine months ended September 30, 2014, primarily due to an increase in issuance of our secured investor certificates.

 

Critical Accounting Estimates

 

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

 

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

 

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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.

 

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, 2014. Based on that evaluation, the principal executive officer and the principal accounting officer concluded that the Company’s disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by the Company in reports that it files or submits under the Securities and Exchange Commission is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and that information required to be disclosed in reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal accounting officer, to allow timely decisions regarding required disclosure.

 

Changes in Internal Controls Over Financial Reporting

 

As of the end of the quarter ended September 30, 2014, there were no changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.

 

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PART II

 

OTHER INFORMATION

 

 

Item 1.  Legal Proceedings.

 

None.

 

Item 1A.  Risk Factors.

 

Not applicable.

 

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

 

(a)Not Applicable

 

(b)Not Applicable

 

(c)Not Applicable

 

Item 3. Defaults Upon Senior Securities

None.

 

Item 4. Mine Safety Disclosures.

 

Not Applicable

 

Item 5. Other Information.

 

None.

 

Item 6. Exhibits

 

Exhibit

NumberTitle of Document

 

31.1Certification 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.

 

31.2Certification 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.

 

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

 

32.2Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the of the Sarbanes-Oxley Act of 2002.
25
 

 

101The following financial information from our Quarterly Report on Form 10-Q for the third quarter of fiscal year 2014 filed with the Securities and Exchange Commission on November 14, 2014, is formatted in eXtensible Business Reporting Language (XBRL): (i) the Consolidated Balance Sheets at September 30, 2014 and December 31, 2013; (ii) Consolidated Statements of Operations for the nine and three months ended September 30, 2014 and 2013; (iii) the Consolidated Statements of Cash Flows for the nine months ended September 30, 2014 and 2013; and (iv) the Notes to Financial Statements (Unaudited).

 

 

26
 

 

SIGNATURES

 

 

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

 

Dated: November 14, 2014

 

 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)

 

 

27