Document and Entity Information
Document and Entity Information - USD ($) | 9 Months Ended | |
Sep. 30, 2015 | Nov. 13, 2015 | |
Document And Entity Information | ||
Entity Registrant Name | American Church Mortgage Company | |
Entity Central Index Key | 934,543 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2015 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Is Entity a Well-known Seasoned Issuer? | No | |
Is Entity a Voluntary Filer? | No | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Public Float | $ 1,677,798 | |
Entity Common Stock, Shares Outstanding | 1,677,798 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2,015 |
Balance Sheets
Balance Sheets - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 |
Statement of Financial Position [Abstract] | ||
Cash and equivalents | $ 6,203,705 | $ 3,767,102 |
Accounts receivable | 190,981 | 245,125 |
Interest receivable | 162,909 | 128,900 |
Current maturities of mortgage loans receivable, net of allowance of $55,553 and $45,759 and deferred origination fees of $21,470 and $45,085 at September 30, 2015 and December 31, 2014, respectively | 1,079,922 | 1,044,286 |
Current maturities of bond portfolio, at fair value | 50,000 | 805,500 |
Prepaid expenses | 8,696 | 5,879 |
Total current assets | 7,696,213 | 5,996,792 |
Mortgage Loans Receivable, net of current maturities, allowance of $1,102,766 and 1,131,472 and deferred origination fess of $299,099 and $417,257 at September 30, 2015 and December 31, 2014, respectively | 21,527,915 | 25,330,471 |
Bond Portfolio, at fair value, net of current maturities | 10,022,381 | 8,003,103 |
Real Estate Held for Sale | 890,527 | 517,422 |
Deferred Offering Costs, net of accumulated amortization of $942,138 and $844,443 at September 30, 2015 and December 31, 2014, respectively | 867,489 | 860,992 |
Total Assets | 41,004,525 | 40,708,780 |
Current Liabilities | ||
Current maturities of secured investor certificates | 1,678,000 | 2,340,000 |
Accounts payable | 73,260 | 22,429 |
Dividends payable | 67,112 | 167,780 |
Total current liabilities | $ 1,818,372 | 2,530,209 |
Deposit on real estate held for sale | 61,600 | |
Secured Investor Certificates, Series B, net of current maturities | $ 15,125,000 | 14,423,000 |
Secured Investor Certificates, Series C, net of current maturities | 6,457,000 | 7,536,000 |
Secured Investor Certificates, Series D | 5,045,000 | 3,447,000 |
Total liabilities | 28,445,372 | 27,997,809 |
Stockholders' Equity | ||
Common stock, par value $.01 per share, Authorized, 30,000,000 shares, Issued and outstanding, 1,677,798 shares at September 30, 2015 and December 31, 2014, respectively | 16,778 | 16,778 |
Additional paid-in capital | 19,113,458 | 19,113,458 |
Accumulated deficit | (6,571,083) | (6,419,265) |
Total stockholders' equity | 12,559,153 | 12,710,971 |
Total Liabilities and Stockholders' Equity | $ 41,004,525 | $ 40,708,780 |
Balance Sheets (Parenthetical)
Balance Sheets (Parenthetical) - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 |
Current Assets | ||
Current allowance for current maturities of mortgage loans recievable | $ 55,553 | $ 45,759 |
Current deferred origination fees for current mortgage loans recievable | 21,470 | 45,085 |
Allowance for mortgage loans recievable | 1,102,766 | 1,131,472 |
Deferred origination fees for mortgage loans recievable | 299,099 | 417,257 |
Accumulated amortization deferred offering costs | $ 942,138 | $ 844,443 |
Stockholders' Equity | ||
Common Stock, par value | $ 0.01 | $ 0.01 |
Common Stock, Authorized | 30,000,000 | 30,000,000 |
Common Stock, Issued | 1,677,798 | 1,677,798 |
Common Stock, Outstanding | 1,677,798 | 1,677,798 |
Statements of Operations
Statements of Operations - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Income Statement [Abstract] | ||||
Interest and Other Income | $ 728,782 | $ 680,645 | $ 2,254,675 | $ 2,116,967 |
Interest Expense | 503,441 | 438,620 | 1,493,017 | 1,326,705 |
Net Interest Income | 225,341 | 242,025 | 761,658 | 790,262 |
Provision for losses on mortgage loans receivable | 46,108 | 110,872 | 142,120 | 183,317 |
Net Interest Income after Provision for Mortgage Losses | 179,233 | 131,153 | 619,538 | 606,945 |
Operating Expenses | ||||
Other operating expenses | $ 154,616 | $ 145,615 | 473,406 | 458,536 |
Real estate impairment | 103,623 | 45,000 | ||
Operating Income | $ 24,617 | $ (14,462) | 146,132 | 103,409 |
Other Income | 380 | 4,053 | 9,206 | |
Net Income (Loss) | $ 24,617 | $ (14,082) | $ 150,185 | $ 112,615 |
Basic and Diluted (Loss) Income Per Share | $ .01 | $ (.01) | $ .09 | $ .07 |
Dividends Declared Per Share | $ .04 | $ .10 | $ .18 | $ .28 |
Weighted Average Common Shares Outstanding - Basic and Diluted | 167,798 | 167,798 | 1,677,798 | 1,677,798 |
Statements of Cash Flows
Statements of Cash Flows - USD ($) | 9 Months Ended | |
Sep. 30, 2015 | Sep. 30, 2014 | |
Cash Flows from Operating Activities | ||
Net income | $ 150,185 | $ 112,615 |
Impairment on real estate held for sale | 103,623 | 45,000 |
Provision for losses on mortgage loans receivable | 142,120 | 183,317 |
Amortization of loan origination discounts | (141,773) | 27,444 |
Amortization of deferred costs | 97,695 | 77,120 |
Accounts receivable | 54,144 | (70,008) |
Interest receivable | (34,009) | (7,376) |
Prepaid expenses | (2,817) | (2,438) |
Accounts payable | 50,831 | 3,738 |
Net cash provided by operating activities | 419,999 | 369,412 |
Cash Flows from Investing Activities | ||
Investment in mortgage loans | (1,242,335) | (1,234,841) |
Collections of mortgage loans | 4,470,581 | 2,529,305 |
Investment in bonds | (1,406,053) | (1,983,250) |
Proceeds from bonds | 142,275 | 1,078,693 |
Net cash provided by investing activities | 1,964,468 | 389,907 |
Cash Flows from Financing Activities | ||
Proceeds from secured investor certificates | 1,593,000 | 1,361,000 |
Payments on secured investor certificate maturities | (1,034,000) | (1,076,000) |
Payments for deferred costs | (104,192) | (143,230) |
Dividends paid | (402,672) | (453,005) |
Net cash provided by (used for) financing activities | 52,136 | (311,235) |
Net Increase (Decrease) in Cash and Equivalents | 2,436,603 | 448,084 |
Cash and Equivalents - Beginning | 3,767,102 | 3,143,377 |
Cash and Equivalents - Ending | $ 6,203,705 | $ 3,591,461 |
Statements of Cash Flows (Paren
Statements of Cash Flows (Parenthetical) - USD ($) | 9 Months Ended | |
Sep. 30, 2015 | Sep. 30, 2014 | |
Statement of Cash Flows [Abstract] | ||
Dividends payable | $ 67,112 | $ 167,780 |
Loan origination fees | 70,145 | |
Interest paid | $ 1,395,322 | $ 1,326,705 |
Summary Of Significant Accounti
Summary Of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2015 | |
Accounting Policies [Abstract] | |
Summary Of Significant Accounting Policies | 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying unaudited financial statements have been prepared in accordance with the instructions for interim statements and, therefore, do not include all information and disclosures necessary for fair presentation of results of operations, financial position, and changes in cash flow in conformity with generally accepted accounting principles. 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 periods presented. The unaudited financial statements of the Company should be read in conjunction with the December 31, 2014 audited financial statements included in the Companys Annual Report on Form 10-K, as filed with the Securities and Exchange Commission for the year ended December 31, 2014. Operating results for the periods presented are not necessarily indicative of the results that may be expected for the year ending December 31, 2015. Nature of Business American Church Mortgage Company, a Minnesota corporation, was incorporated on May 27, 1994. The Company was organized to engage primarily in the business of making mortgage loans to churches and other nonprofit religious organizations throughout the United States, on terms established for individual organizations. Accounting Estimates Management uses estimates and assumptions in preparing these financial statements in accordance with accounting principles generally accepted in the United States of America. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could differ from those estimates. The most sensitive estimates relate to the realizability of the mortgage loans receivable, the valuation of the bond portfolio and real estate held for sale. It is at least reasonably possible that these estimates could change in the near term and that the effect of the change, if any, may be material to the financial statements. Concentration of Credit Risk The Company's loans have been granted to churches and other non-profit religious organizations. The ability of the Companys debtors to honor their contracts is dependent on member contributions and the involvement in the church or organization of its senior pastor. Cash and Equivalents The Company considers all highly liquid debt instruments purchased with maturities of three months or less to be cash equivalents. The Company maintains accounts primarily at two financial institutions. At times throughout the year, the Companys 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 approximately $115,049 and $569,505 in money market fund accounts at September 30, 2015 and December 31, 2014, respectively. The Company has not experienced any losses in such accounts. Bond Portfolio The Company accounts for the bond portfolio under the Accounting Standards Codification (ASC) 320. The Company classifies the bond portfolio as available-for-sale and measures the portfolio at fair value. While the bonds are generally held until contractual maturity, the Company classifies them as available-for-sale as the bonds may be used to repay secured investor certificates or provide additional liquidity or working capital in the short term. The Company has classified $50,000 and $805,500 in bonds as current assets as of September 30, 2015 and December 31, 2014, respectively, based on managements estimates for liquidity requirements and contractual maturities of certain bonds maturing in 2016 and 2015, 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 Companys 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 Companys 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, 2015, the Company provided $1,158,319 for eighteen mortgage loans, of which nine totaling approximately $3,906,869 are three or more mortgage payments in arrears, two loans totaling approximately $1,003,976 are declared to be in default and two loans totaling approximately $596,809 are in the foreclosure process. At December 31, 2014, the Company provided $1,177,231 for seventeen mortgage loans, of which nine totaling approximately $4,641,000 were three or more mortgage payments in arrears, four loans totaling approximately $1,598,000 were declared to be in default and one loan totaling approximately $577,000 is in the foreclosure process. A summary of transactions in the allowance for credit losses for the six months ended September 30, 2015 is as follows: Balance at December 31, 2014 $ 1,177,231 Provision for additional losses 138,964 Charge-offs (157,876 ) Balance at September 30, 2015 $ 1,158,319 The total impaired loans, which are loans that are in the foreclosure process or are declared to be in default, were approximately $1,600,785 and $2,174,000 at September 30, 2015 and December 31, 2014, respectively, which the Company believes are adequately secured by the underlying collateral and the allowance for mortgage loans. Approximately $549,000 and $638,000 of the Companys allowance for mortgage loans was allocated to impaired loans at September 30, 2015 and December 31, 2014, respectively. The Company will declare a loan to be in default and will place the loan on non-accrual status when the following thresholds have been met: (i) the borrower has missed three consecutive mortgage payments; (ii) the borrower has not communicated to the Company any legitimate reason for delinquency in its payments to the Company and has not arranged for the re-continuance of payments; (iii) lines of communication to the borrower have broken down such that any reasonable prospect of rehabilitating the loan and return of regular payments is gone. The Companys 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 Companys policy or deemed to be doubtful of collection, the loan committee of the Advisor to the Company will direct the staff to charge-off the uncollectable receivables. Loans totaling approximately $3,907,000 and $4,641,000 exceeded 90 days past due and no longer are accruing interest at September 30, 2015 and December 31, 2014, respectively. The Company believes that the loans are well secured, not deemed to be in default and the Company is actively pursuing collection of past due payments. The recorded investment in loans on nonaccrual status was approximately $5,508,000 and $6,815,000 at September 30, 2015 and December 31, 2014, respectively. During the nine months ended September 30, 2015, one loan was modified under a troubled debt restructure in the amount of $1,099,600. The modified terms provided forbearance on missed payments as well as a reduction in the interest rate charged on the loan balance. Real Estate Held for Sale As of September 30, 2015, the Company had four properties acquired through foreclosure, and one via deed in lieu of foreclosure, with outstanding balances totaling approximately $1,498,000. 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 this 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 $891,000 as of September 30, 2015 net of an impairment reserve of approximately $607,000. There was no impairment on real estate held for sale during the nine and three months ended September 30, 2015. 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. 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. |
Fair Value Measurements
Fair Value Measurements | 9 Months Ended |
Sep. 30, 2015 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | 2. FAIR VALUE MEASUREMENTS The Company measures certain financial instruments at fair value in our balance sheets. The fair value of these instruments is based on valuations that include inputs that can be classified within one of the three levels of a hierarchy. Level 1 inputs include quoted market prices in an active market for identical assets or liabilities. Level 2 inputs are market data, other than Level 1, that are observable either directly or indirectly. Level 2 inputs include quoted market prices for similar assets or liabilities, quoted market prices in an inactive market, and other observable information that can be corroborated by market data. Level 3 inputs are unobservable and corroborated by little or no market data. Except for the bond portfolio, which is required by authoritative accounting guidance to be recorded at fair value in our Balance Sheets, the Company elected not to record any other financial assets or liabilities at fair value on a recurring basis. We recorded an aggregate allowance for losses on our Agape bonds (see Note 3), which totaled $200,000 for the both the six month period ended September 30, 2015 and the year ended December 31, 2014. The following table summarizes the Companys financial instruments that were measured at fair value on a recurring basis: Fair Value Measurement September 30, 2015 Fair Value Level 3 Bond portfolio $ 10,072,381 $ 10,072,381 Fair Value Measurement December 31, 2014 Fair Value Level 3 Bond portfolio $ 8,808,603 $ 8,808,603 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, 2014 $8,808,603 Purchases 1,406,053 Proceeds (142,275 Balance at September 30, 2015 $ 10,072,381 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 $0 and $45,000 for the periods ended September 30, 2015 and 2014, respectively. The fair value of impaired loans was based upon the Companys loan loss policy, which is Level 3 input. The Company provided an additional provision of $142,120 and $183,317 for loan losses at September 30, 2015 and 2014, respectively. The following table summarizes the Companys financial instruments that were measured at fair value on a nonrecurring basis: September 30, 2015 Level 1 Level 2 Level 3 Fair Value at Impaired loans $ $ $ 1,086,661 $ 1,086,661 Real estate held for resale 890,527 890,527 $ $ 890,527 $ 1,086,661 $ 1,977,188 December 31, 2014 Level 1 Level 2 Level 3 Fair Value at December 31, Impaired loans $ $ $ 1,536,006 $ 1,536,006 Real estate held for resale 517,422 517,422 $ $ 517,422 $ 1,536,006 $ 2,053,428 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, 2014 $ 1,536,006 $ 517,422 Additions/Acquisitions 462,922 576,728 Dispositions/Proceeds (824,214 ) (100,000 ) Provision for other than temporary losses (88,053 ) (103,623 ) Balance at September 30, 2015 $ 1,086,661 $ 890,527 |
Mortgage Loans Receivable and B
Mortgage Loans Receivable and Bond Portfolio | 9 Months Ended |
Sep. 30, 2015 | |
Notes to Financial Statements | |
Mortgage Loans Receivable and Bond Portfolio | 3. MORTGAGE LOANS RECEIVABLE AND BOND PORTFOLIO At September 30, 2015, the Company had mortgage loans receivable totaling $24,086,725. The loans bear interest ranging from 1.00% to 10.25% with a weighted average of approximately 8.36% at September 30, 2015. The Company had mortgage loans receivable totaling $28,014,330 that bore interest ranging from 1.00% to 10.25% with a weighted average of approximately 8.40% at December 31, 2014. The Company has a portfolio of secured church bonds at September 30, 2015 and December 31, 2014, which are carried at fair value. The bonds pay either semi-annual or quarterly interest ranging from 4.00% to 9.75%. The aggregate value of secured church bonds equaled approximately $10,272,381 at September 30, 2015 with a weighted average interest rate of 6.93% and approximately $9,008,603 at December 31, 2014 with a weighted average interest rate of 7.15%. These bonds are due at various maturity dates through April 2040. The contractual maturity schedule for mortgage loans receivable and the bond portfolio as of September 30, 2015, is as follows: Mortgage Loans Bond Portfolio October 1, 2015 through September 30, 2016 $ 1,156,944 $ 50,000 October 1, 2016 through December 31, 2016 1,341,529 34,000 2017 1,671,118 78,000 2018 1,365,477 116,000 2019 1,065,014 110,000 Thereafter 17,486,643 9,884,381 24,086,725 10,272,381 Less loan loss and bond loss allowances (1,158,319) (200,000) Less deferred origination income (320,569 ______-__ Totals $ 22,607,837 $ 10,072,381 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, in excess 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, 2015 and December 31, 2014, which effectively reduces the bonds to the fair value amount management believes will be recovered. |
Secured Investor Certificates
Secured Investor Certificates | 9 Months Ended |
Sep. 30, 2015 | |
Notes to Financial Statements | |
Secured Investor Certificates | 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 6.56% and 6.58% at September 30, 2015 and December 31, 2014, respectively. Holders of the secured investor certificates may renew certificates at the current rates and terms upon maturity at the Companys discretion. Renewals upon maturity are considered neither proceeds from nor issuance of secured investor certificates. Renewals totaled approximately $172,000 and $740,000 for the nine months ended September 30, 2015 and 2014, 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, 2015 is as follows: October 1, 2015 through September 30, 2016 $ 1,678,000 October 1, 2016 through December 31, 2016 2,067,000 2017 2,803,000 2018 4,116,000 2019 2,232,000 Thereafter 15,409,000 Totals $ 28,305,000 |
Fair Value Of Financial Instrum
Fair Value Of Financial Instruments | 9 Months Ended |
Sep. 30, 2015 | |
Notes to Financial Statements | |
Fair Value Of Financial Instruments | 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, 2015 and December 31, 2014, 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 managements estimate of the underlying value of the Company. The estimated fair values of the Companys financial instruments, none of which are held for trading purposes, are as follows: September 30, 2015 December 31, 2014 Carrying Fair Carrying Fair Amount Value Amount Value Cash and equivalents $ 6,203,705 $ 6,203,705 $ 3,767,102 $ 3,767,102 Accounts receivable 190,981 190,981 245,125 245,125 Interest receivable 162,909 162,909 128,900 128,900 Mortgage loans receivable 24,086,725 29,116,943 28,014,330 34,117,383 Bond portfolio 10,072,381 10,072,381 9,008,603 9,008,603 Secured investor certificates 28,305,000 36,284,927 27,746,000 37,500,487 The following methods and assumptions were used by the Company to estimate the fair value of each class of financial instrument for which it is practicable to estimate that value: Cash and equivalents Due to their short-term nature, the carrying amount of cash and cash equivalents approximates fair value. Accounts receivable 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. |
Summary Of Significant Accoun12
Summary Of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2015 | |
Accounting Policies [Abstract] | |
Basis Of Presentation | Basis of Presentation The accompanying unaudited financial statements have been prepared in accordance with the instructions for interim statements and, therefore, do not include all information and disclosures necessary for fair presentation of results of operations, financial position, and changes in cash flow in conformity with generally accepted accounting principles. 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 periods presented. The unaudited financial statements of the Company should be read in conjunction with the December 31, 2014 audited financial statements included in the Companys Annual Report on Form 10-K, as filed with the Securities and Exchange Commission for the year ended December 31, 2014. Operating results for the periods presented are not necessarily indicative of the results that may be expected for the year ending December 31, 2015. |
Nature of Business | Nature of Business American Church Mortgage Company, a Minnesota corporation, was incorporated on May 27, 1994. The Company was organized to engage primarily in the business of making mortgage loans to churches and other nonprofit religious organizations throughout the United States, on terms established for individual organizations. |
Accounting Estimates | Accounting Estimates Management uses estimates and assumptions in preparing these financial statements in accordance with accounting principles generally accepted in the United States of America. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could differ from those estimates. The most sensitive estimates relate to the realizability of the mortgage loans receivable, the valuation of the bond portfolio and real estate held for sale. It is at least reasonably possible that these estimates could change in the near term and that the effect of the change, if any, may be material to the financial statements. |
Concentration of Credit Risk | Concentration of Credit Risk The Company's loans have been granted to churches and other non-profit religious organizations. The ability of the Companys debtors to honor their contracts is dependent on member contributions and the involvement in the church or organization of its senior pastor. |
Cash and Equivalents | Cash and Equivalents The Company considers all highly liquid debt instruments purchased with maturities of three months or less to be cash equivalents. The Company maintains accounts primarily at two financial institutions. At times throughout the year, the Companys 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 approximately $115,049 and $569,505 in money market fund accounts at September 30, 2015 and December 31, 2014, respectively. The Company has not experienced any losses in such accounts. |
Bond Portfolio | Bond Portfolio The Company accounts for the bond portfolio under the Accounting Standards Codification (ASC) 320. The Company classifies the bond portfolio as available-for-sale and measures the portfolio at fair value. While the bonds are generally held until contractual maturity, the Company classifies them as available-for-sale as the bonds may be used to repay secured investor certificates or provide additional liquidity or working capital in the short term. The Company has classified $50,000 and $805,500 in bonds as current assets as of September 30, 2015 and December 31, 2014, respectively, based on managements estimates for liquidity requirements and contractual maturities of certain bonds maturing in 2016 and 2015, respectively. |
Allowance for Mortgage Loans Receivable | Allowance for Mortgage Loans Receivable The Company records mortgage loans receivable at estimated net realizable value, which is the unpaid principal balances of the mortgage loans receivable, less the allowance for mortgage loans. The Companys 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 Companys 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, 2015, the Company provided $1,158,319 for eighteen mortgage loans, of which nine totaling approximately $3,906,869 are three or more mortgage payments in arrears, two loans totaling approximately $1,003,976 are declared to be in default and two loans totaling approximately $596,809 are in the foreclosure process. At December 31, 2014, the Company provided $1,177,231 for seventeen mortgage loans, of which nine totaling approximately $4,641,000 were three or more mortgage payments in arrears, four loans totaling approximately $1,598,000 were declared to be in default and one loan totaling approximately $577,000 is in the foreclosure process. A summary of transactions in the allowance for credit losses for the six months ended September 30, 2015 is as follows: Balance at December 31, 2014 $ 1,177,231 Provision for additional losses 138,964 Charge-offs (157,876 ) Balance at September 30, 2015 $ 1,158,319 The total impaired loans, which are loans that are in the foreclosure process or are declared to be in default, were approximately $1,600,785 and $2,174,000 at September 30, 2015 and December 31, 2014, respectively, which the Company believes are adequately secured by the underlying collateral and the allowance for mortgage loans. Approximately $549,000 and $638,000 of the Companys allowance for mortgage loans was allocated to impaired loans at September 30, 2015 and December 31, 2014, respectively. The Company will declare a loan to be in default and will place the loan on non-accrual status when the following thresholds have been met: (i) the borrower has missed three consecutive mortgage payments; (ii) the borrower has not communicated to the Company any legitimate reason for delinquency in its payments to the Company and has not arranged for the re-continuance of payments; (iii) lines of communication to the borrower have broken down such that any reasonable prospect of rehabilitating the loan and return of regular payments is gone. The Companys 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 Companys policy or deemed to be doubtful of collection, the loan committee of the Advisor to the Company will direct the staff to charge-off the uncollectable receivables. Loans totaling approximately $3,907,000 and $4,641,000 exceeded 90 days past due and no longer are accruing interest at September 30, 2015 and December 31, 2014, respectively. The Company believes that the loans are well secured, not deemed to be in default and the Company is actively pursuing collection of past due payments. The recorded investment in loans on nonaccrual status was approximately $5,508,000 and $6,815,000 at September 30, 2015 and December 31, 2014, respectively. During the nine months ended September 30, 2015, one loan was modified under a troubled debt restructure in the amount of $1,099,600. The modified terms provided forbearance on missed payments as well as a reduction in the interest rate charged on the loan balance. |
Real Estate Held for Sale | Real Estate Held for Sale As of September 30, 2015, the Company had four properties acquired through foreclosure, and one via deed in lieu of foreclosure, with outstanding balances totaling approximately $1,498,000. 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 this 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 $891,000 as of September 30, 2015 net of an impairment reserve of approximately $607,000. There was no impairment on real estate held for sale during the nine and three months ended September 30, 2015. |
Carrying Value of Long-Lived Assets | Carrying Value of Long-Lived Assets The Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that the carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed of significantly before the end of the estimated useful life. Recoverability is assessed based on the carrying amount of the asset compared to the sum of the undiscounted cash flows expected to result from the use and the eventual disposal of the asset, as well as specific appraisal in certain instances. An allowance for losses is recognized when the carrying amount is deemed not recoverable and exceeds fair value as determined through various valuation techniques including, but not limited to, discounted cash flow models, quoted market values, and third party independent appraisals. |
Revenue Recognition | Revenue Recognition Interest income on mortgage loans receivable and the bond portfolio is recognized as earned. Other income included with interest represents cash received for loan origination fees, which are recognized over the life of the loan as an adjustment to the yield on the loan. |
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 Per Common Share | 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. |
Summary Of Significant Accoun13
Summary Of Significant Accounting Policies (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Accounting Policies [Abstract] | |
Allowance For Mortgage Loans Receivable | Balance at December 31, 2014 $ 1,177,231 Provision for additional losses 138,964 Charge-offs (157,876 ) Balance at September 30, 2015 $ 1,158,319 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurement Bond Portfolio | Fair Value Measurement September 30, 2015 Fair Value Level 3 Bond portfolio $ 10,072,381 $ 10,072,381 Fair Value Measurement December 31, 2014 Fair Value Level 3 Bond portfolio $ 8,808,603 $ 8,808,603 |
Changes In Fair Value Bond Portfolio | Bond Portfolio Balance at December 31, 2014 $8,808,603 Purchases 1,406,053 Proceeds (142,275 Balance at September 30, 2015 $ 10,072,381 |
Fair Value Measurements Financial Instruments | September 30, 2015 Level 1 Level 2 Level 3 Fair Value at Impaired loans $ $ $ 1,086,661 $ 1,086,661 Real estate held for resale 890,527 890,527 $ $ 890,527 $ 1,086,661 $ 1,977,188 December 31, 2014 Level 1 Level 2 Level 3 Fair Value at December 31, Impaired loans $ $ $ 1,536,006 $ 1,536,006 Real estate held for resale 517,422 517,422 $ $ 517,422 $ 1,536,006 $ 2,053,428 |
Changes in Fair Value Financial Instruments | Fair Value Measurement Level 3 Fair Value Measurement Level 2 Impaired Loans Real Estate Held for Sale Balance at December 31, 2014 $ 1,536,006 $ 517,422 Additions/Acquisitions 462,922 576,728 Dispositions/Proceeds (824,214 ) (100,000 ) Provision for other than temporary losses (88,053 ) (103,623 ) Balance at September 30, 2015 $ 1,086,661 $ 890,527 |
Mortgage Loans Receivable and15
Mortgage Loans Receivable and Bond Portfolio (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Notes to Financial Statements | |
Contractual Maturity Schedule Mortgage Loans and Bonds | Mortgage Loans Bond Portfolio October 1, 2015 through September 30, 2016 $ 1,156,944 $ 50,000 October 1, 2016 through December 31, 2016 1,341,529 34,000 2017 1,671,118 78,000 2018 1,365,477 116,000 2019 1,065,014 110,000 Thereafter 17,486,643 9,884,381 24,086,725 10,272,381 Less loan loss and bond loss allowances (1,158,319) (200,000) Less deferred origination income (320,569 ______-__ Totals $ 22,607,837 $ 10,072,381 |
Secured Investor Certificates (
Secured Investor Certificates (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Notes to Financial Statements | |
Maturity Schedule Secured Investor Certificates | October 1, 2015 through September 30, 2016 $ 1,678,000 October 1, 2016 through December 31, 2016 2,067,000 2017 2,803,000 2018 4,116,000 2019 2,232,000 Thereafter 15,409,000 Totals $ 28,305,000 |
Fair Value Of Financial Instr17
Fair Value Of Financial Instruments (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Notes to Financial Statements | |
Fair Value Of Financial Instruments | September 30, 2015 December 31, 2014 Carrying Fair Carrying Fair Amount Value Amount Value Cash and equivalents $ 6,203,705 $ 6,203,705 $ 3,767,102 $ 3,767,102 Accounts receivable 190,981 190,981 245,125 245,125 Interest receivable 162,909 162,909 128,900 128,900 Mortgage loans receivable 24,086,725 29,116,943 28,014,330 34,117,383 Bond portfolio 10,072,381 10,072,381 9,008,603 9,008,603 Secured investor certificates 28,305,000 36,284,927 27,746,000 37,500,487 |
Fair Value Measurements - Allow
Fair Value Measurements - Allowance For Credit Losses (Details) ( USD $) | 9 Months Ended |
Sep. 30, 2014USD ($) | |
Fair Value Measurements - Allowance For Credit Losses Details Usd | |
Balance at December 31, 2014 | $ 1,177,231 |
Provision for additional losses | 138,964 |
Charge-offs | (157,876) |
Balance at September 30, 2015 | $ 1,158,319 |
Fair Value Measurements - Fair
Fair Value Measurements - Fair Value Measurement Bond Portfolio (Details) - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 | Sep. 30, 2014 | Dec. 31, 2013 |
Gross Bond portfolio | $ 10,072,381 | $ 8,808,603 | $ 9,973,790 | $ 8,808,603 |
Fair Value Measurement Level 3 | ||||
Gross Bond portfolio | $ 10,072,381 | $ 8,808,603 |
Fair Value Measurements - Chang
Fair Value Measurements - Changes In Fair Value Bond Portfolio (Details) | 9 Months Ended |
Sep. 30, 2014USD ($) | |
Fair Value Disclosures [Abstract] | |
Balance at December 31, 2014 | $ 8,808,603 |
Bond Purchases | 4,053 |
Bond Proceeds | (121,866) |
Balance at September 30, 2015 | $ 9,973,790 |
Fair Value Measurements - Fai21
Fair Value Measurements - Fair Value Measurements Financial Instruments (Details) - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 |
Impaired Loans | $ 1,086,661 | $ 1,536,006 |
Real estate held for resale | 890,527 | 517,422 |
Total Fair Value Measurement | $ 1,977,188 | $ 2,053,428 |
Fair Value Measurment Level 1 | ||
Impaired Loans | ||
Real estate held for resale | ||
Total Fair Value Measurement | ||
Fair Value Measurement Level 2 | ||
Impaired Loans | ||
Real estate held for resale | $ 890,527 | $ 517,422 |
Total Fair Value Measurement | 890,527 | 517,422 |
Fair Value Measurement Level 3 | ||
Impaired Loans | $ 1,086,661 | $ 1,536,006 |
Real estate held for resale | ||
Total Fair Value Measurement | $ 1,086,661 | $ 1,536,006 |
Fair Value Measurements - Cha22
Fair Value Measurements - Changes in Fair Value Financial Instruments (Details) | 9 Months Ended |
Sep. 30, 2015USD ($) | |
Fair Value Measurement Level 3 | |
Balance at December 31, 2014 | $ 1,536,006 |
Additions/Acquisitions | 462,922 |
Dispositions/Proceeds | (824,214) |
Impairment for other than temporary losses | (88,053) |
Balance at September 30, 2015 | 1,086,661 |
Fair Value Measurement Level 2 | |
Balance at December 31, 2014 | 462,922 |
Additions/Acquisitions | 576,728 |
Dispositions/Proceeds | (100,000) |
Impairment for other than temporary losses | (103,623) |
Balance at September 30, 2015 | $ 890,527 |
Mortgage Loans Receivable and23
Mortgage Loans Receivable and Bond Portfolio - Contractual Maturity Schedule Mortgage Loans and Bonds (Details) | Sep. 30, 2015USD ($) |
Mortgage Loans | |
July 1, 2015 through June 30, 2016 | $ 1,156,944 |
July 1, 2016 through December 31, 2016 | 1,341,529 |
2,017 | 1,671,118 |
2,018 | 1,365,477 |
2,019 | 1,065,014 |
Thereafter | 17,486,643 |
Subtotal | 24,086,725 |
Less loan loss and bond loss allowances | (1,158,319) |
Less deferred origination income | (320,569) |
Totals | 22,607,837 |
Bond Portfolio | |
July 1, 2015 through June 30, 2016 | 50,000 |
July 1, 2016 through December 31, 2016 | 34,000 |
2,017 | 78,000 |
2,018 | 116,000 |
2,019 | 110,000 |
Thereafter | 9,884,381 |
Subtotal | 10,272,381 |
Less loan loss and bond loss allowances | $ (200,000) |
Less deferred origination income | |
Totals | $ 10,072,381 |
Secured Investor Certificates -
Secured Investor Certificates - Maturity Schedule Secured Investor Certificates (Details) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | 147 Months Ended | |||
Dec. 31, 2016 | Sep. 30, 2015 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2016 | Mar. 31, 2032 | |
Secured Investor Certificate Maturity Schedule | $ 28,305,000 | ||||||
Secured Investor Certificates | |||||||
Secured Investor Certificate Maturity Schedule | $ 2,067,000 | $ 2,232,000 | $ 4,116,000 | $ 2,803,000 | $ 1,678,000 | $ 15,409,000 |
Fair Value Of Financial Instr25
Fair Value Of Financial Instruments - Fair Value Of Financial Instruments (Details) - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 |
Interest receivable | $ 162,909 | $ 128,900 |
Carrying Value Disclosure | ||
Cash and equivalents | 6,203,705 | 3,767,102 |
Accounts receivable | 190,981 | 245,125 |
Interest receivable | 162,909 | 128,900 |
Mortgage loans receivable | 24,086,725 | 28,014,330 |
Bond portfolio | 10,072,381 | 9,008,603 |
Secured investor certificates | 28,305,000 | 27,746,000 |
Fair Value Disclosure | ||
Cash and equivalents | 6,203,705 | 3,767,102 |
Accounts receivable | 190,981 | 245,125 |
Interest receivable | 162,909 | 128,900 |
Mortgage loans receivable | 29,116,943 | 34,117,383 |
Bond portfolio | 10,027,381 | 9,008,603 |
Secured investor certificates | $ 36,284,927 | $ 37,500,487 |
Summary Of Significant Accoun26
Summary Of Significant Accounting Policies (Details Narrative) - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 |
Accounting Policies [Abstract] | ||
Money Market Funds | $ 115,049 | $ 569,505 |
Bond Portfolio | 50,000 | 805,500 |
Allowance for Mortgage Loans Receivable | 1,158,319 | 1,177,231 |
Impaired Loans | 1,600,785 | 2,174,000 |
Loans Exceeding 90 Days Past Due | 3,907,000 | 4,641,000 |
Foreclosed Properties | 596,809 | 577,000 |
Real Estate Held for Sale Carrying Value | 890,527 | 517,422 |
Allowance Allocated to Impaired Loans | 549,000 | $ 638,000 |
Loan Impairment | 607,000 | |
Total Loans On Nonaccrual Status | 5,508,000 | $ 6,815,000 |
Loans In Default | 1,003,976 | $ 1,598,000 |
Troubled Debt Restructure | $ 1,099,600 |
Fair Value Measurements (Detail
Fair Value Measurements (Details Narrative) - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 |
Fair Value Disclosures [Abstract] | ||
Loan Loss Reserve Church Bonds | $ 200,000 | $ 200,000 |
Impairment For Losses on Real Estate | 45,000 | |
Loan Loss Impaired Loans | $ 142,120 | $ 183,317 |
Mortgage Loans Receivable and28
Mortgage Loans Receivable and Bond Portfolio (Details Narrative) - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 |
Notes to Financial Statements | ||
Mortgage Loans Receivable Gross | $ 24,086,725 | $ 28,014,033 |
Church Bonds Owned Gross | 10,272,381 | 9,008,603 |
Bond Reserve Fund | 200,000 | $ 200,000 |
Agape First Mortgage Bonds | 637,000 | |
Agape Second Mortgage Bonds | 497,000 | |
Agape First Mortgage Bonds Gross | 7,200,000 | |
Agape Second Mortgage Bonds Gross | $ 715,000 |
Secured Investor Certificates29
Secured Investor Certificates (Details Narrative) - USD ($) | Sep. 30, 2015 | Sep. 30, 2014 |
Notes to Financial Statements | ||
Renewals Secured Investor Certificates | $ 172,000 | $ 740,000 |