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, 20092010 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, 2009.2010. Operating results for the periods presented are not necessarily indicative of the results that may be expected for the year ending December 31, 2010.

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.

Management uses estimates and assumptions in preparing these financial statements in accordance with accounting principles generally accepted accounting principles.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.

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 approximately $156,000$11,000 and $5,000 in money market fund accounts at June 30, 2010March 31, 2011 and December 31, 2009,2010, respectively. The Company has not experienced any losses in such accounts.

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 $320,000$789,000 and $960,000$627,000 in bonds as current assets as of June 30, 2010March 31, 2011 and December 31, 2009,2010, respectively, based on management’s estimates for liquidity requirements and contractual maturities of certain bonds maturing in 2011 and 2010, respectively.

The Company records mortgage loans receivable at estimated net realizable value, which is the unpaid principal balances of the mortgage loans receivable, and accounts receivable, less the allowance for mortgage loan losses.loans. The Company’s loan policy provides an allowance for estimated uncollectible loans based on an evaluation of the current status of the loan portfolio. This policy reserves 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 provisionan allowance 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 dec lareddeclared to be in default.default and are in the foreclosure process. At June 30, 2010,March 31, 2011, the Company reserved $618,131$757,392 for seventeensixteen mortgage loans, of which eightten are three or more mortgage payments in arrears. Three of the loans are in the foreclosure process. At December 31, 2009,2010, the Company reserved $475,960$711,829 for sixteen mortgage loans, of which seventen were three or more mortgage payments in arrears. TwoThree of the loans were in the foreclosure process.

A summary of transactions in the allowance for credit losses for the three and six months ended June 30, 2010March 31, 2011 is as follows:

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.

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 certain reclassifications to income for the balance sheetpurpose of calculating earnings per share, as of December 31, 2009, to conform to classifications adopted as of June 30, 2010.  These reclassifications hadthere were no effect on net income (loss) or stockholders’ equity.

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 additional $100,000 impairment chargeallowances for losses on our St. Agnes and Agape bonds at(Note 3), which totaled $0 and $200,000 for the periods ended March 31, 2011 and December 31, 2009 (see Note 32010, respectively. Total allowance for more information).  Total impairment charges forlosses on our bond portfolio equaled $500,000$700,000 at June 30, 2010March 31, 2011 and December 31, 2009.

We determine the fair value of the bond portfolio shown in the table above by comparing it with similar instruments in inactive markets as well as using widely accepted valuation techniques, including, for example, discounted cash flow analysis on the expected cash flows of the bonds.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.

At June 30, 2010,March 31, 2011, the Company had first mortgage loans receivable totaling $31,268,103.$30,999,322. The loans bear interest ranging from 5.00% to 10.25% with a weighted average of approximately 8.70%8.36% at June 30, 2010.March 31, 2011. The Company had first mortgage loans receivable totaling $31,453,578$31,430,505 that bore interest ranging from 5.00% to 10.25% with a weighted average of approximately 8.37%8.30% at December 31, 2009.

The contractual maturity schedule for mortgage loans receivable and the bond portfolio as of June 30, 2010,March 31, 2011, is as follows:

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 6.80%6.72% and 6.44%6.73% at June 30, 2010March 31, 2011 and December 31, 2009,2010, respectively. Holders of

The estimated maturity schedule for the secured investor certificates at June 30, 2010March 31, 2011 is as follows:

The Company commenced a stock repurchase program effective February 2, 2010 whereby it offers to shareholders on an ongoing basis and until(until terminated or modified by the Board of DirectorsDirectors) an exchange of one $1,000 principal amount Series C secured investor certificate for 200 shares of common stock of the Company, and, with respect to odd-lotsodd-lot holders above 200 shares converted into certificates, the sum of $5.00 cash for odd-lot share or portion thereof.each remaining share. This exchange ratio was determined by management and approved by the Board of Directors, and was established as a basis for the completion of the exchange offer. This ratio was not intended to represent the amount at which the Company or any other party would be expected to purchase common stock in an arm’s-length transaction. The Company’s Board of Director sDirectors has approved up to 1,000,000 shares to be repurchased. As of June 30, 2010,March 31, 2011, requests representing approximately 500,000532,000 shares have been submitted for share exchanges. The Company exchanged 358,9712,769 shares during the three months ended June 30, 2010March 31, 2011 for 1,74413 Series C certificates ($13,000 in principal amount) and $50,855paid $845 in cash.

The Company has a $4,500,000$1.42 million line of credit with Beacon Bank until September 2010.  Advances on the line of credit are available up to $4,500,000, subject to borrowing base limitations.Bank. Interest on the line of credit is charged monthly at the prime rate with minimum interest of 5.00%.  If the prime rate becomes greater than 6.00%, the interest rate will be the prime rate less .50%, subject to a minimum interest rate of 6.00%. We had outstanding balances of $1,000,000 and $1,416,000 at March 31, 2011 and December 31, 2010, respectively. The line of credit is secured by a first priority security interest in substantially all of the Company’s assets other than collateral pledged to secure the Company’s Series A, Series

B and Series C secured investor certificates. The maturity date for the line is December 31, 2011, but, at the Company’s election, may be extended to December 31, 2012 if one half of the outstanding balance at December 31, 2010 is paid by December 31, 2011. The line of credit has various financial and non-financial covenants. At June 30, 2010 and DecemberMarch 31, 2009, t he interest rate on the line of credit was 5.00% with outstanding balances of $2,811,685 and $4,100,000, respectively.  Beacon Bank has advised2011, the Company that it will not renew the line of credit, which is due to be renewedwas in September 2010.  The Company is in discussionscompliance with another bank to provide a similar line of credit.  No formal agreement has been reached.

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. The Company paid the Advisor management fees of approximately $96,000$102,000 and $95,000$96,000 during the three monthsmonth periods ended June 30,March 31, 2011 and 2010, and 2009, respectively and $192,000 and $194,000 during the six months ended June 30, 2010 and 2009, respectively.

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 March 31, 2011 and December 31, 2010, 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:

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, 20092010 and other public filings and disclosures.  Investors and shareholders are urged to read these documents carefully.

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

We have completed four public offerings of common stock the last of which also includedand debt securities. We also completed a public offering of debt securities onIn October 7, 2006.  We sold $14,860,000 Series B Secured Investor Certificates of the $23,000,000 offered.  On October 29, 2009,2008, we filed a registration statement with the Securities and Exchange Commission for a public offering of $20,000,000 worth of Series C Secured Investor Certificates, which may be purchased in multiples of $1,000 at interest rates ranging from 5.25%4.50% to 7.25%, subject to changing market rates, and maturities from 4 to 7 and 13 to 20 years. The offering was declared effective by the Securities and Exchange Commission on March 30, 20092010 and amended in January 2010. At June 30, 2010,March 31, 2011, approximately 972 Seri es2,824 Series C certificates had been issued for $972,000.$2,824,000. The Company has also issued 1,7442,581 Series C certificates during the second quarter of 2010 throughin connection with its stock repurchase program.

We currently have seventy-twoseventy-one first mortgage loans aggregating $31,252,856$30,984,253 in principal amount, one second mortgage loan of $15,247$15,069 in principal amount and a first mortgage bond portfolio with par values aggregating $11,097,500.$11,001,500. 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.

Net income for the Company’s sixthree month periods ended June 30,March 31, 2011 and 2010 and 2009 was approximately $197,000$108,000 and $384,000,$220,000, respectively, on total interest and other income of approximately $1,691,000$788,000 and $1,901,000,$900,000, respectively. Interest and other income is comprised of interest from loans, interest from

We continually assess our loan portfolio and reserve for potential losses based on the payment history, status of loans, and market conditions. Due to changing economic conditions and the current status of and trends in our loan portfolio, which has seen a significant rise in both past due loans and loans in the foreclosure process, we made changes to our loan policy in fiscal 20092010 to permit us to accelerate the recording of allowances when amounts become past due. In addition, we have written off accrued interest on certain loans as a result of these changes. These changes to our loan loss policy have increased the amount of reserves against potential loan losses and our expense of past due amounts that are deemed doubtful of collection.

Historically, loans in our portfolio are outstanding for an average of just under threefour and a half 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 sixthree months ended June 30, 2010March 31, 2011 decreased to approximately $502,000$180,000 compared to $541,000$207,000 at June 30, 2009.March 31, 2010. The decrease is the result of lower costs associated with real estate held for sale.

No mortgage loans were paid in full during the sixthree months ended June 30, 2010.March 31, 2011. No new loans were funded during the sixthree months ended June 30, 2010.

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 origination fees of approximately $7,100 and $18,700 for the three and six months ended June 30, 2010, respectively, due to restructured loans.  We did not earn any origination fees for the three and six months ended June 30, 2009.

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, interest payments on secured investor certificates and our line of credit. Our liabilities at June 30, 2010March 31, 2011 are primarily comprised of: dividends declared as of June 30, 2010March 31, 2011 but not yet paid; our line of credit balance; 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.

For the sixthree months ended June 30, 2010,March 31, 2011, cash from operating activities decreased to approximately $473,000$165,000 from $537,000$306,000 from the comparative period ended June 30, 2009,March 31, 2010, primarily related to increased provisionsdecreases in the allowance for losses on mortgage loans receivable, amortization of loan origination discounts and interest receivable.

For the sixthree months ended June 30, 2010,March 31, 2011, cash provided by investing activities was approximately $1,534,000$403,000 compared to cash provided by investing activities of approximately $1,069,000$859,000 from the comparative sixthree months ended June 30, 2009,March 31, 2010, due to an increase in collections of mortgage loans, which was offset by a decrease in proceeds from bonds.

For the sixthree months ended June 30, 2010,March 31, 2011, cash used for financing activities increaseddecreased to approximately $1,691,000$422,000 from $1,683,000$836,000 for the comparative sixthree months ended June 30, 2009,March 31, 2010, primarily due to an increasea decrease in payments on our line of credit.

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.

We do not have any off-balance sheet arrangements.

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 June 30, 2010.March 31, 2011. 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 requir edrequired to be disclosed in reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal accounting officer, to allow timely decisions regarding required disclosure.  We continue to evaluate internal controls, particularly segregation of duties, to provide greater segregation and improve overall internal control.    Some of the remediation actions we have undertaken, and which continued during the quarter ended June 30, 2010  include, but are not limited to, the following: a) we have had an internal control review performed by an independent Board member who performs periodic testing of our internal controls and procedures; and b) we have established separate oversight of bank reconciliations and other cash management procedures by individuals who are not involved in the day to day operations of the Company.  In addition, we constantly monitor changes to financial reporting requirements.

During the three months ended June 30, 2010,March 31, 2011, 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.