Document and Entity Information
Document and Entity Information - USD ($) | 3 Months Ended | |
Mar. 31, 2016 | May. 13, 2016 | |
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 | Mar. 31, 2016 | |
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 | Q1 | |
Document Fiscal Year Focus | 2,016 |
Balance Sheets
Balance Sheets - USD ($) | Mar. 31, 2016 | Dec. 31, 2015 |
Statement of Financial Position [Abstract] | ||
Cash and equivalents | $ 4,861,399 | $ 4,377,110 |
Accounts receivable | 197,865 | 189,609 |
Interest receivable | 167,919 | 172,169 |
Current maturities of mortgage loans receivable, net of allowance of $56,576 and $57,663 and deferred origination fees of $21,658 and $23,406 at March 31, 2016 and December 31, 2015, respectively | 1,119,563 | 1,134,157 |
Current maturities of bond portfolio, at fair value | 63,000 | 84,000 |
Prepaid expenses | 14,517 | 19,904 |
Total current assets | 6,424,263 | 5,976,949 |
Mortgage Loans Receivable, net of current maturities, allowance of $1,152,450 and 1,147,170 and deferred origination fess of $319686 and $311,923 at March 31, 2016 and December 31, 2015, respectively | 22,850,306 | 22,680,542 |
Bond Portfolio, at fair value, net of current maturities | 10,350,428 | 10,429,428 |
Real Estate Held for Sale | 404,322 | 697,422 |
Deferred Offering Costs, net of accumulated amortization of $1,006,796 and $974,991 at March 31, 2016 and December 31, 2015, respectively | 850,029 | 861,810 |
Total Assets | 40,879,348 | 40,646,151 |
Current Liabilities | ||
Current maturities of secured investor certificates | 4,492,000 | 3,120,000 |
Accounts payable | 23,230 | 29,417 |
Dividends payable | 100,668 | 125,836 |
Total current liabilities | $ 4,615,898 | $ 3,275,253 |
Deposit on real estate held for sale | ||
Secured Investor Certificates, Series B, net of current maturities | $ 11,802,000 | $ 13,074,000 |
Secured Investor Certificates, Series C, net of current maturities | 6,574,000 | 6,723,000 |
Secured Investor Certificates, Series D | 5,843,000 | 5,329,000 |
Total liabilities | 28,834,898 | 28,401,253 |
Stockholders' Equity | ||
Common stock, par value $.01 per share, Authorized, 30,000,000 shares, Issued and outstanding, 1,677,798 shares at March 31, 2016 and December 31, 2015, respectively | 16,778 | 16,778 |
Additional paid-in capital | 19,113,458 | 19,113,458 |
Accumulated deficit | (7,085,786) | (6,885,338) |
Total stockholders' equity | 12,044,450 | 12,244,898 |
Total Liabilities and Stockholders' Equity | $ 40,879,348 | $ 40,646,151 |
Balance Sheets (Parenthetical)
Balance Sheets (Parenthetical) - USD ($) | Mar. 31, 2016 | Dec. 31, 2015 |
Current Assets | ||
Current allowance for current maturities of mortgage loans recievable | $ 56,576 | $ 57,663 |
Current deferred origination fees for current mortgage loans recievable | 21,658 | 23,406 |
Allowance for mortgage loans recievable | 1,152,450 | 1,147,170 |
Deferred origination fees for mortgage loans recievable | 319,686 | 311,923 |
Accumulated amortization deferred offering costs | $ 1,006,796 | $ 974,991 |
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 | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Income Statement [Abstract] | ||
Interest and Other Income | $ 676,564 | $ 711,713 |
Interest Expense | 499,319 | 489,650 |
Net Interest Income | 177,245 | 222,063 |
Provision for losses on mortgage loans receivable | 52,099 | $ 83,234 |
Provision for losses of bond portfolio | 60,000 | |
Net Interest Income after Provision for Mortgage Losses | 65,146 | $ 138,829 |
Operating Expenses | ||
Other operating expenses | 164,926 | 159,062 |
Operating (Loss) Income | $ (99,780) | (20,233) |
Other Income | 4,053 | |
Net (Loss) Income | $ (99,780) | $ (16,180) |
Basic and Diluted (Loss) Income Per Share | $ (.06) | $ (0.01) |
Dividends Declared Per Share | $ .06 | $ 0.09 |
Weighted Average Common Shares Outstanding - Basic and Diluted | 1,677,798 | 1,677,798 |
Statements of Cash Flows
Statements of Cash Flows - USD ($) | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Cash Flows from Operating Activities | ||
Net (loss) income | $ (99,780) | $ (16,180) |
Impairment on real estate held for sale | 19,173 | (54,253) |
Provision for losses on mortgage loans receivable | 52,099 | $ 83,234 |
Provision for losses of bond portfolio | 60,000 | |
Amortization of loan origination discounts | 6,000 | $ 48,188 |
Amortization of deferred costs | 31,805 | 32,328 |
Accounts receivable | (8,256) | 56,775 |
Interest receivable | 4,250 | (31,558) |
Prepaid expenses | 5,387 | (9,194) |
Accounts payable | 34,046 | 4,674 |
Net cash provided by operating activities | 104,724 | 114,014 |
Cash Flows from Investing Activities | ||
Investment in mortgage loans | (690,497) | (708,379) |
Collections of mortgage loans | $ 710,923 | 1,444,166 |
Investment in bonds | (4,053) | |
Proceeds from bonds | $ 40,000 | 121,866 |
Net cash provided by (used for) investing activities | 60,426 | 853,600 |
Cash Flows from Financing Activities | ||
Proceeds from secured investor certificates | 514,000 | 611,000 |
Payments on secured investor certificate maturities | (49,000) | (316,000) |
Payments for deferred costs | (20,025) | (26,387) |
Dividends paid | (125,836) | (167,780) |
Net cash provided by (used for) financing activities | 319,139 | 100,833 |
Net Increase (Decrease) in Cash and Equivalents | 484,289 | 1,068,447 |
Cash and Equivalents - Beginning | 4,377,110 | 3,767,102 |
Cash and Equivalents - Ending | $ 4,861,399 | $ 4,835,549 |
Statements of Cash Flows (Paren
Statements of Cash Flows (Parenthetical) - USD ($) | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Statement of Cash Flows [Abstract] | ||
Dividends payable | $ 100,668 | $ 151,002 |
Interest paid | 499,319 | 457,322 |
Non-cash investing activity: Real estate heolf for sale financed through mortgage loans receivable | $ 380,250 | $ 0 |
Summary Of Significant Accounti
Summary Of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2016 | |
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 period presented. The unaudited financial statements of the Company should be read in conjunction with the December 31, 2015 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, 2015. Operating results for the periods presented are not necessarily indicative of the results that may be expected for the year ending December 31, 2016. 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 $2,345,016 and $2,233,533 in money market fund accounts at March 31, 2016 and December 31, 2015, 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 $63,000 and $84,000 in bonds as current assets as of March 31, 2016 and December 31, 2015, respectively, based on managements estimates for liquidity requirements and contractual maturities of certain bonds maturing in 2017 and 2016, 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 March 31, 2016, the Company provided $1,209,026 for seventeen mortgage loans, of which eight totaling approximately $3,394,000 are three or more mortgage payments in arrears, two loans totaling approximately $1,226,000 are declared to be in default and two loans totaling approximately $611,000 are in the foreclosure process. At December 31, 2015, the Company provided $1,205,000 for eighteen mortgage loans, of which eight totaling approximately $3,724,000 were three or more mortgage payments in arrears, two loans totaling approximately $1,004,000 were declared to be in default and three loans totaling approximately $775,000 were in the foreclosure process. A summary of transactions in the allowance for credit losses for the three months ended March 31, 2016 is as follows: Balance at December 31, 2015 $ 1,204,833 Provision for additional losses 52,099 Reclassified to real estate held for sale (29,806 ) Charge-offs (18,100 ) Balance at March 31, 2016 $ 1,209,026 The total impaired loans, which are loans that are in the foreclosure process or are declared to be in default, were approximately $1,837,000 and $1,779,000 at March 31, 2016 and December 31, 2015, respectively, which the Company believes are adequately secured by the underlying collateral and the allowance for mortgage loans. Approximately $579,000 and $581,000 of the Companys allowance for mortgage loans was allocated to impaired loans at March 31, 2016 and December 31, 2015, 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 $3,494,000 and $3,724,000 exceeded 90 days past due but continued to accrue interest at March 31, 2016 and December 31, 2015, 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. Real Estate Held for Sale As of March 31, 2016, the Company had three properties acquired through foreclosure, and one via deed in lieu of foreclosure, with outstanding loan balances totaling approximately $763,000. 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 $405,000 as of March 31, 2016 after an impairment of approximately $358,000. There was an additional impairment of approximately $19,000 for one property that was acquired through foreclosure during the quarter ended March 31, 2015. The Company sold two properties during the quarter ended March 31, 2016. The two properties were sold for approximately $380,000. The Company provided seller financing to the borrowers. The Company realized an additional loss of approximately $52,000 on both properties as of March 31, 2016. 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 (Loss) Per Common Share No adjustments were made to income for the purpose of calculating earnings (loss) per share, as there were no potential dilutive shares outstanding. |
Fair Value Measurements
Fair Value Measurements | 3 Months Ended |
Mar. 31, 2016 | |
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 $260,000 and $200,000 for the periods ended March 31, 2016 and December 31, 2015, respectively. The following table summarizes the Companys financial instruments that were measured at fair value on a recurring basis: Fair Value Measurement March 31, 2016 Fair Value Level 3 Bond portfolio $ 10,413,428 $ 10,413,428 Fair Value Measurement December 31, 2015 Fair Value Level 3 Bond portfolio $ 10,513,428 $ 10,513,428 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, 2015 $ 10,513,428 Proceeds (40,000 ) Additional Bond Fund Reserve (60,000 ) Balance at March 31, 2015 $ 10,413,428 Real estate held for sale and impaired loans are recorded at fair value on a nonrecurring basis. The fair value of real estate held for sale was based upon the listed sales price less expected selling costs, which is a Level 3 input. The resulting impairment charges were $19,173 and $193,104 for the periods ended March 31, 2016 and December 31, 2015, respectively. The following table summarizes the Companys financial instruments that were measured at fair value on a nonrecurring basis: March 31, 2016 Level 1 Level 2 Level 3 Fair Value at March 31, Impaired Loans $ $ $ 1,257,771 $ 1,257,771 Real estate held for resale 404,322 404,322 $ $ $ 1,662,093 $ 1,662,093 December 31, 2015 Level 1 Level 2 Level 3 Fair Value at December 31, Impaired Loans $ $ $ 1,197,302 $ 1,197,302 Real estate held for resale 697,422 697,422 $ $ $ 1,894,724 $ 1,894,724 The change in Level 2 and Level 3 assets measured at fair value on a nonrecurring basis is summarized as follows: Impaired Loans Real Estate Held for Sale Balance at December 31, 2015 $ 1,197,302 $ 697,422 Additions/Acquisitions 221,683 134,173 Dispositions/Proceeds (134,173 ) (408,100 ) Provision for other than temporary losses (27,041 ) (19,173 ) Balance at March 31, 2016 $ 1,257,771 $ 404,322 |
Mortgage Loans Receivabel and B
Mortgage Loans Receivabel and Bond Portfolio | 3 Months Ended |
Mar. 31, 2016 | |
Notes to Financial Statements | |
Mortgage Loans Receivabel and Bond Portfolio | 3. MORTGAGE LOANS RECEIVABLE AND BOND PORTFOLIO At March 31, 2016, the Company had mortgage loans receivable totaling $25,520,239. The loans bear interest ranging from 0% to 10.25% with a weighted average of approximately 8.28% at March 31, 2016. The Company had mortgage loans receivable totaling $25,354,876 that bore interest ranging from 1.00% to 10.25% with a weighted average of approximately 8.35% at December 31, 2015. The Company has a portfolio of secured church bonds at March 31, 2016 and December 31, 2015, which are carried at fair value. The bonds pay either semi-annual or quarterly interest ranging from 2.50% to 9.55%. The aggregate value of secured church bonds equaled approximately $10,673,000 at March 31, 2016 with a weighted average interest rate of 6.79% and approximately $10,713,000 at December 31, 2015 with a weighted average interest rate of 6.92%. 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 March 31, 2016, is as follows: Mortgage Loans Bond Portfolio April 1, 2016 through March 31, 2017 $ 1,197,796 $ 64,000 April 1, 2017 through December 31, 2017 2,668,013 92,000 2018 1,377,619 131,000 2019 1,044,283 135,000 2020 1,401,704 146,000 Thereafter 17,830,825 10,105,428 25,520,239 10,673,428 Less loan loss and bond loss allowances (1,209,026) (260,000) Less deferred origination income (341,344 ______-__ Totals $ 23,969,869 $ 10,413,428 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 $260,000 and $200,000 for the First and Second Mortgage Bonds both at March 31, 2016 and December 31, 2015, which effectively reduces the bonds to the fair value amount management believes will be recovered. |
Secured Investor Certificates
Secured Investor Certificates | 3 Months Ended |
Mar. 31, 2016 | |
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 6.57% and 6.44% at March 31, 2015 and December 31, 2015, 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 $50,000 and $148,000 for the three months ended March 31, 2016 and 2015, 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 March 31, 2016 is as follows: April 1, 2016 through March 31, 2017 $ 4,492,000 April 1, 2017 through December 31, 2017 1,332,000 2018 4,116,000 2019 2,333,000 2020 4,058,000 Thereafter 12,380,000 Totals $ 28,711,000 |
Transactions With Affiliates
Transactions With Affiliates | 3 Months Ended |
Mar. 31, 2016 | |
Notes to Financial Statements | |
Transactions With Affiliates | 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 of approximately $81,000 and $94,000 during the three months ended March 31, 2016 and 2015, respectively. |
Fair Value Of Financial Instrum
Fair Value Of Financial Instruments | 3 Months Ended |
Mar. 31, 2016 | |
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 March 31, 2016 and December 31, 2015, 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: March 31, 2016 December 31, 2015 Carrying Fair Carrying Fair Amount Value Amount Value Cash and equivalents $ 4,861,399 $ 4,861,399 $ 4,377,110 $ 4,377,110 Accounts receivable 197,865 197,865 189,609 189,609 Interest receivable 167,919 167,919 172,169 172,169 Mortgage loans receivable 23,969,869 31,261,113 23,814,699 29,054,399 Bond portfolio 10,413,428 10,413,428 10,513,428 10,513,428 Secured investor certificates 28,711,000 37,537,145 28,246,000 36,995,152 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 Accoun13
Summary Of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2016 | |
Accounting Policies [Abstract] | |
Basis Of Prsentation | 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, 2015 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, 2015. Operating results for the periods presented are not necessarily indicative of the results that may be expected for the year ending December 31, 2016. |
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 $2,345,016 and $2,233,533 in money market fund accounts at March 31, 2016 and December 31, 2015, 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 $63,000 and $84,000 in bonds as current assets as of March 31, 2016 and December 31, 2015, respectively, based on managements estimates for liquidity requirements and contractual maturities of certain bonds maturing in 2017 and 2016, 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 March 31, 2016, the Company provided $1,209,026 for seventeen mortgage loans, of which eight totaling approximately $3,394,000 are three or more mortgage payments in arrears, two loans totaling approximately $1,226,000 are declared to be in default and two loans totaling approximately $611,000 are in the foreclosure process. At December 31, 2015, the Company provided $1,205,000 for eighteen mortgage loans, of which eight totaling approximately $3,724,000 were three or more mortgage payments in arrears, two loans totaling approximately $1,004,000 were declared to be in default and three loans totaling approximately $775,000 were in the foreclosure process. A summary of transactions in the allowance for credit losses for the three months ended March 31, 2016 is as follows: Balance at December 31, 2015 $ 1,204,833 Provision for additional losses 52,099 Reclassified to real estate held for sale (29,806 ) Charge-offs (18,100 ) Balance at March 31, 2016 $ 1,209,026 The total impaired loans, which are loans that are in the foreclosure process or are declared to be in default, were approximately $1,837,000 and $1,779,000 at March 31, 2016 and December 31, 2015, respectively, which the Company believes are adequately secured by the underlying collateral and the allowance for mortgage loans. Approximately $579,000 and $581,000 of the Companys allowance for mortgage loans was allocated to impaired loans at March 31, 2016 and December 31, 2015, 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 $3,494,000 and $3,724,000 exceeded 90 days past due but continued to accrue interest at March 31, 2016 and December 31, 2015, 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. |
Real Estate Held for Sale | Real Estate Held for Sale As of March 31, 2016, the Company had three properties acquired through foreclosure, and one via deed in lieu of foreclosure, with outstanding loan balances totaling approximately $763,000. 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 $405,000 as of March 31, 2016 after an impairment of approximately $358,000. There was an additional impairment of approximately $19,000 for one property that was acquired through foreclosure during the quarter ended March 31, 2015. The Company sold two properties during the quarter ended March 31, 2016. The two properties were sold for approximately $380,000. The Company provided seller financing to the borrowers. The Company realized an additional loss of approximately $52,000 on both properties as of March 31, 2016. |
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 (Loss) Per Common Share | Income (Loss) Per Common Share No adjustments were made to income for the purpose of calculating earnings (loss) per share, as there were no potential dilutive shares outstanding. |
Summary Of Significant Accoun14
Summary Of Significant Accounting Policies (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Accounting Policies [Abstract] | |
Allowance For Credit Losses | Balance at December 31, 2015 $ 1,204,833 Provision for additional losses 52,099 Reclassified to real estate held for sale (29,806 ) Charge-offs (18,100 ) Balance at March 31, 2016 $ 1,209,026 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurement Bond Portfolio | Fair Value Measurement March 31, 2016 Fair Value Level 3 Bond portfolio $ 10,413,428 $ 10,413,428 Fair Value Measurement December 31, 2015 Fair Value Level 3 Bond portfolio $ 10,513,428 $ 10,513,428 |
Change In Fair Value Measurement Bond Portfolio | Bond Portfolio Balance at December 31, 2015 $ 10,513,428 Proceeds (40,000 ) Additional Bond Fund Reserve (60,000 ) Balance at March 31, 2015 $ 10,413,428 |
Fair Value Measurment Impaired Loans and Real Estate Held For Sale | March 31, 2016 Level 1 Level 2 Level 3 Fair Value at March 31, Impaired Loans $ $ $ 1,257,771 $ 1,257,771 Real estate held for resale 404,322 404,322 $ $ $ 1,662,093 $ 1,662,093 December 31, 2015 Level 1 Level 2 Level 3 Fair Value at December 31, Impaired Loans $ $ $ 1,197,302 $ 1,197,302 Real estate held for resale 697,422 697,422 $ $ $ 1,894,724 $ 1,894,724 |
Change In Fair Value Measurement Impaired Loans and Real Estate Held For Sale | Impaired Loans Real Estate Held for Sale Balance at December 31, 2015 $ 1,197,302 $ 697,422 Additions/Acquisitions 221,683 134,173 Dispositions/Proceeds (134,173 ) (408,100 ) Provision for other than temporary losses (27,041 ) (19,173 ) Balance at March 31, 2016 $ 1,257,771 $ 404,322 |
Mortgage Loans Receivabel and16
Mortgage Loans Receivabel and Bond Portfolio (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Notes to Financial Statements | |
Mortgage Loans Receivable and Bond Portfolio | Mortgage Loans Bond Portfolio April 1, 2016 through March 31, 2017 $ 1,197,796 $ 64,000 April 1, 2017 through December 31, 2017 2,668,013 92,000 2018 1,377,619 131,000 2019 1,044,283 135,000 2020 1,401,704 146,000 Thereafter 17,830,825 10,105,428 25,520,239 10,673,428 Less loan loss and bond loss allowances (1,209,026) (260,000) Less deferred origination income (341,344 ______-__ Totals $ 23,969,869 $ 10,413,428 |
Secured Investor Certificates (
Secured Investor Certificates (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Notes to Financial Statements | |
Secured Investor Certificates | April 1, 2016 through March 31, 2017 $ 4,492,000 April 1, 2017 through December 31, 2017 1,332,000 2018 4,116,000 2019 2,333,000 2020 4,058,000 Thereafter 12,380,000 Totals $ 28,711,000 |
Fair Value Of Financial Instr18
Fair Value Of Financial Instruments (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Notes to Financial Statements | |
Fair Value Of Financial Instruments | March 31, 2016 December 31, 2015 Carrying Fair Carrying Fair Amount Value Amount Value Cash and equivalents $ 4,861,399 $ 4,861,399 $ 4,377,110 $ 4,377,110 Accounts receivable 197,865 197,865 189,609 189,609 Interest receivable 167,919 167,919 172,169 172,169 Mortgage loans receivable 23,969,869 31,261,113 23,814,699 29,054,399 Bond portfolio 10,413,428 10,413,428 10,513,428 10,513,428 Secured investor certificates 28,711,000 37,537,145 28,246,000 36,995,152 |
Summary Of Significant Accoun19
Summary Of Significant Accounting Policies - Allowance For Credit Losses (Details) | 3 Months Ended |
Mar. 31, 2016USD ($) | |
Accounting Policies [Abstract] | |
Balance at December 31, 2015 | $ 1,204,833 |
Provision for additional losses | 52,099 |
Reclassified to real estate held for sale | (29,806) |
Charge-offs | (18,100) |
Balance at March 31, 2016 | $ 1,209,026 |
Fair Value Measurements - Fair
Fair Value Measurements - Fair Value Measurement Bond Portfolio (Details) - USD ($) | Mar. 31, 2016 | Dec. 31, 2015 |
Gross Bond portfolio | $ 10,413,428 | $ 10,513,428 |
Impaired Loans | ||
Gross Bond portfolio | $ 10,413,428 | $ 10,513,428 |
Fair Value Measurements - Chang
Fair Value Measurements - Change In Fair Value Measurement Bond Portfolio (Details) | 3 Months Ended |
Mar. 31, 2016USD ($) | |
Fair Value Disclosures [Abstract] | |
Balance at December 31, 2015 | $ 10,513,428 |
Bond Proceeds | (40,000) |
Additional Bond Fund Reserve | (60,000) |
Balance at March 31, 2016 | $ 10,413,428 |
Fair Value Measurements - Fai22
Fair Value Measurements - Fair Value Measurment Impaired Loans and Real Estate Held For Sale (Details) - USD ($) | Mar. 31, 2016 | Dec. 31, 2015 |
Impaired Loans | $ 1,257,771 | $ 1,197,302 |
Real estate held for resale | 404,322 | 697,422 |
Total Fair Value Measurement | $ 1,662,093 | $ 1,894,724 |
Fair Value Measurement 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 | ||
Total Fair Value Measurement | ||
Impaired Loans | ||
Impaired Loans | $ 1,257,771 | $ 1,197,302 |
Real estate held for resale | 404,322 | 697,422 |
Total Fair Value Measurement | $ 1,662,093 | $ 1,894,724 |
Fair Value Measurements - Cha23
Fair Value Measurements - Change In Fair Value Measurement Impaired Loans and Real Estate Held For Sale (Details) | 3 Months Ended |
Mar. 31, 2016USD ($) | |
Impaired Loans | |
Balance at December 31, 2015 | $ 1,197,302 |
Additions/Acquisitions | 221,683 |
Dispositions/Proceeds | (134,173) |
Impairment for other than temporary losses | (27,041) |
Balance at March 31, 2016 | 1,257,771 |
Real Estate Held For Sale | |
Balance at December 31, 2015 | 697,422 |
Additions/Acquisitions | 134,173 |
Dispositions/Proceeds | (408,100) |
Impairment for other than temporary losses | (19,173) |
Balance at March 31, 2016 | $ 404,322 |
Mortgage Loans Receivabel and24
Mortgage Loans Receivabel and Bond Portfolio - Mortgage Loans Receivable and Bond Portfolio (Details) | Mar. 31, 2016USD ($) |
Mortgage Loans | |
April 1, 2016 through March 31, 2017 | $ 1,197,796 |
April 1, 2017 through December 31, 2017 | 2,668,013 |
2,018 | 1,377,619 |
2,019 | 1,044,283 |
2,020 | 1,401,704 |
Thereafter | 17,830,824 |
Subtotal | 25,520,239 |
Less loan loss and bond loss allowances | (1,209,026) |
Less deferred origination income | (341,344) |
Totals | 23,969,869 |
Bond Portfolio | |
April 1, 2016 through March 31, 2017 | 64,000 |
April 1, 2017 through December 31, 2017 | 92,000 |
2,018 | 131,000 |
2,019 | 135,000 |
2,020 | 146,000 |
Thereafter | 10,105,428 |
Subtotal | 10,673,428 |
Less loan loss and bond loss allowances | $ (260,000) |
Less deferred origination income | |
Totals | $ 10,413,428 |
Secured Investor Certificates -
Secured Investor Certificates - Secured Investor Certificates (Details) - USD ($) | 3 Months Ended | 12 Months Ended | 135 Months Ended | ||||
Mar. 31, 2016 | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | Mar. 31, 2018 | Mar. 31, 2017 | Mar. 31, 2032 | |
Secured Investor Certificate Maturity Schedule | $ 28,711,000 | ||||||
Secured Investor Certificates | |||||||
Secured Investor Certificate Maturity Schedule | $ 4,058,000 | $ 2,333,000 | $ 4,116,000 | $ 1,332,000 | $ 4,492,000 | $ 12,380,000 |
Summary Of Significant Accoun26
Summary Of Significant Accounting Policies (Details Narrative) - USD ($) | Mar. 31, 2016 | Dec. 31, 2015 |
Accounting Policies [Abstract] | ||
Money Market Funds | $ 2,345,016 | $ 2,233,533 |
Bond Portfolio | 63,000 | 84,000 |
Allowance for Mortgage Loans Receivable | 1,209,026 | 1,205,000 |
Loans Exceeding 90 Days Past Due | 3,394,000 | 3,724,000 |
Loans in Default | 1,226,000 | 1,004,000 |
Foreclosed Properties | 611,000 | 775,000 |
Real Estate Held for Sale Carrying Value | 404,322 | 697,422 |
Allowance Allocated to Impaired Loans | 579,000 | 581,000 |
Total Loan Impairment | 1,837,000 | $ 1,779,000 |
Additional Impairment Real Estate Held For Sale | 19,000 | |
Real Estate Sold | 380,000 | |
Realized Loss Real Estate Sold | 52,000 | |
Loans In Default | $ 1,226,000 | $ 1,004,000 |
Fair Value Measurements (Detail
Fair Value Measurements (Details Narrative) - USD ($) | Mar. 31, 2016 | Dec. 31, 2015 |
Fair Value Disclosures [Abstract] | ||
Loan Loss Reserve Church Bonds | $ 260,000 | $ 200,000 |
Loan Loss Impaired Loans | $ 19,173 | $ 193,104 |
Mortgage Loans Receivabel and28
Mortgage Loans Receivabel and Bond Portfolio (Details Narrative) - USD ($) | Mar. 31, 2016 | Dec. 31, 2015 |
Notes to Financial Statements | ||
Mortgage Loans Receivable Net of Reserves | $ 25,520,239 | $ 25,354,876 |
Church Bonds Owned Gross | 10,673,000 | 10,713,000 |
Bond Reserve Fund | 260,000 | $ 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 ($) | Mar. 31, 2016 | Mar. 31, 2015 |
Notes to Financial Statements | ||
Renewals Secured Investor Certificates | $ 50,000 | $ 148,000 |
Transactions With Affiliates (D
Transactions With Affiliates (Details Narrative) - USD ($) | Mar. 31, 2016 | Mar. 31, 2015 |
Notes to Financial Statements | ||
Management and Origination Fees | $ 81,000 | $ 94,000 |
Fair Value Of Financial Instr31
Fair Value Of Financial Instruments - Fair Value Of Financial Instruments (Details) - USD ($) | Mar. 31, 2016 | Dec. 31, 2015 |
Interest receivable | $ 167,919 | $ 172,169 |
Carrying Amount | ||
Cash and equivalents | 4,861,399 | 4,377,110 |
Accounts receivable | 197,865 | 189,609 |
Interest receivable | 167,919 | 172,169 |
Mortgage loans receivable | 23,969,869 | 23,814,699 |
Bond portfolio | 10,412,428 | 10,513,428 |
Secured investor certificates | 28,711,000 | 28,246,000 |
Fair Value | ||
Cash and equivalents | 4,861,399 | 4,377,110 |
Accounts receivable | 197,865 | 189,609 |
Interest receivable | 167,919 | 172,169 |
Mortgage loans receivable | 31,261,113 | 29,054,399 |
Bond portfolio | 10,412,428 | 10,513,428 |
Secured investor certificates | $ 37,537,145 | $ 36,995,152 |