Cover
Cover | 6 Months Ended |
Jun. 30, 2022 shares | |
Cover [Abstract] | |
Document Type | 10-Q |
Amendment Flag | false |
Document Quarterly Report | true |
Document Transition Report | false |
Document Period End Date | Jun. 30, 2022 |
Document Fiscal Period Focus | FY |
Document Fiscal Year Focus | 2022 |
Current Fiscal Year End Date | --12-19 |
Entity File Number | 000-25919 |
Entity Registrant Name | AMERICAN CHURCH MORTGAGE COMPANY |
Entity Central Index Key | 0000934543 |
Entity Tax Identification Number | 41-1793975 |
Entity Incorporation, State or Country Code | MN |
Entity Address, Address Line One | 10400 Yellow Circle Drive |
Entity Address, Address Line Two | Suite 102 |
Entity Address, City or Town | Minnetonka |
Entity Address, State or Province | MN |
Entity Address, Postal Zip Code | 55343 |
City Area Code | (952) |
Local Phone Number | 945-9455 |
Title of 12(b) Security | Common Stock, $0.01 par value per share |
Trading Symbol | ACMC |
Security Exchange Name | NONE |
Entity Current Reporting Status | Yes |
Entity Interactive Data Current | Yes |
Entity Filer Category | Non-accelerated Filer |
Entity Small Business | true |
Entity Emerging Growth Company | false |
Entity Shell Company | false |
Entity Common Stock, Shares Outstanding | 1,676,598 |
Balance Sheet ACMC
Balance Sheet ACMC - USD ($) | Jun. 30, 2022 | Dec. 31, 2021 |
Assets | ||
Cash and cash equivalents | $ 3,187,804 | $ 114,798 |
Accounts receivable | 1,720,658 | 79,887 |
Interest receivable | 89,280 | |
Prepaid expenses | 331 | 2,317 |
Financing Receivable, Excluding Accrued Interest, after Allowance for Credit Loss | 13,744,525 | |
Bond Portfolio | 16,337,978 | |
Real Estate Held for Sale | 328,996 | |
Liabilities | ||
Accounts payable | 137 | 137 |
Management fee payable | 19,374 | 21,530 |
Line of credit | 300,000 | |
Secured Investor Certificates, Series B | 4,766,500 | |
Secured Investor Certificates, Series C | 5,977,000 | |
Secured Investor Certificates, Series D | 7,797,000 | |
Secured Investor Certificates, Series E | 3,738,000 | |
Deferred Finance Costs, Own-share Lending Arrangement, Issuance Costs, Net | 675,746 | |
Deferred Finance Costs, Own-share Lending Arrangement, Issuance Costs, Net | (675,746) | |
Stockholders’ Equity | ||
Common Stock, Value, Issued | 16,766 | 16,766 |
Additional paid-in capital | 19,111,060 | 19,111,060 |
Accumulated deficit | (14,238,545) | (10,354,466) |
Total stockholders’ equity | 4,889,281 | 8,773,360 |
Total liabilities and stockholders' equity | $ 4,908,792 | $ 30,697,781 |
Balance Sheet ACMC (Parenthetic
Balance Sheet ACMC (Parenthetical) - USD ($) | Jun. 30, 2022 | Dec. 31, 2021 |
Statement of Financial Position [Abstract] | ||
Financing Receivable, Allowance for Credit Loss, Current | $ 0 | $ 1,486,434 |
Deferred Income, Current | 0 | 152,717 |
Accumulated Amortization, Debt Issuance Costs | $ 0 | $ 804,620 |
Common Stock, Par or Stated Value Per Share | $ 0.01 | $ 0.01 |
Common Stock, Shares Authorized | 30,000,000 | 30,000,000 |
Common Stock, Shares, Outstanding | 1,676,598 | 1,676,598 |
Statment of Operations 6 Months
Statment of Operations 6 Months Ended - USD ($) | 3 Months Ended | 6 Months Ended | ||||
Jun. 30, 2022 | Mar. 31, 2022 | Jun. 30, 2021 | Mar. 31, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | |
Income Statement [Abstract] | ||||||
Interest and Loan Fee Income | $ 515,479 | $ 387,569 | $ 1,081,144 | $ 986,100 | ||
Interest Expense | 992,399 | 407,247 | 1,353,093 | 821,512 | ||
Net Interest Income | (476,920) | (19,678) | (271,949) | 164,588 | ||
Provision for losses on mortgage loans receivable | 1,430,163 | 13,943 | 1,486,434 | 21,042 | ||
Net Interest Income after Provision for Losses on Mortgage Loans | (1,907,083) | (33,621) | (1,758,383) | 143,546 | ||
Operating Expenses | ||||||
Other than temporary impairment on bond portfolio | 1,567,244 | 171,263 | 1,755,504 | 223,545 | ||
Impairment on real estate held for sale | 35,086 | 35,086 | ||||
Other operating expenses | 223,515 | 146,513 | 335,106 | 375,987 | ||
Net (Loss) | $ (3,732,928) | $ (151,151) | $ (351,397) | $ (104,589) | $ (3,884,079) | $ (455,986) |
Basic and Diluted Loss Per Share | $ (2.23) | $ (0.21) | $ (2.32) | $ (0.27) | ||
Dividends Declared Per Share | $ 0.01 | |||||
Weighted Average Number of Shares Outstanding, Diluted | 1,676,598 | 1,676,598 | 1,676,598 | 1,677,198 |
Statement of Operations 3 Month
Statement of Operations 3 Months Ended - USD ($) | 3 Months Ended | 6 Months Ended | ||||
Jun. 30, 2022 | Mar. 31, 2022 | Jun. 30, 2021 | Mar. 31, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | |
Income Statement [Abstract] | ||||||
Interest and Loan Fee Income | $ 515,479 | $ 387,569 | $ 1,081,144 | $ 986,100 | ||
Interest Expense | 992,399 | 407,247 | 1,353,093 | 821,512 | ||
Net Interest Income | (476,920) | (19,678) | (271,949) | 164,588 | ||
Provision for losses on mortgage loans receivable | 1,430,163 | 13,943 | 1,486,434 | 21,042 | ||
Net Interest Income after Provision for Losses on Mortgage Loans | (1,907,083) | (33,621) | (1,758,383) | 143,546 | ||
Operating Expenses | ||||||
Other than temporary impairment on bond portfolio | 1,567,244 | 171,263 | 1,755,504 | 223,545 | ||
Impairment on real estate held for sale | 35,086 | 35,086 | ||||
Other operating expenses | 223,515 | 146,513 | 335,106 | 375,987 | ||
Net (Loss) | $ (3,732,928) | $ (151,151) | $ (351,397) | $ (104,589) | $ (3,884,079) | $ (455,986) |
Basic and Diluted Loss Per Share | $ (2.23) | $ (0.21) | $ (2.32) | $ (0.27) | ||
Dividends Declared Per Share | $ 0.01 | |||||
Weighted Average Number of Shares Outstanding, Diluted | 1,676,598 | 1,676,598 | 1,676,598 | 1,677,198 |
Statement of Stockholders' Equi
Statement of Stockholders' Equity Unaudited - USD ($) | Common Stock [Member] | Additional Paid-in Capital [Member] | Retained Earnings [Member] | Total |
Beginning balance, value at Dec. 31, 2020 | $ 16,766 | $ 19,111,060 | $ (9,042,499) | $ 10,085,327 |
Net loss | (104,589) | (104,589) | ||
Dividends declared | (16,766) | (16,766) | ||
Ending balance, value at Mar. 31, 2021 | 16,766 | 19,111,060 | (9,163,854) | 9,963,972 |
Beginning balance, value at Dec. 31, 2020 | 16,766 | 19,111,060 | (9,042,499) | 10,085,327 |
Net loss | (455,986) | |||
Ending balance, value at Jun. 30, 2021 | 16,766 | 19,111,060 | (9,515,251) | 9,612,575 |
Beginning balance, value at Mar. 31, 2021 | 16,766 | 19,111,060 | (9,163,854) | 9,963,972 |
Net loss | (351,397) | (351,397) | ||
Dividends declared | ||||
Ending balance, value at Jun. 30, 2021 | 16,766 | 19,111,060 | (9,515,251) | 9,612,575 |
Beginning balance, value at Dec. 31, 2021 | 16,766 | 19,111,060 | (10,354,466) | 8,773,360 |
Net loss | (151,151) | (151,151) | ||
Dividends declared | ||||
Ending balance, value at Mar. 31, 2022 | 16,766 | 19,111,060 | (10,505,617) | 8,622,209 |
Beginning balance, value at Dec. 31, 2021 | 16,766 | 19,111,060 | (10,354,466) | 8,773,360 |
Net loss | (3,884,079) | |||
Ending balance, value at Jun. 30, 2022 | 16,766 | 19,111,060 | (14,238,545) | 4,889,281 |
Beginning balance, value at Mar. 31, 2022 | 16,766 | 19,111,060 | (10,505,617) | 8,622,209 |
Net loss | (3,732,928) | (3,732,928) | ||
Dividends declared | ||||
Ending balance, value at Jun. 30, 2022 | $ 16,766 | $ 19,111,060 | $ (14,238,545) | $ 4,889,281 |
Statements of Cash Flows
Statements of Cash Flows - USD ($) | 6 Months Ended | |
Jun. 30, 2022 | Jun. 30, 2021 | |
Cash Flows from Operating Activities | ||
Net (loss) | $ (3,884,079) | $ (455,986) |
Adjustments to reconcile net (loss) income to net cash | ||
Net loss on sales and impairment on real estate held for sale | 328,996 | 100,000 |
Provision for losses on mortgage loans receivable | (1,486,434) | 21,042 |
Other than temporary impairment on bond portfolio | (1,755,504) | 223,545 |
Amortization of loan origination discounts | 1,327,649 | (37,983) |
Accounts receivable | (1,640,771) | 11,410 |
Interest receivable | 89,280 | 142,131 |
Prepaid expenses | 1,986 | (6,114) |
Accounts payable | (13,862) | |
Management fee payable | (2,156) | (1,197) |
Net cash (used for) provided by operating activities | (7,825,653) | 30,039 |
Cash Flows from Investing Activities | ||
Net decrease in loans | 15,383,676 | 1,969,753 |
Proceeds from bonds | 18,093,483 | 85,000 |
Net cash provided by investing activities | 33,477,159 | 2,054,753 |
Cash Flows from Financing Activities | ||
Net decrease in secured investor certificates | (22,278,500) | (866,000) |
Net change in short term borrowings | $ (300,000) | $ (1,210,000) |
Dividends paid | $ (33,532) | |
Net cash (used for) financing activities | $ (22,578,500) | $ (2,109,532) |
Net Increase (Decrease) in Cash and Cash Equivalents | 3,073,006 | (24,740) |
Cash and Cash Equivalents - Beginning of Year | 114,798 | 87,702 |
Cash and Cash Equivalents - End of Year | $ 3,187,804 | $ 62,962 |
Statement of Cash Flows (Contin
Statement of Cash Flows (Continued) - USD ($) | 6 Months Ended | |
Jun. 30, 2022 | Jun. 30, 2021 | |
Supplemental Cash Flow Information | ||
Interest paid | $ 677,347 | $ 774,459 |
Noncash Financing Activities | ||
Renewal of secured investor certificates | $ 149,000 |
1. BASIS OF PRESENTATION
1. BASIS OF PRESENTATION | 6 Months Ended |
Jun. 30, 2022 | |
Accounting Policies [Abstract] | |
1. BASIS OF PRESENTATION | 1. BASIS OF PRESENTATION The accompanying unaudited interim financial statements and the notes thereto have been prepared in accordance with generally accepted accounting principals in the United States of America (“GAAP”). In the opinion of management, the accompanying unaudited interim financial statements contain all normal recurring adjustments necessary to present fairly the financial positions, results of operations, changes in equity and cash flows for the periods presented. The accompanying unaudited financial statements and related notes should be read in conjunction with the audited financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the Securities and Exchange Commission on March 29, 2022. On May 27, 2022, American Church Mortgage Company (“ACMC”) entered into an Asset Agreement dated as of May 27, 2022 (the “Asset Sale Agreement”) with OSK XII, LLC (“OSK”), a third party not affiliated with ACMC. Pursuant to the terms of the Asset Sale Agreement, OSK has agreed to acquire from ACMC substantially all of the assets of ACMC, consisting of ACMC’s Loans, Bonds and Real Estate Held for Sale (the “Transaction”). As provided in the Asset Sale Agreement, OSK agreed to pay the purchase price of $26,100,000, plus interest due on ACMC’s Secured Investor Certificates (the “Purchase Price”), adjusted as follows: (i) less all payments received by ACMC on account of the Loans and the Bonds from March 31, 2022 through the day before the “Closing Date”, (ii) plus the aggregate amount of asset level expenses set forth on a schedule prepared by ACMC as part of ACMC’s confidential schedules delivered to OSK (the “Schedules”). OSK delivered $ 21,976,500 |
2. DISCONTINUED OPERATIONS AND
2. DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE | 6 Months Ended |
Jun. 30, 2022 | |
Discontinued Operations and Disposal Groups [Abstract] | |
2. DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE | 2. DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE Due to the sale transaction discussed above, the Company performed an impairment analysis of its long lived assets and on its intangible assets and determined that an impairment of the Company’s fixed assets and intangible assests has occurred which has resulted in additional impairment charges in the quarter ended June 30, 2022. These impairment charges contributed to a loss of approximately $3,733,000 for the second quarter ended June 30, 2022 as a result of the Asset Sale Agreement. Nature of Business American Church Mortgage Company, a Minnesota corporation, was incorporated on May 27, 1994. The Company is engaged primarily in the business of making mortgage loans to churches and other nonprofit religious organizations throughout the United States, on terms established for individual organizations. Accounting Estimates Management uses estimates and assumptions in preparing these financial statements in accordance with GAAP. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could differ from those estimates. The most sensitive estimates relate to the realizability of the mortgage loans receivable, the valuation of the bond portfolio and the valuation of real estate held for sale. It is at least reasonably possible that these estimates could change in the near term and that the effect of the change, if any, may be material to the financial statements. Risks and Uncertainties The United States and world economies continue to suffer adverse effects from the COVID-19 virus pandemic (“COVID-19”). The impact of the pandemic to the Company has included and may continue to include disruptions or restrictions on employers and contracted agents’ ability to work, reduced demand for new loans and increased repurchase risk of loan or bond defaults. The future impact of the COVID-19 pandemic on the Company cannot be reasonably estimated at this time. Concentration of Credit Risk The Company's loans have been granted to churches and other non-profit religious organizations. The ability of the Company’s debtors to honor their contracts is dependent on member contributions and the involvement in the church or organization of its senior pastor. Cash and Cash Equivalents The Company considers all highly liquid debt instruments purchased with maturities of three months or less to be cash equivalents. The Company maintains accounts primarily at two financial institutions. At times throughout the year, the Company’s cash and equivalents balances may exceed amounts insured by the Federal Deposit Insurance Corporation. Cash in money market funds is not federally insured. Management believes these financial institutions have strong credit ratings and that the credit risk related to these deposits is minimal. The Company has not experienced any losses in such accounts. Bond Portfolio Bonds that management has the intent to hold to maturity are classified as held to maturity and recorded at amortized cost. Amortization of premiums and accretion of discounts (if any) are recognized in interest income using the interest method over the estimated lives of the securities. Declines in fair value of bonds that are deemed to be other than temporary, if applicable, are reflected in earnings as realized losses. In estimating other-than temporary impairment losses, management considered the length of time and the extent to which fair value has been less than cost, the financial condition and near-term prospects of the issuer, and the interest and the ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. Gains and losses on the sales of securities are recorded on the trade date and determined using the specific-identification method. Allowance for Loan Losses on Mortgage Loans Receivable The Company records mortgage loans receivable at estimated net realizable value, which is the unpaid principal balances of the mortgage loans receivable, less the allowance for loan losses on mortgage loans receivable and less deferred loan origination fees. The Company’s loan policy provides an allowance for estimated uncollectible loans based on an evaluation of the current status of the loan portfolio with application of reserve percentages to specific loans based on payment status. This policy reserves for principal amounts outstanding on a specific loan if cumulative interruptions occur in the normal payment schedule of the loan, therefore, the Company recognizes a provision for losses and an allowance for the outstanding principal amount of the loan in the Company’s portfolio if the amount is in doubt of collection. Additionally, no interest income is recognized on impaired loans that are declared to be in default and are in the foreclosure process. The Company will declare a loan to be in default and will place the loan on non-accrual status when the following thresholds have been met: (i) the borrower has missed three consecutive mortgage payments; (ii) the borrower has not communicated to the Company any legitimate reason for delinquency in its payments to the Company and has not arranged for the re-continuance of payments; (iii) lines of communication to the borrower have broken down such that any reasonable prospect of rehabilitating the loan and return of regular payments is gone. The Company’s policies on payments received and interest accrued on non-accrual loans are as follows: The Company will accept payments on loans that are currently on non-accrual status when a borrower has communicated to us that they intend to meet their mortgage obligations. The accrual of interest on a loan is discontinued when the loan becomes 90 consecutive days delinquent or whenever management believes the borrower will be unable to make payments as they become due. The interest on these loans is subsequently accounted for on the cash basis or using the cost-recovery method until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current or restructured and future payments are reasonably assured. No interest income was recognized on non-accrual loans at June 30, 2022 and December 31, 2021. The Company has an Advisory Agreement with Church Loan Advisors, Inc. (the “Advisor”). When a loan is declared in default according to the Company’s policy or deemed to be doubtful of collection, the loan committee of the Advisor will direct the staff to charge-off the uncollectable receivables. Income Taxes The Company elected to be taxed as a Real Estate Investment Trust (REIT). Accordingly, the Company is not subject to Federal income tax to the extent of distributions to its shareholders if the Company meets all the requirements under the REIT provisions of the Internal Revenue Code. The Company evaluated its recognition of income tax benefits using a two-step approach to recognizing and measuring tax benefits when realization of the benefits is uncertain. The first step is to determine whether the benefit meets the more-likely-than-not condition for recognition and the second step is to determine the amount to be recognized based on the cumulative probability that exceeds 50%. Primarily due to the Company’s tax status as a REIT, the Company does not have any significant tax uncertainties that would require recognition or disclosure. Subsequent Events The Company has evaluated events and transactions through August 15, 2022, the date the financial statements were available to be issued. |
3. FAIR VALUE MEASUREMENT
3. FAIR VALUE MEASUREMENT | 6 Months Ended |
Jun. 30, 2022 | |
Fair Value Disclosures [Abstract] | |
3. FAIR VALUE MEASUREMENT | 3. FAIR VALUE MEASUREMENT Some assets and liabilities are measured at fair value on a recurring basis under GAAP. The Company has no such assets or liabilities that are measured at fair value on a recurring basis. Other assets and liabilities may be measured at fair value on a nonrecurring basis. Below is a description of the valuation methodology and significant inputs used for each asset and liability measured at fair value on a nonrecurring basis, as well as the classification of the asset or liability within the fair value hierarchy. Bonds held to maturity Securities held to maturity are not measured at fair value on a recurring basis. However, securities deemed other-than-temporarily impaired are measured at fair value. The fair value measurement of such securities is based on various assumptions market participants would use to value the securities, such as current interest rates, estimated credit and liquidity spreads, conditional default and loss severity rates, and available credit support. Since some of these assumptions are unobservable in the current market environment, the fair value measurement of other-than-temporarily impaired securities held to maturity is considered a Level 3 measurement. Loans Loans are not measured at fair value on a recurring basis. However, loans considered to be impaired may be measured at fair value on a nonrecurring basis. The fair value measurement of an impaired loan that is collateral dependent is based on the fair value of the underlying collateral. Independent appraisals are obtained that utilize one or more valuation methodologies - typically they will incorporate a comparable sales approach and an income approach. Management routinely evaluates the fair value measurements of independent appraisers and adjusts those valuations based on differences noted between actual selling prices of collateral and the most recent appraised value. Such adjustments are usually significant, which results in a Level 3 classification. All other impaired loan measurements are based on the present value of expected future cash flows discounted at the applicable effective interest rate. Real estate held for sale Real estate and other property acquired through or in lieu of loan foreclosure are not measured at fair value on a recurring basis. However, foreclosed assets are initially measured at fair value (less estimated costs to sell) when they are acquired and may also be measured at fair value (less estimated costs to sell) if they become subsequently impaired. The fair value measurement for each asset may be obtained from an independent appraiser or prepared internally. Fair value measurements obtained from independent appraisers generally utilize a market approach based on sales of comparable assets and/or an income approach. Such measurements are usually considered Level 2 measurements. However, management routinely evaluates fair value measurements of independent appraisers by comparing actual selling prices to the most recent appraisals. If management determines significant adjustments should be made to the independent appraisals based on these evaluations, these measurements are considered Level 3 measurements. Fair value measurements prepared internally are based on management's comparisons to sales of comparable assets, but include significant unobservable data and are therefore considered Level 3 measurements. Information regarding the fair value of Assets and liabilities Measured at Fair Value Nonrecurring Fair Value at June 30, 2022 Assets: Quoted Prices in Active Markets for Identical Instruments Level 1 Significant Other Observable Inputs Level 2 Significant Unobservable Inputs Level 3 Total Bond portfolio $ — $ — $ — $ — Impaired loans $ — $ — $ — $ — Real estate held for sale $ — $ — $ — $ — Nonrecurring Fair Value at December 31, 2021 Assets: Quoted Prices in Active Markets for Identical Instruments Significant Other Observable Inputs Significant Unobservable Inputs Total Bond portfolio $ — $ — $ 7,142,094 $ 7,142,094 Impaired loans $ — $ — $ 4,496,970 $ 4,496,970 Real estate held for sale $ — $ — $ 328,996 $ 328,996 As of June 30, 2022, the Company sold all assets to OSK, XII, LLC and therefore no longer own any of the bonds held to maturity. The Company recognized a final impairment of $ 1,755,504 8,897,598 7,142,094 1,755,094 As of June 30, 2022, the Company sold all assets to OSK, XII, LLC and therefore no longer own any of the loans in its portfolio. The Company recognized a final impairment of $ 1,486,434 5,983,404 4,496,970 1,486,434 As of June 30, 2022, the Company sold all assets to OSK, XII, LLC and therefore no longer own any Real Estate Held for Sale. The Company recognized a final impairment of approximately $ 328,996 0 The following presents quantitative information about nonrecurring Level 3 Fair Value Measurements Fair Value Valuation Technique Significant Unobservable Inputs(s) Range/Weighted June 30, 2022 Bond Portfolio $ - Market or Income Approach Discount to Appraised Values 10-50% Impaired Loans $ - Market or Income Approach Discount to Appraised Values 10-100% Real Estate Held for Sale $ - Market or Income Approach Discount to Appraised Values 10-20% December 31, 2021 Bond Portfolio $7,142,094 Market or Income Approach Discount to Appraised Values 10-20% Impaired Loans $4,496,970 Market or Income Approach Discount to Appraised Values 10-100% Real Estate Held for Sale $328,996 Market or Income Approach Discount to Appraised Values 10-20% The estimated Carrying Values of the Company’s Financial Instruments June 30, 2022 Level 1 Level 2 Level 3 Carrying Value at June 30, 2022 Cash and equivalents $ 3,187,804 $ — $ — $ 3,187,804 Accounts receivable 1,720,989 — — 1,720,989 Interest receivable — — — — Mortgage loans receivable — — — — Bond portfolio — — — — Line of credit — — — — Secured investor certificates — — — — December 31, 2021 Level 1 Level 2 Level 3 Carrying Value Cash and equivalents $ 114,798 $ — $ — $ 114,798 Accounts receivable 79,887 — — 79,887 Interest receivable 89,280 — — 89,280 Mortgage loans receivable — — 13,744,525 13,744,525 Bond portfolio — — 16,337,978 16,337,978 Line of credit 300,000 — — 300,000 Secured investor certificates — 22,278,500 — 22,278,500 Limitations The fair value of a financial instrument is the current amount that would be exchanged between market participants, other than in a forced liquidation. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company's various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. Consequently, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company. Fair value estimates are made at a specific point in time based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company's entire holdings of a particular instrument. Because no market exists for a significant portion of the Company's financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters that could affect the estimates. Fair value estimates are based on existing balance-sheet financial instruments without attempting to estimate the value of anticipated future business. |
4. MORTGAGE LOANS RECEIVABLE
4. MORTGAGE LOANS RECEIVABLE | 6 Months Ended |
Jun. 30, 2022 | |
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Abstract] | |
4. MORTGAGE LOANS RECEIVABLE | 4. MORTGAGE LOANS RECEIVABLE As of June 30, 2022, the Company sold all assets to OSK, XII, LLC and therefore no longer own any of the loans in its portfolio. The Company recognized a final impairment of $ 1,486,434 15,383,676 At June 30, 2022, the Company closed-out its loan loss reserve totaling $1,486,434 since all assets were sold to OSK, XII, LLC. At June 30, 2021, the Company reserved $1,515,038 for fourteen mortgage loans. Nine of these loans are three or more mortgage payments in arrears of which two are declared to be in default. The total principal amount of these fourteen loans totaled approximately $6,449 A summary of transactions in the Allowance for Mortgage Loans Six Months Ended Balance at December 31, 2021 $ 1,486,434 Charge-offs (1,486,434) Balance at June 30, 2022 $ 0 Six Months Ended Balance at December 31, 2020 $ 1,493,996 Provisions for loan losses 21,042 Balance at June 30, 2021 $ 1,515,038 One loan was in the foreclosure process, had a principal balance of $ 543,822 0 543,822 Loans that are in the foreclosure process or are declared to be in default, had a principal balance of $ 921,583 73,900 747,683 The outbreak of COVID-19 has affected churches due to shelter-in-place directives which ceased or greatly curtailed social gatherings such as church worship services. The Company’s borrowers have experienced financial duress during the COVID-19 shelter in place restrictions, amplified by the financial setbacks for many of the church members who have lost their jobs, been furloughed, or had their incomes diminished. The Company provided some temporary relief by allowing its borrowers to either make interest only payments for a period of ninety days or forgo one monthly mortgage payment (forbearance). In 2020, the Company provided nine churches totaling approximately $ 2,552,000 2,119,000 217,000 The Company did not restructure any loans during the six month period ended June 30, 2022. A summary of Loans Re-structured or Modified December 31, 2021 Type of Loan Number of Loans Original Principal Balance Original Average Interest Rate Unpaid Principal Balance Modified Average Interest Rate Mortgage Loans 6 $4,196,544 8.101% $3,415,692 6.431% |
5. BOND PORTFOLIO
5. BOND PORTFOLIO | 6 Months Ended |
Jun. 30, 2022 | |
Transfers and Servicing [Abstract] | |
5. BOND PORTFOLIO | 5. BOND PORTFOLIO The Company had a portfolio of secured church bonds at December 31, 2021, which were carried at amortized cost. The bonds paid either semi-annual or quarterly interest ranging from 3.50% to 9.75%. The aggregate par value of secured church bonds equaled $ 18,093,483 1,755,504 842,000 Total other than temporary impairment related to the bond portfolio was $ 1,755,504 7,142,094 Below is a roll-forward of the amount of Other than Temporary Impairment Related to Credit Loss June 30, 2022 December 31, 2021 Beginning Balance $ 1,755,504 $ 834,226 Credit loss realized from redemption of securities (1,755,504 ) (18,743 ) Additions to other than temporary impairment — 940,021 Ending Balance $ — $ 1,755,504 |
6. SECURED INVESTOR CERTIFICATE
6. SECURED INVESTOR CERTIFICATES | 6 Months Ended |
Jun. 30, 2022 | |
Debt Disclosure [Abstract] | |
6. SECURED INVESTOR CERTIFICATES | 6. SECURED INVESTOR CERTIFICATES Pursuant to the terms of the Asset Sale Agreement, OSK delivered $ 21,976,500 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 6.12% at December 31, 2021. Holders of the secured investor certificates may renew certificates at the current rates and terms upon maturity at the Company’s discretion. Renewals upon maturity are considered neither proceeds from nor issuance of secured investor certificates. Renewals totaled approximately $ 530,000 |
7. TRANSACTIONS WITH AFFILIATES
7. TRANSACTIONS WITH AFFILIATES | 6 Months Ended |
Jun. 30, 2022 | |
Related Party Transactions [Abstract] | |
7. TRANSACTIONS WITH AFFILIATES | 7. 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 management. For its services, the Advisor is entitled to receive a management fee equal to 1.25% annually of the Company's Average Invested Assets, plus one-half of any origination fee charged to borrowers on mortgage loans made by the Company. A majority of the independent board members approve the Advisory Agreement on an annual basis. The Company paid the Advisor management and origination fees of approximately $ 123,000 268,000 |
8. LINE OF CREDIT
8. LINE OF CREDIT | 6 Months Ended |
Jun. 30, 2022 | |
Debt Disclosure [Abstract] | |
8. LINE OF CREDIT | 8. LINE OF CREDIT On April 9, 2018, the Company entered into a Loan and Security Agreement (the “Loan Agreement”) with Alerus Financial, N.A., as lender (the “Lender”), and a Revolving Note (the “Note”) evidencing a $ 4,000,000 make loans to the Company from time to time and after the date of the loan agreement and the Company may repay and re-borrow pursuant to the terms and conditions of the Revolving Loan as long as no borrowing causes that dollar limit to be exceeded and the Company is not otherwise in default on the Revolving Loan. The Revolving Loan is secured by a first priority security interest in substantially all of the Company’s assets other than collateral pledged to secure the Company’s secured investor certificates, both those currently issued and any potentially issued in the future. The Company borrowed against the line of credit and has an outstanding balance of $0 and $300,000 as of June 30, 2022 and December 31, 2021 respectively. The interest rate on the Revolving Loan is the prevailing Wall Street Journal U.S. Prime Rate (the Index) plus 1.00%. On January 19, 2022, the Revolving Loan was extended through April 19, 2022. The Company did not renew the line of credit on April 19, 2022. Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995 Certain statements contained in this section and elsewhere in this Form 10-Q constitute “forward-looking statements” “believe”, “expect”, “anticipate”, “may”, “plan”, “should”, 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, 2021 and other public filings and disclosures. Investors and shareholders are urged to read these documents carefully. Recent Developments On May 27, 2022, American Church Mortgage Company (“ACMC”) entered into an Asset Agreement dated as of May 27, 2022 (the “Asset Sale Agreement”) with OSK XII, LLC (“OSK”), a third party not affiliated with ACMC. Pursuant to the terms of the Asset Sale Agreement, OSK has agreed to acquire from ACMC substantially all of the assets of ACMC, consisting of ACMC’s Assets and Bonds (the “Transaction”). As provided in the Asset Sale Agreement, OSK agreed to pay the purchase price of $26,100,000, plus interest due on ACMC’s Secured Investor Certificates (the “Purchase Price”), adjusted as follows: (i) less all payments received by ACMC on account of the Loans and the Bonds from March 31, 2022 through the day before the “Closing Date” (defined below), (ii) plus the aggregate amount of asset level expenses set forth on a schedule prepared by ACMC as part of ACMC’s confidential schedules delivered to OSK (the “Schedules”). The Asset Sale Agreement provides that at least two days before the Closing Date, OSK must deliver $21,976,500, plus interest from April 1, 2022 to the Closing Date, to an account at Herring Bank, which will be used to redeem ACMC’s Secured Investor Certificates. The Transaction closed on June 30, 2022. Plan of Operation We were founded in May 1994 and commenced active business operations on April 15, 1996 after the completion of our initial public offering. Results of Operations 2022 Six Months Ended June 30, 2022 Compared to 2021 Six Months Ended June 30, 2021 Our net loss for the six months ended June 30, 2022 and 2021 was $3,884,079 and $455,986 respectively, on total interest and other income of approximately $1,081,000 and $986,000, respectively. Interest and other income is comprised of interest from loans, interest from bonds, amortization of bond discounts and amortization of loan origination fees. As of June 30, 2022 we sold all of the assets in our loan and bond portfolio to OSK through an Asset Sale Agreement (see above). The sale of all of our assets resulted in an additional impairment charge contributing to the loss for the six month period ended June 30, 2022. As of June 30, 2021, our loans receivable have interest rates ranging from 0% to 10.25%, with an average, principal-adjusted interest rate of 7.65%. Our bond portfolio has an average current yield of 6.76% as of June 30, 2021. Interest expense was approximately $1,353,000 and $822,000 for the six months ended June 30, 2022 and 2021, respectively. The increase in interest expense was largely due to the recognition of all amortized expenses related to our Secured Investor Certificate offerings. We follow a loan loss allowance policy on our portfolio of loans outstanding. This critical policy requires complex judgments and estimates. We record mortgage loans receivable at their estimated net realizable value, which is the unpaid principal balance less the allowance for mortgage loans. Our loan policy provides an allowance for estimated uncollectible loans based on an evaluation of the current status of the loan portfolio. This policy provides for principal amounts outstanding on a particular loan if cumulative interruptions occur in the normal payment schedule of a loan. Our policy will provide an allowance for the outstanding principal amount of a loan in our portfolio in the amount that is in doubt of being collected. Additionally, no interest income is recognized on impaired loans or loans that are in the foreclosure process. We will declare a loan to be in default and will place the loan on non-accrual status when the following thresholds have been met: (i) the borrower has missed three consecutive mortgage payments; (ii) the borrower has not communicated to the Company any legitimate reason for delinquency in its payments to the Company and has not arranged for the re-continuance of payments; (iii) lines of communication to the borrower have broken down such that any reasonable prospect of rehabilitating the loan and the return to regular monthly mortgage payments is gone. Our policies on payments received and interest accrued on non-accrual loans are as follows: (i) We will accept payments on loans that are currently on non-accrual status when a borrower has communicated to us that they intend to meet their mortgage obligations. A payment made on a non-accrual loan is considered a good faith deposit as to the intent to resume their mortgage payment obligation. This good faith deposit is credited back to interest first then principal as stated in the mortgage loan documentation. (ii) A letter outlining the re-payment terms or the restructure terms (if any) of the loan is provided to the borrower. This letter will be signed by the Senior Pastor and all board members of the borrower. This letter resumes the obligation to make payments on non-accrual loans. (iii) The borrower must meet all its payment obligations for the next 120 days without interruption in order to be removed from non-accrual status. When a loan is declared in default according to our policy or deemed to be doubtful of collection, the loan committee of our Advisor will direct the staff to charge-off the uncollectable receivables. Allowance for losses on mortgage loans receivable was $0 as of June 30, 2022 compared to $1,486,434 as of December 31, 2021. We closed-out or provision for losses on loans during the period ended June 30, 2021due to the sale of all loans in our portfolio under the Asset Sale Agreement with OSK compared to $21,042 for the period ended June 30, 2021. At December 31, 2021, we provided approximately $1,486,000 allowance for loan loss reserve for twelve mortgage loans, of which eight were three or more mortgage payments in arrears of which two were declared to be in default. Our lending practices limit deployment of our capital to churches and other non-profit religious organizations. The total principal amount of our second mortgage loans is limited to 20% of our average invested assets. We do not loan to any borrower who has been in operation for less than two years and the borrower must demonstrate they can service the debt outstanding for the prior three years based on historical financial statements. We do not loan money based on projections or pledge programs. The loan amount to any borrower cannot exceed 75% loan to appraised value. Typically, we do not loan over 70% loan to value except in extenuating circumstances. In addition, the borrower’s long-term debt (including the proposed loan) cannot exceed four times the borrower’s gross income for the previous twelve month period. Historically, loans in our portfolio are outstanding for an average of seven years. Our borrowers are typically small independent churches with little or no borrowing history. Once a church establishes a payment history with us, they look to refinance their loan with a local bank, credit union or other financial institution which is willing to provide financing since the borrower has established a payment history and have demonstrated they can meet their mortgage debt obligations. Operating expenses for the six months ended June 30, 2022 increased to approximately $2,126,000 compared to $600,000 for the six months ended June 30, 2021. The increase was the result of an increase for additional impairment on our bond portfolio and real estate held for sale. 2022 Second Quarter Compared to 2021 Second Quarter The Company had a net loss of approximately $3,733,000 for the three months ended June 30, 2022 compared to a net loss of approximately $351,000 for the three months ended June 30, 2021, on total interest and other income of approximately $515,000 and $388,000, respectively. Interest expense was approximately $992,000 and $407,000 for the three months ended June 30, 2022 and 2021, respectively. The decrease in net interest income from the prior three month period was approximately $457,000. Operating expenses for the three months ended June 30, 2022 increased to approximately $1,826,000 compared to $318,000 at June 30, 2021. The increase in operating expenses was due to an increase in other than temporary impairment on our bond portfolio and real estate held for sale. Mortgage Loans and Bond Portfolio No new loans were funded and no bonds were purchased during the six months ended June 30, 2022 and 2021, respectively. We previously owned $4,321,000 First Mortgage Bonds issued by Greater Travelers Rest (“GTR”) located in Decatur, Georgia. The total principal amount of First Mortgage Bonds issued by GTR is $17,390,000. We, along with all other bondholders, have a superior lien over all other creditors. The last correspondence to bondholders was January 22, 2021 in which the trustee agreed to deferment of sinking fund payments since the COVID-19 pandemic caused a significant decrease in giving from the Church membership. The agreement meant that the trustee would not declare an event of default under the terms of the trust indenture as a result of missed sinking fund payments. The trustee and the church entered into a payment plan to get the church current on their sinking fund payments in the first quarter of 2021. If the church keeps with the plan, starting in 2022, the pay-dates should be made on time to the bondholders. We have not been updated as to the status of the payment plan and no interest or principal due to us has been made in 2022. These bonds were sold to OSK in the Asset Sale Agreement. We previously owned $529,000 First Mortgage Bonds and $497,000 Second Mortgage Bonds issued by Agape Assembly Baptist Church located in Orlando, Florida. The total principal amount of First Mortgage Bonds issued by Agape is $7,200,000, and the total principal amount of Second Mortgage Bonds issued is $715,000. Agape defaulted on its payment obligations to bondholders in September 2010. The church subsequently commenced a Chapter 11 bankruptcy reorganization proceeding regarding the property that secures the First Mortgage Bonds in December 2010. In October 2014, the bondholders of Agape agreed to a modification in the terms of their bonds which resulted in the temporary resumption of both principal and interest payments to both the first and second mortgage bond holders. Both the First Mortgage Bonds and Second Mortgage Bonds were modified to a fully amortized fixed rate, quarterly interest payment of 6.25% with a new maturity date of September 2037 for all the issued and outstanding bonds. We, along with all other bondholders, have a superior lien over all other creditors. The Church subsequently defaulted on their modification agreement in 2016 and no interest payments were made to bondholders during the year ended December 31, 2021 or 2020. However, the trustee made a distribution to bondholders during 2017 of $18.75 per $1,000 bond as a repayment of principal only, effectively reducing the outstanding balance of each $1,000 bond to approximately $826. The trustee again initiated foreclosure action against the Church and prevailed in its pursuit to foreclose on the Church’s property on November 1, 2019. However, on the eve of the foreclosure sale, the Church again filed for bankruptcy protection. In October 2020, bondholders were asked by the trustee to accept or reject a plan of reorganization. The trustee is recommending bondholders accept the reorganization plan. We accepted the reorganization plan. Acceptance of the plan by bondholders could result in a return of approximately 67% of the original principal investment outstanding. As of June 30, 2022, we have not been updated as to the status of the reorganization plan. These bonds were sold to OSK in the Asset Sale Agreement. We previously owned $900,000 First Mortgage Bonds issued by Soul Reapers Worship Center International located in Raleigh, North Carolina. The total principal amount of First Mortgage Bonds issued by Soul Reapers is $1,920,000. The Church has failed to make payments as required under the terms of the Trust Indenture. As a Bondholder, we expected to receive interest and principal payment(s) on time and according to the terms of the Bonds. We did not receive any quarterly interest payments from the issuer for the period ended June 30, 2022. These bonds were sold to OSK in the Asset Sale Agreement. Real Estate Held for Sale We record real estate held for sale at the estimated fair value, which is net of the expected expenses related to the sale of the real estate. We recorded an additional $0 and $100,000 impairment on our real estate held for sale for the six month period ended June 30, 2022 and 2021, respectively. We sold our real estate held for sale to OSK in the Asset Sale Agreement. Dividends We have elected to operate as a real estate investment trust (REIT), therefore we are required, among other things, to distribute to shareholders at least 90% of “Taxable Income” in order to maintain our REIT status. The dividends declared and paid to shareholders may include cash from origination fees even though they are not recognized as income in their entirety for the period under generally accepted accounting principles in the United States. We did not earn any origination fees for the six months ended June 30, 2022 and 2021, respectively. We did not pay any dividends for the period ended June 30, 2022. We paid a dividend of $.01 for each share held of record on April 28, 2021. The dividend, which was paid April 30, 2021, represents a 0.40% annual rate of return on each share of common stock owned, assuming a purchase price of $10 per share. On June 27, 2022 the sale was approved by shareholders, the timing of any distributions to ACMC’s shareholders depends on, among other factors, the timing of ACMC performing all of its obligations and requirements after the closing of the Sale and payment of any applicable liabilities and obligations. The shareholders approved the Sale, subject to the satisfaction of the liabilities of ACMC, the Board intends, although there can be no assurance, to provide for an initial distribution of between $4.6 million and $4.8 million in the aggregate, or approximately $2.75 to $2.89 per share of ACMC’s common stock. The Board anticipates that an initial distribution will be made during the third quarter of 2022 and that a second distribution may be made at a later date prior the end of the calendar year. Liquidity and Capital Resources During the six months ended June 30, 2022, total assets decreased by approximately $25,789,000 due primarily to the sale of all our assets to OSK in the Asset Sales Agreement. Liabilities decreased by for the same reason, due to a pay-off of all our secured investor certificates outstanding and our line of credit outstanding. For the six months ended June 30, 2022, net cash provided by operating activities increased to approximately $7,825,000 from $30,000 from the comparative period ended June 30, 2021, primarily due to the sale of all assets and an increase in losses on operations. For the six months ended June 30, 2022, net cash provided by investing activities was approximately $33,477,000 compared to $2,055,000 from the comparative six months ended June 30, 2021, due to an sale of all asset from our mortgage loans and bond portfolio. For the six months ended June 30, 2022, net cash (used for) financing activities increased to approximately $(22,579,000) from $(2,110,000) for the comparative six months ended June 30, 2021, primarily due to the pay-down on our Secured Investor Certificates. Critical Accounting Estimates Preparation of our financial statements requires estimates and judgments to be made that affect the amounts of assets, liabilities, revenues and expenses reported. Such decisions include the selection of the appropriate accounting principles to be applied and the assumptions on which to base accounting estimates. We evaluate these estimates based on assumptions we believe to be reasonable under the circumstances. The difficulty in applying these policies arises from the assumptions, estimates and judgments that have to be made currently about matters that are inherently uncertain, such as future economic conditions, operating results and valuations as well as management intentions. As the difficulty increases, the level of precision decreases, meaning that actual results can and probably will be different from those currently estimated. Management uses estimates and assumptions in preparing these financial statements in accordance with generally accepted accounting principles. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could differ from those estimates. The most sensitive estimates relate to the realizability of the mortgage loans receivable and the valuation of the bond portfolio and real estate held for sale. It is at least reasonably possible that these estimates could change in the near term and that the effect of the change, if any, may be material to the financial statements. We estimate the value of real estate we hold pending re-sale based on a number of factors. We look at the current condition of the property as well as current market conditions in determining a fair value, which will determine the listing price of each property. Each property is valued based on its current listing price less any anticipated selling costs, including for example, realtor commissions. Since churches are single use facilities the listing price of the property may be lower than the total amount owed to us. The fair value of the real estate held for sale includes estimates of expenses related to the sale of the real estate. Off-Balance Sheet Arrangements We do not have any off-balance sheet arrangements. Item 3. Quantitative and Qualitative Disclosures About Market Risk N/A Items 4. Controls and Procedures Disclosure Controls and Procedures An evaluation was carried out under the supervision and with the participation of the Company’s management, including the principal executive officer and the principal accounting officer, of the effectiveness of the Company’s disclosure controls and procedures as of the end of the quarter ended June 30, 2022. Based on that evaluation, the principal executive officer and the principal accounting officer concluded that the Company’s disclosure controls and procedures were not effective to provide reasonable assurance that information required to be disclosed by the Company in reports that it files or submits under the Securities and Exchange Commission is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and that information required to be disclosed in reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal accounting officer, to allow timely decisions regarding required disclosure. We have limited number of personnel performing finance and accounting functions. Were there a larger staff, it would be possible to provide for enhanced disclosure of financial reporting matters. Management is required to apply its judgement in evaluating the cost benefit relationship of possible controls and procedures. Management realizes this is a material weakness. Changes in Internal Controls Over Financial Reporting During the three months ended June 30, 2022, there were no changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting. PART II OTHER INFORMATION Item 1. Legal Proceedings None. Item 1A. Risk Factors. Not applicable. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds (a) Not Applicable (b) Not Applicable (c) Not Applicable Item 3. Defaults Upon Senior Securities None. Item 4. Mine Safety Disclosures Not Applicable Item 5. Other Information None. Item 6. Exhibits Exhibit Number Title of Document 31.1 Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1 Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the of the Sarbanes-Oxley Act of 2002. 32.2 Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the of the Sarbanes-Oxley Act of 2002. 101 The following financial information from our Quarterly Report on Form 10-Q for the first quarter of fiscal year 2022 filed with the Securities and Exchange Commission on August 15, 2022, is formatted in eXtensible Business Reporting Language (XBRL): (i) the Consolidated Balance Sheets at June 30, 2022 and December 31, 2021; (ii) Consolidated Statements of Operations for the six and three months ended June 30, 2022 and 2021; (iii) the Consolidated Statements of Cash Flows for the six months ended June 30, 2022 and 2021; and (iv) the Notes to Financial Statements (Unaudited). SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused the report to be signed on its behalf by the undersigned, thereunto duly authorized. Dated: August 15, 2022 AMERICAN CHURCH MORTGAGE COMPANY By: /s/ Philip J. Myers Philip J. Myers Chief Executive Officer (Principal Executive Officer) By: /s/ Scott J. Marquis Scott J. Marquis Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer) |
1. BASIS OF PRESENTATION (Polic
1. BASIS OF PRESENTATION (Policies) | 6 Months Ended |
Jun. 30, 2022 | |
Accounting Policies [Abstract] | |
The accompanying unaudited interim financial statements and the notes thereto have been prepared in accordance with generally accepted accounting principals in the United States of America (“GAAP”). In the opinion of management, the accompanying unaudited interim financial statements contain all normal recurring adjustments necessary to present fairly the financial positions, results of operations, changes in equity and cash flows for the periods presented. | The accompanying unaudited interim financial statements and the notes thereto have been prepared in accordance with generally accepted accounting principals in the United States of America (“GAAP”). In the opinion of management, the accompanying unaudited interim financial statements contain all normal recurring adjustments necessary to present fairly the financial positions, results of operations, changes in equity and cash flows for the periods presented. The accompanying unaudited financial statements and related notes should be read in conjunction with the audited financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the Securities and Exchange Commission on March 29, 2022. |
2. DISCONTINUED OPERATIONS AN_2
2. DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE (Policies) | 6 Months Ended |
Jun. 30, 2022 | |
Discontinued Operations and Disposal Groups [Abstract] | |
Accounting Estimates | Accounting Estimates Management uses estimates and assumptions in preparing these financial statements in accordance with GAAP. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could differ from those estimates. The most sensitive estimates relate to the realizability of the mortgage loans receivable, the valuation of the bond portfolio and the valuation of real estate held for sale. It is at least reasonably possible that these estimates could change in the near term and that the effect of the change, if any, may be material to the financial statements. |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers all highly liquid debt instruments purchased with maturities of three months or less to be cash equivalents. The Company maintains accounts primarily at two financial institutions. At times throughout the year, the Company’s cash and equivalents balances may exceed amounts insured by the Federal Deposit Insurance Corporation. Cash in money market funds is not federally insured. Management believes these financial institutions have strong credit ratings and that the credit risk related to these deposits is minimal. The Company has not experienced any losses in such accounts. |
3. FAIR VALUE MEASUREMENT (Tabl
3. FAIR VALUE MEASUREMENT (Tables) | 6 Months Ended |
Jun. 30, 2022 | |
Fair Value Disclosures [Abstract] | |
Assets and liabilities Measured at Fair Value | Information regarding the fair value of Assets and liabilities Measured at Fair Value Nonrecurring Fair Value at June 30, 2022 Assets: Quoted Prices in Active Markets for Identical Instruments Level 1 Significant Other Observable Inputs Level 2 Significant Unobservable Inputs Level 3 Total Bond portfolio $ — $ — $ — $ — Impaired loans $ — $ — $ — $ — Real estate held for sale $ — $ — $ — $ — Nonrecurring Fair Value at December 31, 2021 Assets: Quoted Prices in Active Markets for Identical Instruments Significant Other Observable Inputs Significant Unobservable Inputs Total Bond portfolio $ — $ — $ 7,142,094 $ 7,142,094 Impaired loans $ — $ — $ 4,496,970 $ 4,496,970 Real estate held for sale $ — $ — $ 328,996 $ 328,996 |
Level 3 Fair Value Measurements | The following presents quantitative information about nonrecurring Level 3 Fair Value Measurements Fair Value Valuation Technique Significant Unobservable Inputs(s) Range/Weighted June 30, 2022 Bond Portfolio $ - Market or Income Approach Discount to Appraised Values 10-50% Impaired Loans $ - Market or Income Approach Discount to Appraised Values 10-100% Real Estate Held for Sale $ - Market or Income Approach Discount to Appraised Values 10-20% December 31, 2021 Bond Portfolio $7,142,094 Market or Income Approach Discount to Appraised Values 10-20% Impaired Loans $4,496,970 Market or Income Approach Discount to Appraised Values 10-100% Real Estate Held for Sale $328,996 Market or Income Approach Discount to Appraised Values 10-20% |
Carrying Values of the Company’s Financial Instruments | The estimated Carrying Values of the Company’s Financial Instruments June 30, 2022 Level 1 Level 2 Level 3 Carrying Value at June 30, 2022 Cash and equivalents $ 3,187,804 $ — $ — $ 3,187,804 Accounts receivable 1,720,989 — — 1,720,989 Interest receivable — — — — Mortgage loans receivable — — — — Bond portfolio — — — — Line of credit — — — — Secured investor certificates — — — — December 31, 2021 Level 1 Level 2 Level 3 Carrying Value Cash and equivalents $ 114,798 $ — $ — $ 114,798 Accounts receivable 79,887 — — 79,887 Interest receivable 89,280 — — 89,280 Mortgage loans receivable — — 13,744,525 13,744,525 Bond portfolio — — 16,337,978 16,337,978 Line of credit 300,000 — — 300,000 Secured investor certificates — 22,278,500 — 22,278,500 |
4. MORTGAGE LOANS RECEIVABLE (T
4. MORTGAGE LOANS RECEIVABLE (Tables) | 6 Months Ended |
Jun. 30, 2022 | |
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Abstract] | |
Allowance for Mortgage Loans | A summary of transactions in the Allowance for Mortgage Loans Six Months Ended Balance at December 31, 2021 $ 1,486,434 Charge-offs (1,486,434) Balance at June 30, 2022 $ 0 Six Months Ended Balance at December 31, 2020 $ 1,493,996 Provisions for loan losses 21,042 Balance at June 30, 2021 $ 1,515,038 |
Loans Re-structured or Modified | The Company did not restructure any loans during the six month period ended June 30, 2022. A summary of Loans Re-structured or Modified December 31, 2021 Type of Loan Number of Loans Original Principal Balance Original Average Interest Rate Unpaid Principal Balance Modified Average Interest Rate Mortgage Loans 6 $4,196,544 8.101% $3,415,692 6.431% |
5. BOND PORTFOLIO (Tables)
5. BOND PORTFOLIO (Tables) | 6 Months Ended |
Jun. 30, 2022 | |
Transfers and Servicing [Abstract] | |
Other than Temporary Impairment Related to Credit Loss | Below is a roll-forward of the amount of Other than Temporary Impairment Related to Credit Loss June 30, 2022 December 31, 2021 Beginning Balance $ 1,755,504 $ 834,226 Credit loss realized from redemption of securities (1,755,504 ) (18,743 ) Additions to other than temporary impairment — 940,021 Ending Balance $ — $ 1,755,504 |
1. BASIS OF PRESENTATION (Detai
1. BASIS OF PRESENTATION (Details Narrative) | Jun. 30, 2022 USD ($) |
Accounting Policies [Abstract] | |
Redemption Secured Investor Certificates | $ 21,976,500 |
Assets and liabilities Measured
Assets and liabilities Measured at Fair Value (Details) - USD ($) | Jun. 30, 2022 | Dec. 31, 2021 |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Real Estate, Held-for-Sale | $ 328,996 | |
Fair Value, Inputs, Level 1 [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Bond Portfolio | ||
[custom:CustomImpairedLoans-0] | ||
Real Estate, Held-for-Sale | ||
Fair Value, Inputs, Level 2 [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Bond Portfolio | ||
[custom:CustomImpairedLoans-0] | ||
Real Estate, Held-for-Sale | ||
Fair Value, Inputs, Level 3 [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Bond Portfolio | 7,142,094 | |
[custom:CustomImpairedLoans-0] | 4,496,970 | |
Real Estate, Held-for-Sale | 328,996 | |
Fair Value, Inputs, Level 1, Level 2, and Level 3 [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Bond Portfolio | 7,142,094 | |
[custom:CustomImpairedLoans-0] | 4,496,970 | |
Real Estate, Held-for-Sale | $ 328,996 |
Carrying Values of the Company_
Carrying Values of the Company’s Financial Instruments (Details) - USD ($) | Jun. 30, 2022 | Dec. 31, 2021 |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Cash and equivalents | $ 3,187,804 | $ 114,798 |
Accounts receivable | 1,720,658 | 79,887 |
Interest receivable | 89,280 | |
Bond portfolio | 16,337,978 | |
Line of credit | 300,000 | |
Fair Value, Inputs, Level 1 [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Cash and equivalents | 3,187,804 | 114,798 |
Accounts receivable | 1,720,989 | 79,887 |
Interest receivable | 89,280 | |
Mortgage loans receivable | ||
Bond portfolio | ||
Line of credit | 300,000 | |
Secured investor certificates | ||
Fair Value, Inputs, Level 2 [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Cash and equivalents | ||
Accounts receivable | ||
Interest receivable | ||
Mortgage loans receivable | ||
Bond portfolio | ||
Line of credit | ||
Secured investor certificates | 22,278,500 | |
Fair Value, Inputs, Level 3 [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Cash and equivalents | ||
Accounts receivable | ||
Interest receivable | ||
Mortgage loans receivable | 13,744,525 | |
Bond portfolio | 16,337,978 | |
Line of credit | ||
Secured investor certificates | ||
Fair Value, Inputs, Level 1, Level 2, and Level 3 [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Cash and equivalents | 3,187,804 | 114,798 |
Accounts receivable | 1,720,989 | 79,887 |
Interest receivable | 89,280 | |
Mortgage loans receivable | 13,744,525 | |
Bond portfolio | 16,337,978 | |
Line of credit | 300,000 | |
Secured investor certificates | $ 22,278,500 |
3. FAIR VALUE MEASUREMENT (Deta
3. FAIR VALUE MEASUREMENT (Details Narrative) - USD ($) | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2022 | Jun. 30, 2021 | Dec. 31, 2021 | Dec. 31, 2020 | |
Fair Value Disclosures [Abstract] | ||||
Impairment Reserve Bond Portfolio | $ 1,755,504 | $ 1,755,094 | ||
Carrying Value Bonds Held to Maturity | 8,897,598 | |||
Bond Portfolio | 7,142,094 | |||
Allowance For Mortgage Loans Receivable | 0 | $ 1,515,038 | 1,486,434 | $ 1,493,996 |
Carrying Value Impaired Loans | 5,983,404 | |||
Fair Value Impaired Loans | 4,496,970 | |||
Real Estate Owned, Valuation Allowance, Period Increase (Decrease) | $ 328,996 | $ 100,000 | $ 0 |
Allowance for Mortgage Loans (D
Allowance for Mortgage Loans (Details) - USD ($) | 6 Months Ended | |||
Jun. 30, 2022 | Jun. 30, 2021 | Dec. 31, 2021 | Dec. 31, 2020 | |
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Abstract] | ||||
Allowance Mortgage Loans Receivable | $ 0 | $ 1,515,038 | $ 1,486,434 | $ 1,493,996 |
Provision For Loan Losses | $ (1,486,434) | $ 21,042 |
Loans Re-structured or Modified
Loans Re-structured or Modified (Details) | Dec. 31, 2021 USD ($) |
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Abstract] | |
[custom:NumberOfLoans-0] | $ 6 |
[custom:OriginalPrincipalBalance-0] | $ 4,196,544 |
[custom:OriginalAverageInterestRate-0] | 8.101% |
[custom:UnpaidPrincipalBalance-0] | $ 3,415,692 |
[custom:ModifiedAverageInterestRate-0] | 6.431% |
4. MORTGAGE LOANS RECEIVABLE (D
4. MORTGAGE LOANS RECEIVABLE (Details Narrative) - USD ($) | Jun. 30, 2022 | Mar. 31, 2022 | Dec. 31, 2021 | Jun. 30, 2021 | Dec. 31, 2020 |
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Abstract] | |||||
Allowance Mortgage Loans Receivable | $ 0 | $ 1,486,434 | $ 1,515,038 | $ 1,493,996 | |
Loans Receivable | 15,383,676 | ||||
Principal Balance Loans In Default | 543,822 | 921,583 | |||
Fair Value Loans In Default | 0 | 73,900 | |||
Valucation Allowance Impaired Loans | 543,822 | $ 747,683 | |||
Loans Exceeding 90 Days Past Due | 2,552,000 | ||||
Loans Interest Only Payments | $ 2,119,000 | ||||
Principal Balance Loans Paying Interest Only | $ 217,000 |
Other than Temporary Impairment
Other than Temporary Impairment Related to Credit Loss (Details) - USD ($) | 6 Months Ended | 12 Months Ended |
Jun. 30, 2022 | Dec. 31, 2021 | |
Transfers and Servicing [Abstract] | ||
Beginning Balance | $ 1,755,504 | $ 834,226 |
Credit loss realized from redemption of securities | (1,755,504) | (18,743) |
Additions to other than temporary impairment | 940,021 | |
Ending Balance | $ 1,755,504 |
5. BOND PORTFOLIO (Details Narr
5. BOND PORTFOLIO (Details Narrative) | Dec. 31, 2021 USD ($) |
Transfers and Servicing [Abstract] | |
Church Bonds Owned Gross | $ 18,093,483 |
Bond Reserve Fund | 1,755,504 |
Maturities and Redemptions of Bonds | 842,000 |
Bond Portfolio | $ 7,142,094 |
6. SECURED INVESTOR CERTIFICA_2
6. SECURED INVESTOR CERTIFICATES (Details Narrative) - USD ($) | Jun. 30, 2022 | Dec. 31, 2021 |
Debt Disclosure [Abstract] | ||
Redemption Secured Investor Certificates | $ 21,976,500 | |
Renewal Secured Investor Certificates | $ 530,000 |
7. TRANSACTIONS WITH AFFILIAT_2
7. TRANSACTIONS WITH AFFILIATES (Details Narrative) - USD ($) | 6 Months Ended | 12 Months Ended |
Jun. 30, 2022 | Dec. 31, 2021 | |
Related Party Transactions [Abstract] | ||
Advisory Management Fee | $ 123,000 | $ 268,000 |
8. LINE OF CREDIT (Details Narr
8. LINE OF CREDIT (Details Narrative) | Jun. 30, 2022 USD ($) |
Debt Disclosure [Abstract] | |
[custom:RevolvingLineOfCredit-0] | $ 4,000,000 |