UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-11
Amendment No. 1
FOR REGISTRATION UNDER THE SECURITIES ACT OF
1933
OF SECURITIES OF CERTAIN REAL ESTATE COMPANIES
American Church Mortgage Company
(Exact name of registrant as specified in governing
instruments)
10237 Yellow Circle Drive
Minnetonka, Minnesota 55343
(952) 945-9455
(Address, including zip code, and telephone
number, including area code, of registrant’s principal executive offices)
Philip J. Myers, President
10237 Yellow Circle Drive
Minnetonka, Minnesota 55343
(952) 945-9455
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
Copies to:
Philip T. Colton, Esq.
Winthrop & Weinstine, P.A.
225 South Sixth Street, Suite 3500
Minneapolis, Minnesota 55402
(612) 604-6400
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the Registration Statement becomes effective.
If any of the
Securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities
Act, check the following box:
[X]
If
this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the
following box and list the Securities Act registration statement number of the earlier effective registration statement for the
same offering.
[_]
If
this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier effective registration statement for the same offering.
[_]
If
this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier effective registration statement for the same offering.
[_]
If
delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box.
[_]
Indicate by check
mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company,
or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller
reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
[_]
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Accelerated filer
[_]
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Non-accelerated filer
[_]
(Do not check if smaller reporting company)
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Smaller reporting company
[X]
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Emerging growth company
[_]
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If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act
.
[_]
CALCULATION OF REGISTRATION FEE
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Title Of Each Class Of Securities
To Be Registered
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Amount
to be
Registered
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Proposed Maximum
Offering Price
Per Unit
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Proposed Maximum
Aggregate Offering
Price
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Amount Of
Registration Fee
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Series E Secured Investor Certificates
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10,000
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$1,000
(1)
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$10,000,000
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$1,245.00
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(1)
Certificates may be purchased in any multiple
of $1,000.
Registration No. 333-220531
PROSPECTUS
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American Church Mortgage Company
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$10,000,000 of Series E
Secured Investor Certificates
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American Church
Mortgage Company has operated as a real estate investment trust or “REIT” since its commencement of operations in 1996.
We make mortgage loans to churches and other non-profit religious organizations. We also purchase mortgage secured bonds issued
by such organizations.
We are offering
our Series E Secured Investor Certificates.
This is a best efforts
offering. The underwriter is not required to sell any specific number or dollar amount of securities but will use their best efforts
to sell the securities offered.
We may offer new
certificates with the following maturities: five (5) to fifteen (15) years. Depending on our capital needs, certificates with certain
terms may not always be available. We will periodically establish and may change interest rates on the unsold certificates offered
in this prospectus. Current interest rates can be found in the “Description of the Certificates” section of this prospectus.
Investors are advised to check for prospectus supplements as interest rates are subject to change. However, once a certificate
is sold, its interest rate will not change during its term.
The certificates
are non-negotiable and may be transferred only in limited circumstances with the consent of our advisor. There is no public market
for the certificates. The certificates will not be listed on any securities exchange. Our investors may have difficulty selling
certificates prior to their scheduled maturity dates.
Neither the Securities
and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The certificates
are not “Certificates Of Deposit” or similar obligations and are not guaranteed by the FDIC or any other governmental
fund or private entity. Investing in certificates involves risks and conflicts of interest. See “Risk Factors” beginning
on page five (5) and “Conflicts of Interest” beginning on page thirteen (13). Those risks include the following:
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·
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If we fail to maintain our REIT status, we will be taxed as a corporation, which could adversely
affect our ability to make debt service payments to holders of certificates.
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·
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We have conflicts of interest with the underwriter and our advisor, which are under common management.
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·
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You may have difficulty selling your certificates because there is no public market and our advisor
must approve all transfers of certificates.
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·
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Our mortgages and bonds are secured by church property, which is typically special limited use
collateral.
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·
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The use of forecasts in this offering is prohibited. Any representations to the contrary and any
predictions, written or oral, as to the amount or certainty of any present or future cash benefit or tax consequence which may
flow from an investment in this program is not permitted.
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Series D Secured Investor Certificates
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Price to Public
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Selling Commission and Offering Expenses
(2)
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Proceeds to Us
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Minimum Purchase
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$1,000
(1)
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$48.50
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$952
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Total
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$10,000,000
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$485,000
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$9,515,000
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_______________________
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(1)
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Certificates may be purchased in any multiple of $1,000.
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(2)
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Assumes the sale of all certificates offered hereby, of which there can be no assurance. Estimated
for purposes of this table based on a 2.75% underwriter’s commission, a 0.75% underwriter’s management fee, a $60,000
non-accountable expense fee payable to the underwriter, and $75,000 in other offering expenses.
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(3)
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See the Plan of Distribution section of the Registration Statement for additional details.
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AMERICAN INVESTORS GROUP, INC.
Minnetonka, Minnesota
November 6, 2017
This Offering Expires November 6, 2020
AMERICAN CHURCH MORTGAGE COMPANY
Minnetonka, Minnesota
Table of Contents
PROSPECTUS SUMMARY
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1
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RISK FACTORS
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6
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WHO MAY INVEST
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12
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USE OF PROCEEDS
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13
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COMPENSATION TO ADVISOR AND AFFILIATES
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13
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CONFLICTS OF INTEREST
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14
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DISTRIBUTIONS
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17
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CAPITALIZATION
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19
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SELECTED FINANCIAL DATA
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20
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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21
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OUR BUSINESS
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28
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MANAGEMENT
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49
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EXECUTIVE COMPENSATION AND EQUITY COMPENSATION PLANS; DIRECTOR COMPENSATION
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52
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
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52
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
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53
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THE ADVISOR AND OUR ADVISORY AGREEMENT
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53
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MATERIAL FEDERAL INCOME TAX CONSEQUENCES ASSOCIATED WITH THE CERTIFICATES
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55
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QUALIFICATION AS A REIT FOR FEDERAL INCOME TAX PURPOSES
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56
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ERISA CONSIDERATIONS
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57
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DESCRIPTION OF CAPITAL STOCK
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58
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DESCRIPTION OF THE CERTIFICATES
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59
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SUMMARY OF THE ORGANIZATIONAL DOCUMENTS
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65
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PLAN OF DISTRIBUTION
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67
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COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
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69
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LEGAL MATTERS
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69
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EXPERTS
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69
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ADDITIONAL INFORMATION
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69
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INDEX TO FINANCIAL STATEMENTS
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F-i
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PROSPECTUS
SUMMARY
This summary highlights
some information from the prospectus. It may not be all the information that is important to you. To understand this offering fully,
you should read the entire prospectus carefully, including the risk factors and the financial statements. In this prospectus, American
Church Mortgage Company refers to itself as “we,” “us,” and “our.” Our prospective investors
are sometimes referred to as “you” or “your.”
American Church Mortgage Company
American Church
Mortgage Company operates as a real estate investment trust, or REIT. We make mortgage backed loans from $100,000 to $2,000,000
to churches and other non-profit religious organizations for the purchase, construction/interim or refinancing of real estate and
improvements. As of June 30, 2017 we had sixty-one (61) first mortgage loans outstanding aggregating $24,905,098 in principal amount,
three (3) second mortgage loans totaling $225,881 in principal amount and a first mortgage bond portfolio with par values aggregating
$13,504,616. We intend to continue to lend funds pursuant to our business plan as funds from the sale of our securities become
available and as funds become otherwise available, for example through the repayment of loans.
American Church
Mortgage Company was incorporated in the State of Minnesota on May 27, 1994. Our executive offices and those of our advisor are
located at 10237 Yellow Circle Drive, Minnetonka (Minneapolis), Minnesota 55343. Our telephone number is (952) 945-9455.
Our Advisor
We are managed by
Church Loan Advisors, Inc. Church Loan Advisors, Inc. is referred to in this prospectus as our advisor. Church Loan Advisors has
served as our advisor since 1994. Our advisor manages our business activities, provides our office space, personnel, equipment
and support services. Our advisor assumes most of the normal operating expenses we would otherwise incur if we had our own employees
and directly managed our business activities. Pursuant to the advisory agreement between us and our advisor, we pay our advisor
advisory fees based on our average invested assets and certain expenses. In addition, our advisor receives up to one half of any
origination fees associated with a mortgage loan made or renewed by us. Our advisor is affiliated by common ownership with American
Investors Group, Inc., which is the underwriter of this offering (the “Underwriter”).
More Information
We have filed
a registration statement on Form S-11 with the Securities and Exchange Commission (the “SEC”) with respect to the
Secured Investor Certificates to be issued in the offering. This prospectus is a part of that registration statement. This
Offering expires three years from the date of effectiveness.
The registration
statement is, and all of our filings with the SEC (some of which include our financial statements) are, available to the public
over the Internet at the SEC’s web site at http://www.sec.gov. You can also access many of the documents that are referred
to in this prospectus at the web site we maintain at http://www.church loans.net under the heading “Regulatory Filings.”
The Certificates Offered
Issuer
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American Church Mortgage Company
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Trustee
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Herring Bank, Amarillo, Texas
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Securities Offered
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Series E Secured Investor Certificates
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Offering Price
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100% of the principal amount per certificate; multiples of $1,000 per certificate.
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Maturity
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5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and 15 year maturities. Each certificate will mature on the anniversary of the last day of the fiscal quarter in which the certificate is purchased. We may cease offering specified maturities, and begin re offering any unavailable maturity, at any time.
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Interest Rates
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As of the offering date, the interest rates we will pay for each maturity of certificates are set forth in the section entitled “Description of the Certificates” to this prospectus. However, investors are advised to check for prospectus supplements as interest rates are subject to change.
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Interest Payments
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Interest will be paid quarterly to certificate holders.
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Principal Payment
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Unless you renew your certificate, we will pay the entire principal amount of the certificate at maturity.
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Redemption
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We generally will not be required to redeem outstanding certificates prior to maturity. We may redeem outstanding certificates in the following cases:
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In our sole discretion, at any time upon 30 days’ notice.
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If you die, your representative may require us to redeem your certificate, subject to an aggregate limit of $25,000 in any calendar quarter for all redemptions.
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If we terminate our advisory agreement with Church Loan Advisors, Inc., our current advisor, for any reason, we will be required to offer to redeem all outstanding certificates (but are permitted to redeem fewer than all).
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If we redeem any certificate, we will pay the holder an amount equal to the outstanding principal amount of the redeemed certificate plus accrued but unpaid interest.
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Collateral
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To secure payment of the certificates, we will assign to the trustee as collateral non defaulted mortgage secured promissory notes and church bonds with an aggregate outstanding principal balance equal to at least 100% of the aggregate outstanding principal amount of the certificates. We may, in our discretion, substitute cash or cash equivalents. Unless there is an event of default, we will not assign underlying mortgages securing the assigned promissory notes. To the extent not collateralized, the certificates will constitute a subordinated claim against the issuer.
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Renewal
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Certificates are renewable at your option at the interest rates we are offering at the time the certificate matures. We may charge a fee not to exceed 1.25% on renewals. We may cease offering to renew certificates at any time.
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Transferability
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The certificates are non-negotiable and may be transferred only in limited circumstances with the consent of our advisor.
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Absence of Public Market
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There is no market for the certificates. We do not believe that a public market will develop. You may not be able to sell your certificates.
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Sales Commission, Fees
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We will pay the underwriter a commission for assisting us in selling the certificates. The underwriter will receive a sales commission of up to 2.75% and an underwriting management fee equal to 0.75% of the principal amount of certificates sold. In addition, we will pay to the underwriter a non-accountable expense fee of up to $60,000, as further described herein at the section entitled “Use of Proceeds” and offering related costs that we incur including legal and registration fees up to $75,000.
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Outstanding Indebtedness
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Our bylaws prohibit us from borrowing in excess of 300% of Stockholders’ equity, except under certain circumstances.
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At June 30, 2017, the Company had $12,764
,000 worth of Series B Secured Investor Certificates outstanding, $6,734,000 worth of Series C Secured Investor Certificates outstanding and $7,965,000 worth of Series D Secured Investor Certificates outstanding.
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Offering Expiration
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The Offering expires November 6, 2020
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Use of Proceeds
We will use the
proceeds received from the sale of the certificates principally to fund mortgage loans we make to churches and other non-profit
religious organizations and to purchase bonds issued by those organizations. Some of the proceeds may be used to redeem our equity
securities and repay maturing certificates.
Our REIT Status
The Company was
formed as a Real Estate Investment Trust (“REIT”) in 1994 and began active operations in 1996. As a REIT, we generally
are not subject to federal income tax on income that we distribute to our Stockholders. Under the Internal Revenue Code, we are
subject to numerous organizational and operational requirements, including a requirement that we distribute to our Stockholders
at least 90% of our taxable income as calculated on an annual basis. If we fail to qualify for taxation as a REIT in any year,
our taxable income will be taxed at regular corporate rates, and we may not be able to qualify for treatment as a REIT for that
year and the next four years. Even if we qualify as a REIT for federal income tax purposes, we may be subject to federal, state
and local taxes on our income and property and to federal income and excise taxes on any undistributed income.
Risk Factors
An investment in
our certificates involves a degree of risk. See “Risk Factors” for a more complete discussion of factors you should
consider before purchasing certificates. Some of the significant risks include:
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·
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As a “best efforts” offering, all or a material amount of the certificates may not
be sold, and consequently, some or all of the additional funds we are seeking may not be available to us.
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·
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As a “no minimum” offering, there is no minimum number of principal amount of certificates
that must be sold. We will receive the proceeds from the sale of certificates as they are sold.
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·
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If we fail to maintain our REIT status, we will be taxed as a corporation, which could adversely
affect our ability to make debt service payments to holders of certificates.
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·
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Conflicts of interest with the underwriter and our advisor in connection with this offering and
our on-going business operations could affect decisions made by our advisor on our behalf.
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·
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There is no public trading market for the certificates. It is not likely that a market for the
certificates will develop after this offering.
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·
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Fluctuations in interest rates or default in repayment of loans by borrowers could adversely affect
our ability to make interest payments on and repay certificates as they mature.
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Conflicts of Interest
A number of potential
conflicts exist between us and our advisor and its principals. These conflicts include:
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·
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Our President owns and is the President of both our advisor and the underwriter and thus controls
both entities. Our President was formerly our Chief Financial Officer and Treasurer.
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·
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Our Chief Financial Officer and Treasurer is Chief Financial and Operations Officer of the underwriter
and a Vice President of our Advisor and thus is in a position of control of both entities.
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·
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The underwriter for this offering and our advisor are also under common control.
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Agreements between us and our advisor and the underwriter were not negotiated at arm’s length.
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·
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We and the underwriter have common business interests.
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·
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Negotiations between us and our advisor during the organization and structuring of our operations
were not at arm’s length.
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·
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The advisory agreement was not negotiated at arm’s length, but is subject to annual renewal
by our board of directors.
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·
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We share operations facilities with our advisor and the underwriter.
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Our advisor and
its affiliates may engage in businesses similar to ours. We compensate our advisor and its affiliates for services rendered and
pay an annual advisory fee of up to 1.25% of average invested assets and up to one half of any origination fee charged to borrowers
on mortgage loans made by us.
Our Investment Objectives
Our investment objectives
are to provide our certificate holders with:
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·
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a higher level of distributable income or interest rate than is available in guaranteed or government
backed fixed income investments;
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·
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preservation of their investment capital through portfolio diversification (lending funds to many
different borrowers and purchasing bonds issued by numerous issuers);
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·
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greater security for our portfolio through investment only in mortgage backed loans and securities
(providing us with collateral in the event of a borrower’s default); and
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·
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greater security for our certificate holders by our pledging mortgage secured promissory notes
or debt securities that we hold to secure our obligations under the certificates (providing certificate holders with a stream of
revenue and potential sale proceeds in the event of our default).
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Business Objectives and Policies
We make mortgage
loans from $100,000 to $2,000,000 to churches and other non-profit religious organizations throughout the United States. We seek
to:
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·
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find qualified borrowers and make loans in accordance with our Lending Guidelines;
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lend at rates of interest in excess of our cost of funds;
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offer competitively attractive mid-term (3-15 years) loans and long-term (20-30 year) loans (although
there is no limit on the term of our loans);
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·
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charge origination fees (i.e. “points”) from the borrower at the outset of a loan and
upon any renewal of a loan;
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·
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make a limited amount of higher interest rate and increased risk second mortgage loans and short
term construction/interim loans to qualified borrowers; and
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·
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purchase a limited amount of mortgage secured debt securities issued by churches and other non-profit
religious organizations, typically at par value.
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Our policies limit the amount of second
mortgage loans to 20% of our average invested assets on the date any second mortgage loan is closed and limit the amount of mortgage
secured debt securities to 30% of our average invested assets on the date of their purchase. All other mortgage loans we make are
secured by a first mortgage (or deed of trust). We may make fixed interest rate loans having maturities of one to thirty years.
We may borrow up to 300% of our Stockholders’ equity, unless greater amounts are permitted under certain circumstances.
Lending Guidelines
We follow specified
lending guidelines and criteria in evaluating the creditworthiness of potential borrowers. These guidelines and criteria include:
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Loans we make cannot exceed 75% of the appraised value of the real property and improvements securing
the loan.
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We may not loan more than $2,000,000 to a single borrower.
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We require appraisals of the property securing our loans.
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The borrower must furnish us with a mortgagee title policy insuring our interest in the collateral.
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The borrower’s long term debt (including the proposed loan) as of the date of the mortgage
loan may not exceed four times the borrower’s gross income for its most recent twelve (12) months.
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The borrower must furnish us with financial statements (balance sheet and income and expense statement)
for its last three (3) complete fiscal years and current financial statements for the period within ninety (90) days of the loan
closing date. A borrower must have the last complete fiscal year financial statements reviewed by a certified public accountant
(CPA) engaged by the borrower and who is independent of the borrower. On loans in excess of $500,000 our advisor may require the
last complete fiscal year be audited by a CPA engaged by the borrower and who is independent of the borrower. In lieu of the above
requirement, we or our advisor may employ a qualified accountant. The qualified accountant we employ would be required to be independent
of the borrower. Our employed qualified accountant would not be independent of us. Compiled financial statements of the borrower
are acceptable from our employed qualified accountant. Along with the compiled financial statements of the borrower, our employed
qualified accountant would perform partial and targeted review examination procedures for borrowers. On loans in excess of $500,000
the advisor may require partial and targeted audit examination procedures for borrowers.
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·
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Borrowers in existence for less than three (3) fiscal years must provide financial statements since
inception. No loan will be extended to a borrower in operation less than two (2) calendar years absent express approval by our
board of directors.
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Who May Invest
You may purchase
up to $5,000 of certificates only if you have either (i) a minimum annual gross income (without regard to your investment in our
shares or certificates) of at least $45,000 and a net worth (exclusive of home, home furnishings and automobiles) of $45,000; or
(ii) a net worth (determined with the foregoing exclusions) of at least $150,000. You may purchase more than $5,000 of certificates
only if you have either: (i) a minimum annual gross income (without regard to your investment in our shares or certificates) of
at least $70,000 and a net worth (exclusive of home, home furnishings and automobiles) of at least $70,000; or (ii) a net worth
(determined with the foregoing exclusions) of at least $250,000. Suitability standards may be higher in certain states. Please
see
Exhibit B
.
In the case of fiduciary
accounts, these minimum standards must be met by the beneficiary of the fiduciary account or by the donor or grantor who directly
or indirectly supplies the funds to purchase the shares or certificates if the donor or grantor is the fiduciary.
The underwriter’s
account application to be signed by all purchasers of the Series E Secured Investor Certificates contains an arbitration agreement
for disputes with the underwriter. By this agreement, each purchaser agrees that all controversies with the underwriter relating
to the Certificates will be determined by arbitration before the Financial Industry Regulatory Authority (“FINRA”).
RISK FACTORS
An investment in
our certificates involves various risks. In addition to the other information set forth in the prospectus, you should consider
the following factors before making a decision to purchase certificates.
This prospectus
contains statements of a forward looking nature relating to future events or our future performance. These forward-looking statements
are based on our current expectations, assumptions, estimates and projections about us and our industry. When used in this prospectus,
the words “expects,” “believes,” “anticipates,” “estimates,” “intends,”
“will” and similar expressions are intended to identify forward-looking statements. These statements include, but are
not limited to, statements of our plans, strategies and prospects contained in this prospectus.
These forward looking
statements are only predictions and are subject to risks and uncertainties that could cause actual events or results to differ
materially from those projected. The cautionary statements made in this prospectus should be read as being applicable to all related
forward-looking statements wherever they appear in this prospectus. We assume no obligation to update these forward-looking statements
publicly for any reason. Actual results could differ materially from those anticipated in these forward looking statements.
Risks Related to Method and Terms of This Offering
This is a
Best Efforts Offering
. The underwriter’s obligation to sell the certificates requires only its best efforts to locate
purchasers on our behalf. The underwriter is not obligated to purchase any certificates. Less than all of the certificates offered
may be sold. If less than all the certificates offered are sold, we will have less cash for working capital and to loan to churches
and other non-profit religious organizations.
This is a
No Minimum Offering
. The distribution agreement does not require that a minimum number of certificates be sold before we
receive proceeds from their sale. We will receive proceeds from the sale of certificates when and if they are sold.
We Will Incur
Expenses in This Offering
. Expenses incurred in connection with this offering will reduce our assets that will be available
for working capital and investment.
Risks Related to Us
Our Failure
to Qualify as a Real Estate Investment Trust Could Reduce the Funds We Have Available for Investment
. We operate as a real
estate investment trust. As a REIT, we are allowed a deduction for dividends paid to our Stockholders in computing our taxable
income. Thus, only our Stockholders are taxed on our taxable income that we distribute. This treatment substantially eliminates
the “double taxation” of earnings to which many corporations and their Stockholders are subject. Qualification as a
REIT involves the application of highly technical and complex Internal Revenue Code provisions. To qualify and maintain our status
as a REIT, we must meet certain share ownership, income, asset and distribution tests on a continuing basis. No assurance can be
given that we will satisfy these tests at all times. Further, the requirements for a REIT may substantially affect day to day decision
making by our advisor. Our advisor may be forced to take action it would not otherwise take or refrain from action which might
otherwise be desirable in order to maintain our REIT status.
If we fail to qualify
as a REIT in any taxable year, then we would be subject to federal income tax (including any applicable minimum tax) on our taxable
income computed in the usual manner for corporate taxpayers without any deduction for distributions to our Stockholders. Unless
entitled to relief under specific statutory provisions, we would be disqualified from treatment as a REIT for the four taxable
years following the year of losing our REIT status. To renew our REIT qualification at the end of such a four year period, we would
be required to distribute all of our current and accumulated earnings and profits before the end of the period.
We intend to continue
to operate as a REIT. However, future economic, market, legal, tax or other consequences may disqualify us as a REIT or may cause
our board of directors to revoke the REIT election. Loss of REIT status from either our disqualification as a REIT or our revocation
of REIT status would not affect whether the certificates are classified as debt for federal income tax purposes, the anticipated
federal income tax consequences to U.S. Persons who hold the certificates or whether we may deduct interest paid to certificate
holders for United States federal income tax purposes. To generate funds with which to pay federal income taxes because of the
loss of REIT status, however, could reduce our funds that are available for investment, could cause us to incur additional indebtedness,
or could cause us to liquidate investments, each of which could affect adversely our ability to make debt service payments to holders
of certificates.
Conflicts
of Interest Arise From Our Relationship with Our Advisor and the Underwriter
. The terms of transactions involving our formation
and the formation of our advisor, and our contractual relationship with our advisor, were not negotiated at
arm’s
length. Our non-independent directors and officers may have conflicts of interest in enforcing agreements between us and our advisor
or the underwriter. Future business arrangements and agreements between us and our advisor or the underwriter and their affiliates
must be approved by our board of directors, including a majority of our independent directors.
Future Changes
in Tax Laws May Affect Our REIT Status
. In this prospectus, we discuss our tax treatment as a REIT based on existing provisions
of the Internal Revenue Code, existing and proposed regulations, existing administrative interpretations and existing court decisions.
New legislation, regulations, administrative interpretations or court decisions may significantly change the tax laws. Therefore,
continuing qualification as a REIT may vary substantially from the treatment we describe in this prospectus, which may impact the
consequences of purchasing certificates.
Risks Related to the Certificates
We May Incur
More Indebtedness
. At June 30, 2017, we had $12,764
,000 principal amount of Series
B Secured Investor Certificates, $6,734,000 principal amount of Series C Secured Investor Certificates and $7,965,000 principal
amount of Series D Secured Investor Certificates outstanding. We may incur additional indebtedness in the future. We may assign
or pledge some of our mortgage-secured promissory notes or other collateral in connection with incurring this additional indebtedness.
Our ability to incur additional indebtedness is limited to 300% of our Stockholders’ Equity by our bylaws. As of June 30,
2017, we can incur $6,443,000 in additional indebtedness, unless an increased amount is approved by a majority of our Independent
Directors and disclosed and justified to our Stockholders. Once the threshold is reached (or if approval is not obtained), we will
not be able to incur additional indebtedness unless we raise additional equity capital. This limitation could restrict our growth
or affect our ability to repay the certificates as they mature.
The Indenture
Contains Limited Protection for Holders of Certificates
. The indenture governing the certificates contains only limited
events of default other than our failure to pay principal and interest on the certificates on time. Further, the indenture provides
for only limited protection for holders of certificates upon a consolidation or merger between us and another entity or the sale
or transfer of all or substantially all of our assets. The indenture governing the certificates does not prohibit additional indebtedness.
While the certificates are secured debt obligations, if the Company takes on additional indebtedness, the Company’s risk
of default on the certificates may increase. If we default in the repayment of the certificates or under the indenture, you will
have to rely on the trustee to exercise your remedies on your behalf. You will not be able to seek remedies against us directly.
The effect of each of these is that recovery of your investment could be difficult if there is a default.
The Company
and the Underwriter Have a Limited Track Record with Respect to the Company’s Securities
. The Company has engaged
in six public offerings of its securities through the underwriter. 2,467,918 shares of common stock were sold between 1996 and
2002 and 1,677,798 shares remain outstanding. $15,000,000, $14,860,000, $7,932,000 and $8,234,000 principal amount of Series A,
Series B, Series C and Series D Secured Investor Certificates, respectively, were sold from 2002 to 2017. The Company paid all
amounts due under its Series A, Series B, Series C and Series D Investor Certificates in accordance with their terms in cash or
renewed into subsequent series certificates if requested by the holder. No Series A Certificates remain outstanding as of June
30, 2017 and $27,732,000 in Series B, Series C and Series D certificates remain outstanding as of August 31, 2017. Past performance
is not necessarily indicative of the results that may be expected for the Series E Secured Investor Certificates. Please see the
Secured Investor Certificate table in the “Description of the Certificates” section.
There Are
Potential Adverse Effects Associated with Lending Borrowed Funds
. We intend to deploy the proceeds from this offering to
make loans to or purchase bonds issued by churches and other non-profit religious organizations. Lending borrowed funds is subject
to greater risks than in unleveraged lending. The profit we realize from lending borrowed funds is largely determined by the difference,
or “spread,” between the interest rates we pay on the borrowed funds and the interest rates that our borrowers pay
us. Our spread may be materially and adversely affected by changes in prevailing interest rates. Furthermore, the financing costs
associated with lending borrowed funds could decrease the effective spread in lending borrowed funds, which could adversely affect
our ability to pay interest on and repay the certificates as they mature.
Fluctuations
in Interest Rates May Affect Our Ability to Sell Certificates
. If the interest rates we offer on certificates become less
attractive due to changes in interest rates for similar investments, our ability to sell certificates could be adversely affected
or certificate holders could choose not to renew their certificates upon maturity. Since we may rely on the proceeds from the sales
of certificates and renewals of certificates, in part, to pay maturing certificates, a decline in sales of certificates could adversely
affect our ability to pay your certificate upon maturity. We may change the interest rates at which we are currently offering certificates
in response to fluctuations in interest rates.
There Is No
Public Market for the Certificates
. There is no market for certificates issued by us. It is unlikely that a market will
develop. The certificates will not be listed on any exchange. In addition, the market for REIT securities historically has been
less liquid than other types of securities. It may be impossible for you to recoup your investment prior to maturity of the certificates.
There Will
Not Be a Sinking Fund, Insurance or Guarantee Associated with the Certificates
. We will not contribute funds to a separate
account, commonly known as a sinking fund, to repay principal or interest on the certificates upon maturity or default. The certificates
are not certificates of deposit or similar obligations of, or guaranteed by, any depository institution. Further, no governmental
or other entity insures or guarantees payment on the certificates if we do not have enough funds to make principal or interest
payments. Therefore, if you purchase certificates, you will have to rely on our revenue from operations, along with the security
provided by the collateral for the certificates, for repayment of principal and interest on the certificates.
The Collateral
for the Certificates May Not Be Adequate if We Default
. The certificates will at all times be secured by mortgage-secured
promissory notes and church bonds having an outstanding principal balance or cash equal to at least 100% of the outstanding principal
balance of the certificates. If we default in the repayment of the certificates, or another event of default occurs, the trustee
will not be able to foreclose on the mortgages securing the promissory notes and bonds in order to obtain funds to repay certificate
holders. Rather, the trustee will need to look to the revenue stream associated with our borrowers’ payments on or repayment
of the promissory notes and bonds or revenue derived from sale of the promissory notes or bonds to repay certificate holders. If
the trustee chooses to rely on revenues received from our borrowers, certificate holders may face a delay in payment on certificates
in the event of default, as borrowers will repay their obligations to us in accordance with amortization schedules associated with
their promissory notes or bonds. If the trustee chooses to sell promissory notes or bonds in the event of our default, the proceeds
from the sales may not be sufficient to repay our obligations on all outstanding or defaulted certificates.
The Certificates
Are Not Negotiable Instruments and Are Subject to Restrictions on Transfer
. The certificates are not negotiable debt instruments.
Rights of record ownership of the certificates may be transferred only with our advisor’s prior written consent. You will
not be able to freely transfer the certificates.
We Are Obligated
to Redeem Certificates Only in Limited Circumstances
. You will have no right to require us to prepay or redeem any certificate
prior to its maturity date, except in the case of your death or if we replace our current advisor. Further, even in the event of
your death, we will not be required to redeem your certificates if we have redeemed at least $25,000 of principal amount of Series
D certificates for all holders during the calendar quarter in which your representative notifies us of your death and requests
redemption.
We Are Able
to Redeem Certificates at Any Time
. While we are obligated to redeem certificates in limited circumstances, we are permitted
to redeem all or a portion of the outstanding certificates at any time upon thirty (30) days’ notice. While we have no current
plans to redeem certificates, and possibly may not redeem any prior to maturity (except in the case of death), there is no guarantee
that investors will be able to hold their certificates until maturity.
We May Not
Have Sufficient Available Cash to Redeem Certificates if We Terminate Our Advisory Agreement with Our Current Advisor
.
We will be required to offer to redeem all outstanding certificates if we terminate our advisory agreement with Church Loan Advisors,
Inc., our current advisor, for any reason. If the holders of a significant principal amount of certificates request that we redeem
their certificates, we may be required to sell a portion of our mortgage loan and church bond portfolio to satisfy the redemption
requests. Any such sale would likely be at a discount to the recorded value of the mortgage loans and bonds being sold. Further,
if we are unable to sell loans or church bonds in our portfolio, we may be unable to satisfy the redemption obligations.
Risks Related to Management
We Are Dependent
Upon Our Advisor
. Our advisor, Church Loan Advisors, Inc., manages us and selects our investments subject to general supervision
by our board of directors and compliance with our lending policies. We depend upon our advisor and its personnel for most aspects
of our business operations. Our success depends on the success of our advisor in locating borrowers and negotiating loans upon
terms favorable to us. Among others, our advisor performs the following services for us:
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mortgage loan marketing and procurement
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bond portfolio selection and investment
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mortgage loan underwriting
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mortgage loan servicing
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developing and maintaining business relationships
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managing relationships with our accountants and attorneys
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corporate management including payment of office rent, etc.
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reporting to state, federal, tax and other regulatory authorities
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reports to Stockholders and Stockholder relations
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Certificate
Holders Will Have No Right to Participate in Our Management
. Only debt securities are being offered hereby; investors participating
in this offering will not become Stockholders and will have no voting rights and will have virtually no input regarding management
of the Company. You should not purchase certificates unless you are willing to entrust our management to our advisor and our board
of directors.
Our Directors
May Not Be Held Personally Liable for Certain Actions, Which Could Discourage Stockholder Suits Against Them.
Minnesota
law and our articles of incorporation and bylaws provide that our directors shall not be personally liable for monetary damages
for breach of fiduciary duty as a director, with certain exceptions. These provisions may discourage Stockholders from bringing
suit against a director for breach of fiduciary duty and may reduce the likelihood of derivative litigation brought by Stockholders
on behalf of us against a director. In addition, our bylaws provide for mandatory indemnification of directors and officers to
the fullest extent permitted by Minnesota law.
We Have Conflicts
of Interest with Our Advisor and the Underwriter
. Affiliations and conflicts of interests exist among our officers and
directors and the owner and officers and directors of our advisor and the underwriter. Our President, Philip Myers owns and is
the President of our advisor and the underwriter and thus controls both entities. Our Chief Financial Officer and Treasurer, Scott
J. Marquis is a Vice-President of our advisor and is the Chief Financial and Operations Officer of the underwriter and thus could
be considered to be in a position of control of both entities. Our President and the officers and directors of our advisor are
involved in the church financing business through their affiliations with the underwriter. The underwriter originates, offers and
sells first mortgage bonds for churches. We may purchase first mortgage bonds issued by churches through the underwriter in its
capacity as underwriter for the issuing church, or as broker or dealer on the secondary market. In such event, the underwriter
would receive commissions (paid by the issuing church) on original issue bonds, or “mark-ups” in connection with any
secondary transactions. If we sell church bonds in our portfolio, the bonds will be sold through the underwriter. We would pay
the underwriter commissions in connection with such transactions. Generally, mortgage loans we originate are smaller than the bond
financings originated by the underwriter. However, there may be circumstances where our advisor and the underwriter could recommend
either type of financing to a prospective borrower. The decisions of our advisor and the underwriter could adversely affect the
credit quality of our portfolio and decreases to the value of our portfolio could negatively impact the Company’s ability
to pay interest on the certificates.
Redemption
Obligations Relating to the Certificates May Affect Our Ability to Replace our Advisor
. We will be required to offer to
redeem all outstanding certificates if we terminate our advisory agreement with Church Loan Advisors, Inc. Our independent directors
are required to review and approve the agreement with our advisor on an annual basis. The redemption provision relating to the
certificates may have the effect of reducing our ability to replace our current advisor.
Risks Related to Mortgage Lending
We Are Subject
to the Risks Generally Associated with Mortgage Lending
. Mortgage lending involves various risks, many of which are unpredictable
and beyond our control and foresight. It is not possible to identify all potential risks associated with mortgage lending. Some
of the more common risks encountered may be summarized as follows:
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low demand for mortgage loans
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interest rate and real estate valuation fluctuations
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changes in the level of consumer confidence
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availability of credit worthy borrowers
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demographic and population patterns
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taxes and tax law changes
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availability of alternative financing and competitive conditions
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factors affecting specific borrowers
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national and local economic conditions
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state and federal laws and regulations
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bankruptcy or insolvency of a borrower
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borrower misrepresentation(s) and/or fraud
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Losses Associated
with Default, Foreclosure of a Mortgage and Sale of Mortgaged Property Pose Additional Risks
. We have experienced losses
associated with default, foreclosure of mortgages, and sales of mortgaged properties. The time frame to foreclose on a property
varies from state to state, and delays can occur due to backlog in court dockets. We have experienced delays from 12 to 18 months.
Such delays have and can cause the value of the mortgaged property to further deteriorate due to lack of maintenance. Theft and
vandalism have also occurred on our foreclosed properties. Some borrowers have removed fixtures and furnishings including sound
systems, chairs, pulpits, appliances, mechanical and electrical systems prior to vacating the facility which further reduces the
value of our collateral. The properties also incur operating expenses pending their sale (property insurance, security, real estate
taxes, repairs and maintenance) and these expenses could be substantial if we cannot readily dispose of the property. Expenses
related to the foregoing could prevent us from recovering the full value of a loan in the event of foreclosure, which shortfall
would decrease the value of assets held by the Company and could negatively impact the Company’s ability to pay interest
on the certificates.
Real Estate
Taxes Resulting from a Foreclosure May Prevent Us from Recovering the Full Value of a Loan
. If we foreclose on a mortgage
and take legal title to a church’s real estate, real estate taxes could be levied and assessed against the property since
the property would no longer be owned by a non-profit entity. These expenses would be our financial responsibility, and could be
substantial in relation to our prior loan if we cannot readily dispose of the property. Such expenses could prevent us from recovering
the full value of a loan in the event of foreclosure, which shortfall would decrease the value of assets held by the Company and
could negatively impact the Company’s ability to pay interest on the certificates.
Second Mortgage
Loans Pose Additional Risks
. Our Lending Guidelines allow us to make second mortgage loans. The principal amount of such
loans may not exceed 20% of our average invested assets. Second mortgage loans entail more risk than first mortgage loans, as foreclosure
of senior indebtedness or liens could require us to pay the senior debt or risk losing our mortgage.
Fixed Rate
Debt Can Result in Yield Fluctuations
. Fixed rate debt obligations carry certain risks. A general rise in interest rates
could make the yield on a particular mortgage loan lower than prevailing rates. This could negatively affect our value and consequently
the value of the certificates. Neither we nor our advisor can predict changes in interest rates. We attempt to reduce this risk
by borrowing through the issuance of intermediate and long term certificates with set interest rates and making loans with this
capital for intermediate and long terms that lock in certain target interest rate spreads. We do not intend to borrow funds or
sell certificates if the cost of such borrowing exceeds the income we believe we can earn from lending the funds.
The Mortgage
Banking Industry Is Highly Competitive
. We compete with a wide variety of lenders, including banks, religious denominations,
credit unions, insurance companies, pension funds and fraternal organizations for mortgage loans. Many competitors have greater
financial resources, access to lower cost capital, larger staffs and longer operating histories than we have, and thus may be a
more attractive lender to potential borrowers.
Fluctuations
in Interest Rates May Affect Our Ability to Repay the Certificates
. Prevailing market interest rates impact borrower decisions
to obtain new loans or to refinance existing loans, possibly having a negative effect upon our ability to originate mortgage loans.
If interest rates decrease and the economic advantages of refinancing mortgage loans increase, then prepayments of higher interest
mortgage loans in our portfolio would likely reduce our portfolio’s overall rate of return (yield).
We Are Subject
to the Risks Associated with Fluctuations in National and Local Economic Conditions
. The mortgage lending industry is subject
to increased credit risks and rates of foreclosures during economic downturns. In addition, because we provide mortgages to churches
and other religious organizations who generally receive financing through charitable contributions, our financial results are subject
to fluctuations based on a lack of consumer confidence or a severe or prolonged national or regional recession. As a result of
these and other circumstances, our potential borrowers may decide to defer or terminate plans for financing their properties. In
addition, during such economic times we may be unable to locate as many credit worthy borrowers. In addition,
we believe the risks
associated with our business are more severe during periods of economic slowdown or recession if these periods are accompanied
by declining values in real estate. For example, declining real estate values would likely reduce the level of new loan originations,
since borrowers often use increases in the value of their existing properties to support the purchase of or investment in additional
properties. Borrowers may also be less able to pay principal and interest on our loans if the real estate economy weakens, which
could result in higher default rates. Higher default rates could adversely affect the Company’s results of operations, which
could negatively impact the Company’s ability to pay interest on the certificates. Further, declining real estate values
significantly increase the likelihood that we will incur losses in the event of default because the value of our collateral may
be insufficient to cover our basis in the investment.
The Company
Faces Certain Risks and Uncertainties Related to Financing and Liquidity, and These Volatilities Could Have an Impact on its Operations
and its Ability to Maintain its Long term Capital Needs and/or Secure Additional Financing
. The Company faces certain risks
and uncertainties, particularly during volatile market conditions. These volatilities could have an impact on operations to the
extent that the Company experiences slower maturities or repayment of mortgage loans, illiquid markets for our bond portfolio,
or a higher redemption rates on our Secured Investor Certificates than has been the case historically.
The Company’s
operating performance is affected by our ability to earn interest and origination fees in excess of what we pay and to match maturities
of our long-term debt with maturities of our mortgage loans and bond portfolio. We may incur additional indebtedness, particularly
through the sale of Secured Investor Certificates, but the success of such an offering is uncertain.
Our Business
May Be Adversely Affected if Our Borrowers Become Insolvent or Bankrupt
. If any of our borrowers become insolvent or bankrupt,
the borrower’s mortgage payments will be delayed and may cease entirely. For example, due to difficult economic conditions,
church members may have reduced pay or may be unemployed and unable to find new employment. As such, members may make fewer or
no contributions to our borrowers, which could result in the borrower’s inability to make mortgage payments or make them
on time. In those situations, we may be forced to foreclose on the mortgage and take legal title to the real estate and incur expenses
related to the foreclosure and disposition of the property. Such increased expenses paired with possible lower real estate values
(having been reduced by the foregoing expenses) could adversely affect our results of operations, which could negatively impact
our ability to pay interest on the certificates.
We Have Fluctuating
Earnings
. As mortgage lenders, we make provision for losses relating to our loan portfolio and sometimes take impairment
charges due to our borrowers defaulting or declaring bankruptcy. As national and local economies worsen, increases in the occurrence
of such events can result in greater fluctuation of our earnings, which can reduce our net income. Our earnings are also impacted
by non-performing assets and the carrying cost of maintaining such assets (taxes, insurance and maintenance). Inconsistent earnings
could adversely affect our financial condition and results of operations, which could increase the risk of us defaulting on the
indenture and/or could negatively impact our ability to pay interest on the certificates or to pay such interest in a timely manner.
Risks Related to Mortgage Lending to Churches
Churches Rely
on Member Contributions to Repay Our Loans
. Churches rely on member contributions for their primary source of income. Member
contributions are used to repay our loans. The membership of a church or the per capita contributions of its members may not increase
or remain constant after a loan is funded. For example, difficult economic conditions, church members may have reduced pay or may
be unemployed and unable to find new employment. As such, members may make fewer or no contributions to our borrowers. A decrease
in a church’s income could result in its inability to pay its obligation to us, which may affect our ability to pay interest
due on or repay the certificates. We have no control over the financial performance of a borrowing church after a loan is funded.
Churches Depend
upon Their Senior Pastors
. A church’s senior pastor usually plays an important role in the management, spiritual
leadership and continued viability of that church. A senior pastor’s absence, resignation or death could have a negative
impact on a church’s operations, and thus its continued ability to generate revenues sufficient to service its obligations
to us.
The Limited
Use Nature of Church Facilities Limits the Value of Our Mortgage Collateral
. Our loans are secured principally by first
mortgages upon the real estate and improvements owned or to be owned by churches and other religious and non-profit organizations.
Although we require an appraisal of the premises as a pre-condition to making a loan, the appraised value of the premises cannot
be relied upon as being the actual amount which might be obtained in the event of a default by the borrower. The actual liquidation
value of church, school or other institutional premises could be adversely affected by, among other factors: (i) its limited use
nature; (ii) the availability on the market of similar properties; (iii) the availability and cost of financing, rehabilitation
or renovation to prospective buyers; (iv) the length of time the seller is willing to hold the property on the market; or (v) the
availability in the area of the mortgaged property of congregations or other buyers willing to pay the fair value for a church
facility.
Risks Related to Environmental Laws
We May Face
Liability under Environmental Laws
. Under federal, state and local laws and regulations, a secured lender (like us) may
be liable, under certain limited circumstances, for the costs of removal or remediation of certain hazardous or toxic substances
and other costs (including government fines and injuries to persons and adjacent property). Liability may be imposed whether or
not the owner or lender knew of, or was responsible for, the presence of hazardous or toxic substances. The costs of remediation
or removal of hazardous or toxic substances, or of fines for personal or property damages, may be substantial and material to our
business operations. The presence of hazardous or toxic substances, or the failure to promptly remediate such substances, may adversely
affect our ability to resell real estate collateral after foreclosure or could cause us to forego foreclosure. This is a changing
area of the law. The courts have found both in favor and against lender liability in this area under various factual scenarios.
We may require an environmental database check on all properties to be used as collateral for our mortgage loans.
The Collateral
for Our Loans and Our Lenders May Be Subject to Environmental Claims
. If there are environmental problems associated with
the real estate securing any of our loans, the associated remediation or removal requirements imposed by federal, state and local
laws could affect our ability to realize value on our collateral or our borrower’s ability to repay its loan.
WHO MAY INVEST
Who May Purchase
Certificates
. You should purchase certificates only if you are prepared to hold the certificates until maturity, only if
you have significant financial means, and only if you have no immediate need for liquidity of your investment. We have established
financial suitability standards for investors desiring to purchase certificates. You may purchase up to $5,000 of certificates
only if you have either (i) a minimum annual gross income (without regard to your investment in shares or certificates) of at least
$45,000 and a net worth (exclusive of home, home furnishings and automobiles) of $45,000; or (ii) a net worth (determined with
the foregoing exclusions) of at least $150,000. You may purchase more than $5,000 of certificates only if you have either: (i)
a minimum annual gross income of (without regard to your investment in shares or certificates) at least $70,000 and a net worth
(exclusive of home, home furnishings and automobiles) of $70,000; or (ii) a net worth (determined with the foregoing exclusions)
of at least $250,000. Suitability standards may be higher in some states. Please see
Exhibit B
. We may not complete a sale
of certificates until five days after you have received a prospectus. We will refund your investment upon your request, which we
must receive within five days after you subscribe, if you received a prospectus only at the time of subscription.
Fiduciary
Accounts
. In the case of fiduciary accounts, these minimum standards must be met by the beneficiary of the fiduciary account
or by the donor or grantor who directly or indirectly supplies the funds to purchase the shares or certificates if the donor or
grantor is the fiduciary.
USE OF PROCEEDS
The following represents
our estimate of the use of the offering proceeds from the sale of the certificates, assuming that all the offered certificates
are sold.
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Total
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Percent
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Gross Offering Proceeds
(1)
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$
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10,000,000
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100.00
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%
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Less Expenses
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Selling Commissions
(2)
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350,000
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3.50
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%
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Underwriter’s Expense Allowance
(3)
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60,000
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.60
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%
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Offering Expenses
(4)
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75,000
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.75
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%
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Total Public Offering-Related Expenses
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485,000
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4.85
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%
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Amount Available for Investment
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$
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9,515,000
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95.15
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%
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________________________________________
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(1)
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We are offering the certificates on a “best efforts” basis through the underwriter.
There is no assurance that any or all certificates will be sold.
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(2)
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We will pay the underwriter a sales commission of 2.75% and an underwriting management fee equal
to 0.75% of the principal amount of certificates sold.
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(3)
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We will pay the underwriter a non-accountable expense allowance of up to $60,000, if all of the
certificates are sold, payable as follows: (i) $10,000 is payable upon the sale of each $1,000,000 of certificates up to the sale
of $5,000,000 of certificates; and (ii) $1,000 is payable upon the sale of each additional $1,000,000 of certificates up to completion
of the sale of all certificates offered hereby or the termination of this offering, whichever is first.
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(4)
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These figures are our best estimates of the legal, accounting, printing, filing fees and other
expenses attendant to this offering, all of which have been or will be paid to independent professionals and service providers.
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The principal purpose
of this offering is to raise capital to allow us to make mortgage loans to churches and/or to other non-profit religious organizations
and to purchase mortgage bonds issued by churches. We presently expect to use all of the net proceeds for this purpose, regardless
of the amount of proceeds raised in this offering. Because it is possible that it may take time to invest the proceeds in this
manner, however, we would in that case invest the net proceeds in permitted temporary investments and may use some portion for
working capital purposes including, but not limited to: redeeming our equity securities and repaying maturing certificates. The
Series B, C and D Secured Investor Certificates bear interest at rates ranging from 3.00% to 7.25% and have maturities ranging
from 3 months to 15 years.
COMPENSATION
TO ADVISOR AND AFFILIATES
This table discloses
all the compensation our advisor and its affiliates can receive either directly or indirectly. In accordance with applicable state
law, the total of all acquisition fees and expenses we pay in connection with our business cannot exceed 6% of the amount loaned,
unless a majority of the directors (including a majority of our independent directors) not otherwise interested in the transaction
approve the transaction as being commercially competitive, fair and reasonable to us. Our total operating expenses cannot (in the
absence of a satisfactory showing to the contrary) in any fiscal year exceed the greater of: (a) 2% of our average invested assets;
or (b) 25% of our net income for the year. Our independent directors may, upon a finding of unusual and nonrecurring factors which
they deem sufficient, determine that a higher level of expenses is justified in any given year.
ADVISOR COMPENSATION
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ITEM OF
COMPENSATION
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RECIPIENT
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AMOUNT OR METHOD OF COMPENSATION
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Advisory Fee
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Advisor
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Up to 1.25% annually, paid monthly, of our average invested assets up to $35 million. This fee is reduced to 1.00% on assets from $35 million to $50 million and to .75% on assets over $50 million. Our advisor received advisory fees in the amount of $343,416 for the year ended December 31, 2015, $314,817 for the year ended December 31, 2016 and $161,732 for the six months ended June 30, 2017. Although our Advisor can charge up to 1.25% annually, the Advisor charged an average of .0718% and .0784% for the years ended December 31, 2016 and 2015, and .0707% for the six month period ended June 30, 2017, respectively. Assuming we had borrowed the maximum amount permitted under our bylaws (not in excess of 300% of Stockholders’ equity, except under certain circumstances), which at June 30, 2017 would have been an additional $6,443,000 and assuming our average invested assets were $45,079,000, the advisory fee could be as high as $538,290 per year.
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Acquisition Fees/Expenses
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Advisor
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In connection with mortgage loans we make, borrowers may be required to pay our advisor’s expenses for closing and other loan-related expenses, such as accounting fees and appraisal fees paid by our advisor to independent service providers. Our advisor may retain payments made by the borrower in excess of costs, but our bylaws limit the total of all acquisition fees and acquisition expenses to a reasonable amount and in no event in excess of six percent (6%) of the funds advanced to the borrower.
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Advisor Loan Origination Fee
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Advisor
|
Up to one-half of the origination fees collected from the borrower at closing in connection with each mortgage loan we make. Our advisor received origination fees in the amount of $48,800 for the year ended December 31, 2015, $9,500 for the year ended December 31, 2016, and $4,200 for the six months ended June 30, 2017. We cannot estimate the total amount of loan origination fees that may be realized by our advisor, but assuming all of the certificates are sold and we invest in that one-year period net proceeds of $9,515,000 in mortgage loans with an average origination fee of 3%, the loan origination fees payable to our advisor in such year could be up to $142,725. As our sixty-four loans mature or are otherwise repaid, we may make new loans to borrowers. Loan origination fees would also be payable to our advisor if we make new loans from these funds to borrowers.
|
AFFILIATE COMPENSATION
|
ITEM OF
COMPENSATION
|
RECIPIENT
|
AMOUNT OR METHOD OF COMPENSATION
|
|
|
|
Commissions on the Sale of Certificates in this Offering
|
Underwriter
|
2.75% of the principal amount of the certificates. The underwriter may re-allow all or a portion of this amount to other participating broker-dealers who are members of the Financial Industry Regulatory Authority (“FINRA”).
|
|
|
|
Non-Accountable Expense Allowance Relating to the Sale of Certificates in this Offering
|
Underwriter
|
Up to $60,000 to cover the underwriter’s costs and expenses relating to the offer and sale of the certificates in this offering, payable as follows: (i) $10,000 paid upon the sale of each $1,000,000 of certificates up to the sale of $5,000,000 of certificates, and (ii) $1,000 payable upon the sale of each additional $1,000,000 of certificates up to the Offering completion of sale of all certificates offered hereby or the termination of this offering, whichever occurs first.
|
|
|
|
Underwriter’s Management Fee Commissions and Expenses on First Mortgage Bonds Purchased
|
Underwriter
|
0.75% of the principal amount of the certificates sold, payable only upon original issuance. Underwriter customary mark-ups and mark-downs on first mortgage church bonds we purchase and sell through the underwriter on the secondary market, and commissions earned on church bonds we purchase in the primary market are not in connection with this offering and are not in connection with the underwriter’s 0.75% management fee.
|
|
|
|
Underwriter’s Renewal Fee
|
Underwriter
|
1.25% of the principal amount of the certificates renewed.
|
|
|
|
Underwriter’s Legal Fees
|
Underwriter
|
Underwriter will receive no more than $5,000 worth of legal fees paid for by issuer.
|
CONFLICTS
OF INTEREST
We are subject to
various conflicts of interest arising from our relationship with our advisor and the underwriter. Our President, Philip J. Myers,
is the President of both our advisor and the underwriter and thus is in a position of control of both entities. In addition, Mr.
Myers owns 100% of the underwriter and advisor. Our Chief Financial Officer and Treasurer, Scott J. Marquis is the Chief Financial
Officer and Chief Operating Officer of the underwriter and thus also in a position of control of both entities. Our advisor, its
affiliates, our directors and the directors of our advisor are not restricted from engaging for their own accounts in business
activities
similar to ours. Occasions may arise when our interests would be in conflict with those of one or more of the directors, our advisor
or their affiliates. Our directors, a majority of whom are independent, will endeavor to exercise their fiduciary duties in a
manner that will preserve and protect our rights and the interests of the Stockholders in the event any conflicts of interest
arise. Any transactions between us and any director, our advisor or any of their affiliates, other than the purchase or sale,
in the ordinary course of our business, of church bonds from or through the underwriter, will require the approval of a majority
of the directors, including a majority of our independent directors, who are not interested in the transaction.
Transactions with Affiliates and Related Parties
We compensate our
advisor and its affiliates for services they provide to us. Our board of directors has the responsibility to ensure that such services
are provided on terms no less favorable than we could obtain from unrelated persons or entities. The underwriter may receive commissions
from our transactions in church bonds, and our principals and our advisor may receive a benefit in connection with such transactions
due to their affiliation with the underwriter.
Compensation to Our Advisor and Conflicts of Interest
We pay our advisor
an annual advisory fee equal to a 1.25% of our average invested assets up to $35 million. This fee is reduced to 1.00% on assets
from $35 million to $50 million and to .75% on assets over $50 million. The fee is not dependent on our advisor’s performance.
Our advisor receives a portion of the fees we make when we make or renew a mortgage loan based upon a percentage of the amount
paid by a mortgage borrower as “points,” or origination fees. Accordingly, a conflict of interest could arise since
the retention, acquisition or disposition of a particular loan could be advantageous to our advisor, but detrimental to us, or
vice-versa. Because origination fees are payable upon the closing of the loan or its renewal, and the amount is dependent upon
the size of the mortgage loan, our advisor may have a conflict of interest in negotiating the terms of the loan and in determining
the appropriate amount of indebtedness to be incurred by the borrower.
We and our advisor
believe that it would not be possible, as a practical matter, to eliminate these potential conflicts of interest. However, the
advisory agreement must be renewed annually by the affirmative vote of a majority of the independent directors. The independent
directors may determine not to renew the advisory agreement if they determine that our advisor is not satisfactorily performing
its duties. In connection with the performance of their fiduciary responsibilities, the existence of possible conflicts of interest
will be one of the factors for the directors to consider in determining the action we will take.
Compensation to the Underwriter and Conflicts of Interest
We will pay the
underwriter commissions based on the gross amount of the certificates it sells on our behalf in this offering. A conflict of interest
could arise from this compensation arrangement, as the underwriter may be incented to sell certificates at a time when we may not
be able to immediately deploy the resulting proceeds to fund mortgage loans or purchase church bonds.
Our Affiliates May Compete with Us
Any of our directors
or officers may have personal business interests that conflict with our interests and may engage in the church lending business
or any other business. A director or officer may have an interest in an entity we engage to render advice or services, and may
receive compensation from such entity in addition to compensation received from us. However, there have been no personal business
interests of our officers or directors which have conflicted with the Company’s interests thus far.
The underwriter
provides financing to churches and other not-for-profit religious organizations. Therefore, a conflict could arise if the underwriter
were to pursue and secure a lending opportunity otherwise available to us. However, the average size of first mortgage bond financings
undertaken by the underwriter is approximately $1.75 million, with $1,000,000 being its stated (but not required) minimum financing.
We focus on financings ranging from $100,000 to $1,000,000 in size, though we are permitted to make loans up to $2,000,000. Conflicts
of interest between the underwriter and us likely will be reduced by virtue of the targeted size of loans pursued by each. We have
agreed with the underwriter that financing prospects of less than $1,000,000 will be first directed to us for consideration. If
we determine that the loan is not suitable or decline to make the loan for any reason, or if the prospective borrower independently
declines to accept our lending, then the underwriter or its affiliates will have the opportunity to provide financing to that prospective
borrower.
Neither our advisor
nor its affiliates are prohibited from providing the same services to others, including competitors. These relationships may produce
conflicts in our advisor’s and its affiliates’ allocation of time and resources among various projects.
Non Arm’s-Length Agreements
Many agreements
and arrangements we have with our advisor and its affiliates, including those relating to compensation, were not negotiated at
arm’s-length. The conflicts or potential conflicts arising from these agreements and arrangements are mitigated
by
the following factors: (i) our bylaws limit our operating expenses to an amount that does not exceed the greater of 2% of our
average invested assets or 25% of our net income unless the independent directors approve a higher amount and disclose the justification
for the higher expenses to our investors; (ii) our advisor seeks to structure its business relationships so as to be competitive
with other programs in the marketplace; and (iii) the agreements and arrangements are subject to approval by a majority of our
independent directors.
Lack of Separate Legal Representation
The law firm of
Winthrop & Weinstine, P.A., Minneapolis, Minnesota, is counsel to us in connection with this offering and may in the future
act as counsel to us, the underwriter, our advisor, our affiliates, and various affiliates of our advisor with respect to other
matters. There is a possibility that in the future the interests of the various parties may become adverse. In the event that a
dispute were to arise between us and the underwriter, our advisor or any of its affiliates, or our affiliates, separate counsel
for such matters will be retained as and when appropriate.
Legal Proceedings
There are presently
no legal actions against us, pending or threatened.
Shared Operations Facilities
We are located in
the leased offices of the underwriter, American Investors Group, Inc., in Minnetonka (Minneapolis), Minnesota. We expect to continue
to be housed in these or similar leased premises along with the underwriter and its affiliates. We are not separately charged for
rent or related expenses. Our advisor incurs our occupancy expense and many of our operating expenses in exchange for the advisory
fee.
Market Price of and Dividends on
the Registrant’s Common Equity and Related Stockholder Matters.
Outstanding Securities
As of
September 19, 2017, 1,677,798 shares of our common stock and $27,732,000 of Secured Investor Certificates were issued and
outstanding.
Holders of Our Common Shares
As of September
19, 2017, we had 587 record holders of our $.01 par common stock.
Lack of Liquidity for our Shares and Inconsistent Public
Market Price
There is only a
thinly-traded market for our common shares. It is not expected that a material liquid market for the shares will develop any time
soon. In addition, the market for REIT securities historically has been less liquid than non-real estate types of publicly-traded
equity securities. Because of such illiquidity and the fact that the shares would be valued by market-makers (if a market develops)
based on market forces which consider various factors beyond our control, there can be no assurance that the market value of the
shares at any given time would be the same or higher than the public purchase price of our shares. In addition, the market price,
if a market develops, could decline if the yields from other competitive investments exceed the actual dividends paid by us on
our shares. Our common stock is not currently listed or traded on any exchange or market.
Our Class A Common
Stock, $.01 par value per share, has traded on the over-the-counter market Pink Sheets at certain isolated times under the symbol
“ACMC.PK” through June 30, 2017. The last sale price was $2.01 per share on June 30, 2017. The following table sets
forth the high bid quotation and the low bid quotation as quoted by the Pink Sheets in 2015, 2016 and for the first and second
quarter of 2017. Such over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission
and may not necessarily represent actual transactions.
|
|
High
|
|
Low
|
|
Calendar Year 2017
|
|
|
|
|
|
First Quarter
|
|
$
|
2.80
|
|
$
|
1.90
|
|
Second Quarter
|
|
$
|
2.46
|
|
$
|
2.01
|
|
|
|
|
|
|
|
Calendar Year 2016
|
|
|
|
|
|
First Quarter
|
|
$
|
2.50
|
|
$
|
2.15
|
|
Second Quarter
|
|
$
|
2.60
|
|
$
|
2.10
|
|
Third Quarter
|
|
$
|
2.90
|
|
$
|
2.13
|
|
Fourth Quarter
|
|
$
|
2.75
|
|
$
|
1.61
|
|
|
|
|
|
|
|
Calendar Year 2015
|
|
|
|
|
|
First Quarter
|
|
$
|
4.49
|
|
$
|
3.86
|
|
Second Quarter
|
|
$
|
4.29
|
|
$
|
4.00
|
|
Third Quarter
|
|
$
|
4.00
|
|
$
|
3.32
|
|
Fourth Quarter
|
|
$
|
3.70
|
|
$
|
2.10
|
|
DISTRIBUTIONS
In order to qualify
for the beneficial tax treatment afforded real estate investment trusts by the Internal Revenue Code, we are required to pay dividends
in annual amounts which are equal to at least 90% of our “real estate investment trust taxable income.” We intend to
make distributions that meet this requirement. Annual distributions will be estimated for the first three quarters of each fiscal
year and adjusted annually based upon our audited year-end financial report.
Note: Investors
who purchase certificates in this offering will not be entitled to receive dividends from us as they will not own any of our common
stock.
We began making
regular quarterly distributions to our Stockholders for the period of operations ended June 30, 1996. Distributions for prior years,
and the yield and annualized yield, respectively, represented by such distributions (assuming shares were purchased for $10.00
per share), are as follows:
For Year Ended:
|
|
Dollar Amount
Distributed Per Share: (1)
|
|
Yield Per Share
Represented:
|
|
December 31, 1996
|
|
0.6646
|
|
9.375
|
%
|
December 31, 1997
|
|
0.9475
|
|
9.475
|
%
|
December 31, 1998
|
|
0.8906
|
|
8.906
|
%
|
December 31, 1999
|
|
0.8500
|
|
8.50
|
%
|
December 31, 2000
|
|
0.8250
|
|
8.25
|
%
|
December 31, 2001
|
|
0.8313
|
|
8.3125
|
%
|
December 31, 2002
|
|
0.7688
|
|
7.6875
|
%
|
December 31, 2003
|
|
0.6500
|
|
6.50
|
%
|
December 31, 2004
|
|
0.6688
|
|
6.6875
|
%
|
December 31, 2005
|
|
0.6188
|
|
6.1875
|
%
|
December 31, 2006
|
|
0.5875
|
|
5.875
|
%
|
December 31, 2007
|
|
0.2625
|
|
2.625
|
%
|
December 31, 2008
|
|
0.3500
|
|
3.50
|
%
|
December 31, 2009
|
|
0.4000
|
|
4.00
|
%
|
December 31, 2010
|
|
0.4000
|
|
4.00
|
%
|
December 31, 2011
|
|
0.4000
|
|
4.00
|
%
|
December 31, 2012
|
|
0.3800
|
|
3.80
|
%
|
December 31, 2013
|
|
0.4000
|
|
4.00
|
%
|
December 31, 2014
|
|
0.3700
|
|
3.70
|
%
|
December 31, 2015
|
|
0.2550
|
|
2.55
|
%
|
December 31, 2016
|
|
0.2400
|
|
2.40
|
%
|
Quarter ended March 31, 2017
|
|
0.0700
|
|
2.80
|
%
|
Quarter ended June 30, 2017
|
|
0.0700
|
|
2.80
|
%
|
________________________________________
|
(1)
|
Yield calculated for shares originally purchased for $10.00 per share.
|
As a Real Estate
Investment Trust, we make regular quarterly distributions to Stockholders. The amount of distributions to our Stockholders must
equal at least 90% of our “real estate investment trust taxable income” in order for us to retain REIT status. Stockholder
distributions are estimated for our first three quarters each fiscal year and adjusted annually based upon our audited year-end
financial report. Cash available for distribution to our Stockholders is derived primarily from the interest portion of monthly
mortgage payments we receive from churches borrowing money from us, from origination and other fees paid to us by borrowers in
connection with loans we make, interest income from mortgage-backed securities issued by churches and other non-profit religious
organizations purchased and held by us for investment purposes, and earnings on any permitted temporary investments made by us.
All dividends are paid by us at the discretion of the board of directors and will depend upon our earnings and financial condition,
maintenance of real estate investment trust status, funds available for distribution, results of operations, economic conditions,
and such other factors as our board of directors deems relevant.
During any period
where our shares of common stock are being offered and sold and the proceeds therefrom accumulated for the purpose of funding loans
to be made by us, the relative yield generated by such capital, and, thus, dividends (if any) to Stockholders, could be less than
expected until we have fully invested such funds into loans. We seek to address this issue by (i) collecting from borrowers an
origination fee at the time a loan is made, (ii) timing our lending activities to coincide as much as possible with sales of our
securities, and (iii) investing our undeployed capital in permitted temporary investments that offer the highest yields together
with safety and liquidity. However, there can be no assurance that these strategies will improve current yields to our Stockholders.
In order to qualify for the beneficial tax treatment afforded to real estate investment trusts by the Internal Revenue Code, we
are required to pay dividends to holders of our shares in annual amounts which are equal to at least 90% of our “real estate
investment trust taxable income.” For the fiscal year ended December 31, 2016, we distributed 100% of our taxable income
to our Stockholders in the form of quarterly dividends. We intend to continue distributing virtually all of such income to our
Stockholders on a quarterly basis, subject to (i) limitations imposed by applicable state law, and (ii) the factors identified
above. The portion of any dividend that exceeds our earnings and profits will be considered a return of capital and will not currently
be subject to federal income tax to the extent that such dividends do not exceed a Stockholders’ basis in their shares.
Funds available
to us from the repayment of principal (whether at maturity or otherwise) of loans made by us, or from sale or other disposition
of any properties or any of our other investments, may be reinvested in additional loans to churches, invested in mortgage-backed
securities issued by churches or other non-profit organizations, or in permitted temporary investments, rather than distributed
to the Stockholders. We can pass through the capital gain character of any income generated by computing its net capital gains
and designating a like amount of our distribution to our Stockholders as “capital gain dividends.” The distribution
requirement to maintain qualification as a real estate investment trust does not require distribution of net capital gains, if
generated. Thus, if we have a choice of whether to distribute any such gains, undistributed net capital gains (if any) will be
taxable to us. The board of directors, including a majority of the Independent Directors, will determine whether and to what extent
the proceeds of any disposition of property will be distributed to our Stockholders.
Equity Compensation Plans
We do not have any
equity compensation plans under which equity securities of the Company are authorized for issuance.
CAPITALIZATION
The following table
sets forth our capitalization as of December 31, 2016 and as of June 30, 2017 as adjusted to give effect to the sale of all of
the certificates offered hereby, of which there can be no assurance.
|
|
December 31, 2016
|
|
June 30, 2017
|
|
|
|
Actual
|
|
Actual
|
|
As Adjusted
(1)
|
|
Long Term Debt
|
|
$
|
28,061,619
|
|
$
|
27,629,650
|
|
$
|
37,629,650
|
|
Current Liabilities
|
|
2,940,619
|
|
1,627,650
|
|
1,627,650
|
|
Stockholders’ Equity
Common Stock, $.01 par value per share; 30,000,000 shares authorized; issued and outstanding 1,677,798 at December 31, 2016 and June 30, 2017
|
|
16,778
|
|
16,778
|
|
16,778
|
|
Additional Paid-In Capital
|
|
19,113,458
|
|
19,113,458
|
|
19,113,458
|
|
Accumulated Deficit
|
|
(7,625,217
|
)
|
(7,828,175
|
)
|
(7,828,175
|
)
|
Total Stockholders’ Equity
|
|
11,505,019
|
|
11,302,061
|
|
11,302,061
|
|
Total Capitalization
|
|
$
|
39,566,638
|
|
$
|
38,931,711
|
|
$
|
48,931,711
|
|
|
|
|
|
|
|
|
|
|
|
|
________________________________________
(1) This is a best-efforts, no minimum
offering. If less than all of the certificates offered hereby are sold, then the Long Term Debt figures in the “As Adjusted”
columns would be reduced in proportion to the reduced sales.
SELECTED
FINANCIAL DATA
The selected financial
data pres
e
nted below is derived from our audited financial statements
as of and for the years ended December 31, 2015 and 2016 and our unaudited statements as of and for the six months ended June 30,
2016 and 2017. The financial statements are included in the appendix. You should refer to the financial statements and notes thereto,
for a more detailed presentation of financial information.
|
Year Ended December 31,
|
|
For the Six Months Ended
|
|
2015
|
|
2016
|
|
June 30, 2016
|
|
June 30, 2017
|
|
|
|
|
|
(unaudited)
|
|
(unaudited)
|
Statement of Operations
|
|
|
|
|
|
|
|
Interest and Other Income
|
$ 2,936,326
|
|
$ 2,698,186
|
|
$ 1,338,230
|
|
$ 1,382,792
|
Interest Expense
|
1,997,249
|
|
2,025,000
|
|
1,005,657
|
|
955,754
|
Net Interest Income
|
939,077
|
|
673,186
|
|
332,573
|
|
427,038
|
Provision for losses on mortgage loans receivable
|
188,634
|
|
155,056
|
|
144,476
|
|
51,799
|
Net Interest Income after Provision for Mortgage Losses
|
750,443
|
|
518,130
|
|
188,097
|
|
375,239
|
Other than temporary impairment on bond portfolio
|
-
|
|
258,000
|
|
120,000
|
|
-
|
Operating Expenses
|
792,730
|
|
597,337
|
|
342,236
|
|
343,305
|
Operating Income (Loss)
|
(42,287)
|
|
(337,207)
|
|
(274,139)
|
|
31,934
|
Other Income
|
4,053
|
|
-
|
|
-
|
|
-
|
Net Income (Loss)
|
$ (38,234
)
|
|
$ (337,207
)
|
|
$ (274,139
)
|
|
$ 31,934
|
Basic and Diluted Income (Loss) Per Share
|
$ (0.02)
|
|
$ (0.20)
|
|
$ (0.16)
|
|
$ 0.02
|
Dividends Declared Per Share
|
$ 0.23
|
|
$ 0.24
|
|
$ 0.06
|
|
$ 0.07
|
Weighted Average Common Shares Outstanding - Basic and Diluted
|
1,677,798
|
|
1,677,798
|
|
1,677,798
|
|
1,677,798
|
|
|
Year Ended December 31,
|
|
For the Six Months As Of
|
|
|
2015
|
|
2016
|
|
June 30, 2016
|
|
June 30, 2017
|
|
|
|
|
|
|
(unaudited)
|
|
(unaudited)
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents
|
|
$
|
4,377,110
|
|
|
$
|
3,382,994
|
|
|
$
|
4,422,274
|
|
|
$
|
963,383
|
|
Current maturities of loans receivable, net of allowances and deferred origination fees
|
|
|
1,134,157
|
|
|
|
725,727
|
|
|
|
1,102,477
|
|
|
|
1,725,407
|
|
Current maturities of bond portfolio
|
|
|
84,000
|
|
|
|
111,000
|
|
|
|
104,000
|
|
|
|
131,000
|
|
Loans Receivable, net of current maturities, allowance and deferred origination fees
|
|
|
22,680,542
|
|
|
|
22,396,071
|
|
|
|
22,594,951
|
|
|
|
21,721,841
|
|
Bonds Receivable, net of current maturities
|
|
|
10,429,428
|
|
|
|
11,371,616
|
|
|
|
11,175,428
|
|
|
|
12,915,616
|
|
Accounts Receivable
|
|
|
189,609
|
|
|
|
219,352
|
|
|
|
206,467
|
|
|
|
237,509
|
|
Interest Receivable
|
|
|
172,169
|
|
|
|
175,912
|
|
|
|
174,580
|
|
|
|
178,477
|
|
Investments
|
|
|
—
|
|
|
|
2,410
|
|
|
|
—
|
|
|
|
2,410
|
|
Prepaid Expense
|
|
|
19,904
|
|
|
|
1,489
|
|
|
|
9,132
|
|
|
|
11,109
|
|
Real Estate Held for Sale
|
|
|
697,422
|
|
|
|
340,872
|
|
|
|
340,872
|
|
|
|
225,872
|
|
Deferred Offering Costs
|
|
|
861,810
|
|
|
|
839,195
|
|
|
|
858,250
|
|
|
|
819,087
|
|
Total Assets
|
|
$
|
40,646,151
|
|
|
$
|
39,566,638
|
|
|
$
|
40,988,431
|
|
|
$
|
38,931,711
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts Payable
|
|
$
|
29,417
|
|
|
$
|
36,951
|
|
|
|
27,340
|
|
|
$
|
49,204
|
|
Secured Investor Certificates
|
|
|
28,246,000
|
|
|
|
27,924,000
|
|
|
|
29,091,000
|
|
|
|
27,463,000
|
|
Dividends Payable
|
|
|
125,836
|
|
|
|
100,668
|
|
|
|
100,668
|
|
|
|
117,446
|
|
Total Liabilities
|
|
$
|
28,401,253
|
|
|
$
|
28,061,619
|
|
|
$
|
29,219,008
|
|
|
$
|
27,629,650
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Equity
|
|
|
12,244,898
|
|
|
|
11,505,019
|
|
|
|
11,769,423
|
|
|
|
11,302,061
|
|
Total Liabilities and Stockholders’ Equity
|
|
$
|
40,646,151
|
|
|
$
|
39,566,638
|
|
|
$
|
40,988,431
|
|
|
$
|
38,931,711
|
|
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 prospectus constitute “forward-looking statements” within the meaning
of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve a number of known and unknown
risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different
from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include,
but are not limited to, (i) trends affecting our financial condition or results of operations; (ii) our business and growth strategies;
(iii) the mortgage loan industry and the status of religious organizations; (iv) our financing plans; and other risks detailed
in the Company’s other periodic reports filed with the Securities and Exchange Commission. The words “believe”,
“expect”, “anticipate”, “may”, “plan”, “should”, and similar expressions
identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which
speak only as of the date the statements were made and are not guarantees of future performance.
Management’s Discussion and Analysis
The following discussion
regarding our financial statements should be read in conjunction with the financial statements and notes thereto included in this
prospectus beginning at page F-1. We commenced operations as a real estate investment trust in 1996, specializing in providing
mortgage loans to churches and other religious non-profit organizations.
Financial Condition
Our total assets
decreased from $39,566,638 at December 31, 2016 to $38,931,711 at June 30, 2017. The primary reason for the decrease in total assets
from December 31, 2016 through June 30, 2017 was a decrease in our cash position due to the maturity of our secured investor certificates.
Stockholders’ equity decreased from $11,505,019 at December 31, 2016 to $11,302,061 at June 30, 2017. This was due to a dividend
pay-out of $234,872 which was larger than our net income of $31,934. The larger dividend payout was a result of origination income
that was earned during the six month period but is not recognized in its entirety for the period under generally accepted accounting
principles (“GAAP”). Our primary liabilities at June 30, 2017 and December 31, 2016 were our Secured Investor Certificates,
which were $27,463,000 and $27,924,000 respectively. We also had dividends declared as of the end of the period reported on, but
which are not paid until the 30th day of the ensuing month.
Results of Operations – Six Months Ended June
30, 2016 Compared to Six Months Ended June 30, 2017
The following table
shows the results of our operations for the six months ended June 30, 2016 and 2017:
|
|
For the Six Months Ended
|
|
|
June 30, 2016
|
|
June 30, 2017
|
|
|
(unaudited)
|
|
(unaudited)
|
Statement of Operations
|
|
|
|
|
Interest and Other Income
|
|
$
|
1,338,230
|
|
|
$
|
1,382,792
|
|
Interest Expense
|
|
|
1,005,657
|
|
|
|
955,754
|
|
Net Interest Income
|
|
|
332,573
|
|
|
|
427,038
|
|
Provision for losses on mortgage loans receivable
|
|
|
144,476
|
|
|
|
51,799
|
|
Net Interest Income after Provision for Mortgage Losses
|
|
|
188,097
|
|
|
|
375,239
|
|
Other than temporary impairment on bond portfolio
|
|
|
120,000
|
|
|
|
—
|
|
Operating Expenses
|
|
|
342,236
|
|
|
|
343,305
|
|
Operating Income (Loss)
|
|
|
(274,139
|
)
|
|
|
31,934
|
|
Other Income
|
|
|
—
|
|
|
|
—
|
|
Net Income (Loss)
|
|
$
|
(274,139
|
)
|
|
$
|
31,934
|
|
Basic and Diluted Income (Loss) Per Share
|
|
$
|
(0.16
|
)
|
|
$
|
0.02
|
|
Dividends Declared Per Share
|
|
$
|
0.06
|
|
|
$
|
0.07
|
|
Weighted Average Common Shares Outstanding - Basic and Diluted
|
|
|
1,677,798
|
|
|
|
1,677,798
|
|
Since we began active
business operations on April 15, 1996, we have paid 85 consecutive quarterly dividend payments to Stockholders. These dividend
payments have resulted in an average annual return of 5.617% to Stockholders who purchased shares at $10 per share in our public
offerings of stock. Each loan funded during the quarter generates origination income which is due and payable to Stockholders as
taxable income even though origination income is not recognized in its entirety for the period under generally accepted accounting
principles (“GAAP”). We anticipate distributing all of our taxable income in the form of dividends to our Stockholders
in the foreseeable future to maintain our REIT status and to provide income to our Stockholders.
Net income (loss)
for the Company’s six month periods ended June 30, 2017 and 2016 was approximately $31,934 and $(274,139), respectively,
on total interest and other income of approximately $1,382,792 and $1,338,230, 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, 2017, the Company’s loans receivable had interest rates ranging from 0% to 10.25%, with an average, principal-adjusted
interest rate of 8.20%. The Company’s bond portfolio has an average current yield of 6.84% as of June 30, 2017. As of June
30, 2016, the average, principal-adjusted interest rate on the Company’s portfolio of loans was 8.28% and the Company’s
portfolio of bonds had an average current yield of 6.78%. The increase in interest income was due to the recognition of origination
income and an increase in interest income on our bond portfolio.
Interest expense was approximately
$956,000 and $1,006,000 for the six month periods ended June 30, 2017 and 2016, respectively. The decrease in interest expense
was due to the maturity of some of our Secured Investor Certificates. Net interest margin increased from 24.85% to 30.80% resulting
primarily from an increase in interest and other income of approximately 3.33% and a decrease in interest expense of approximately
4.96%.
Allowance for losses
on mortgage loans receivable increased during the six months ended June 30, 2016 as we recorded additional allowance against the
mortgage loans. We recorded an additional allowance for losses on loans during the six months ended June 30, 2017 of $51,799 compared
to $144,476 for the six months ended June 30, 2016. At June 30, 2017, we reserved $1,363,782 for seventeen mortgage loans, of which
seven are three or more mortgage payments in arrears, three loans are declared to be in default and two loans were in the foreclosure
process.
Our lending practices
limit deployment of our capital to churches and other non-profit religious organizations. The total principal amount of our second
mortgage loans is limited to 20% of our average invested assets. We currently have three second mortgage loans aggregating approximately
$226,000 in principal amount outstanding. We do not lend to any potential borrowers who have been in operation for less than two
years and borrowers must demonstrate that they can service the proposed debt outstanding based on an analysis of the prior three
years of financial statements. We do not lend money based on projections or pledge programs. The loan amount to a borrower cannot
exceed 75% loan to appraised value. 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 limited
borrowing history. Once a church establishes a payment history with us, they look to refinance their loan at lower interest rates
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 has demonstrated they can meet their mortgage debt obligations.
Operating expenses
for the six months ended June 30, 2017 increased slightly to approximately $343,000 compared to $342,000 at June 30, 2016. The
increase was a result of a payment for internal auditing fees.
Mortgage Loans
and Bond Portfolio
Three new loans
were funded during the six months ended June 30, 2017. All three loans were short term bridge financing loans with a terms of less
than one year.
We currently own $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, a minimum of 80% of the bondholders of Agape agreed to a modification in the terms of their bonds which
has resulted in the resumption of both principal and interest payments to both the first and second mortgage bond holders. Both
the First Mortgage Bonds and Second Mortgage Bonds have been modified to a fully amortized fixed rate, quarterly interest payment
of 6.25% with a new maturity date of September 2037 for all the issued and outstanding bonds. We, along with all other bondholders,
have a superior lien over all other creditors. We have an aggregate other than temporary impairment of $458,000 for the First and
Second Mortgage Bonds at June 31, 2017 and December 31, 2016, which effectively reduces the bonds to the fair value amount management
believes will be recovered. The Church has subsequently defaulted on their modification agreement in 2016 and no interest payments
were made to bondholders during the six month period ended June 30, 2017. However, the trustee made a distribution to bondholders
during the quarter 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.
Real Estate Held for Sale
As of June 30, 2017, we
had one property acquired via deed in lieu of foreclosure, with outstanding loan balances totaling $225,872. The Church is still
occupying this property and paying rent while trying to either sell the building or obtain refinancing.
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. The fair value of our real estate held for sale, which represents the carrying value, is $225,872 as of June 30,
2017. There was no additional impairment for the six month period ended June 30, 2017.
We sold one property and
disposed of a second property during the six month period ended June 30, 2017. The first property was sold to an unrelated third
party for approximately $48,000. The second property was disposed by way of a “Quit-Claim Deed” to an unrelated third
party. The disposed property had no carrying value. We realized an additional loss of approximately $67,000 on property that was
sold as of June 30, 2017. We sold two properties during the six month period ended June 31, 2016. The two properties were sold
for approximately $380,000. The Company provided seller financing to the borrowers. We realized an additional loss of approximately
$52,000 on both properties as of June 30, 2016.
Dividends
We have elected to operate
as a real estate investment trust (REIT), therefore we are required, among other things, to distribute to Stockholders at least
90% of “Taxable Income” in order to maintain our REIT status. The dividends declared and paid to Stockholders may include
cash from origination fees even though they are not recognized as income in their entirety for the period under generally accepted
accounting principles in the United States. We earned $31,750 and $6,000 in origination fees for the six months ended June 30,
2017 and 2016, respectively.
We paid a dividend of $.07
for each share held of record on April 25, 2017. The dividend was paid April 28, 2017.
Our Board of Directors
declared a dividend of $.07 for each share held of record on July 28, 2017. The dividend was paid July 31, 2017
.
Comparison of the fiscal years ended December 31, 2015
and 2016
The following table
shows the results of our operations for fiscal 2015 and 2016:
|
|
Year Ended December 31,
|
|
|
2015
|
|
2016
|
|
|
|
|
|
Statement of Operations
|
|
|
|
|
|
|
|
|
Interest and Other Income
|
|
$
|
2,936,326
|
|
|
$
|
2,698,186
|
|
Interest Expense
|
|
|
1,997,249
|
|
|
|
2,025,000
|
|
Net Interest Income
|
|
|
939,077
|
|
|
|
673,186
|
|
Provision for losses on mortgage loans receivable
|
|
|
188,634
|
|
|
|
155,056
|
|
Net Interest Income after Provision for Mortgage Losses
|
|
|
750,443
|
|
|
|
518,130
|
|
Other than temporary impairment on bond portfolio
|
|
|
—
|
|
|
|
258,000
|
|
Operating Expenses
|
|
|
792,730
|
|
|
|
597,337
|
|
Operating Income (Loss)
|
|
|
(42,287
|
)
|
|
|
(337,207
|
)
|
Other Income
|
|
|
4,053
|
|
|
|
—
|
|
Net Income (Loss)
|
|
$
|
(38,234
|
)
|
|
$
|
(337,207
|
)
|
Basic and Diluted Income (Loss) Per Share
|
|
$
|
(0.02
|
)
|
|
$
|
(0.20
|
)
|
Dividends Declared Per Share
|
|
$
|
0.23
|
|
|
$
|
0.24
|
|
Weighted Average Common Shares Outstanding - Basic and Diluted
|
|
|
1,677,798
|
|
|
|
1,677,798
|
|
Net (loss) for our year
ended December 31, 2016 was $(337,207) on total interest and other income of $2,698,186 compared to net (loss) of $(38,234) on
total interest and other income of $2,936,326 for the year ended December 31, 2015. The decrease in net income was primarily due
to the payoff of first mortgage loans, which reduced our interest-earning assets during 2016 along with an increase in our interest
expense on our secured investor certificates and also increase in our provision for losses on our mortgage loans and bond losses.
Net interest income earned
on the Company's portfolio of loans was $673,186 for the year ended December 31, 2016, compared to $939,077 for 2015. The decrease
in net interest income was due to the decrease in interest income of approximately $238,000 due to a decrease in our mortgage loans
outstanding. Excluded from revenue for the year ended December 31, 2016 is $13,160 of origination income, or “points,”
we received. Recognition of origination income under GAAP must be deferred over the expected life of each loan. However, under
tax principles, origination income is recognized in the period received. Accordingly, because our status as a REIT requires, among
other things, the distribution to Stockholders of at least 90% of taxable income, the dividends declared and paid to our Stockholders
for the quarters ended March 31, 2016, June 30, 2016, September 30, 2016 and December 31, 2016 included origination income even
though it was not recognized in its entirety as income for the period under GAAP.
Our operating expenses
for our fiscal year ended December 31, 2016 were $597,337 compared to $792,730 for our fiscal year ended December 31, 2015. The
decrease in operating expenses was primarily a result of a decrease in overall operating expenses involving legal and accounting
along with a decrease and interest expense on our Secured Investor Certificates.
Our Board of Directors
declared dividends of $.060 for each share of record on May 1, 2016, $.060 for each share of record on July 30, 2016, $.060 for
each shares of record on October 28, 2016 and $.060 for each shares of record on January 28, 2017. Based on the quarters ended
March 31, 2016, June 30, 2016, September 30, 2016 and December 31, 2016 and assuming a share purchase price of $10.00, the dividends
paid represented a 2.40
% annual yield in 2016. 100% of the dividends paid to Stockholders
for the tax year 2016 were non-dividend distributions due to the realized (carry-forward) loss on a $2,035,000 bond issue in 2012
in which we recorded a $1,875,000 loss and additional realized losses on two first mortgage loans. We expect dividends paid in
2017 to be 100% non-dividend distributions due to the realized (carry-forward) loss on this bond issue and the two first mortgage
loans.
We choose to distribute
income from ongoing operations in the form of dividends to Stockholders. As a Real Estate Investment Trust we are required to distribute
up to 90% of our taxable income. The table below reflects taxable income, net income from operations, dividend distributions and
the effect of the distributions to Stockholders for the periods ended December 31, 2016 and 2015. Any amount distributed to Stockholders
in excess of income from ongoing operations is deemed to be return of principal which results in a reduction of our Stockholder
equity.
|
|
December 31, 2016
|
|
December 31, 2015
|
|
|
|
|
|
Net Taxable Income
|
|
$
|
40,077
|
|
|
$
|
159,107
|
|
Net Income From Operations (before items)
|
|
$
|
215,572
|
|
|
$
|
347,054
|
|
Total Dividend Distributions
|
|
$
|
402,672
|
|
|
$
|
427,839
|
|
Principal Distribution
|
|
$
|
187,100
|
|
|
$
|
80,785
|
|
Number of Shares Outstanding
|
|
|
1,667,798
|
|
|
|
1,667,798
|
|
Amount of Principal Distributed per Share
|
|
$
|
0.11
|
|
|
$
|
0.05
|
|
Liquidity and Capital Resources
Our revenue is derived
principally from interest income, and secondarily, from origination fees and renewal fees generated by mortgage loans that we make.
We also earn income through interest on funds that are invested pending their use in funding mortgage loans or distributions of
dividends to our Stockholders, and on income generated on church bonds we may purchase and own. We generate revenue through (i)
permitted temporary investments of cash, and (ii) making mortgage loans to churches and other non-profit religious organizations.
Our principal expenses are advisory fees, legal and auditing fees, communications costs with our Stockholders, and the expenses
of our transfer agent and registrar.
Our loan portfolio consists
primarily of long-term fixed rate loans. We currently do not have any short-term variable rate loans or renewable loans in our
portfolio. Historically, loans in our portfolio are outstanding for an average of approximately six years. Our borrowers are typically
small independent churches with little or no borrowing history. Once a church establishes a payment history with us, they often
look to re-finance their loan with a local bank, credit union or other financial institution that is willing to provide financing
since the borrower has established a payment history and has demonstrated they can meet their mortgage debt obligations.
Currently, our bond portfolio
comprises 30% of our assets under management. The total principal amount of mortgage- secured debt securities we purchase from
churches and other non-profit religious organizations is limited to 30% of our Average Invested Assets. The total principal amount
outstanding is approximately $11,942,000 as of December 31, 2016 and was approximately $10,713,000 as of December 31, 2015. We
earned approximately $715,000 on our bond portfolio in 2016 and approximately $625,000 in 2015.
In addition, we are able
to borrow funds in an amount up to 300% of Stockholders’ equity (in the absence of a satisfactory showing that a higher level
of borrowing is appropriate; any excess in borrowing over such 300% level must be approved by a majority of the Independent Directors
and disclosed to Stockholders in the next quarterly report along with justification for such excess) in order to increase our lending
capacity.
In July 2014, the Company
filed a registration statement with the Securities and Exchange Commission to offer $10,000,000 of Series “D” Secured
Investor Certificates. The Securities and Exchange Commission declared our registration statement effective on August 12, 2014.
The certificates were offered in multiples of $1,000 with interest rates ranging from 4.00% to 7.00
%,
subject to changing market rates. Certificates are being offered with maturities from 5 and 7 to 15 years. The certificates are
collateralized by certain mortgage loans receivables and our bond portfolio of approximately the same value. Our future capital
needs are expected to be met by (i) future public offerings of our shares and/or our certificates; and (ii) the repayment of existing
loans and bonds and
potential
sale of bonds. As of August 14, 2017 our offering was terminated. We sold $8,234,000 in Series “D” Secured Investor
Certificates. We continually review the market for other sources of capital such as a new line of credit.
We anticipate that funds
from maturing loans will equal or exceed obligations due on our certificates during 2017. To the extent necessary, we will seek
short-term financing or a new working capital facility to meet any short-term cash requirements, which we currently expect would
be minimal. We expect to use any extra cash available to us to fund new loans.
The table below shows the
principal amount of loans and bonds to be paid through June 30, 2018 and the number of secured investor certificates maturing through
June 30, 2018. We have approximately $963,000 in cash on hand to pay maturing certificates. We may need to obtain additional funds
from other sources to meet our certificate maturity obligations. One source is the potential sale of bonds in our portfolio or
future public offerings of our share and/or our certificates.
|
|
Twelve Month period
Ended June 2018
|
|
|
|
Contractual maturity schedule mortgage loans
|
|
$
|
1,868,411
|
|
Contractual maturity schedule bond portfolio
|
|
|
131,000
|
|
Total
|
|
$
|
1,999,411
|
|
|
|
|
|
|
Contractual maturity schedule secured investor certificates
|
|
$
|
1,461,000
|
|
Additional funds required to pay maturing certificates
|
|
$
|
(538,411
|
)
|
Holders of our secured investor certificates
may renew certificates at the current rates and terms upon maturity at our discretion. Renewals upon maturity are considered neither
proceeds from nor issuance of secured investor certificates. Renewals totaled approximately $831,000 and $958,000 during 2016 and
2015, respectively. These renewals represent 27% and 41% of the maturing certificates. We believe that renewals we offer to maturing
certificate holders will reduce the amount of cash needed to pay maturing certificates in fiscal year 2017. In addition, at June
30, 2017 we have approximately $963,000 in cash on hand to pay maturing certificates which we believe will be sufficient to support
any shortfall arising for the mismatch between contractual maturities of assets and liabilities.
During the six months ended
June 30, 2017, total assets decreased by approximately $635,000 due to a decrease in cash to pay for maturing secured investor
certificates. Current liabilities decreased by approximately $1,313,000 for the six months ended June 30, 2017 due to a decrease
in current maturities of our secured investor certificates. Non-current liabilities decreased by approximately $432,000 for the
six months ended June 30, 2017 due to a decrease of secured investor certificates outstanding.
For the six months ended
June 30, 2017, net cash provided by operating activities increased to approximately $213,712 from $28,035 from the comparative
period ended June 30, 2016, primarily due to an decrease in our provision for losses on our bond portfolio.
For the six months ended
June 30, 2017, net cash (used for) investing activities was approximately $(1,915,000) compared to $(541,000) from the comparative
six months ended June 30, 2016, due to an increase in investment in mortgage loans.
For the six months ended
June 30, 2017, net cash (used for) provided by financing activities decreased to approximately $(719,000) from $558,000 for the
comparative six months ended June 30, 2016, primarily due to an increase in payments on maturing secured investor certificates
Loan Loss Reserve Policy
We follow a loan
loss reserve 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 reserves for principal amounts outstanding on a particular loan if cumulative interruptions
occur in the normal payment schedule of a loan. Our policy will reserve for the outstanding principal amount of a loan in our portfolio
if the amount is in doubt of being collected. Additionally, no interest income is recognized on impaired loans that are in the
foreclosure process. At June 30, 2017, we had a loan loss reserve accrual of $1,363,782 for seventeen mortgage loans, of which
seven totaling approximately $3,457,000 are three or more mortgage payments in arrears, three loans totaling approximately $1,226,000
are declared to be in default and two loans totaling approximately $633,000 are in the foreclosure process. At December 31, 2016,
we provided $1,311,983 for seventeen mortgage loans, of which seven totaling approximately $3,449,000 were three or
more
mortgage payments in arrears, three loans totaling approximately $1,226,000 were declared to be in default and two loans totaling
approximately $627,000 were in the foreclosure process.
As of June 30, 2017,
we had seven first mortgage loans three or more payments in arrears, three loans declared to be in default and two loans were in
the process of being foreclosed.
Of the twelve loans with
payments in arrears, the first impaired loan has an outstanding balance of approximately $468,000. The church is located in Atlanta,
Georgia. This loan is in the foreclosure process. We are currently assessing our options regarding this property. The church has
been working on getting re-financing. The church is located in a residential area.
The second impaired loan
has an outstanding balance of $166,000. The church is located in Detroit, Michigan. This loan is in the foreclosure process. The
Church has been making periodic payments and is current in their mortgage payments to us. However, the Church still owes us attorney
fees and back taxes. We are currently assessing our options regarding this property. The church is located in a commercial area.
Therefore, we believe the facility can be converted and used other than as a church.
The third impaired loan
has an outstanding balance of approximately $460,000. The church is located in Miami, Florida. This loan has been declared to be
in default. The church has resumed making monthly interest only payments. We plan on restructuring this loan in 2017 if the church
continues to make monthly payments. The church is located in a residential area.
The fourth impaired loan
has an outstanding balance of approximately $544,000. This loan has been declared in default. The church is located in Detroit,
Michigan and is located in an area suffering from urban blight and high crime. The church is currently unoccupied. We are continually
assessing our options with a local realtor. This church is located in a commercial area. Therefore, we believe the facility can
be converted and used other than as a church.
The fifth impaired loan
has an outstanding balance of $222,000. The church is located in Atlanta, Georgia. This loan has been declared in default. The
church has stopped making regular monthly mortgage payments. The church has sent three small mortgage payments toward their indebtedness
as of June 30, 2017. We are currently assessing our options regarding this property. The church is located in a residential area.
The sixth impaired loan
has an outstanding balance of $383,000. The church is located in Raleigh, North Carolina. The church has missed six mortgage payments
since the loan was funded in November 2004. However, the church did not miss any payments in 2016 or 2017. We are working with
the church to bring its payments current. The church is located in a residential area.
The seventh impaired loan
has an outstanding balance of $295,000. The church is located in Seagoville, Texas. The church has missed six payments since the
loan was funded in August 2006 of which two payments were missed in 2017. We are working with the church to bring its payments
current. The church is located in a residential area
The eighth impaired loan
has an outstanding balance of $685,000. The church is located in Dallas, Texas. The church has missed four payments since the loan
was funded in September 2008 of which two payments were missed in 2017. We are working with the church to bring its payments current.
The church is a commercial building. Therefore, we believe the facility can be converted and used other than as a church.
The ninth impaired loan
has an outstanding balance of $653,000. The church is located in Linton, Indiana. The church has missed three payments since the
loan was funded in September 2007. However, the church did not miss any payments in 2016 or 2017. We are working with the church
to bring its payments current. The church is located in a residential area.
The tenth impaired loan
has an outstanding balance of $460,000. The church is located in Cincinnati, Ohio. The church has missed seven payments since the
loan was funded in April 2011, of which two payments were missed to 2016 and one in 2017. We are working with the church to bring
its payments current. The church is located in a residential area
The eleventh impaired loan
has an outstanding balance of $735,000. The church is located in Richmond Hills, Texas. The church has missed numerous payments
since the loan was funded in November 2004. We are working with the church to bring its payments current. The church is a commerical
building. Therefore, we believe the facility can be converted and used other than as a
The twelfth impaired loan
has an outstanding balance of $245,000. The church is located in Kirbyville, Texas. The church has missed three payments since
the loan was funded in June 2003. However, the church did not miss any payments in 2016 or 2017. We are working with the church
to bring its payments current.
We presently expect our allowance for mortgage
loans to be adequate to cover all losses incurred and probable. Listed below is our current loan loss reserve policy:
Incident
|
Percentage of Loan Reserved
|
Status of Loan
|
1.
|
None
|
Loan is current, no interruption in payments during history of the loan, (“interruption” means receipt by us more than 30 days after scheduled payment date).
|
|
|
|
2.
|
None
|
Loan current, previous interruptions experienced, but none in the last six month period. Applies to restructured loans or loans given forbearance.
|
|
|
|
3.
|
None
|
Loan current, previous interruptions experienced, but none in the last 90 day period.
|
|
|
|
4.
|
1.00%
|
Loan serviced regularly, but 2 or 3 payments cumulative in arrears. Delinquency notice has been sent.
|
|
|
|
5.
|
5.00%
|
Loan serviced regularly, but 4 or 5 payments cumulative in arrears. Repayment plan requested.
|
|
|
|
6.
|
10.00%
|
Loan is declared to be in default. Legal counsel engaged to begin foreclosure. Additional accrual of overdue payments and penalties ceased.
|
|
|
|
7.
|
The greater of: (i) accumulated reserve
during default period equal to principal loan balance in excess of 65% of original collateral value; or (ii) 1% of the remaining
principal balance each quarter during which the default remains in effect.
|
Foreclosure proceeding underway. Accrual of all overdue interest and principal payments including penalties to be expensed. Reserve amount dependent on value of collateral. All expenses related to enforcing loan agreements are expensed.
|
The Company’s
Advisor, on an ongoing basis, will review reserve amounts under the policy stated above and determine the need, if any, to reserve
amounts in excess of its current policy. Any additional reserve amounts will be equal to or greater than its current reserve policy.
Allowance for mortgage loans are calculated on the remaining principal balance on the date of calculation and recorded on a quarterly
basis.
We expect to foreclose
on one property in 2017 and will incur costs to secure and prepare these properties for sale. We seek to exhaust all options available
to us to before proceeding to foreclosure. We do not foresee any foreclosures other than this one church in the foreseeable future.
Bond Loss Policy
The allowance for
losses on bonds is estimated by management and is determined by reviewing: (i) payment history, (ii) our experience with defaulted
bond issues, (iii) the issuer’s payment history as well as (iv) historical trends.
We currently own $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, a minimum of 80% of the bondholders of Agape agreed to a modification in the terms of their bonds which
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 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. The Company, along with all other bondholders,
has a superior lien over all other creditors. We have an aggregate other than temporary impairment of $458,000 for the First and
Second Mortgage Bonds at June 30, 2017 and December 31, 2016, which effectively reduces the bonds to the fair value amount management
believes will be recovered. The Church has subsequently defaulted on their modification agreement in 2016 and no interest payments
were made to bondholders during the six month period ended June 30, 2017. However, the trustee made a distribution to bondholders
during the quarter 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.
Critical Accounting Policies and 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 sale based on a number of factors. We look at the current condition of the property as well
as current market conditions in determining a fair value, which will determine the listing price of each property. Each property
is valued based on its current listing price less any anticipated selling costs, including for example, realtor commissions. Since
churches are single use facilities the listing price of the property may be lower than the total amount owed to us. Attorney fees,
taxes, utilities along with real estate commission fees will also reduce the amount we collect from the sale of a property we have
acquired through foreclosure. The fair value of the real estate held for sale includes estimates of expenses related to the sale
of the real estate.
Off-Balance Sheet Arrangements
We have no off-balance
sheet arrangements that have or are reasonably likely to have a current or future effect that is material to investors on our financial
condition, revenues or expenses, results of operations, liquidity, capital resources or capital expenditures.
OUR BUSINESS
General
American Church
Mortgage Company was established by American Investors Group, Inc. (the “underwriter” or “American”) to
service demand that the principals of American identified through the course of its business for mortgage lending to church borrowers
in the amount of $100,000 to $2,000,000. Because of the regulatory and administrative expenses associated with bond financing,
the economic feasibility of bond financing diminishes for financings under $750,000. As a result, American believed that many churches
were forced to either forego the project for which their financing request was made, fund their project from cash flow over a period
of time and at greater expense, or seek bank financing on terms which were not always favorable or available to them. We were incorporated
in Minnesota on May 27, 1994 to provide a lending source to this segment of the industry, capitalizing on a lack of significant
competition in the specialized business of making smaller church loans, the experienced human resources available at American and
our advisor, and the marketing, advertising and general goodwill of American. We began making loans in April 1996. We make loans
throughout the United States in principal amounts limited in range from $100,000 to $2,000,000. We may invest up to 30% of our
average invested assets in mortgage secured debt securities (bonds) issued by churches and other non-profit religious organizations.
We intend to lend funds and acquire mortgage secured investments pursuant to our business plan as additional funds become available
from this offering, and thereafter as funds from loan repayments, bond maturities and other resources become available.
We utilize American’s
unique specialization in procuring, qualifying and servicing church loans to enhance our operations. American has underwritten
first mortgage bonds for churches throughout the United States since 1987. In underwriting church bonds, American reviews financing
applications, analyzes prospective borrowers’ financial capability, and structures, markets and sells, mortgage-backed bond
securities to the investing public. Since its inception, American has underwritten approximately 287 church bond financings, in
which approximately $546,350,000 in first mortgage bonds have been sold to public investors. The average size of church bond financings
underwritten by American since its inception is approximately $1,904,000.
Since our establishment,
we have made 193 mortgage loans to churches totaling $100,767,503, with the average principal amount of such loans being approximately
$522,000. Of the 193 loans we have made, 105 loans totaling $58,777,727 have been repaid early by the borrowing churches. As of
June 30, 2017, we had sixty-one (61) first mortgage loans aggregating $24,905,108 in principal amount, three second mortgage loans
totaling $225,871 in principal amount and a first mortgage bond portfolio with par values aggregating $13,505,598.
Financing Business
We make first mortgage
loans in amounts ranging from $100,000 to $2,000,000, to churches and other non-profit religious organizations, and invest in mortgage-secured
debt instruments issued by churches and other non-profit religious organizations, called church bonds. We apply essentially all
of our working capital (after adequate reserves determined by our advisor) toward making mortgage loans and investing in church
bonds. We seek to:
|
·
|
find qualified borrowers and make loans in accordance with our Lending Guidelines;
|
|
·
|
lend at rates of interest in excess of our cost of funds;
|
|
·
|
offer competitively attractive mid-term (5-15 years) loans and long term (20-30 year) loans (although
there is no limit on the term of our loans);
|
|
·
|
charge origination fees, or “points,” from the borrower at the outset of a loan and
upon any renewal of a loan;
|
|
·
|
make a limited amount of higher interest rate second mortgage loans and construction/interim loans
to qualified borrowers; and
|
|
·
|
purchase a limited amount of mortgage-secured debt securities issued by churches and other non-profit
religious organizations, typically at par value.
|
Our policies limit
the amount of second mortgage loans to 20% of our average invested assets on the date any second mortgage loan is closed, and limit
the amount of mortgage secured debt securities to 30% of average invested assets on the date of their purchase. All other mortgage
loans we make (or church bonds purchased for investment) will be secured by a first mortgage or deed of trust on the borrower’s
real property. As of June 30, 2017, we had three second mortgage loans outstanding aggregating approximately $224,000 representing
0.89% of approximately $25,131,000 in principal amount outstanding and the percentage of average invested assets in mortgage-secured
debt securities, was 30.98% of average invested assets of approximately $38,229,000 in assets under management. As we attempt to
make mortgage loans that maximize interest income, we may make longer term fixed-rate loans in our discretion in order to reduce
the risk of downward interest rate fluctuations.
Our lending and
investing decisions, including determination of a prospective borrower’s or church bond issuer’s financial credit worthiness,
are made for us by our advisor. We have no employees. Employees and agents of our advisor conduct all aspects of our business,
including (i) marketing and advertising; (ii) communication with prospective borrowers; (iii) processing loan applications; (iv)
closing loans; (v) servicing loans; and (vi) administering our day-to-day business activities. In consideration of its services,
the advisor is entitled to receive a fee equal to 1.25% annually of the Company’s average invested assets up to $35 million.
This fee is reduced to 1.00% on assets from $35 million to $50 million. In addition, we pay, to the advisor, one half of any origination
fee charged to borrowers on mortgage loans we make. The advisor’s management fees are computed and payable monthly.
Current First Mortgage Loan Terms
We offer prospective
borrowers a selection of loan types, which include a choice of fixed or variable rates of interest indexed to the prime rate, the
U.S. Treasury 10-Year Notes, or another generally recognized reference index, and having various terms to maturity, origination
fees and other terms and conditions. The terms of loans we offer may be changed by our advisor as a result of such factors as (i)
the credit quality and experience of the borrowers; (ii) the terms of loans in our portfolio; (iii) competition from other lenders;
(iv) anticipated need to increase the overall yield on our mortgage loan portfolio; (v) local and national economic factors; and
(vi) actual experience in borrowers’ demand for the loans. We currently make the loan types described in the table below.
This table describes material terms
of loans available from us. The table does not purport to identify all possible terms, rates, and fees we may offer. We may modify
the terms identified below or offer loan terms different than those identified below. Many loans are individually negotiated and
differ from the terms described below.
Loan Type
|
Interest Rate
(1)
|
Origination Fee
(2)
|
20/25 Year Term
(3)
|
Fixed @ 7.95%/8.25% respectively
|
3.5%
|
20 Year Term
(3)
|
Variable Annually @ Prime + 4.00%
|
3.5%
|
3 Year Renewable Term
(4)
|
Fixed @ 7.25%
|
3.0%
|
Construction/Interim 1 Year Term
|
Fixed @ 8.00% to 9.00%
|
2.0%
|
________________________________________
|
(1)
|
“Prime” means the prime rate of interest charged to preferred customers, as published
by a federally chartered bank chosen by us. We may also tie our offered interest rates to other indices.
|
|
(2)
|
These are “target” fees and negotiation of these fees with borrowers can occur. Origination
fees are generally based on the original principal amount of the loan and are collected from the borrower at the origination and
renewal of loans, one half of which is payable directly to our Advisor.
|
|
(3)
|
Fully amortized repayment term. Amortization terms may vary, as may other loan terms, depending
on individual loan negotiations and competitive forces.
|
|
(4)
|
Renewable term loans are repaid based on a 25 year amortization schedule, and are renewable at
the conclusion of their initial term for additional like terms up to an aggregated maximum of 25 years. We charge a fee of 1% upon
the date of each renewal. If renewed by the borrower, the interest rate is adjusted upon renewal to Prime plus a specified percentage
“spread.”
|
Portfolio of the Company
As of June 30, 2017,
we had sixty-one first mortgage loans aggregating $24,905,108 in original principal amount and three second mortgage loans aggregating
$225,871 in original principal amount and purchased $13,505,598 principal amount first mortgage bonds issued by churches.
The table below identifies, by state,
the loan amounts and amounts outstanding of the Company’s mortgage loans as of June 30, 2017.
American Church Mortgage Company
Current Loan Portfolio
State
|
|
Number of Loans in the State
|
|
Loan Amount
|
|
Principal Balance as of 6/30/17
|
|
Percentage of Total
|
|
AR
|
|
|
|
1
|
|
|
$
|
225,000.00
|
|
|
$
|
29,992.20
|
|
|
|
0.12
|
%
|
|
AZ
|
|
|
|
1
|
|
|
$
|
600,000.00
|
|
|
$
|
574,426.14
|
|
|
|
2.29
|
%
|
|
CA
|
|
|
|
2
|
|
|
$
|
530,000.00
|
|
|
$
|
493,127.29
|
|
|
|
1.96
|
%
|
|
CT
|
|
|
|
1
|
|
|
$
|
435,000.00
|
|
|
$
|
410,718.10
|
|
|
|
1.63
|
%
|
|
FL
|
|
|
|
6
|
|
|
$
|
3,561,500.00
|
|
|
$
|
3,162,223.20
|
|
|
|
12.58
|
%
|
|
GA
|
|
|
|
3
|
|
|
$
|
1,555,000.00
|
|
|
$
|
1,365,813.56
|
|
|
|
5.43
|
%
|
|
IL
|
|
|
|
4
|
|
|
$
|
865,250.00
|
|
|
$
|
829,104.79
|
|
|
|
3.30
|
%
|
|
IN
|
|
|
|
3
|
|
|
$
|
1,505,000.00
|
|
|
$
|
1,515,761.47
|
|
|
|
6.03
|
%
|
|
LA
|
|
|
|
1
|
|
|
$
|
500,000.00
|
|
|
$
|
447,377.46
|
|
|
|
1.78
|
%
|
|
MA
|
|
|
|
3
|
|
|
$
|
1,400,000.00
|
|
|
$
|
1,127,258.39
|
|
|
|
4.49
|
%
|
|
MD
|
|
|
|
2
|
|
|
$
|
1,515,000.00
|
|
|
$
|
1,213,654.02
|
|
|
|
4.83
|
%
|
|
MI
|
|
|
|
3
|
|
|
$
|
1,364,000.00
|
|
|
$
|
1,264,333.75
|
|
|
|
5.03
|
%
|
|
MN
|
|
|
|
2
|
|
|
$
|
431,250.00
|
|
|
$
|
372,308.52
|
|
|
|
1.48
|
%
|
|
NC
|
|
|
|
3
|
|
|
$
|
1,630,915.00
|
|
|
$
|
985,587.11
|
|
|
|
3.92
|
%
|
|
NJ
|
|
|
|
1
|
|
|
$
|
427,500.00
|
|
|
$
|
384,228.60
|
|
|
|
1.53
|
%
|
|
NY
|
|
|
|
5
|
|
|
$
|
3,715,000.00
|
|
|
$
|
1,932,528.10
|
|
|
|
7.69
|
%
|
|
OH
|
|
|
|
6
|
|
|
$
|
1,955,000.00
|
|
|
$
|
1,502,286.62
|
|
|
|
5.98
|
%
|
|
OR
|
|
|
|
1
|
|
|
$
|
445,000.00
|
|
|
$
|
308,315.86
|
|
|
|
1.23
|
%
|
|
PA
|
|
|
|
2
|
|
|
$
|
1,300,000.00
|
|
|
$
|
842,606.57
|
|
|
|
3.35
|
%
|
|
TX
|
|
|
|
10
|
|
|
$
|
4,725,500.00
|
|
|
$
|
4,507,520.47
|
|
|
|
17.94
|
%
|
|
VA
|
|
|
|
3
|
|
|
$
|
1,320,000.00
|
|
|
$
|
1,164,255.64
|
|
|
|
4.63
|
%
|
|
WV
|
|
|
|
1
|
|
|
$
|
780,000.00
|
|
|
$
|
697,551.52
|
|
|
|
2.78
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals:
|
|
|
|
|
|
|
$
|
30,785,915.00
|
|
|
$
|
25,130,979.38
|
|
|
|
100.00
|
%
|
The table below identifies the borrowing
institutions and certain key terms of the loans comprising our loan portfolio as of June 30, 2017.
Loan
|
Loan Amount
|
Term in Years
|
Interest Rate
|
Appraised Value
|
Funding Date
|
|
|
|
|
|
|
Praise Chapel International
|
$115,000
|
5 years
|
10.00%
|
175,000
|
03/02/99
|
Freewill Christian Center (Second Loan)
|
$596,000
|
20 years
|
10.00%
|
797,000
|
06/22/99
|
Praise Christian Center Church
|
$500,000
|
20 years
|
9.85%
|
926,000
|
01/21/00
|
St. Paul AME Church
|
$200,000
|
20 years
|
10.25%
|
325,000
|
11/02/00
|
Second Missionary Baptist Church
|
$225,000
|
20 years
|
10.25%
|
370,000
|
06/19/01
|
Nehemiah Christian Outreach Ministries
|
$115,000
|
3 years
|
8.50%
|
140,000
|
05/30/02
|
House of Joy and Praise Outreach Center
|
$435,000
|
20 years
|
9.25%
|
780,000
|
12/30/02
|
Life Changing Faith Christian Church
|
$460,000
|
20 years
|
9.00%
|
690,000
|
03/12/03
|
Zion Hill Baptist Church
|
$255,000
|
20 years
|
8.65%
|
690,000
|
05/30/03
|
Bend Christian Center (Refinance)
|
$445,000
|
25 years
|
8.65%
|
101,000
|
06/19/03
|
Glad Tidings Community Church
|
$663,000
|
25 years
|
8.75%
|
900,000
|
06/30/03
|
Praise Tabernacle Jamaica (Refinance)
|
$600,000
|
20 years
|
8.65%
|
950,143
|
11/25/03
|
Praise Tabernacle Deliverance (Refinance) (Second Mtg)
|
$50,000
|
25 years
|
8.35%
|
1,058,000
|
12/19/03
|
Faith Christian Center
|
$475,000
|
20 years
|
8.65%
|
746,000
|
04/21/04
|
Shiloh Temple House of God
|
$500,000
|
20 years
|
8.25%
|
710,000
|
04/29/04
|
The Lord Jesus Christ Church on the Rock
|
$195,000
|
20 years
|
8.25%
|
300,000
|
07/09/04
|
Holy Tabernacle Ministries
|
$325,000
|
25 years
|
8.50%
|
500,000
|
09/16/04
|
Christ Wonderful World Outreach
|
$543,000
|
20 years
|
8.25%
|
725,000
|
11/03/04
|
Covenant Love Christian Center
|
$785,000
|
20 years
|
8.25%
|
1,200,000
|
11/10/04
|
New Life Community Church of Truth
|
$570,000
|
20 years
|
8.25%
|
790,000
|
11/30/04
|
Zion Mission
|
$410,000
|
25 years
|
8.50%
|
800,000
|
02/04/05
|
Inter-Denominational Fellowship Ministries (Refinance)
|
$315,000
|
25 years
|
8.75%
|
491,000
|
04/06/05
|
Mt. Ararat Baptist Church (Refinance)
|
$215,000
|
25 years
|
8.95%
|
1,000,000
|
04/24/05
|
True Vine Baptist Church
|
$198,500
|
25 years
|
8.75%
|
265,000
|
06/01/05
|
Calvary Baptist Church of Houston
|
$250,000
|
25 years
|
8.95%
|
350,000
|
06/29/05
|
International Deliverance Center
|
$518,000
|
25 years
|
1.00%
|
738,000
|
06/30/05
|
Unity of Faith Worship Center (Refinance)
|
$424,915
|
30 years
|
8.75%
|
835,150
|
06/30/05
|
Iglesia de Dios Pentecostal MI
|
$775,000
|
25 years
|
8.75%
|
1,008,484
|
07/13/05
|
Defenders Faith Center
|
$260,000
|
25 years
|
8.95%
|
470,000
|
11/29/05
|
Abundant Faith Baptist Church
|
$206,000
|
25 years
|
8.75%
|
500,000
|
02/15/06
|
Grace Christian Center (Refinance)
|
$1,600,000
|
25 years
|
8.50%
|
2,225,000
|
03/30/06
|
Living Water Seventh-Day Adventist Church
|
$640,000
|
30 years
|
8.75%
|
855,000
|
05/23/06
|
Serenity Church of God in Christ (Refinance)
|
$250,000
|
30 years
|
8.95%
|
370,909
|
06/13/06
|
Iglesia Nueva Vida en Cristo
|
$195,000
|
30 years
|
8.75%
|
233,000
|
06/28/06
|
Norman Quintero Ministries
|
$275,000
|
25 years
|
9.00%
|
383,000
|
08/15/06
|
Church of God of Prophecy of the Last Days
|
$497,000
|
30 years
|
8.95%
|
710,000
|
12/07/06
|
Loan
|
Loan
Amount
|
Terms
in Years
|
Interest
Rate
|
Appraised
Value
|
Funding
Date
|
|
|
|
|
|
|
Sword of the Word Evangelistic Ministry
|
$800,000
|
25 years
|
8.75%
|
1,650,000
|
12/20/06
|
The Church of the Living God - Full Gospel Ministries
|
$1,055,000
|
30 years
|
8.75%
|
1,875,000
|
12/21/06
|
Anchored in Faith Ministries (Refinance)
|
$675,000
|
25 years
|
9.25%
|
900,000
|
09/19/07
|
New Maranatha-Karibu SDA Church
|
$427,500
|
30 years
|
8.95%
|
570,000
|
10/18/07
|
Greater St. Andrews AME Church
|
$440,000
|
30 years
|
8.95%
|
1,250,000
|
11/01/07
|
Burning Bush Worship Center
|
$450,000
|
30 years
|
8.95%
|
600,000
|
12/03/07
|
Rock Spring Church
|
$780,000
|
30 years
|
8.50%
|
1,425,000
|
12/12/07
|
Believers New Life Ministries
|
$266,000
|
25 years
|
8.25%
|
395,000
|
07/02/08
|
Guiding Light Apostolic Church
|
$430,000
|
25 years
|
8.25%
|
1,250,000
|
08/20/08
|
Victory Church
|
$1,100,000
|
25 years
|
7.50%
|
1,500,000
|
09/05/08
|
Iglesia Pentecosted Alpha & Omega
|
$236,250
|
25 years
|
8.75%
|
317,000
|
09/25/08
|
Norman Quintero Ministries (Kiest Blvd)
|
$645,000
|
5 years
|
6.50%
|
1,500,000
|
09/30/08
|
New Stranger's Home Baptist Church
|
$350,000
|
30 years
|
8.50%
|
3,000,000
|
12/22/08
|
Family Center Church of God in Christ (Includes $15,500 2nd)
|
$249,500
|
25 years
|
7.50%
|
600,000
|
04/29/09
|
Hope for You Family Life and Worship Center
|
$470,000
|
25 years
|
8.95%
|
637,000
|
04/29/11
|
Treasures From Heaven Ministries, Inc.
|
$500,000
|
5 years
|
5.50%
|
630,000
|
07/12/12
|
Christ's Oasis Ministries, Inc.
|
$365,000
|
3 years
|
7.25%
|
460,000
|
08/05/13
|
Iglesia Emmanuel Antelope Valley
|
$180,000
|
30 years
|
8.50%
|
215,000
|
12/06/13
|
Centro Cristiano Carismatico
|
$600,000
|
25 years
|
8.00%
|
2,640,000
|
06/09/14
|
Faithway Baptist Church
|
$225,000
|
25 years
|
8.00%
|
300,000
|
11/12/14
|
Pembroke Park C.O.G.I.C.
|
$1,085,000
|
25 years
|
8.50%
|
3,220,000
|
12/15/14
|
Praise Christian Center World Outreach
|
$1,680,000
|
20 years
|
8.25%
|
2,800,000
|
11/24/15
|
Triple-R-Real Estate (Tyler Texas Property
|
$100,000
|
3 years
|
0.00%
|
100,000
|
02/26/16
|
St. Michael House of Prayer
|
$280,250
|
3 years
|
5.00%
|
280,250
|
03/10/16
|
Christ's Oasis Ministries, Inc. (2nd Mortgage)
|
$170,000
|
5 years
|
8.25%
|
2,050,000
|
12/20/16
|
Global Christian Ministries (Bridge Loan)
|
$1,185,000
|
1 year
|
6.95%
|
4,300,000
|
03/22/17
|
Iglesia De Dios Del Espiritu Santo (Bridge Loan)
|
$960,000
|
1 year
|
6.95%
|
1,250,000
|
06/30/17
|
|
|
|
|
|
|
The following church bonds, which are
secured by mortgages, were held by the Company as of June 30, 2017. Each of these bonds is callable at any time by the issuer at
par.
Issuer
|
Principal Amount
|
Purchase Price
|
Coupon
|
Yield to Maturity
|
Current Yield
|
Maturity Date
|
Original Issue Date
|
AGAPE ASSEMBLY BAPTIST CHURCH*
|
$487,575
|
Various
|
4.00%
|
4.00%
|
4.00%
|
5/15/2037
|
12/15/2014
|
|
|
|
|
|
|
|
|
AGAPE ASSEMBLY BAPTIST CHURCH (Second Mortgage Bond)*
|
$538,023
|
$538,023
|
4.00%
|
4.00%
|
4.00%
|
9/15/2037
|
12/15/2014
|
|
|
|
|
|
|
|
|
BAYNORTH CHURCH OF CHRIST
|
$1,000
|
$1,000
|
6.75%
|
6.75%
|
6.75%
|
1/15/2033
|
1/15/2017
|
BAYNORTH CHURCH OF CHRIST
|
$10,000
|
$10,000
|
7.00%
|
7.00%
|
7.00%
|
7/15/2033
|
1/15/2017
|
BAYNORTH CHURCH OF CHRIST
|
$10,000
|
$10,000
|
7.00%
|
7.00%
|
7.00%
|
1/15/2037
|
1/15/2017
|
BAYNORTH CHURCH OF CHRIST
|
$5,000
|
$5,000
|
7.00%
|
7.00%
|
7.00%
|
7/15/2037
|
1/15/2017
|
BAYNORTH CHURCH OF CHRIST
|
$31,000
|
$31,000
|
7.00%
|
7.00%
|
7.00%
|
7/15/2041
|
1/15/2017
|
BAYNORTH CHURCH OF CHRIST
|
$34,000
|
$34,000
|
7.00%
|
7.00%
|
7.00%
|
1/15/2042
|
1/15/2017
|
Issuer
|
Principal Amount
|
Purchase Price
|
Coupon
|
Yield to Maturity
|
Current Yield
|
Maturity Date
|
Original Issue Date
|
|
|
|
|
|
|
|
|
BETHANY BAPTIST CHURCH OF BALTIMORE CITY
|
$5,000
|
$4,850
|
8.00%
|
8.25%
|
8.32%
|
12/15/2030
|
12/15/2005
|
BETHANY BAPTIST CHURCH OF BALTIMORE CITY
|
$3,000
|
$3,000
|
8.00%
|
8.00%
|
8.00%
|
12/15/2030
|
12/15/2005
|
BETHANY BAPTIST CHURCH OF BALTIMORE CITY
|
$10,000
|
$10,000
|
7.50%
|
7.50%
|
7.50%
|
12/15/2022
|
12/15/2005
|
|
|
|
|
|
|
|
|
CALVARY PRESBYTERIAN CHURCH OF GHANA
|
$44,000
|
$44,000
|
8.00%
|
8.00%
|
8.00%
|
1/1/2038
|
7/1/2014
|
CALVARY PRESBYTERIAN CHURCH OF GHANA
|
$45,000
|
$45,000
|
8.00%
|
8.00%
|
8.00%
|
7/1/2038
|
7/1/2014
|
CALVARY PRESBYTERIAN CHURCH OF GHANA
|
$48,000
|
$48,000
|
8.00%
|
8.00%
|
8.00%
|
1/1/2039
|
7/1/2014
|
CALVARY PRESBYTERIAN CHURCH OF GHANA
|
$48,000
|
$48,000
|
8.00%
|
8.00%
|
8.00%
|
7/1/2039
|
7/1/2014
|
|
|
|
|
|
|
|
|
CALVARY TABERNACLE INC
|
$13,000
|
$13,000
|
5.00%
|
5.00%
|
5.00%
|
6/15/2021
|
12/15/2013
|
CALVARY TABERNACLE INC
|
$35,000
|
$35,000
|
5.25%
|
5.25%
|
5.25%
|
12/15/2021
|
12/15/2013
|
CALVARY TABERNACLE INC
|
$41,000
|
$41,000
|
5.25%
|
5.25%
|
5.25%
|
6/15/2022
|
12/15/2013
|
CALVARY TABERNACLE INC
|
$13,000
|
$13,000
|
5.50%
|
5.50%
|
5.50%
|
12/15/2022
|
12/15/2013
|
CALVARY TABERNACLE INC
|
$11,000
|
$11,000
|
5.50%
|
5.50%
|
5.50%
|
6/15/2023
|
12/15/2013
|
CALVARY TABERNACLE INC
|
$21,000
|
$21,000
|
5.75%
|
5.75%
|
5.75%
|
12/15/2023
|
12/15/2013
|
CALVARY TABERNACLE INC
|
$35,000
|
$35,000
|
5.75%
|
5.75%
|
5.75%
|
6/15/2024
|
12/15/2013
|
CALVARY TABERNACLE INC
|
$45,000
|
$45,000
|
6.00%
|
6.00%
|
6.00%
|
12/15/2025
|
12/15/2013
|
CALVARY TABERNACLE INC
|
$58,000
|
$58,000
|
6.00%
|
6.00%
|
6.00%
|
6/15/2026
|
12/15/2013
|
CALVARY TABERNACLE INC
|
$52,000
|
$52,000
|
6.00%
|
6.00%
|
6.00%
|
12/15/2026
|
12/15/2013
|
CALVARY TABERNACLE INC
|
$61,000
|
$61,000
|
6.00%
|
6.00%
|
6.00%
|
6/15/2027
|
12/15/2013
|
CALVARY TABERNACLE, INC.
|
$25,000
|
$25,000
|
6.00%
|
6.00%
|
6.00%
|
12/15/2027
|
12/15/2013
|
CALVARY TABERNACLE, INC.
|
$34,000
|
$34,000
|
6.00%
|
6.00%
|
6.00%
|
12/15/2027
|
12/15/2013
|
CALVARY TABERNACLE, INC.
|
$25,000
|
$25,000
|
6.25%
|
6.25%
|
6.25%
|
6/15/2028
|
12/15/2013
|
CALVARY TABERNACLE, INC.
|
$25,000
|
$25,000
|
6.25%
|
6.25%
|
6.25%
|
6/15/2028
|
12/15/2013
|
CALVARY TABERNACLE, INC.
|
$25,000
|
$25,000
|
6.25%
|
6.25%
|
6.25%
|
12/15/2028
|
12/15/2013
|
CALVARY TABERNACLE, INC.
|
$25,000
|
$25,000
|
6.25%
|
6.25%
|
6.25%
|
12/15/2028
|
12/15/2013
|
CALVARY TABERNACLE, INC.
|
$25,000
|
$25,000
|
6.25%
|
6.25%
|
6.25%
|
6/15/2029
|
12/15/2013
|
CALVARY TABERNACLE, INC.
|
$25,000
|
$25,000
|
6.25%
|
6.25%
|
6.25%
|
6/15/2029
|
12/15/2013
|
CALVARY TABERNACLE, INC.
|
$25,000
|
$25,000
|
6.25%
|
6.25%
|
6.25%
|
12/15/2029
|
12/15/2013
|
CALVARY TABERNACLE, INC.
|
$25,000
|
$25,000
|
6.25%
|
6.25%
|
6.25%
|
12/15/2029
|
12/15/2013
|
CALVARY TABERNACLE, INC.
|
$25,000
|
$25,000
|
6.50%
|
6.50%
|
6.50%
|
6/15/2030
|
12/15/2013
|
CALVARY TABERNACLE, INC.
|
$25,000
|
$25,000
|
6.50%
|
6.50%
|
6.50%
|
6/15/2030
|
12/15/2013
|
CALVARY TABERNACLE, INC.
|
$25,000
|
$25,000
|
6.50%
|
6.50%
|
6.50%
|
12/15/2030
|
12/15/2013
|
CALVARY TABERNACLE, INC.
|
$25,000
|
$25,000
|
6.50%
|
6.50%
|
6.50%
|
12/15/2030
|
12/15/2013
|
CALVARY TABERNACLE, INC.
|
$25,000
|
$25,000
|
6.50%
|
6.50%
|
6.50%
|
6/15/2031
|
12/15/2013
|
CALVARY TABERNACLE, INC.
|
$25,000
|
$25,000
|
6.50%
|
6.50%
|
6.50%
|
6/15/2031
|
12/15/2013
|
CALVARY TABERNACLE, INC.
|
$25,000
|
$25,000
|
6.75%
|
6.75%
|
6.75%
|
12/15/2031
|
12/15/2013
|
CALVARY TABERNACLE, INC.
|
$2,000
|
$2,000
|
7.00%
|
7.00%
|
7.00%
|
12/15/2033
|
12/15/2013
|
CALVARY TABERNACLE, INC.
|
$18,000
|
$18,000
|
7.00%
|
7.00%
|
7.00%
|
6/15/2035
|
12/15/2013
|
CALVARY TABERNACLE, INC.
|
$25,000
|
$25,000
|
7.25%
|
7.25%
|
7.25%
|
6/15/2037
|
12/15/2013
|
CALVARY TABERNACLE, INC.
|
$13,000
|
$13,000
|
7.25%
|
7.25%
|
7.25%
|
6/15/2037
|
12/15/2013
|
|
|
|
|
|
|
|
|
CENTENNIAL STAR OF BETHLEHEM CHURCH
|
$1,000
|
$1,000
|
7.25%
|
7.25%
|
7.25%
|
3/1/2019
|
3/1/2003
|
Issuer
|
Principal Amount
|
Purchase Price
|
Coupon
|
Yield to Maturity
|
Current Yield
|
Maturity Date
|
Original Issue Date
|
CENTENNIAL STAR OF BETHLEHEM CHURCH
|
$5,000
|
$5,000
|
7.25%
|
7.25%
|
7.25%
|
3/1/2020
|
3/1/2003
|
CENTENNIAL STAR OF BETHLEHEM CHURCH
|
$6,000
|
$5,820
|
7.75%
|
8.51%
|
7.99%
|
9/1/2026
|
3/1/2003
|
|
|
|
|
|
|
|
|
CHRIST BIBLE TEACHING CENTER
|
$3,000
|
$2,910
|
7.75%
|
8.13%
|
7.99%
|
7/15/2024
|
7/15/2005
|
CHRIST BIBLE TEACHING CENTER
|
$3,000
|
$2,910
|
8.00%
|
8.25%
|
8.34%
|
7/15/2028
|
7/15/2005
|
|
|
|
|
|
|
|
|
CHRIST FELLOWSHIP BAPTIST CHURCH
|
$1,000
|
$1,000
|
7.00%
|
7.00%
|
7.00%
|
6/1/2018
|
6/1/2006
|
CHRIST FELLOWSHIP BAPTIST CHURCH
|
$1,000
|
$1,000
|
7.25%
|
7.25%
|
7.25%
|
12/1/2019
|
6/1/2006
|
CHRIST FELLOWSHIP BAPTIST CHURCH
|
$10,000
|
$10,000
|
7.25%
|
7.25%
|
7.25%
|
6/1/2021
|
6/1/2006
|
CHRIST FELLOWSHIP BAPTIST CHURCH
|
$5,000
|
$5,000
|
8.00%
|
8.00%
|
8.00%
|
6/1/2026
|
6/1/2006
|
CHRIST FELLOWSHIP BAPTIST CHURCH
|
$10,000
|
$10,000
|
8.00%
|
8.00%
|
8.00%
|
12/1/2029
|
6/1/2006
|
CHRIST FELLOWSHIP BAPTIST CHURCH
|
$25,000
|
$25,000
|
7.00%
|
7.00%
|
7.00%
|
9/15/2038
|
9/15/2016
|
CHRIST FELLOWSHIP BAPTIST CHURCH
|
$175,000
|
$175,000
|
7.00%
|
7.00%
|
7.00%
|
9/15/2041
|
9/15/2016
|
|
|
|
|
|
|
|
|
CHRIST'S OASIS MINISTRIES, INC.
|
$12,000
|
$12,000
|
6.75%
|
6.75%
|
6.75%
|
5/15/2033
|
11/15/2016
|
CHRIST'S OASIS MINISTRIES, INC.
|
$1,000
|
$1,000
|
7.50%
|
7.50%
|
7.50%
|
3/15/2030
|
9/15/2012
|
CHRIST'S OASIS MINISTRIES, INC.
|
$3,000
|
$3,000
|
6.75%
|
6.75%
|
6.75%
|
11/15/2032
|
11/15/2016
|
CHRIST'S OASIS MINISTRIES, INC.
|
$37,000
|
$37,000
|
7.75%
|
7.75%
|
7.75%
|
9/15/2036
|
9/15/2012
|
CHRIST'S OASIS MINISTRIES, INC.
|
$130,000
|
$130,000
|
7.75%
|
7.75%
|
7.75%
|
3/15/2037
|
9/15/2012
|
CHRIST'S OASIS MINISTRIES, INC.
|
$133,000
|
$133,000
|
7.75%
|
7.75%
|
7.75%
|
9/15/2037
|
9/15/2012
|
CHRIST'S OASIS MINISTRIES, INC.
|
$2,000
|
$2,000
|
7.00%
|
7.00%
|
7.00%
|
5/15/2038
|
11/15/2016
|
CHRIST'S OASIS MINISTRIES, INC.
|
$50,000
|
$50,000
|
7.00%
|
7.00%
|
7.00%
|
11/15/2039
|
11/15/2016
|
CHRIST'S OASIS MINISTRIES, INC.
|
$50,000
|
$50,000
|
7.00%
|
7.00%
|
7.00%
|
5/15/2040
|
11/15/2016
|
CHRIST'S OASIS MINISTRIES, INC.
|
$50,000
|
$50,000
|
7.00%
|
7.00%
|
7.00%
|
11/15/2040
|
11/15/2016
|
CHRIST'S OASIS MINISTRIES, INC.
|
$50,000
|
$50,000
|
7.00%
|
7.00%
|
7.00%
|
5/15/2041
|
11/15/2016
|
CHRIST'S OASIS MINISTRIES, INC.
|
$3,000
|
$3,000
|
7.00%
|
7.00%
|
7.00%
|
5/15/2041
|
11/15/2016
|
CHRIST'S OASIS MINISTRIES, INC.
|
$50,000
|
$50,000
|
7.00%
|
7.00%
|
7.00%
|
11/15/2041
|
11/15/2016
|
CHRIST'S OASIS MINISTRIES, INC.
|
$24,000
|
$24,000
|
7.00%
|
7.00%
|
7.00%
|
11/15/2041
|
11/15/2016
|
|
|
|
|
|
|
|
|
COPPERAS COVE UNITY MISSIONARY BAPTIST
|
$3,000
|
$3,000
|
8.25%
|
8.25%
|
8.25%
|
2/15/2031
|
2/15/2008
|
COPPERAS COVE UNITY MISSIONARY BAPTIST
|
$15,000
|
$15,000
|
8.50%
|
8.50%
|
8.50%
|
8/15/2038
|
2/15/2008
|
COPPERAS COVE UNITY MISSIONARY BAPTIST
|
$43,000
|
$43,000
|
8.50%
|
8.50%
|
8.50%
|
2/15/2039
|
2/15/2008
|
|
|
|
|
|
|
|
|
CULLEN MISSIONARY BAPTIST CHURCH
|
$42,000
|
$42,000
|
8.50%
|
8.50%
|
8.50%
|
5/15/2038
|
11/15/2008
|
CULLEN MISSIONARY BAPTIST CHURCH
|
$43,000
|
$43,000
|
8.50%
|
8.50%
|
8.50%
|
11/15/2038
|
11/15/2008
|
|
|
|
|
|
|
|
|
DIVINE GOSPEL MISSION INTERNATIONAL
|
$9,000
|
$9,000
|
7.25%
|
7.25%
|
7.25%
|
12/15/2017
|
12/15/2016
|
DIVINE GOSPEL MISSION INTERNATIONAL
|
$5,000
|
$5,000
|
7.25%
|
7.25%
|
7.25%
|
6/15/2018
|
12/15/2016
|
DIVINE GOSPEL MISSION INTERNATIONAL
|
$5,000
|
$5,000
|
7.25%
|
7.25%
|
7.25%
|
12/15/2018
|
12/15/2016
|
DIVINE GOSPEL MISSION INTERNATIONAL
|
$5,000
|
$5,000
|
7.25%
|
7.25%
|
7.25%
|
6/15/2019
|
12/15/2016
|
DIVINE GOSPEL MISSION INTERNATIONAL
|
$6,000
|
$6,000
|
7.25%
|
7.25%
|
7.25%
|
12/15/2019
|
12/15/2016
|
DIVINE GOSPEL MISSION INTERNATIONAL
|
$6,000
|
$6,000
|
7.25%
|
7.25%
|
7.25%
|
6/15/2020
|
12/15/2016
|
DIVINE GOSPEL MISSION INTERNATIONAL
|
$7,000
|
$7,000
|
7.25%
|
7.25%
|
7.25%
|
6/15/2021
|
12/15/2016
|
Issuer
|
Principal Amount
|
Purchase Price
|
Coupon
|
Yield to Maturity
|
Current Yield
|
Maturity Date
|
Original Issue Date
|
DIVINE GOSPEL MISSION INTERNATIONAL
|
$6,000
|
$6,000
|
7.25%
|
7.25%
|
7.25%
|
12/15/2021
|
12/15/2016
|
DIVINE GOSPEL MISSION INTERNATIONAL
|
$7,000
|
$7,000
|
7.25%
|
7.25%
|
7.25%
|
6/15/2022
|
12/15/2016
|
DIVINE GOSPEL MISSION INTERNATIONAL
|
$7,000
|
$7,000
|
7.25%
|
7.25%
|
7.25%
|
12/15/2022
|
12/15/2016
|
DIVINE GOSPEL MISSION INTERNATIONAL
|
$7,000
|
$7,000
|
7.25%
|
7.25%
|
7.25%
|
6/15/2023
|
12/15/2016
|
DIVINE GOSPEL MISSION INTERNATIONAL
|
$8,000
|
$8,000
|
7.25%
|
7.25%
|
7.25%
|
12/15/2023
|
12/15/2016
|
DIVINE GOSPEL MISSION INTERNATIONAL
|
$8,000
|
$8,000
|
7.25%
|
7.25%
|
7.25%
|
6/15/2024
|
12/15/2016
|
DIVINE GOSPEL MISSION INTERNATIONAL
|
$8,000
|
$8,000
|
7.25%
|
7.25%
|
7.25%
|
12/15/2024
|
12/15/2016
|
DIVINE GOSPEL MISSION INTERNATIONAL
|
$8,000
|
$8,000
|
7.25%
|
7.25%
|
7.25%
|
6/15/2025
|
12/15/2016
|
DIVINE GOSPEL MISSION INTERNATIONAL
|
$9,000
|
$9,000
|
7.25%
|
7.25%
|
7.25%
|
12/15/2025
|
12/15/2016
|
DIVINE GOSPEL MISSION INTERNATIONAL
|
$9,000
|
$9,000
|
7.25%
|
7.25%
|
7.25%
|
6/15/2026
|
12/15/2016
|
DIVINE GOSPEL MISSION INTERNATIONAL
|
$10,000
|
$10,000
|
7.25%
|
7.25%
|
7.25%
|
12/15/2026
|
12/15/2016
|
DIVINE GOSPEL MISSION INTERNATIONAL
|
$10,000
|
$10,000
|
7.25%
|
7.25%
|
7.25%
|
6/15/2027
|
12/15/2016
|
DIVINE GOSPEL MISSION INTERNATIONAL
|
$10,000
|
$10,000
|
7.25%
|
7.25%
|
7.25%
|
12/15/2027
|
12/15/2016
|
DIVINE GOSPEL MISSION INTERNATIONAL
|
$11,000
|
$11,000
|
7.25%
|
7.25%
|
7.25%
|
6/15/2028
|
12/15/2016
|
DIVINE GOSPEL MISSION INTERNATIONAL
|
$11,000
|
$11,000
|
7.25%
|
7.25%
|
7.25%
|
12/15/2028
|
12/15/2016
|
DIVINE GOSPEL MISSION INTERNATIONAL
|
$12,000
|
$12,000
|
7.25%
|
7.25%
|
7.25%
|
6/15/2029
|
12/15/2016
|
DIVINE GOSPEL MISSION INTERNATIONAL
|
$12,000
|
$12,000
|
7.25%
|
7.25%
|
7.25%
|
12/15/2029
|
12/15/2016
|
DIVINE GOSPEL MISSION INTERNATIONAL
|
$12,000
|
$12,000
|
7.25%
|
7.25%
|
7.25%
|
6/15/2030
|
12/15/2016
|
DIVINE GOSPEL MISSION INTERNATIONAL
|
$13,000
|
$13,000
|
7.25%
|
7.25%
|
7.25%
|
12/15/2030
|
12/15/2016
|
DIVINE GOSPEL MISSION INTERNATIONAL
|
$14,000
|
$14,000
|
7.25%
|
7.25%
|
7.25%
|
6/15/2031
|
12/15/2016
|
DIVINE GOSPEL MISSION INTERNATIONAL
|
$14,000
|
$14,000
|
7.25%
|
7.25%
|
7.25%
|
12/15/2031
|
12/15/2016
|
DIVINE GOSPEL MISSION INTERNATIONAL
|
$15,000
|
$15,000
|
7.25%
|
7.25%
|
7.25%
|
6/15/2032
|
12/15/2016
|
DIVINE GOSPEL MISSION INTERNATIONAL
|
$15,000
|
$15,000
|
7.25%
|
7.25%
|
7.25%
|
12/15/2032
|
12/15/2016
|
DIVINE GOSPEL MISSION INTERNATIONAL
|
$16,000
|
$16,000
|
7.25%
|
7.25%
|
7.25%
|
6/15/2033
|
12/15/2016
|
DIVINE GOSPEL MISSION INTERNATIONAL
|
$16,000
|
$16,000
|
7.25%
|
7.25%
|
7.25%
|
12/15/2033
|
12/15/2016
|
DIVINE GOSPEL MISSION INTERNATIONAL
|
$17,000
|
$17,000
|
7.25%
|
7.25%
|
7.25%
|
6/15/2034
|
12/15/2016
|
DIVINE GOSPEL MISSION INTERNATIONAL
|
$17,000
|
$17,000
|
7.25%
|
7.25%
|
7.25%
|
12/15/2034
|
12/15/2016
|
DIVINE GOSPEL MISSION INTERNATIONAL
|
$18,000
|
$18,000
|
7.25%
|
7.25%
|
7.25%
|
6/15/2035
|
12/15/2016
|
DIVINE GOSPEL MISSION INTERNATIONAL
|
$19,000
|
$19,000
|
7.25%
|
7.25%
|
7.25%
|
12/15/2035
|
12/15/2016
|
DIVINE GOSPEL MISSION INTERNATIONAL
|
$20,000
|
$20,000
|
7.25%
|
7.25%
|
7.25%
|
6/15/2036
|
12/15/2016
|
DIVINE GOSPEL MISSION INTERNATIONAL
|
$20,000
|
$20,000
|
7.25%
|
7.25%
|
7.25%
|
12/15/2036
|
12/15/2016
|
DIVINE GOSPEL MISSION INTERNATIONAL
|
$21,000
|
$21,000
|
7.25%
|
7.25%
|
7.25%
|
6/15/2037
|
12/15/2016
|
DIVINE GOSPEL MISSION INTERNATIONAL
|
$22,000
|
$22,000
|
7.25%
|
7.25%
|
7.25%
|
12/15/2037
|
12/15/2016
|
DIVINE GOSPEL MISSION INTERNATIONAL
|
$23,000
|
$23,000
|
7.25%
|
7.25%
|
7.25%
|
6/15/2038
|
12/15/2016
|
DIVINE GOSPEL MISSION INTERNATIONAL
|
$24,000
|
$24,000
|
7.25%
|
7.25%
|
7.25%
|
12/15/2038
|
12/15/2016
|
DIVINE GOSPEL MISSION INTERNATIONAL
|
$25,000
|
$25,000
|
7.25%
|
7.25%
|
7.25%
|
6/15/2039
|
12/15/2016
|
DIVINE GOSPEL MISSION INTERNATIONAL
|
$25,000
|
$25,000
|
7.25%
|
7.25%
|
7.25%
|
12/15/2039
|
12/15/2016
|
DIVINE GOSPEL MISSION INTERNATIONAL
|
$27,000
|
$27,000
|
7.25%
|
7.25%
|
7.25%
|
6/15/2040
|
12/15/2016
|
DIVINE GOSPEL MISSION INTERNATIONAL
|
$27,000
|
$27,000
|
7.25%
|
7.25%
|
7.25%
|
12/15/2040
|
12/15/2016
|
DIVINE GOSPEL MISSION INTERNATIONAL
|
$29,000
|
$29,000
|
7.25%
|
7.25%
|
7.25%
|
6/15/2041
|
12/15/2016
|
DIVINE GOSPEL MISSION INTERNATIONAL
|
$29,000
|
$29,000
|
7.25%
|
7.25%
|
7.25%
|
12/15/2041
|
12/15/2016
|
DIVINE GOSPEL MISSION INTERNATIONAL
|
$6,000
|
$6,000
|
7.25%
|
7.25%
|
7.25%
|
15/15/2020
|
12/15/2016
|
|
|
|
|
|
|
|
|
Issuer
|
Principal Amount
|
Purchase Price
|
Coupon
|
Yield to Maturity
|
Current Yield
|
Maturity Date
|
Original Issue Date
|
FIRST LOVE FELLOWSHIP, INC.
|
$5,000
|
$4,450
|
7.75%
|
8.50%
|
8.15%
|
1/15/2024
|
7/15/2006
|
FIRST LOVE FELLOWSHIP, INC.
|
$5,000
|
$5,000
|
8.00%
|
8.00%
|
8.00%
|
7/15/2028
|
7/15/2006
|
FIRST LOVE FELLOWSHIP, INC.
|
$1,000
|
$1,000
|
7.75%
|
7.75%
|
7.75%
|
7/15/2023
|
7/15/2006
|
|
|
|
|
|
|
|
|
FROM THE HEART CHURCH MINISTRIES, INC.
|
$10,000
|
$10,000
|
7.25%
|
7.25%
|
7.25%
|
7/15/2018
|
7/15/2012
|
FROM THE HEART CHURCH MINISTRIES, INC.
|
$12,000
|
$12,000
|
7.25%
|
7.25%
|
7.25%
|
1/15/2022
|
7/15/2012
|
FROM THE HEART CHURCH MINISTRIES, INC.
|
$22,000
|
$22,000
|
7.25%
|
7.25%
|
7.25%
|
7/15/2022
|
7/15/2012
|
FROM THE HEART CHURCH MINISTRIES, INC.
|
$2,000
|
$2,000
|
7.25%
|
7.25%
|
7.25%
|
7/15/2022
|
7/15/2012
|
FROM THE HEART CHURCH MINISTRIES, INC.
|
$32,000
|
$32,000
|
7.25%
|
7.25%
|
7.25%
|
1/15/2023
|
7/15/2012
|
FROM THE HEART CHURCH MINISTRIES, INC.
|
$6,000
|
$6,000
|
7.25%
|
7.25%
|
7.25%
|
7/15/2024
|
7/15/2012
|
FROM THE HEART CHURCH MINISTRIES, INC.
|
$13,000
|
$13,000
|
7.25%
|
7.25%
|
7.25%
|
1/15/2025
|
7/15/2012
|
FROM THE HEART CHURCH MINISTRIES, INC.
|
$68,000
|
$68,000
|
7.25%
|
7.25%
|
7.25%
|
7/15/2025
|
7/15/2012
|
FROM THE HEART CHURCH MINISTRIES, INC.
|
$47,000
|
$47,000
|
7.25%
|
7.25%
|
7.25%
|
1/15/2026
|
7/15/2012
|
FROM THE HEART CHURCH MINISTRIES, INC.
|
$125,000
|
$125,000
|
7.25%
|
7.25%
|
7.25%
|
7/15/2026
|
7/15/2012
|
FROM THE HEART CHURCH MINISTRIES, INC.
|
$6,000
|
$6,000
|
7.25%
|
7.25%
|
7.25%
|
1/15/2027
|
7/15/2012
|
FROM THE HEART CHURCH MINISTRIES, INC.
|
$2,000
|
$2,000
|
7.25%
|
7.25%
|
7.25%
|
1/15/2027
|
7/15/2012
|
FROM THE HEART CHURCH MINISTRIES, INC.
|
$42,000
|
$42,000
|
7.25%
|
7.25%
|
7.25%
|
7/15/2027
|
7/15/2012
|
|
|
|
|
|
|
|
|
GREATER HOLY TRINITY
|
$33,000
|
$33,000
|
9.45%
|
9.45%
|
9.45%
|
12/15/2017
|
2/15/2006
|
GREATER HOLY TRINITY
|
$36,000
|
$36,000
|
9.55%
|
9.55%
|
9.55%
|
6/15/2018
|
2/15/2006
|
GREATER HOLY TRINITY
|
$36,000
|
$36,000
|
9.55%
|
9.55%
|
9.55%
|
12/15/2018
|
2/15/2006
|
GREATER HOLY TRINITY
|
$38,000
|
$38,000
|
9.65%
|
9.65%
|
9.65%
|
6/15/2019
|
2/15/2006
|
GREATER HOLY TRINITY
|
$40,000
|
$40,000
|
9.65%
|
9.65%
|
9.65%
|
12/15/2019
|
2/15/2006
|
GREATER HOLY TRINITY
|
$42,000
|
$42,000
|
9.65%
|
9.65%
|
9.65%
|
6/15/2020
|
2/15/2006
|
GREATER HOLY TRINITY
|
$44,000
|
$44,000
|
9.75%
|
9.75%
|
9.75%
|
12/15/2020
|
2/15/2006
|
GREATER HOLY TRINITY
|
$45,000
|
$45,000
|
9.75%
|
9.75%
|
9.75%
|
6/15/2021
|
2/15/2006
|
GREATER HOLY TRINITY
|
$56,000
|
$56,000
|
9.75%
|
9.75%
|
9.75%
|
12/15/2021
|
2/15/2006
|
|
|
|
|
|
|
|
|
GREATER ST. MATTHEW BAPTIST CHURCH
|
$16,000
|
$16,000
|
3.50%
|
3.50%
|
3.50%
|
2/1/2019
|
2/1/2016
|
GREATER ST. MATTHEW BAPTIST CHURCH
|
$16,000
|
$16,000
|
3.75%
|
3.75%
|
3.75%
|
8/1/2019
|
2/1/2016
|
GREATER ST. MATTHEW BAPTIST CHURCH
|
$17,000
|
$17,000
|
4.00%
|
4.00%
|
4.00%
|
2/1/2020
|
2/1/2016
|
GREATER ST. MATTHEW BAPTIST CHURCH
|
$17,000
|
$17,000
|
4.00%
|
4.00%
|
4.00%
|
8/1/2020
|
2/1/2016
|
GREATER ST. MATTHEW BAPTIST CHURCH
|
$17,000
|
$17,000
|
4.25%
|
4.25%
|
4.25%
|
2/1/2021
|
2/1/2016
|
GREATER ST. MATTHEW BAPTIST CHURCH
|
$18,000
|
$18,000
|
4.50%
|
4.50%
|
4.50%
|
8/1/2021
|
2/1/2016
|
GREATER ST. MATTHEW BAPTIST CHURCH
|
$18,000
|
$18,000
|
4.75%
|
4.75%
|
4.75%
|
2/1/2022
|
2/1/2016
|
GREATER ST. MATTHEW BAPTIST CHURCH
|
$25,000
|
$25,000
|
5.00%
|
5.00%
|
5.00%
|
8/1/2022
|
2/1/2016
|
GREATER ST. MATTHEW BAPTIST CHURCH
|
$26,000
|
$26,000
|
5.25%
|
5.25%
|
5.25%
|
2/1/2023
|
2/1/2016
|
GREATER ST. MATTHEW BAPTIST CHURCH
|
$14,000
|
$14,000
|
5.50%
|
5.50%
|
5.50%
|
8/1/2023
|
2/1/2016
|
GREATER ST. MATTHEW BAPTIST CHURCH
|
$13,000
|
$13,000
|
5.75%
|
5.75%
|
5.75%
|
2/1/2024
|
2/1/2016
|
GREATER ST. MATTHEW BAPTIST CHURCH
|
$25,000
|
$25,000
|
6.00%
|
6.00%
|
6.00%
|
8/1/2024
|
2/1/2016
|
GREATER ST. MATTHEW BAPTIST CHURCH
|
$19,000
|
$19,000
|
6.00%
|
6.00%
|
6.00%
|
2/1/2025
|
2/1/2016
|
GREATER ST. MATTHEW BAPTIST CHURCH
|
$15,000
|
$15,000
|
6.00%
|
6.00%
|
6.00%
|
8/1/2025
|
2/1/2016
|
GREATER ST. MATTHEW BAPTIST CHURCH
|
$20,000
|
$20,000
|
6.00%
|
6.00%
|
6.00%
|
2/1/2026
|
2/1/2016
|
Issuer
|
Principal Amount
|
Purchase Price
|
Coupon
|
Yield to Maturity
|
Current Yield
|
Maturity Date
|
Original Issue Date
|
GREATER ST. MATTHEW BAPTIST CHURCH
|
$15,000
|
$15,000
|
2.75%
|
2.75%
|
2.75%
|
8/1/2017
|
2/1/2016
|
GREATER ST. MATTHEW BAPTIST CHURCH
|
$15,000
|
$15,000
|
3.00%
|
3.00%
|
3.00%
|
2/1/2018
|
2/1/2016
|
GREATER ST. MATTHEW BAPTIST CHURCH
|
$15,000
|
$15,000
|
3.25%
|
3.25%
|
3.25%
|
8/1/2018
|
2/1/2016
|
|
|
|
|
|
|
|
|
GREATER TRAVELER'S REST BAPTIST CHURCH
|
$100,000
|
$100,000
|
5.75%
|
5.75%
|
5.75%
|
1/15/2026
|
1/15/2015
|
GREATER TRAVELER'S REST BAPTIST CHURCH
|
$100,000
|
$100,000
|
6.25%
|
6.25%
|
6.25%
|
1/15/2030
|
1/15/2015
|
GREATER TRAVELER'S REST BAPTIST CHURCH
|
$50,000
|
$50,000
|
7.00%
|
7.00%
|
7.00%
|
1/15/2034
|
1/15/2015
|
GREATER TRAVELER'S REST BAPTIST CHURCH
|
$10,000
|
$10,000
|
7.00%
|
7.00%
|
7.00%
|
7/15/2034
|
1/15/2015
|
GREATER TRAVELER'S REST BAPTIST CHURCH
|
$100,000
|
$100,000
|
7.00%
|
7.00%
|
7.00%
|
7/15/2035
|
1/15/2015
|
GREATER TRAVELER'S REST BAPTIST CHURCH
|
$106,000
|
$106,000
|
7.00%
|
7.00%
|
7.00%
|
7/15/2035
|
1/15/2015
|
GREATER TRAVELER'S REST BAPTIST CHURCH
|
$78,000
|
$78,000
|
7.00%
|
7.00%
|
7.00%
|
7/15/2035
|
1/15/2015
|
GREATER TRAVELER'S REST BAPTIST CHURCH
|
$50,000
|
$50,000
|
7.00%
|
7.00%
|
7.00%
|
7/15/2036
|
1/15/2015
|
GREATER TRAVELER'S REST BAPTIST CHURCH
|
$141,000
|
$141,000
|
7.00%
|
7.00%
|
7.00%
|
7/15/2036
|
1/15/2015
|
GREATER TRAVELER'S REST BAPTIST CHURCH
|
$143,000
|
$143,000
|
5.25%
|
5.25%
|
5.25%
|
1/15/2024
|
1/15/2015
|
GREATER TRAVELER'S REST BAPTIST CHURCH
|
$2,000
|
$2,000
|
8.00%
|
8.00%
|
8.00%
|
3/1/2024
|
1/15/2015
|
GREATER TRAVELER'S REST BAPTIST CHURCH
|
$400,000
|
$400,000
|
6.00%
|
6.00%
|
6.00%
|
1/15/2027
|
1/15/2015
|
GREATER TRAVELER'S REST BAPTIST CHURCH
|
$200,000
|
$200,000
|
6.75%
|
6.75%
|
6.75%
|
1/15/2033
|
1/15/2015
|
GREATER TRAVELER'S REST BAPTIST CHURCH
|
$300,000
|
$300,000
|
7.00%
|
7.00%
|
7.00%
|
1/15/2035
|
1/15/2015
|
GREATER TRAVELER'S REST BAPTIST CHURCH
|
$69,000
|
$69,000
|
7.00%
|
7.00%
|
7.00%
|
1/15/2035
|
1/15/2015
|
GREATER TRAVELER'S REST BAPTIST CHURCH
|
$500,000
|
$500,000
|
7.00%
|
7.00%
|
7.00%
|
1/15/2036
|
1/15/2015
|
GREATER TRAVELER'S REST BAPTIST CHURCH
|
$550,000
|
$550,000
|
7.00%
|
7.00%
|
7.00%
|
1/15/2037
|
1/15/2015
|
GREATER TRAVELER'S REST BAPTIST CHURCH
|
$21,000
|
$21,000
|
7.00%
|
7.00%
|
7.00%
|
1/15/2037
|
1/15/2015
|
GREATER TRAVELER'S REST BAPTIST CHURCH
|
$100,000
|
$100,000
|
7.00%
|
7.00%
|
7.00%
|
7/15/2037
|
1/15/2015
|
GREATER TRAVELER'S REST BAPTIST CHURCH
|
$570,000
|
$570,000
|
7.00%
|
7.00%
|
7.00%
|
1/15/2038
|
1/15/2015
|
GREATER TRAVELER'S REST BAPTIST CHURCH
|
$550,000
|
$550,000
|
7.00%
|
7.00%
|
7.00%
|
1/15/2039
|
1/15/2015
|
GREATER TRAVELER'S REST BAPTIST CHURCH
|
$30,000
|
$30,000
|
7.00%
|
7.00%
|
7.00%
|
1/15/2039
|
1/15/2015
|
GREATER TRAVELER'S REST BAPTIST CHURCH
|
$101,000
|
$101,000
|
7.00%
|
7.00%
|
7.00%
|
7/15/2039
|
1/15/2015
|
GREATER TRAVELER'S REST BAPTIST CHURCH
|
$50,000
|
$50,000
|
7.00%
|
7.00%
|
7.00%
|
1/15/2040
|
1/15/2015
|
|
|
|
|
|
|
|
|
GREATER WORKS CHURCH OF GOD IN CHRIST
|
$1,000
|
$1,000
|
5.00%
|
5.00%
|
5.00%
|
7/1/2020
|
7/1/2013
|
GREATER WORKS CHURCH OF GOD IN CHRIST
|
$4,000
|
$4,000
|
5.00%
|
5.00%
|
5.00%
|
1/1/2021
|
7/1/2013
|
GREATER WORKS CHURCH OF GOD IN CHRIST
|
$1,000
|
$1,000
|
5.25%
|
5.25%
|
5.25%
|
7/1/2021
|
7/1/2013
|
GREATER WORKS CHURCH OF GOD IN CHRIST
|
$6,000
|
$6,000
|
5.25%
|
5.25%
|
5.25%
|
1/1/2022
|
7/1/2013
|
GREATER WORKS CHURCH OF GOD IN CHRIST
|
$4,000
|
$4,000
|
5.50%
|
5.50%
|
5.50%
|
7/1/2022
|
7/1/2013
|
GREATER WORKS CHURCH OF GOD IN CHRIST
|
$7,000
|
$7,000
|
5.50%
|
5.50%
|
5.50%
|
1/1/2023
|
7/1/2013
|
GREATER WORKS CHURCH OF GOD IN CHRIST
|
$1,000
|
$1,000
|
5.75%
|
5.75%
|
5.75%
|
7/1/2023
|
7/1/2013
|
GREATER WORKS CHURCH OF GOD IN CHRIST
|
$7,000
|
$7,000
|
5.75%
|
5.75%
|
5.75%
|
1/1/2024
|
7/1/2013
|
GREATER WORKS CHURCH OF GOD IN CHRIST
|
$1,000
|
$1,000
|
6.00%
|
6.00%
|
6.00%
|
7/1/2025
|
7/1/2013
|
GREATER WORKS CHURCH OF GOD IN CHRIST
|
$8,000
|
$8,000
|
6.00%
|
6.00%
|
6.00%
|
1/1/2026
|
7/1/2013
|
GREATER WORKS CHURCH OF GOD IN CHRIST
|
$9,000
|
$9,000
|
6.00%
|
6.00%
|
6.00%
|
7/1/2026
|
7/1/2013
|
GREATER WORKS CHURCH OF GOD IN CHRIST
|
$9,000
|
$9,000
|
6.00%
|
6.00%
|
6.00%
|
1/1/2027
|
7/1/2013
|
GREATER WORKS CHURCH OF GOD IN CHRIST
|
$4,000
|
$4,000
|
6.00%
|
6.00%
|
6.00%
|
7/1/2027
|
7/1/2013
|
GREATER WORKS CHURCH OF GOD IN CHRIST
|
$2,000
|
$2,000
|
6.25%
|
6.25%
|
6.25%
|
7/1/2028
|
7/1/2013
|
Issuer
|
Principal Amount
|
Purchase Price
|
Coupon
|
Yield to Maturity
|
Current Yield
|
Maturity Date
|
Original Issue Date
|
GREATER WORKS CHURCH OF GOD IN CHRIST
|
$2,000
|
$2,000
|
6.25%
|
6.25%
|
6.25%
|
1/1/2029
|
7/1/2013
|
GREATER WORKS CHURCH OF GOD IN CHRIST
|
$4,000
|
$4,000
|
6.25%
|
6.25%
|
6.25%
|
7/1/2029
|
7/1/2013
|
GREATER WORKS CHURCH OF GOD IN CHRIST
|
$13,000
|
$13,000
|
6.50%
|
6.50%
|
6.50%
|
7/1/2032
|
7/1/2013
|
GREATER WORKS CHURCH OF GOD IN CHRIST
|
$13,000
|
$13,000
|
6.50%
|
6.50%
|
6.50%
|
1/1/2033
|
7/1/2013
|
GREATER WORKS CHURCH OF GOD IN CHRIST
|
$2,000
|
$2,000
|
7.00%
|
7.00%
|
7.00%
|
7/1/2038
|
7/1/2013
|
GREATER WORKS CHURCH OF GOD IN CHRIST
|
$31,000
|
$31,000
|
8.00%
|
8.00%
|
8.00%
|
10/15/2038
|
7/1/2013
|
GREATER WORKS CHURCH OF GOD IN CHRIST
|
$41,000
|
$41,000
|
8.00%
|
8.00%
|
8.00%
|
4/15/2039
|
7/1/2013
|
|
|
|
|
|
|
|
|
HIS TABERNACLE FAMILY CHURCH
|
$20,000
|
$20,000
|
6.25%
|
6.25%
|
6.25%
|
4/15/2029
|
10/15/2013
|
HIS TABERNACLE FAMILY CHURCH
|
$20,000
|
$20,000
|
6.25%
|
6.25%
|
6.25%
|
10/15/2029
|
10/15/2013
|
HIS TABERNACLE FAMILY CHURCH
|
$25,000
|
$25,000
|
6.50%
|
6.50%
|
6.50%
|
4/15/2030
|
10/15/2013
|
HIS TABERNACLE FAMILY CHURCH
|
$2,000
|
$2,000
|
6.50%
|
6.50%
|
6.50%
|
4/15/2030
|
10/15/2013
|
HIS TABERNACLE FAMILY CHURCH
|
$22,000
|
$22,000
|
6.50%
|
6.50%
|
6.50%
|
10/15/2030
|
10/15/2013
|
HIS TABERNACLE FAMILY CHURCH
|
$30,000
|
$30,000
|
6.50%
|
6.50%
|
6.50%
|
10/15/2031
|
10/15/2013
|
HIS TABERNACLE FAMILY CHURCH
|
$42,000
|
$42,000
|
6.50%
|
6.50%
|
6.50%
|
4/15/2032
|
10/15/2013
|
HIS TABERNACLE FAMILY CHURCH
|
$27,000
|
$27,000
|
6.75%
|
6.75%
|
6.75%
|
4/15/2036
|
10/15/2013
|
HIS TABERNACLE FAMILY CHURCH
|
$20,000
|
$20,000
|
7.00%
|
7.00%
|
7.00%
|
4/15/2038
|
10/15/2013
|
|
|
|
|
|
|
|
|
INTEGRITY CHURCH INTERNATIONAL
|
$5,000
|
$4,850
|
7.75%
|
8.12%
|
7.99%
|
9/15/2025
|
3/15/2003
|
INTEGRITY CHURCH INTERNATIONAL
|
$5,000
|
$5,000
|
7.75%
|
7.75%
|
7.75%
|
9/15/2025
|
3/15/2003
|
INTEGRITY CHURCH INTERNATIONAL
|
$5,000
|
$5,000
|
7.25%
|
7.25%
|
7.25%
|
3/15/2019
|
3/15/2003
|
|
|
|
|
|
|
|
|
MT. JOYNER MISSIONARY BAPTIST CHURCH
|
$1,000
|
$1,000
|
8.00%
|
8.00%
|
8.00%
|
1/15/2023
|
1/15/2008
|
MT. JOYNER MISSIONARY BAPTIST CHURCH
|
$10,000
|
$10,000
|
8.00%
|
8.00%
|
8.00%
|
7/15/2028
|
1/15/2008
|
MT. JOYNER MISSIONARY BAPTIST CHURCH
|
$1,000
|
$1,000
|
8.25%
|
8.25%
|
8.25%
|
1/15/2035
|
1/15/2008
|
|
|
|
|
|
|
|
|
NEW BEGINNING MISSIONARY BAPTIST CHURCH
|
$2,000
|
$2,000
|
8.00%
|
8.00%
|
8.00%
|
7/15/2031
|
7/15/2008
|
|
|
|
|
|
|
|
|
NEW CREATION OUTREACH MINISTRIES
|
$3,000
|
$3,000
|
5.00%
|
5.00%
|
5.00%
|
7/1/2023
|
7/1/2015
|
NEW CREATION OUTREACH MINISTRIES
|
$15,000
|
$15,000
|
5.75%
|
5.75%
|
5.75%
|
7/1/2025
|
7/1/2015
|
NEW CREATION OUTREACH MINISTRIES
|
$27,000
|
$27,000
|
6.00%
|
6.00%
|
6.00%
|
1/1/2026
|
7/1/2015
|
NEW CREATION OUTREACH MINISTRIES
|
$9,000
|
$9,000
|
6.00%
|
6.00%
|
6.00%
|
7/1/2027
|
7/1/2015
|
NEW CREATION OUTREACH MINISTRIES
|
$19,000
|
$19,000
|
6.00%
|
6.00%
|
6.00%
|
1/1/2029
|
7/1/2015
|
NEW CREATION OUTREACH MINISTRIES
|
$12,000
|
$12,000
|
6.25%
|
6.25%
|
6.25%
|
7/1/2029
|
7/1/2015
|
NEW CREATION OUTREACH MINISTRIES
|
$20,000
|
$20,000
|
6.25%
|
6.25%
|
6.25%
|
1/1/2030
|
7/1/2015
|
NEW CREATION OUTREACH MINISTRIES
|
$23,000
|
$23,000
|
6.50%
|
6.50%
|
6.50%
|
7/1/2030
|
7/1/2015
|
NEW CREATION OUTREACH MINISTRIES
|
$29,000
|
$29,000
|
6.50%
|
6.50%
|
6.50%
|
1/1/2031
|
7/1/2015
|
NEW CREATION OUTREACH MINISTRIES
|
$2,000
|
$2,000
|
6.75%
|
6.75%
|
6.75%
|
7/1/2032
|
7/1/2015
|
NEW CREATION OUTREACH MINISTRIES
|
$20,000
|
$20,000
|
6.75%
|
6.75%
|
6.75%
|
7/1/2032
|
7/1/2015
|
NEW CREATION OUTREACH MINISTRIES
|
$15,000
|
$15,000
|
6.75%
|
6.75%
|
6.75%
|
1/1/2033
|
7/1/2015
|
|
|
|
|
|
|
|
|
NEW LIFE CHRISTIAN CENTER, INC.
|
$1,000
|
$1,000
|
8.25%
|
8.25%
|
8.25%
|
2/1/2024
|
2/1/2007
|
NEW LIFE CHRISTIAN CENTER, INC.
|
$5,000
|
$5,000
|
8.00%
|
8.00%
|
8.00%
|
2/1/2026
|
2/1/2007
|
Issuer
|
Principal Amount
|
Purchase Price
|
Coupon
|
Yield to Maturity
|
Current Yield
|
Maturity Date
|
Original Issue Date
|
|
|
|
|
|
|
|
|
NORTH CAROLINA COLLEGE OF THEOLOGY
|
$4,000
|
$4,000
|
4.25%
|
4.25%
|
4.25%
|
10/1/2017
|
4/1/2015
|
NORTH CAROLINA COLLEGE OF THEOLOGY
|
$5,000
|
$5,000
|
4.50%
|
4.50%
|
4.50%
|
4/1/2018
|
4/1/2015
|
NORTH CAROLINA COLLEGE OF THEOLOGY
|
$5,000
|
$5,000
|
4.50%
|
4.50%
|
4.50%
|
10/1/2018
|
4/1/2015
|
NORTH CAROLINA COLLEGE OF THEOLOGY
|
$5,000
|
$5,000
|
4.75%
|
4.75%
|
4.75%
|
4/1/2019
|
4/1/2015
|
NORTH CAROLINA COLLEGE OF THEOLOGY
|
$5,000
|
$5,000
|
5.00%
|
5.00%
|
5.00%
|
10/1/2019
|
4/1/2015
|
NORTH CAROLINA COLLEGE OF THEOLOGY
|
$5,000
|
$5,000
|
5.00%
|
5.00%
|
5.00%
|
4/1/2020
|
4/1/2015
|
NORTH CAROLINA COLLEGE OF THEOLOGY
|
$5,000
|
$5,000
|
5.00%
|
5.00%
|
5.00%
|
10/1/2020
|
4/1/2015
|
NORTH CAROLINA COLLEGE OF THEOLOGY
|
$6,000
|
$6,000
|
5.25%
|
5.25%
|
5.25%
|
4/1/2021
|
4/1/2015
|
NORTH CAROLINA COLLEGE OF THEOLOGY
|
$6,000
|
$6,000
|
5.25%
|
5.25%
|
5.25%
|
10/1/2021
|
4/1/2015
|
NORTH CAROLINA COLLEGE OF THEOLOGY
|
$6,000
|
$6,000
|
5.50%
|
5.50%
|
5.50%
|
4/1/2022
|
4/1/2015
|
NORTH CAROLINA COLLEGE OF THEOLOGY
|
$6,000
|
$6,000
|
5.50%
|
5.50%
|
5.50%
|
10/1/2022
|
4/1/2015
|
NORTH CAROLINA COLLEGE OF THEOLOGY
|
$6,000
|
$6,000
|
5.75%
|
5.75%
|
5.75%
|
4/1/2023
|
4/1/2015
|
NORTH CAROLINA COLLEGE OF THEOLOGY
|
$6,000
|
$6,000
|
5.75%
|
5.75%
|
5.75%
|
10/1/2023
|
4/1/2015
|
NORTH CAROLINA COLLEGE OF THEOLOGY
|
$7,000
|
$7,000
|
6.00%
|
6.00%
|
6.00%
|
4/1/2024
|
4/1/2015
|
NORTH CAROLINA COLLEGE OF THEOLOGY
|
$7,000
|
$7,000
|
6.00%
|
6.00%
|
6.00%
|
10/1/2024
|
4/1/2015
|
NORTH CAROLINA COLLEGE OF THEOLOGY
|
$7,000
|
$7,000
|
6.00%
|
6.00%
|
6.00%
|
4/1/2025
|
4/1/2015
|
NORTH CAROLINA COLLEGE OF THEOLOGY
|
$5,000
|
$5,000
|
6.50%
|
6.50%
|
6.50%
|
7/15/2025
|
1/15/2014
|
NORTH CAROLINA COLLEGE OF THEOLOGY
|
$7,000
|
$7,000
|
6.00%
|
6.00%
|
6.00%
|
10/1/2025
|
4/1/2015
|
NORTH CAROLINA COLLEGE OF THEOLOGY
|
$5,000
|
$5,000
|
6.50%
|
6.50%
|
6.50%
|
1/15/2026
|
1/15/2014
|
NORTH CAROLINA COLLEGE OF THEOLOGY
|
$7,000
|
$7,000
|
6.25%
|
6.25%
|
6.25%
|
4/1/2026
|
4/1/2015
|
NORTH CAROLINA COLLEGE OF THEOLOGY
|
$14,000
|
$14,000
|
6.50%
|
6.50%
|
6.50%
|
7/15/2026
|
1/15/2014
|
NORTH CAROLINA COLLEGE OF THEOLOGY
|
$7,000
|
$7,000
|
6.25%
|
6.25%
|
6.25%
|
10/1/2026
|
4/1/2015
|
NORTH CAROLINA COLLEGE OF THEOLOGY
|
$2,000
|
$2,000
|
6.75%
|
6.75%
|
6.75%
|
1/15/2027
|
1/15/2014
|
NORTH CAROLINA COLLEGE OF THEOLOGY
|
$8,000
|
$8,000
|
6.50%
|
6.50%
|
6.50%
|
4/1/2027
|
4/1/2015
|
NORTH CAROLINA COLLEGE OF THEOLOGY
|
$1,000
|
$1,000
|
6.75%
|
6.75%
|
6.75%
|
7/15/2027
|
1/15/2014
|
NORTH CAROLINA COLLEGE OF THEOLOGY
|
$8,000
|
$8,000
|
6.50%
|
6.50%
|
6.50%
|
10/1/2027
|
4/1/2015
|
NORTH CAROLINA COLLEGE OF THEOLOGY
|
$8,000
|
$8,000
|
6.75%
|
6.75%
|
6.75%
|
4/1/2028
|
4/1/2015
|
NORTH CAROLINA COLLEGE OF THEOLOGY
|
$12,000
|
$12,000
|
6.75%
|
6.75%
|
6.75%
|
7/15/2028
|
1/15/2014
|
NORTH CAROLINA COLLEGE OF THEOLOGY
|
$9,000
|
$9,000
|
6.75%
|
6.75%
|
6.75%
|
10/1/2028
|
4/1/2015
|
NORTH CAROLINA COLLEGE OF THEOLOGY
|
$9,000
|
$9,000
|
7.00%
|
7.00%
|
7.00%
|
4/1/2029
|
4/1/2015
|
NORTH CAROLINA COLLEGE OF THEOLOGY
|
$9,000
|
$9,000
|
7.00%
|
7.00%
|
7.00%
|
10/1/2029
|
4/1/2015
|
NORTH CAROLINA COLLEGE OF THEOLOGY
|
$10,000
|
$10,000
|
7.00%
|
7.00%
|
7.00%
|
4/1/2030
|
4/1/2015
|
NORTH CAROLINA COLLEGE OF THEOLOGY
|
$10,000
|
$10,000
|
7.00%
|
7.00%
|
7.00%
|
10/1/2030
|
4/1/2015
|
NORTH CAROLINA COLLEGE OF THEOLOGY
|
$10,000
|
$10,000
|
7.00%
|
7.00%
|
7.00%
|
4/1/2031
|
4/1/2015
|
NORTH CAROLINA COLLEGE OF THEOLOGY
|
$11,000
|
$11,000
|
7.00%
|
7.00%
|
7.00%
|
10/1/2031
|
4/1/2015
|
NORTH CAROLINA COLLEGE OF THEOLOGY
|
$11,000
|
$11,000
|
7.00%
|
7.00%
|
7.00%
|
4/1/2032
|
4/1/2015
|
NORTH CAROLINA COLLEGE OF THEOLOGY
|
$12,000
|
$12,000
|
7.00%
|
7.00%
|
7.00%
|
10/1/2032
|
4/1/2015
|
NORTH CAROLINA COLLEGE OF THEOLOGY
|
$12,000
|
$12,000
|
7.25%
|
7.25%
|
7.25%
|
4/1/2033
|
4/1/2015
|
NORTH CAROLINA COLLEGE OF THEOLOGY
|
$12,000
|
$12,000
|
7.25%
|
7.25%
|
7.25%
|
10/1/2033
|
4/1/2015
|
NORTH CAROLINA COLLEGE OF THEOLOGY
|
$13,000
|
$13,000
|
7.25%
|
7.25%
|
7.25%
|
4/1/2034
|
4/1/2015
|
NORTH CAROLINA COLLEGE OF THEOLOGY
|
$13,000
|
$13,000
|
7.25%
|
7.25%
|
7.25%
|
10/1/2034
|
4/1/2015
|
NORTH CAROLINA COLLEGE OF THEOLOGY
|
$14,000
|
$14,000
|
7.25%
|
7.25%
|
7.25%
|
4/1/2035
|
4/1/2015
|
Issuer
|
Principal Amount
|
Purchase Price
|
Coupon
|
Yield to Maturity
|
Current Yield
|
Maturity Date
|
Original Issue Date
|
NORTH CAROLINA COLLEGE OF THEOLOGY
|
$14,000
|
$14,000
|
7.25%
|
7.25%
|
7.25%
|
10/1/2035
|
4/1/2015
|
NORTH CAROLINA COLLEGE OF THEOLOGY
|
$15,000
|
$15,000
|
7.50%
|
7.50%
|
7.50%
|
4/1/2036
|
4/1/2015
|
NORTH CAROLINA COLLEGE OF THEOLOGY
|
$16,000
|
$16,000
|
7.50%
|
7.50%
|
7.50%
|
10/1/2036
|
4/1/2015
|
NORTH CAROLINA COLLEGE OF THEOLOGY
|
$16,000
|
$16,000
|
7.50%
|
7.50%
|
7.50%
|
4/1/2037
|
4/1/2015
|
NORTH CAROLINA COLLEGE OF THEOLOGY
|
$17,000
|
$17,000
|
7.75%
|
7.75%
|
7.75%
|
10/1/2037
|
4/1/2015
|
NORTH CAROLINA COLLEGE OF THEOLOGY
|
$17,000
|
$17,000
|
7.75%
|
7.75%
|
7.75%
|
4/1/2038
|
4/1/2015
|
NORTH CAROLINA COLLEGE OF THEOLOGY
|
$18,000
|
$18,000
|
7.75%
|
7.75%
|
7.75%
|
10/1/2038
|
4/1/2015
|
NORTH CAROLINA COLLEGE OF THEOLOGY
|
$19,000
|
$19,000
|
8.00%
|
8.00%
|
8.00%
|
4/1/2039
|
4/1/2015
|
NORTH CAROLINA COLLEGE OF THEOLOGY
|
$20,000
|
$20,000
|
8.00%
|
8.00%
|
8.00%
|
10/1/2039
|
4/1/2015
|
NORTH CAROLINA COLLEGE OF THEOLOGY
|
$20,000
|
$20,000
|
8.00%
|
8.00%
|
8.00%
|
4/1/2040
|
4/1/2015
|
NORTH CAROLINA COLLEGE OF THEOLOGY
|
$71,000
|
$71,000
|
8.00%
|
8.00%
|
8.00%
|
11/15/2040
|
4/1/2015
|
NORTH CAROLINA COLLEGE OF THEOLOGY
|
$71,000
|
$71,000
|
8.00%
|
8.00%
|
8.00%
|
5/15/2041
|
4/1/2015
|
NORTH CAROLINA COLLEGE OF THEOLOGY
|
$71,000
|
$71,000
|
8.00%
|
8.00%
|
8.00%
|
11/15/2041
|
4/1/2015
|
|
|
|
|
|
|
|
|
REFUGE WAY OF THE CROSS
|
$2,000
|
$2,000
|
4.50%
|
4.50%
|
4.50%
|
11/15/2021
|
5/15/2016
|
REFUGE WAY OF THE CROSS
|
$5,000
|
$5,000
|
4.75%
|
4.75%
|
4.75%
|
11/15/2021
|
5/15/2016
|
REFUGE WAY OF THE CROSS
|
$9,000
|
$9,000
|
5.25%
|
5.25%
|
5.25%
|
5/15/2025
|
5/15/2016
|
REFUGE WAY OF THE CROSS
|
$4,000
|
$4,000
|
5.50%
|
5.50%
|
5.50%
|
11/15/2025
|
5/15/2016
|
REFUGE WAY OF THE CROSS
|
$19,000
|
$19,000
|
5.50%
|
5.50%
|
5.50%
|
5/15/2026
|
5/15/2016
|
REFUGE WAY OF THE CROSS
|
$16,000
|
$16,000
|
5.75%
|
5.75%
|
5.75%
|
11/15/2026
|
5/15/2016
|
REFUGE WAY OF THE CROSS
|
$30,000
|
$30,000
|
5.75%
|
5.75%
|
5.75%
|
5/15/2027
|
5/15/2016
|
REFUGE WAY OF THE CROSS
|
$1,000
|
$1,000
|
6.00%
|
6.00%
|
6.00%
|
11/15/2027
|
5/15/2016
|
REFUGE WAY OF THE CROSS
|
$9,000
|
$9,000
|
6.00%
|
6.00%
|
6.00%
|
5/15/2028
|
5/15/2016
|
REFUGE WAY OF THE CROSS
|
$14,000
|
$14,000
|
6.00%
|
6.00%
|
6.00%
|
11/15/2028
|
5/15/2016
|
REFUGE WAY OF THE CROSS
|
$7,000
|
$7,000
|
6.25%
|
6.25%
|
6.25%
|
5/15/2029
|
5/15/2016
|
REFUGE WAY OF THE CROSS
|
$4,000
|
$4,000
|
6.25%
|
6.25%
|
6.25%
|
11/15/2029
|
5/15/2016
|
REFUGE WAY OF THE CROSS
|
$16,000
|
$16,000
|
6.25%
|
6.25%
|
6.25%
|
11/15/2029
|
5/15/2016
|
REFUGE WAY OF THE CROSS
|
$37,000
|
$37,000
|
6.25%
|
6.25%
|
6.25%
|
5/15/2030
|
5/15/2016
|
REFUGE WAY OF THE CROSS
|
$37,000
|
$37,000
|
6.25%
|
6.25%
|
6.25%
|
5/15/2030
|
5/15/2016
|
REFUGE WAY OF THE CROSS
|
$10,000
|
$10,000
|
6.50%
|
6.50%
|
6.50%
|
5/15/2031
|
5/15/2016
|
REFUGE WAY OF THE CROSS
|
$9,000
|
$9,000
|
6.50%
|
6.50%
|
6.50%
|
11/15/2031
|
5/15/2016
|
REFUGE WAY OF THE CROSS
|
$18,000
|
$18,000
|
7.00%
|
7.00%
|
7.00%
|
5/15/2035
|
5/15/2016
|
REFUGE WAY OF THE CROSS
|
$50,000
|
$50,000
|
7.00%
|
7.00%
|
7.00%
|
5/15/2039
|
5/15/2016
|
REFUGE WAY OF THE CROSS
|
$35,000
|
$35,000
|
7.00%
|
7.00%
|
7.00%
|
11/15/2039
|
5/15/2016
|
REFUGE WAY OF THE CROSS
|
$24,000
|
$24,000
|
7.00%
|
7.00%
|
7.00%
|
11/15/2040
|
5/15/2016
|
REFUGE WAY OF THE CROSS
|
$3,000
|
$3,000
|
7.00%
|
7.00%
|
7.00%
|
11/15/2040
|
5/15/2016
|
REFUGE WAY OF THE CROSS
|
$76,000
|
$76,000
|
7.00%
|
7.00%
|
7.00%
|
5/15/2041
|
5/15/2016
|
|
|
|
|
|
|
|
|
SANCTUARY OF FAITH
|
$18,000
|
$18,000
|
7.00%
|
7.00%
|
7.00%
|
4/15/2039
|
4/15/2015
|
SANCTUARY OF FAITH
|
$25,000
|
$25,000
|
7.00%
|
7.00%
|
7.00%
|
10/15/2039
|
4/15/2015
|
SANCTUARY OF FAITH
|
$16,000
|
$16,000
|
7.00%
|
7.00%
|
7.00%
|
10/15/2039
|
4/15/2015
|
SANCTUARY OF FAITH
|
$25,000
|
$25,000
|
7.00%
|
7.00%
|
7.00%
|
4/15/2040
|
4/15/2015
|
SANCTUARY OF FAITH
|
$16,000
|
$16,000
|
7.00%
|
7.00%
|
7.00%
|
4/15/2040
|
4/15/2015
|
Issuer
|
Principal Amount
|
Purchase Price
|
Coupon
|
Yield to Maturity
|
Current Yield
|
Maturity Date
|
Original Issue Date
|
|
|
|
|
|
|
|
|
SOUL REAPERS WORSHIP CENTER
|
$16,000
|
$16,000
|
7.50%
|
7.50%
|
7.50%
|
5/15/2041
|
9/15/2015
|
SOUL REAPERS WORSHIP CENTER
|
$16,000
|
$16,000
|
7.50%
|
7.50%
|
7.50%
|
11/15/2041
|
9/15/2015
|
SOUL REAPERS WORSHIP CENTER
|
$26,000
|
$26,000
|
7.50%
|
7.50%
|
7.50%
|
5/15/2042
|
9/15/2015
|
SOUL REAPERS WORSHIP CENTER
|
$36,000
|
$36,000
|
7.50%
|
7.50%
|
7.50%
|
11/15/2042
|
9/15/2015
|
SOUL REAPERS WORSHIP CENTER
|
$38,000
|
$38,000
|
7.50%
|
7.50%
|
7.50%
|
5/15/2043
|
9/15/2015
|
SOUL REAPERS WORSHIP CENTER
|
$40,000
|
$40,000
|
7.50%
|
7.50%
|
7.50%
|
11/15/2043
|
9/15/2015
|
SOUL REAPERS WORSHIP CENTER
|
$43,000
|
$43,000
|
7.50%
|
7.50%
|
7.50%
|
5/15/2044
|
9/15/2015
|
SOUL REAPERS WORSHIP CENTER
|
$44,000
|
$44,000
|
7.50%
|
7.50%
|
7.50%
|
11/15/2044
|
9/15/2015
|
SOUL REAPERS WORSHIP CENTER
|
$45,000
|
$45,000
|
7.50%
|
7.50%
|
7.50%
|
5/15/2045
|
9/15/2015
|
SOUL REAPERS WORSHIP CENTER
|
$47,000
|
$47,000
|
7.50%
|
7.50%
|
7.50%
|
11/15/2045
|
9/15/2015
|
SOUL REAPERS WORSHIP CENTER
|
$49,000
|
$49,000
|
7.50%
|
7.50%
|
7.50%
|
5/15/2046
|
9/15/2015
|
SOUL REAPERS WORSHIP CENTER
|
$15,000
|
$15,000
|
8.00%
|
8.00%
|
8.00%
|
3/15/2032
|
9/15/2015
|
SOUL REAPERS WORSHIP CENTER
|
$16,000
|
$16,000
|
8.00%
|
8.00%
|
8.00%
|
9/15/2032
|
9/15/2015
|
SOUL REAPERS WORSHIP CENTER
|
$17,000
|
$17,000
|
8.00%
|
8.00%
|
8.00%
|
3/15/2033
|
9/15/2015
|
SOUL REAPERS WORSHIP CENTER
|
$18,000
|
$18,000
|
8.00%
|
8.00%
|
8.00%
|
9/15/2033
|
9/15/2015
|
SOUL REAPERS WORSHIP CENTER
|
$18,000
|
$18,000
|
8.00%
|
8.00%
|
8.00%
|
3/15/2034
|
9/15/2015
|
SOUL REAPERS WORSHIP CENTER
|
$19,000
|
$19,000
|
8.00%
|
8.00%
|
8.00%
|
9/15/2034
|
9/15/2015
|
SOUL REAPERS WORSHIP CENTER
|
$20,000
|
$20,000
|
8.00%
|
8.00%
|
8.00%
|
3/15/2035
|
9/15/2015
|
SOUL REAPERS WORSHIP CENTER
|
$20,000
|
$20,000
|
8.00%
|
8.00%
|
8.00%
|
9/15/2035
|
9/15/2015
|
SOUL REAPERS WORSHIP CENTER
|
$22,000
|
$22,000
|
8.00%
|
8.00%
|
8.00%
|
3/15/2036
|
9/15/2015
|
SOUL REAPERS WORSHIP CENTER
|
$22,000
|
$22,000
|
8.00%
|
8.00%
|
8.00%
|
9/15/2036
|
9/15/2015
|
SOUL REAPERS WORSHIP CENTER
|
$23,000
|
$23,000
|
8.00%
|
8.00%
|
8.00%
|
3/15/2037
|
9/15/2015
|
SOUL REAPERS WORSHIP CENTER
|
$24,000
|
$24,000
|
8.00%
|
8.00%
|
8.00%
|
9/15/2037
|
9/15/2015
|
SOUL REAPERS WORSHIP CENTER
|
$25,000
|
$25,000
|
8.00%
|
8.00%
|
8.00%
|
3/15/2038
|
9/15/2015
|
SOUL REAPERS WORSHIP CENTER
|
$26,000
|
$26,000
|
8.00%
|
8.00%
|
8.00%
|
9/15/2038
|
9/15/2015
|
SOUL REAPERS WORSHIP CENTER
|
$27,000
|
$27,000
|
8.00%
|
8.00%
|
8.00%
|
3/15/2039
|
9/15/2015
|
SOUL REAPERS WORSHIP CENTER
|
$28,000
|
$28,000
|
8.00%
|
8.00%
|
8.00%
|
9/15/2039
|
9/15/2015
|
SOUL REAPERS WORSHIP CENTER
|
$30,000
|
$30,000
|
8.00%
|
8.00%
|
8.00%
|
3/15/2040
|
9/15/2015
|
SOUL REAPERS WORSHIP CENTER
|
$30,000
|
$30,000
|
8.00%
|
8.00%
|
8.00%
|
9/15/2040
|
9/15/2015
|
SOUL REAPERS WORSHIP CENTER
|
$32,000
|
$32,000
|
8.00%
|
8.00%
|
8.00%
|
3/15/2041
|
9/15/2015
|
SOUL REAPERS WORSHIP CENTER
|
$33,000
|
$33,000
|
8.00%
|
8.00%
|
8.00%
|
9/15/2041
|
9/15/2015
|
SOUL REAPERS WORSHIP CENTER
|
$35,000
|
$35,000
|
8.00%
|
8.00%
|
8.00%
|
3/15/2042
|
9/15/2015
|
|
|
|
|
|
|
|
|
THE HOUSE OF REFUGE APOSTOLIC CHURCH
|
$1,000
|
$1,000
|
8.00%
|
8.00%
|
8.00%
|
8/15/2030
|
11/15/2007
|
THE HOUSE OF REFUGE APOSTOLIC CHURCH
|
$57,000
|
$57,000
|
8.75%
|
8.75%
|
8.75%
|
8/15/2037
|
11/15/2007
|
THE HOUSE OF REFUGE APOSTOLIC CHURCH
|
$62,000
|
$62,000
|
8.65%
|
8.65%
|
8.65%
|
6/15/2038
|
11/15/2007
|
THE HOUSE OF REFUGE APOSTOLIC CHURCH
|
$63,000
|
$63,000
|
8.65%
|
8.65%
|
8.65%
|
12/15/2038
|
11/15/2007
|
|
|
|
|
|
|
|
|
THE MOUNT PISGAH MISSIONARY BAPTIST CHURCH
|
$3,000
|
$3,000
|
6.75%
|
6.75%
|
6.75%
|
11/1/2018
|
5/1/2009
|
THE MOUNT PISGAH MISSIONARY BAPTIST CHURCH
|
$4,000
|
$4,000
|
6.75%
|
6.75%
|
6.75%
|
5/1/2019
|
5/1/2009
|
THE MOUNT PISGAH MISSIONARY BAPTIST CHURCH
|
$4,000
|
$4,000
|
7.00%
|
7.00%
|
7.00%
|
11/1/2019
|
5/1/2009
|
THE MOUNT PISGAH MISSIONARY BAPTIST CHURCH
|
$5,000
|
$5,000
|
7.00%
|
7.00%
|
7.00%
|
5/1/2020
|
5/1/2009
|
Issuer
|
Principal Amount
|
Purchase Price
|
Coupon
|
Yield to Maturity
|
Current Yield
|
Maturity Date
|
Original Issue Date
|
THE MOUNT PISGAH MISSIONARY BAPTIST CHURCH
|
$5,000
|
$5,000
|
7.00%
|
7.00%
|
7.00%
|
11/1/2020
|
5/1/2009
|
THE MOUNT PISGAH MISSIONARY BAPTIST CHURCH
|
$6,000
|
$6,000
|
7.50%
|
7.50%
|
7.50%
|
11/1/2022
|
5/1/2009
|
THE MOUNT PISGAH MISSIONARY BAPTIST CHURCH
|
$1,000
|
$1,000
|
7.50%
|
7.50%
|
7.50%
|
5/1/2023
|
5/1/2009
|
THE MOUNT PISGAH MISSIONARY BAPTIST CHURCH
|
$2,000
|
$2,000
|
7.50%
|
7.50%
|
7.50%
|
11/1/2023
|
5/1/2009
|
THE MOUNT PISGAH MISSIONARY BAPTIST CHURCH
|
$6,000
|
$6,000
|
7.75%
|
7.75%
|
7.75%
|
5/1/2024
|
5/1/2009
|
THE MOUNT PISGAH MISSIONARY BAPTIST CHURCH
|
$7,000
|
$7,000
|
7.75%
|
7.75%
|
7.75%
|
11/1/2024
|
5/1/2009
|
THE MOUNT PISGAH MISSIONARY BAPTIST CHURCH
|
$7,000
|
$7,000
|
7.75%
|
7.75%
|
7.75%
|
5/1/2025
|
5/1/2009
|
THE MOUNT PISGAH MISSIONARY BAPTIST CHURCH
|
$1,000
|
$1,000
|
8.00%
|
8.00%
|
8.00%
|
11/1/2025
|
5/1/2009
|
THE MOUNT PISGAH MISSIONARY BAPTIST CHURCH
|
$8,000
|
$8,000
|
8.00%
|
8.00%
|
8.00%
|
5/1/2026
|
5/1/2009
|
THE MOUNT PISGAH MISSIONARY BAPTIST CHURCH
|
$8,000
|
$8,000
|
8.00%
|
8.00%
|
8.00%
|
11/1/2026
|
5/1/2009
|
THE MOUNT PISGAH MISSIONARY BAPTIST CHURCH
|
$8,000
|
$8,000
|
8.00%
|
8.00%
|
8.00%
|
5/1/2027
|
5/1/2009
|
THE MOUNT PISGAH MISSIONARY BAPTIST CHURCH
|
$9,000
|
$9,000
|
8.00%
|
8.00%
|
8.00%
|
11/1/2027
|
5/1/2009
|
THE MOUNT PISGAH MISSIONARY BAPTIST CHURCH
|
$9,000
|
$9,000
|
8.00%
|
8.00%
|
8.00%
|
5/1/2028
|
5/1/2009
|
THE MOUNT PISGAH MISSIONARY BAPTIST CHURCH
|
$9,000
|
$9,000
|
8.00%
|
8.00%
|
8.00%
|
11/1/2028
|
5/1/2009
|
THE MOUNT PISGAH MISSIONARY BAPTIST CHURCH
|
$10,000
|
$10,000
|
8.00%
|
8.00%
|
8.00%
|
5/1/2029
|
5/1/2009
|
THE MOUNT PISGAH MISSIONARY BAPTIST CHURCH
|
$11,000
|
$11,000
|
8.00%
|
8.00%
|
8.00%
|
5/1/2030
|
5/1/2009
|
THE MOUNT PISGAH MISSIONARY BAPTIST CHURCH
|
$1,000
|
$1,000
|
8.25%
|
8.25%
|
8.25%
|
5/1/2031
|
5/1/2009
|
THE MOUNT PISGAH MISSIONARY BAPTIST CHURCH
|
$1,000
|
$1,000
|
8.25%
|
8.25%
|
8.25%
|
5/1/2032
|
5/1/2009
|
|
|
|
|
|
|
|
|
THE NEW YORK DONG YANG FIRST CHURCH
|
$5,000
|
$5,000
|
7.25%
|
7.25%
|
7.25%
|
12/1/2018
|
12/1/2003
|
|
|
|
|
|
|
|
|
THE SANCTUARY OF WILMINGTON
|
$2,000
|
$2,000
|
5.50%
|
5.50%
|
5.50%
|
4/15/2022
|
4/15/2013
|
THE SANCTUARY OF WILMINGTON
|
$1,000
|
$1,000
|
5.75%
|
5.75%
|
5.75%
|
4/15/2023
|
4/15/2013
|
THE SANCTUARY OF WILMINGTON
|
$2,000
|
$2,000
|
5.75%
|
5.75%
|
5.75%
|
10/15/2023
|
4/15/2013
|
THE SANCTUARY OF WILMINGTON
|
$1,000
|
$1,000
|
6.00%
|
6.00%
|
6.00%
|
4/15/2024
|
4/15/2013
|
THE SANCTUARY OF WILMINGTON
|
$1,000
|
$1,000
|
6.00%
|
6.00%
|
6.00%
|
10/15/2024
|
4/15/2013
|
THE SANCTUARY OF WILMINGTON
|
$3,000
|
$3,000
|
6.00%
|
6.00%
|
6.00%
|
4/15/2025
|
4/15/2013
|
THE SANCTUARY OF WILMINGTON
|
$49,000
|
$49,000
|
6.00%
|
6.00%
|
6.00%
|
4/15/2026
|
4/15/2013
|
THE SANCTUARY OF WILMINGTON
|
$52,000
|
$52,000
|
6.00%
|
6.00%
|
6.00%
|
10/15/2026
|
4/15/2013
|
THE SANCTUARY OF WILMINGTON
|
$32,000
|
$32,000
|
6.25%
|
6.25%
|
6.25%
|
10/15/2027
|
4/15/2013
|
THE SANCTUARY OF WILMINGTON
|
$55,000
|
$55,000
|
6.25%
|
6.25%
|
6.25%
|
4/15/2028
|
4/15/2013
|
THE SANCTUARY OF WILMINGTON
|
$49,000
|
$49,000
|
6.25%
|
6.25%
|
6.25%
|
10/15/2028
|
4/15/2013
|
THE SANCTUARY OF WILMINGTON
|
$57,000
|
$57,000
|
6.25%
|
6.25%
|
6.25%
|
4/15/2029
|
4/15/2013
|
THE SANCTUARY OF WILMINGTON
|
$12,000
|
$12,000
|
6.50%
|
6.50%
|
6.50%
|
10/15/2030
|
4/15/2013
|
THE SANCTUARY OF WILMINGTON
|
$67,000
|
$67,000
|
6.50%
|
6.50%
|
6.50%
|
4/15/2031
|
4/15/2013
|
THE SANCTUARY OF WILMINGTON
|
$57,000
|
$57,000
|
6.50%
|
6.50%
|
6.50%
|
10/15/2031
|
4/15/2013
|
THE SANCTUARY OF WILMINGTON
|
$25,000
|
$25,000
|
6.75%
|
6.75%
|
6.75%
|
4/15/2034
|
4/15/2013
|
THE SANCTUARY OF WILMINGTON
|
$13,000
|
$13,000
|
6.75%
|
6.75%
|
6.75%
|
10/15/2034
|
4/15/2013
|
THE SANCTUARY OF WILMINGTON
|
$8,000
|
$8,000
|
7.00%
|
7.00%
|
7.00%
|
4/15/2038
|
4/15/2013
|
THE SANCTUARY OF WILMINGTON
|
$51,000
|
$51,000
|
6.00%
|
6.00%
|
6.00%
|
4/15/2027
|
4/15/2013
|
THE SANCTUARY OF WILMINGTON
|
$25,000
|
$25,000
|
6.00%
|
6.00%
|
6.00%
|
10/15/2025
|
4/15/2013
|
|
|
|
|
|
|
|
|
UNITY BAPTIST CHURCH
|
$20,000
|
$20,000
|
5.75%
|
5.75%
|
5.75%
|
2/15/2025
|
8/15/2013
|
Issuer
|
Principal Amount
|
Purchase Price
|
Coupon
|
Yield to Maturity
|
Current Yield
|
Maturity Date
|
Original Issue Date
|
UNITY BAPTIST CHURCH
|
$20,000
|
$20,000
|
6.00%
|
6.00%
|
6.00%
|
8/15/2026
|
8/15/2013
|
UNITY BAPTIST CHURCH
|
$1,000
|
$1,000
|
6.25%
|
6.25%
|
6.25%
|
2/15/2027
|
8/15/2013
|
UNITY BAPTIST CHURCH
|
$7,000
|
$7,000
|
6.25%
|
6.25%
|
6.25%
|
8/15/2027
|
8/15/2013
|
UNITY BAPTIST CHURCH
|
$52,000
|
$52,000
|
6.25%
|
6.25%
|
6.25%
|
2/15/2028
|
8/15/2013
|
UNITY BAPTIST CHURCH
|
$48,000
|
$48,000
|
6.25%
|
6.25%
|
6.25%
|
8/15/2028
|
8/15/2013
|
UNITY BAPTIST CHURCH
|
$3,000
|
$3,000
|
6.50%
|
6.50%
|
6.50%
|
2/15/2029
|
8/15/2013
|
UNITY BAPTIST CHURCH
|
$11,000
|
$11,000
|
6.50%
|
6.50%
|
6.50%
|
8/15/2029
|
8/15/2013
|
UNITY BAPTIST CHURCH
|
$11,000
|
$11,000
|
6.50%
|
6.50%
|
6.50%
|
2/15/2030
|
8/15/2013
|
UNITY BAPTIST CHURCH
|
$2,000
|
$2,000
|
6.50%
|
6.50%
|
6.50%
|
8/15/2030
|
8/15/2013
|
|
|
|
|
|
|
|
|
VERITAS CHAPEL
|
$4,000
|
$4,000
|
2.75%
|
2.75%
|
2.75%
|
10/15/2017
|
4/15/2016
|
VERITAS CHAPEL
|
$4,000
|
$4,000
|
3.00%
|
3.00%
|
3.00%
|
4/15/2018
|
4/15/2016
|
VERITAS CHAPEL
|
$4,000
|
$4,000
|
3.25%
|
3.25%
|
3.25%
|
10/15/2018
|
4/15/2016
|
VERITAS CHAPEL
|
$5,000
|
$5,000
|
3.50%
|
3.50%
|
3.50%
|
4/15/2019
|
4/15/2016
|
VERITAS CHAPEL
|
$4,000
|
$4,000
|
3.75%
|
3.75%
|
3.75%
|
10/15/2019
|
4/15/2016
|
VERITAS CHAPEL
|
$5,000
|
$5,000
|
4.00%
|
4.00%
|
4.00%
|
4/15/2020
|
4/15/2016
|
VERITAS CHAPEL
|
$5,000
|
$5,000
|
4.00%
|
4.00%
|
4.00%
|
10/15/2020
|
4/15/2016
|
VERITAS CHAPEL
|
$5,000
|
$5,000
|
4.25%
|
4.25%
|
4.25%
|
4/15/2021
|
4/15/2016
|
VERITAS CHAPEL
|
$5,000
|
$5,000
|
4.50%
|
4.50%
|
4.50%
|
10/15/2021
|
4/15/2016
|
VERITAS CHAPEL
|
$5,000
|
$5,000
|
4.50%
|
4.50%
|
4.50%
|
4/15/2022
|
4/15/2016
|
VERITAS CHAPEL
|
$5,000
|
$5,000
|
4.75%
|
4.75%
|
4.75%
|
10/15/2022
|
4/15/2016
|
VERITAS CHAPEL
|
$6,000
|
$6,000
|
5.00%
|
5.00%
|
5.00%
|
4/15/2023
|
4/15/2016
|
VERITAS CHAPEL
|
$5,000
|
$5,000
|
5.00%
|
5.00%
|
5.00%
|
10/15/2023
|
4/15/2016
|
VERITAS CHAPEL
|
$6,000
|
$6,000
|
5.00%
|
5.00%
|
5.00%
|
04/15/2024
|
4/15/2016
|
VERITAS CHAPEL
|
$6,000
|
$6,000
|
5.25%
|
5.25%
|
5.25%
|
10/15/2024
|
4/15/2016
|
VERITAS CHAPEL
|
$6,000
|
$6,000
|
5.00%
|
5.00%
|
5.00%
|
4/15/2025
|
4/15/2016
|
VERITAS CHAPEL
|
$6,000
|
$6,000
|
5.50%
|
5.50%
|
5.50%
|
10/15/2025
|
4/15/2016
|
VERITAS CHAPEL
|
$7,000
|
$7,000
|
5.50%
|
5.50%
|
5.50%
|
4/15/2026
|
4/15/2016
|
VERITAS CHAPEL
|
$6,000
|
$6,000
|
5.75%
|
5.75%
|
5.75%
|
10/15/2026
|
4/15/2016
|
VERITAS CHAPEL
|
$7,000
|
$7,000
|
5.75%
|
5.75%
|
5.75%
|
4/15/2027
|
4/15/2016
|
VERITAS CHAPEL
|
$7,000
|
$7,000
|
6.00%
|
6.00%
|
6.00%
|
10/15/2027
|
4/15/2016
|
VERITAS CHAPEL
|
$7,000
|
$7,000
|
6.00%
|
6.00%
|
6.00%
|
4/15/2028
|
4/15/2016
|
VERITAS CHAPEL
|
$7,000
|
$7,000
|
6.00%
|
6.00%
|
6.00%
|
10/15/2028
|
4/15/2016
|
VERITAS CHAPEL
|
$8,000
|
$8,000
|
6.00%
|
6.00%
|
6.00%
|
4/15/2029
|
4/15/2016
|
VERITAS CHAPEL
|
$8,000
|
$8,000
|
6.25%
|
6.25%
|
6.25%
|
10/15/2029
|
4/15/2016
|
VERITAS CHAPEL
|
$8,000
|
$8,000
|
6.25%
|
6.25%
|
6.25%
|
4/15/2030
|
4/15/2016
|
VERITAS CHAPEL
|
$8,000
|
$8,000
|
6.50%
|
6.50%
|
6.50%
|
10/15/2030
|
4/15/2016
|
VERITAS CHAPEL
|
$9,000
|
$9,000
|
6.50%
|
6.50%
|
6.50%
|
4/15/2031
|
4/15/2016
|
VERITAS CHAPEL
|
$9,000
|
$9,000
|
6.75%
|
6.75%
|
6.75%
|
10/15/2031
|
4/15/2016
|
VERITAS CHAPEL
|
$9,000
|
$9,000
|
6.75%
|
6.75%
|
6.75%
|
4/15/2032
|
4/15/2016
|
VERITAS CHAPEL
|
$10,000
|
$10,000
|
7.00%
|
7.00%
|
7.00%
|
10/15/2032
|
4/15/2016
|
VERITAS CHAPEL
|
$10,000
|
$10,000
|
7.00%
|
7.00%
|
7.00%
|
4/15/2033
|
4/15/2016
|
VERITAS CHAPEL
|
$10,000
|
$10,000
|
7.00%
|
7.00%
|
7.00%
|
10/15/2033
|
4/15/2016
|
Issuer
|
Principal Amount
|
Purchase Price
|
Coupon
|
Yield to Maturity
|
Current Yield
|
Maturity Date
|
Original Issue Date
|
VERITAS CHAPEL
|
$11,000
|
$11,000
|
7.00%
|
7.00%
|
7.00%
|
4/15/2034
|
4/15/2016
|
VERITAS CHAPEL
|
$11,000
|
$11,000
|
7.00%
|
7.00%
|
7.00%
|
10/15/2034
|
4/15/2016
|
VERITAS CHAPEL
|
$12,000
|
$12,000
|
7.00%
|
7.00%
|
7.00%
|
4/15/2035
|
4/15/2016
|
VERITAS CHAPEL
|
$12,000
|
$12,000
|
7.00%
|
7.00%
|
7.00%
|
10/15/2035
|
4/15/2016
|
VERITAS CHAPEL
|
$12,000
|
$12,000
|
7.00%
|
7.00%
|
7.00%
|
4/15/2036
|
4/15/2016
|
VERITAS CHAPEL
|
$13,000
|
$13,000
|
7.00%
|
7.00%
|
7.00%
|
10/15/2036
|
4/15/2016
|
VERITAS CHAPEL
|
$13,000
|
$13,000
|
7.00%
|
7.00%
|
7.00%
|
4/15/2037
|
4/15/2016
|
VERITAS CHAPEL
|
$14,000
|
$14,000
|
7.00%
|
7.00%
|
7.00%
|
10/15/2037
|
4/15/2016
|
VERITAS CHAPEL
|
$14,000
|
$14,000
|
7.00%
|
7.00%
|
7.00%
|
4/15/2038
|
4/15/2016
|
VERITAS CHAPEL
|
$15,000
|
$15,000
|
7.00%
|
7.00%
|
7.00%
|
10/15/2038
|
4/15/2016
|
VERITAS CHAPEL
|
$15,000
|
$15,000
|
7.00%
|
7.00%
|
7.00%
|
4/15/2039
|
4/15/2016
|
VERITAS CHAPEL
|
$16,000
|
$16,000
|
7.00%
|
7.00%
|
7.00%
|
10/15/2039
|
4/15/2016
|
VERITAS CHAPEL
|
$17,000
|
$17,000
|
7.00%
|
7.00%
|
7.00%
|
4/15/2040
|
4/15/2016
|
VERITAS CHAPEL
|
$17,000
|
$17,000
|
7.00%
|
7.00%
|
7.00%
|
10/15/2040
|
4/15/2016
|
VERITAS CHAPEL
|
$18,000
|
$18,000
|
7.00%
|
7.00%
|
7.00%
|
4/15/2041
|
4/15/2016
|
________________________________________
*Agape Assembly Baptist Church is currently
in default.
Mortgage Loan Processing and Underwriting
Our advisor’s
personnel process and verify mortgage loan applications. Verification procedures are designed to assure a borrower’s qualification
under our Lending Guidelines. Verification procedures include obtaining:
|
·
|
applications containing key information concerning the prospective borrower
|
|
·
|
financial statements of the prospective borrower
|
|
·
|
organizational documents and history of the borrower
|
|
·
|
preliminary title report or commitment for mortgagee title insurance
|
|
·
|
a real estate appraisal in accordance with our Lending Guidelines
|
We require that
appraisals and financial statements be prepared by independent third-party professionals who are pre-approved based on their experience,
reputation and education. Completed loan applications, together with a written summary are presented by a loan analyst to our loan
committee for consideration. Our loan committee is usually comprised of both our advisor’s president and our advisor’s
vice-president, but at times also includes our advisor’s loan officer/administrator and other officers and employees of the
advisor and the advisor’s affiliates. Once the loan committee has met and evaluated and discussed a potential loan, the loan
is approved or denied, typically by consensus. If accepted, the loan, the terms of which may have been revised by the committee,
is then presented to the potential borrower, who may, from time to time, be permitted to negotiate additional revisions. Once a
borrower has accepted a loan proposal, however, it must submit a good faith deposit. At that point, a loan officer of our advisor
may begin the loan preparation process by arranging for certain services on behalf of the borrower, in order to achieve pricing
and timing efficiencies. Such services may include, but are not limited to: the provision of mortgage title insurance and for the
services of professional independent third-party accountants and appraisers regarding delivery of title commitments, preliminary
title reports, title policies, environmental evaluations, financial statements, and appraisals meeting our loan lending criteria.
Our advisor may arrange for the direct payment for professional services and for the direct reimbursement to it of related expenditures
by borrowers and prospective borrowers. Upon closing and funding of mortgage loans, an origination fee based on the original principal
amount of each loan is generally charged, of which one-half is payable to us and one-half is payable to our advisor. We may charge
a fee to recoup expenses we have incurred. This fee would be calculated based on funds we have paid for appraisal, accounting and
title
work.
These costs are usually paid by borrowers from proceeds at closing. We may not recoup these fees if a commitment fee is not charged.
Loan Commitments
Subsequent to approval
by our loan committee, and prior to funding a loan, we issue a loan commitment to qualified applicants. We may charge a loan commitment
fee, but typically do not. Commitments indicate the loan amount, origination fees, closing costs, underwriting expenses (if any),
funding conditions, approval expiration dates, interest rate and other terms. Commitments generally set forth a “prevailing”
interest rate that is subject to change in accordance with market interest rate fluctuations until the final loan closing documents
are prepared. In certain cases we may establish (“lock-in”) interest rate commitments up to sixty days from the commitment
to closing. Interest rate commitments beyond sixty days will not normally be issued unless we receive a fee premium based upon
the assessment of the risk associated with a longer “lock-in” period.
Loan Portfolio Management
Our advisor manages
and services our portfolio of mortgage loans in accordance with an advisory agreement. Our advisor is responsible for all aspects
of our mortgage loan business, including:
|
·
|
closing and recording of mortgage documents
|
|
·
|
collecting principal and interest payments
|
|
·
|
enforcing loan terms and other borrower’s requirements
|
|
·
|
periodic review of each mortgage loan file
|
|
·
|
determination of reserve classifications
|
|
·
|
exercising our remedies in connection with defaulted or non-performing loans
|
Fees and costs of
attorneys, insurance, bonds and other direct expenses incurred in connection with the exercise of remedies in connection with a
loan default are our responsibility, although they may be recouped from the borrower in the process of pursuing our remedies. Our
advisor will not receive any additional compensation for services rendered in connection with ongoing loan portfolio management
or exercising our remedies in the event of a loan default.
Loan Funding and Borrowing
Our mortgage loans
and purchases of church bonds are funded with available cash resources. Historically, we have obtained cash resources from the
sale of our common stock, the repayment of our investments in loans and bonds or the sale of certificates. We may use the proceeds
of the sale of certificates to fund mortgage loans and purchase church bonds. We may borrow up to 300% of Stockholders’ equity,
unless greater amounts are permitted under certain circumstances.
Lending Guidelines
Our business of
mortgage lending to churches and other non-profit religious organizations is managed in accordance with and subject to our Lending
Guidelines. Our Lending Guidelines identify our general business guidelines and the parameters of our lending business.
|
·
|
Loans we make are limited to churches and other non-profit religious organizations and are secured
by mortgages. The total principal amount of our second mortgage loans is limited to 20% of our average invested assets. All other
loans and bonds will be secured by first mortgages.
|
|
·
|
The total principal amount of mortgage-secured debt securities we purchase from churches and other
non-profit religious organizations is limited to 30% of our average invested assets.
|
|
·
|
The loan amount cannot exceed 75% of the appraised value of the real estate and improvements securing
each loan. On all loans, we require a written appraisal certified by a member of the Appraisal Institute or a state-certified appraiser.
|
|
·
|
The borrower must furnish us with an ALTA (American Land Title Association) or equivalent mortgagee
title policy insuring our mortgage interest.
|
|
·
|
The borrower’s long-term debt (including the proposed loan) cannot exceed four times the
borrower’s gross income for the previous 12 months.
|
|
·
|
The borrower must furnish us with financial statements (balance sheet and income and expense statement)
for its last three (3) complete fiscal years and current financial statements for the period within ninety (90) days of the loan
closing date. A borrower must have the last complete fiscal year financial statements reviewed by a certified public accountant
(CPA) engaged by the borrower and who is independent of the borrower. On loans in excess of $500,000 our advisor may require the
last complete fiscal year be audited by a CPA engaged by the borrower and who is independent of the borrower. In lieu of the above
requirement, we or our advisor may employ a qualified accountant. The qualified accountant we employ would be required to be independent
of the borrower. Our employed qualified accountant would not be independent of us. Compiled financial statements of the borrower
are acceptable from our employed qualified accountant. Along with the compiled financial statements of the borrower, our employed
qualified accountant would perform partial and targeted review examination procedures for borrowers. On loans in excess of $500,000,
the advisor may require partial and targeted audit examination procedures for borrowers.
|
|
·
|
Borrowers in existence for less than three (3) fiscal years must provide financial statements since
their inception. No loan will be extended to a borrower in operation less than two (2) calendar years absent express approval by
our board of directors.
|
|
·
|
Our advisor typically requires the borrower to arrange for automatic electronic or drafting of
monthly payments.
|
|
·
|
Our advisor may require (i) key-person life insurance on the life of the senior pastor of a church;
(ii) personal guarantees of church members and/or affiliates; and (iii) other security enhancements for our benefit.
|
|
·
|
The borrower must agree to provide us with annual financial statements within 120 days of each
fiscal year end during the term of the loan.
|
|
·
|
Our advisor may require the borrower to grant to us a security interest in all personal property
located and to be located upon the mortgaged premises (excluding property leased by the borrower).
|
|
·
|
We may make fixed-interest rate loans having maturities of three to thirty years.
|
|
·
|
We may borrow up to 300% of Stockholders’ equity, unless greater amounts are permitted under
certain circumstances.
|
We require borrowers
to maintain a general perils and liability coverage insurance policy naming us as the loss-payee in connection with damage or destruction
to the property of the borrower which typically includes weather-related damage, fire, vandalism and theft. In its discretion,
our advisor may require the borrower to provide flood, earthquake and/or other special coverage.
These Lending Guidelines
are in addition to the prohibited investments and activities set forth in our bylaws, which are discussed in the next section.
Prohibited Investments and Activities
Our bylaws impose
certain prohibitions and restrictions on our investment practices and activities, including prohibitions against:
|
·
|
Investing more than 10% of our total assets in unimproved real property or mortgage loans on unimproved
real property;
|
|
·
|
Investing in commodities or commodity futures contracts other than “interest rate futures”
contracts intended only for hedging purposes;
|
|
·
|
Investing in mortgage loans (including construction/interim loans) on any one property which in
the aggregate with all other mortgage loans on the property would exceed 75% of the appraised value of the property unless substantial
justification exists because of the presence of other underwriting criteria;
|
|
·
|
Investing in mortgage loans that are subordinate to any mortgage or equity interest of our advisor
or our directors or any of their affiliates;
|
|
·
|
Investing in equity securities;
|
|
·
|
Engaging in any short sales of securities or in trading, as distinguished from investment activities;
|
|
·
|
Issuing redeemable equity securities;
|
|
·
|
Engaging in underwriting or the agency distribution of securities issued by others;
|
|
·
|
Issuing options or warrants to purchase our shares at an exercise price less than the fair market
value of the shares on the date of the issuance or if the issuance thereof would exceed 10% in the aggregate of our outstanding
shares;
|
|
·
|
Issuing debt securities unless the debt service coverage for the most recently completed fiscal
year, as adjusted for known changes, is sufficient to properly service the higher level of debt;
|
|
·
|
Investing in real estate contracts of sale unless such contracts are in recordable form and are
appropriately recorded in the chain of title;
|
|
·
|
Selling or leasing to our advisor, a director or any affiliate thereof unless approved as being
fair and reasonable by a majority of directors (including a majority of independent directors), not otherwise interested in such
transaction;
|
|
·
|
Acquiring property from our advisor or any director, or any affiliate thereof (other than church
bonds from American Investors Group, Inc. in the ordinary course of our investing activities), unless a majority of our directors
(including a majority of our independent directors) not otherwise interested in such transaction approve the transaction as being
fair and reasonable and at a price no greater than the cost of the asset to our advisor, director or any affiliate thereof, or
if the price is in excess of such cost, that substantial justification for such excess exists and such excess is reasonable. In
no event shall the cost of such asset exceed its current appraised value;
|
|
·
|
Investing or making mortgage loans unless a mortgagee’s or owner’s title insurance
policy or commitment as to the priority of the mortgage or condition of title is obtained; or
|
|
·
|
Issuing our shares on a deferred payment basis or other similar arrangement.
|
We do not intend
to invest in the securities of other issuers for the purpose of exercising control, to engage in the purchase and sale of investments
other than as described in this prospectus, to offer securities in exchange for property unless deemed prudent by a majority of
our directors, to repurchase or otherwise reacquire our shares or to make loans to other persons except in the ordinary course
of our business as described herein.
We will not make
loans to or borrow from, or enter into any contract, joint venture or transaction with, any director or officer of ours, our advisor
or any affiliate of any of the foregoing unless a majority of our directors, including a majority of the independent directors,
approves the transaction as fair and reasonable to us and the transaction is on terms and conditions no less favorable to us than
those available from unaffiliated third parties. If we invest in any property, mortgage or other real estate interest pursuant
to a transaction with our advisor or any directors or officers thereof, then the investment will be based upon a current appraisal
of the underlying property from an independent qualified appraiser selected by the independent directors and will not be made at
a price greater than fair market value as determined by such appraisal.
Policy Changes
Our bylaw relating
to policies, prohibitions and restrictions referred to under “Our Business—Prohibited Investments and Activities”
may not be changed (except in certain immaterial respects by a majority approval of the board of directors) without the approval
of a majority of the independent directors and the approval of the holders of a majority of our shares, at a duly held meeting
for that purpose.
Competition
The business of
making loans to churches and non-profit religious organizations is competitive. We compete with a wide variety of investors, including
banks, savings and loan associations, insurance companies, pension funds and fraternal organizations which may have investment
objectives similar to ours. Many competitors have greater financial resources, larger staffs and longer operating histories than
we have. We compete in this industry by limiting our business “niche” to lending to churches and other non-profit religious
organizations, offering loans with competitive and flexible terms, and emphasizing our expertise in the specialized industry segment
of lending to churches and other non-profit religious organizations.
Allowance for Mortgage Loans Receivable
We record 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. Our loan loss policy provides an allowance for estimated uncollectible loans based on an evaluation
of the current status of the loan portfolio. This policy provides for principal amounts outstanding on a particular loan if cumulative
interruptions occur in the normal payment schedule of a loan; therefore, the Company recognizes a provision for losses and an allowance
for the outstanding principal amount of a loan in the Company’s portfolio if the amount is in doubt of collection. Additionally,
no additional interest income is recognized on impaired loans that are declared to be in default and are in the foreclosure process.
At June 30, 2017, we provided $1,363,782 for seventeen mortgage loans, of which seven loans totaling approximately $3,457,000 are
three or more mortgage payments in arrears, three loans totaling approximately $1,226,000 are declared to be in default and two
loans totaling approximately $633,000 are in the foreclosure process. At December 31, 2016, we provided $1,311,983 for seventeen
mortgage loans, of which seven totaling approximately $3,449,000 were three or more mortgage payments in arrears, three loans totaling
approximately $1,226,000 were declared to be in default and two loans totaling approximately $627,000 were in the foreclosure process.
The total impaired
loans, which are loans that are in the foreclosure process or are declared to be in default, were approximately $1,858,000 and
$1,853,000 at June 30, 2017 and December 31, 2016, respectively, which we believe are adequately secured by the underlying collateral
and the allowance for mortgage loans. Approximately $688,000 and $663,000 of our allowance for mortgage loans was allocated to
impaired loans at June 30, 2017 and December 31, 2016, respectively.
Loan Loss Provision
We follow a loan
loss reserve 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 reserves for principal amounts outstanding on a particular loan if cumulative interruptions
occur in the normal payment schedule of a loan. Our policy will reserve for the outstanding principal amount of a loan in our portfolio
if the amount is in doubt of being collected. Additionally, no interest income is recognized on impaired loans that are in the
foreclosure process.
Real Estate Held for Sale/Description of Properties
Acquired through Foreclosure
As of June 30, 2017,
we had property acquired via deed in lieu of foreclosure, with outstanding loan balances totaling approximately $225,872. The Church
is still occupying the property and paying rent while trying to either sell the building or obtain refinancing. Each property is
valued based on its current listing price less any anticipated selling costs, including, for example, realtor commissions. The
fair value of our real estate held for sale, which represents the carrying value, is $225,872 as of June 30, 2017 after a reserve
of approximately $12,000. The general competitive conditions surrounding the potential sale of our properties are tied, in large
part, to the fact that they are special-use properties with variable zoning restrictions. We principally lend to churches, which
are commonly exempt from zoning restrictions. However, while a church property may be exempt from zoning restrictions, if it is
located in a residential area, it still may only be used as a church, thereby limiting the pool of potential buyers. On the other
hand, a church or other property that is zoned for commercial use generally experiences higher demand, as potential buyers can
convert the property to their own business use. As such, our properties that are located in residential areas typically experience
less demand than those zoned for commercial use.
We sold one property and
disposed of a second property during the six month period ended June 30, 2017. The first property was sold to an unrelated third
party for approximately $48,000. The second property was disposed by way of a “Quit-Claim Deed” to an unrelated third
party. The disposed property had no carrying value. The Company realized an additional loss of approximately $67,000 on property
that was sold as of June 30, 2017. The Company sold two properties during the six month period ended June 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 June 30, 2016. We sold one property acquired through foreclosure for approximately
$32,000 for the period ended June 30, 2016.
Description of the
property we acquired via deed in lieu of foreclosure is listed below.
In 2008, we received
a deed in lieu of foreclosure on a church located in Pine Bluff, Arkansas and have recorded the deed in the county where the church
is located. Due to the value of the property ($360,000) versus the amount owed to us ($238,000), we have allowed the church to
either obtain financing from another source or list the property for sale in hopes of recovering some of its equity. The church
is paying us monthly rent until the property is refinanced or sold. We have included this property in Real Estate Held for Sale
at $226,000 at June 30, 2017. This property is located in a residential area.
Listed in the chart
below are the foreclosure properties; the city and state in which the property is located; the principal balance outstanding; the
reserve or write-down amount of the property; and the current value after realtor fees.
Location of Property Obtained
Through Foreclosure
|
|
Principal
Balance Owed
|
|
Reserve Amount
|
|
Carrying Value
|
Pine Bluff, Arkansas*
|
|
$
|
237,760
|
|
|
$
|
11,888
|
|
|
$
|
225,872
|
|
Totals:
|
|
$
|
237,760
|
|
|
$
|
11,888
|
|
|
$
|
225,872
|
|
________________________________________
*This property was obtained through
a deed in lieu of foreclosure
Our advisor, Church
Loan Advisors, Inc., manages our properties held for sale but receives no additional compensation for this service. The advisor
contracts with realtors to provide comparable sales data and has access to our properties to show to prospective buyers. We also
engage maintenance personnel recommended by the local listing agent to perform routine maintenance to the properties including
repairs to broken windows or doors and cutting of grass and management of weeds during the summer months. Our advisor also pays
all bills, at our expense, for items such as insurance, taxes, utilities, alarm system monitoring and maintenance personnel. Our
advisor is Church Loan Advisors, Inc., 10237 Yellow Circle Drive Minnetonka, Minnesota 55343, (952) 945-9455. Church Loan Advisors,
Inc. has been our advisor since we began active business operations in April 1996.
Employees
We have no employees
but we have two executive officers: Philip J. Myers, our Chief Executive Officer and President, and Scott J. Marquis, our Chief
Financial Officer and Treasurer. However, our daily operations and other material aspects of our business are managed by Church
Loan Advisors, Inc. (the “Advisor”) on a “turn-key” basis using employees of the Advisor and/or its Affiliates.
At present, certain officers and directors of American and the Advisor are providing services to us at no charge and which will
not be reimbursed to them. These services include, among others, legal and analytic services relating to the execution of our business
plan, development and preparation of reports to be filed under the Securities Exchange Act, and utilization of proprietary forms
and documents utilized by the Advisor in connection with our business operations.
Subject to the supervision
of the board of directors, our business is managed by the Advisor, which provides us investment advisory and administrative services.
Philip J. Myers, our Chief Executive Officer, President and a Director, is President of the Advisor and President of American Investors
Group, Inc., the underwriter of our past public offerings. The Advisor utilizes two employees of American on a full-time basis
and one employee of American on a part-time or other basis. The Company does not presently expect to directly employ anyone in
the foreseeable future, since all of our administrative functions and operations are contracted through the Advisor. However, legal,
accounting and certain other services are provided to us by outside professionals and paid by us directly.
MANAGEMENT
General
Directors are elected
for a term expiring at the next annual meeting of our Stockholders and serve for one-year terms and until their successors are
duly elected and qualified. Annual Stockholder meetings are typically held in May. Officers serve at the discretion of the board
of directors. Among other requirements, in order to maintain our REIT status, a majority of our directors must be “independent.”
Our executive officers and directors are as follows:
Name
|
|
Age
|
|
Office
|
|
Director Since
|
|
Philip J. Myers
|
|
61
|
|
President, Secretary and Chairman
|
|
2001
|
|
Scott J. Marquis
|
|
59
|
|
Chief Financial Officer and Treasurer
|
|
—
|
|
Kirbyjon H. Caldwell
|
|
63
|
|
Independent Director
|
|
1994
|
|
Dennis J. Doyle
|
|
65
|
|
Independent Director
|
|
1994
|
|
Michael G. Holmquist
|
|
67
|
|
Independent Director
|
|
2003
|
|
Philip J.
Myers
has been our Chairman, President and Secretary since April 2001. He has also served as President, Treasurer, Stockholder
and a director of our Advisor, Church Loan Advisors, Inc. since 1994, President, Secretary, majority Stockholder and a director
of American Investors Group, Inc., a registered broker-dealer, since 1996, and of its parent company, Apostle Holdings Corp. since
2000. Mr. Myers has been an officer and owner of American Investors Group, Inc. and has engaged directly in church mortgage
lending since 1989. He earned his bachelor of arts degree in political science in 1977 from the State University of New York at
Binghamton and his juris doctor degree from the State University of New York at Buffalo School of Law in 1980. From 1980 to 1982,
Mr. Myers served as an attorney in the Division of Market Regulation of the U.S. Securities and Exchange Commission in Washington,
D.C. and, from 1982 to 1984, as an attorney with the Division of Enforcement of the Securities and Exchange Commission in San Francisco.
From August 1984 to January 1986, he was employed as an attorney with the San
Francisco
law firm of Wilson, Ryan and Compilongo where he specialized in corporate finance, securities and broker-dealer matters. From
January 1986 to January 1989, Mr. Myers was Senior Vice President and General Counsel of Financial Planners Equity Corporation,
a 400 broker securities dealer formerly located in Marin County, California. He became affiliated with American Investors Group,
Inc. in 1989. He is an inactive member of the New York, California and Minnesota State Bar Associations. Mr. Myers holds
General Securities Representative and General Securities Principal licenses with the Financial Industry Regulation Authority (FINRA).
Mr. Myers’ 29 years of experience in church lending combined with the practice of law in the securities, corporate
and regulatory arenas and his experience as a CEO afford him a comprehensive and broad based insight into managing the direction,
opportunities and challenges of the Company.
Scott J. Marquis
is our Chief Financial Officer and Treasurer. He was appointed to this position in September of 2009 by our board of directors.
He is also currently employed full-time as Chief Financial and Operating Officer of the underwriter, American Investors Group,
Inc., where he has been employed since February 1987. Prior to his employment with American Investors Group, Inc., Mr. Marquis
was employed for approximately seven years with the Minneapolis-based broker-dealer, Piper Jaffray Companies in various capacities
within its operations department. Mr. Marquis attended the University of Minnesota, Minneapolis, Minnesota and served in the
United States Coast Guard Reserve (retired). Mr. Marquis is a licensed financial principal and registered representative of
American Investors Group, Inc., holds his Series 7, 63 and 27 licenses from the Financial Industry National Regulatory Authority.
Mr. Marquis’ knowledge of and experience in operating a public REIT company allow him to provide valuable insights to
the board in its oversight of the Company’s operations as a REIT.
Kirbyjon H.
Caldwell
has served as an independent director of the Company since 1994. He has been Senior Pastor of Windsor Village
United Methodist Church in Houston, Texas since January 1982. The membership of Windsor Village exceeds 17,000. Rev. Caldwell
received his B.A. degree in Economics from Carlton College (1975), an M.B.A. in Finance from the University of Pennsylvania’s
Wharton School (1977), and his Masters in Theology from Southern Methodist University School of Theology (1981). He is Chair of
the Goverance & Nominating Committee, Inc. for NRG Energy and a member of the Amegy Bank Advisory Board, Bridgeway Capital
Management Board, The Greater Houston Partnership Executive Committee, Houston Gold Assocation Executive Committee, Baylor College
of Medicine Executive Committee and M.D. Anderson-The University Cancer Foundation. He is also the founder of community development
organizations and a limited partner with the Houston Texans franchise. Pastor Caldwell brings to the Company’s board a unique
combination of talents as a former financial services professional with and MBA and a leading denominational pastor with national
recognition. He is uniquely qualified to advise management on the direction and thinking of church leaders, the principal market
of the Company.
Dennis J.
Doyle
has served as an independent director of the Company since 1994. He is a Stockholder and co-founder of Welsh Companies,
Inc., Minneapolis, Minnesota, a full-service real estate company involved in property management, brokerage, investment sales,
construction and commercial development. Since 1977, he has held many positions within Welsh’s services business ranging
from manual laborer to licensed broker to positions in executive management. He has served as Chief Executive Officer of Welsh
since 1987. He continues to hold a real estate broker’s license in Minnesota. He is the general partner in the Wildamere
Capital Management 10 million square foot portfolio of properties. Mr. Doyle is the founder and chief executive officer of
Matter, a privately funded, not-for-profit organization established to fight poverty, hunger, and disease by utilizing corporate
surplus. Mr. Doyle is a member of the board of director of Tradition Capital Bank. Mr. Doyle’s 30 years in real
estate and years as the CEO of a growing commercial real estate company, in addition to his 20 years of service on the Company’s
Board allows him to offer profound insight into the management of the Company’s real estate-based lending activities.
Michael G
Holmquist
has served as an independent director of the Company since 2003. Mr. Holmquist is a Certified Public Accountant
practicing from his office in Minnetonka, Minnesota. Prior to entering the accounting field in 1977, he worked for two years as
a public school teacher and served four years in the U.S. Coast Guard. He is a graduate of St. Olaf College. Mr. Holmquist
was an original incorporator of American Investors Group and an employee of the firm from 1986-1989. Mr. Holmquist’s
experience as a CPA and tax professional qualifies him to lead our Sarbanes-Oxley accounting compliance efforts as well as regularly
evaluate our internal control and reporting procedures.
Day-to-Day Management of Operations
We have no employees.
Our advisor manages our day-to-day operations under the advisory agreement. Our officers receive no compensation for their services,
other than through their interests in our advisor and our affiliates. Our officers have no employment contracts with us or our
advisor and are considered employees of the advisor “at will.” We believe that because of the depth of management of
our advisor and its affiliates the loss of one or more key employees of our advisor, or one or more of our officers, would not
have a material adverse effect upon our operations. As required by our bylaws, a majority of our directors are independent directors
in that they are otherwise unaffiliated with and do not receive compensation from us (other than in their capacity as directors)
or from our advisor or the underwriter.
Duties of Directors
Our directors are
responsible for considering and approving our policies. Directors meet as often and devote such time to our business as their oversight
duties may require. Pursuant to our bylaws, the independent directors have the responsibility of evaluating the capability and
performance of our advisor and determining that the compensation we pay to our advisor is reasonable. During 2016, our directors
held four meetings. The attendance policy of the Board encourages and expects all board members to attend all Board meetings. During
2015, Mr. Myers, Mr. Doyle attended 100% of the meetings held, Mr. Holmquist attended two of the meetings while Reverend
Caldwell attended one of the meetings held.
Neither our articles
of incorporation or bylaws nor any of our policies restrict officers or directors from conducting, for their own account, or on
behalf of others, business activities of the type we conduct.
Directors and officers
have a duty to us and our Stockholders. Our directors may be removed by a majority vote of all shares outstanding and entitled
to vote at any annual meeting or special meeting called for such purpose.
Executive Compensation
Since inception,
the Company has not had employees. The Company has two executive officers, Philip J. Myers, who serves in several capacities and
is not compensated for such position and Scott J. Marquis who serves as the Company’s Chief Financial Officer and Treasurer
and is not compensated for such position. The Company’s business is managed by the Advisor. The actions and decisions of
the Company and the Advisor are governed by the Company’s independent directors and by the Company’s Bylaws and the
Advisory Agreement. Both of these documents substantially comply with the NASAA REIT Guidelines, which include substantive limitations
on, among other things, conflicts of interest and related party transactions. As such, the Company has not adopted a Code of Ethics.
In addition, because
the Company has no employees, and because neither Mr. Myers nor Mr. Marquis is compensated by the Company, there is no
Company compensation committee. However, we currently pay each independent director $500 for each board meeting attended ($400
for telephonic meetings), limited to $2,500 per year. We also reimburse directors for travel expenses incurred in connection with
their duties as our directors. Please see “Director Compensation.” As a non-independent director, Philip J. Myers
receives no compensation or reimbursements in connection with his service on our board of directors.
Director Independence
Our board of directors
has determined that each of Dennis J. Doyle, Kirbyjon H. Caldwell and Michael G. Holmquist are “independent,”
as that term is defined in NASAA REIT Guidelines and in Rule 4200(a)(15) of the NASDAQ Marketplace Rules. Accordingly, the board
is composed of a majority of independent directors. There are no transactions with the directors which were evaluated in connection
with the board’s determination of the independence or which have not already been disclosed elsewhere in this registration
statement.
Fiduciary Responsibility of Board of Directors and Indemnification
The board of directors
and our advisor are accountable to us and to our Stockholders. Consequently, they must exercise good faith and integrity in handling
our affairs. Similarly, our advisor has contractual obligations to us which it must discharge with the utmost good faith and integrity.
Our articles require
us to indemnify and pay or reimburse reasonable expenses to any individual who is our present or former director, advisor or affiliate,
provided that: (i) the director, advisor or affiliate seeking indemnification has determined, in good faith, that the course of
conduct which caused the loss or liability was in our best interest; (ii) the director, advisor or affiliate seeking indemnification
was acting on our behalf or performing services on our behalf; (iii) such liability or loss was not the result of negligence or
misconduct on the part of the indemnified party, except that in the event the indemnified party is or was an independent director,
such liability or loss shall not have been the result of gross negligence or willful misconduct; and (iv) such indemnification
or agreement to be held harmless is recoverable only out of our assets and not from our Stockholders directly.
We may advance amounts
to persons entitled to indemnification for legal and other expenses and costs incurred as a result of legal action instituted against
or involving such person if: (i) the legal action relates to the performance of duties or services by the indemnified party for
or on our behalf; (ii) the legal action is initiated by a third party who is not a Stockholder, or the legal action is initiated
by a Stockholder acting in his or her capacity as such and a court specifically approves such advancement; and (iii) the indemnified
party receiving such advances undertakes, in writing, to repay the advanced funds, with interest at the rate we determined, in
cases in which such party would not be entitled to indemnification.
Notwithstanding
the foregoing, we may not indemnify our directors, advisor, or affiliates and any persons acting as a broker-dealer for any losses,
liabilities or expenses arising from or out of an alleged violation of federal or state securities laws by such party unless one
or more of the following conditions are met: (i) there has been a successful adjudication on the merits of each count involving
alleged securities law violations as to the particular indemnitee; (ii) such claims have been dismissed with prejudice on the merits
by a court of competent jurisdiction as to the particular indemnitee; or (iii) a court of competent jurisdiction approves a settlement
of the claims against a particular indemnitee and finds that indemnification of the settlement and the related costs should be
made, and the court considering the request for indemnification has been advised of the position of the Securities and Exchange
Commission and of the published position of any state securities regulatory authority in which our securities were offered or sold
as to indemnification for violations of securities laws.
Subject to the limitations
described above, we have the power to purchase and maintain insurance on behalf of an indemnified party. We may procure insurance
covering our liability for indemnification. The indemnification permitted by our Articles is more restrictive than permitted under
the Minnesota Business Corporation Act.
Warrants and Options
In January 2003,
we terminated our stock option plan for directors and the adviser and outstanding stock options were surrendered and cancelled.
No options were exercised during the option plan’s existence. No options or warrants are outstanding as of the date of this
Prospectus.
EXECUTIVE
COMPENSATION AND EQUITY COMPENSATION PLANS; DIRECTOR COMPENSATION
The Company pays
no compensation to its officers and has no other employees. The Company has no equity compensation plans. Because no compensation
or equity awards have been awarded to, earned by or paid to any executive officer of the Company, the Company has not included
any tables or charts describing executive compensation. However, compensation paid to our directors for the fiscal year ended December
31, 2016 is described below.
Name
|
|
Fees Earned
or Paid in
Cash
(1)
|
|
Stock
Awards
|
|
Option
Awards
|
|
Non-Equity
Incentive Plan
Compensation
|
|
Non-Qualified
Incentive Plan
Compensation
|
|
All Other
Compensation
|
|
Total
|
|
Kirbyjon H. Caldwell
|
|
$
|
1,200
|
|
n/a
|
|
n/a
|
|
n/a
|
|
n/a
|
|
n/a
|
|
$
|
1,200
|
|
Dennis J. Doyle
|
|
$
|
1,600
|
|
n/a
|
|
n/a
|
|
n/a
|
|
n/a
|
|
n/a
|
|
$
|
1,600
|
|
Michael G. Holmquist
|
|
$
|
1,400
|
|
n/a
|
|
n/a
|
|
n/a
|
|
n/a
|
|
$
|
536
(2)
|
|
$
|
1,936
|
|
Philip J. Myers
|
|
n/a
|
|
n/a
|
|
n/a
|
|
n/a
|
|
n/a
|
|
n/a
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
________________________________________
|
(1)
|
All Directors, except Philip J. Myers, are paid $500 per board meeting attended ($400 for telephonic
meetings), limited to $2,500 per year, and reimbursed for travel expenses incurred in connection with their duties as directors;
no reimbursements were paid in 2016.
|
|
(2)
|
Mr. Holmquist was paid an additional $536 during 2016 for auditing and testing the Company’s
internal controls to determine if the Company has established and is maintaining an adequate system of controls as defined by Section
404 of the Sarbanes-Oxley Act of 2002
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table
sets forth as of June 30, 2017, the number of shares beneficially owned by each director and by all executive officers and directors
as a group, and the beneficial owner of 5% or more of our outstanding stock, based on 1,677,798 shares of common stock outstanding
at that date. Unless otherwise noted, each of the following persons has sole voting and investment power with respect to the shares
set forth opposite their respective names.
Name and Address of Beneficial Owner (1)
|
|
Number of Shares of
Common Stock
Beneficially Owned
|
|
Percent of Class
|
|
Philip J. Myers
|
|
83,687
|
(2)
|
4.98
|
%
|
Scott J. Marquis
|
|
1,300
|
|
.08
|
%
|
Kirbyjon H. Caldwell
|
|
—
|
|
—
|
|
Dennis J. Doyle
|
|
—
|
|
—
|
|
Michael H. Holmquist
|
|
319
|
|
.02
|
%
|
All Executive Officers and Directors as a Group (five individuals)
|
|
85,306
|
|
5.08
|
%
|
________________________________________
|
(1)
|
The address for each Director is 10237 Yellow Circle Drive, Minnetonka, Minnesota 55343.
|
|
(2)
|
This number includes 25,014 shares owned directly by Mr. Myers and 58,673 shares owned by
Apostle Holdings Corp., an affiliate of our Advisor, which is 100% owned by Mr. Myers.
|
CERTAIN RELATIONSHIPS
AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
Our advisor, Church
Loan Advisors, Inc., manages our business subject to the supervision of our board of directors. Our advisor provides us with lending,
marketing, management and administrative services. Our President, Philip J. Myers, owns and is the President of both our advisor
and American Investors Group, Inc., the underwriter of this offering, and thus controls both entities. Our Chief Financial Officer
and Treasurer, Scott J. Marquis, is both a Vice President of our advisor and Chief Financial Officer and Chief Operating Officer
of American Investors Group, Inc. and thus in a position of control of both entities. On our behalf, our advisor regularly uses
the services of personnel employed by American Investors Group, Inc., including our President, Philip J. Myers, and Vice-President
Scott J. Marquis. We incur no direct cost for such services, except for the advisory fee we pay to our advisor. While our advisor
has no employees, it does have two executive officers. See section “The Advisor and Our Advisory Agreement” herein.
Transactions with Our Advisor
We pay our advisor
advisory fees and expenses. In addition, our advisor receives a portion of any origination fees associated with a mortgage loan
made or renewed by us. The Company paid the advisor management and origination fees of approximately $138
,000
for the six months ended June 30, 2017 and $324,000 for the year ended December 31, 2016. We believe that the terms of the advisory
agreement are no less favorable to us had we entered into the agreement with an independent third party as advisor.
Transactions with the Underwriter
Effective as of
the date of this offering, we have entered into a distribution agreement with the underwriter. Pursuant to the agreement, we will
pay the underwriter a commission based on the gross principal amount of certificates sold in this offering and an underwriter’s
management fee based on the principal amount and term of certificates sold in this offering. We will also pay the underwriter a
non-accountable expense reimbursement of up to $60,000, assuming all of the certificates are sold. The underwriter is an affiliate
of our advisor. We believe that the terms of the distribution agreement are no less favorable to us than if we had entered into
the agreement with an independent third party. The following table sets forth the name and positions of certain officers and all
directors of the underwriter:
Name
|
|
Position
|
Philip J. Myers
|
|
President, Treasurer and Director
|
Scott J. Marquis
|
|
Chief Financial and Operating Officer
|
In the course of
our business, we may purchase church bonds being underwritten and sold by American Investors Group, Inc., (“American”).
Although we would not pay any commissions, American will benefit from such purchases as a result of commissions paid to it by the
issuer of the bonds. American also may benefit from mark-ups on bonds we buy from it and mark-downs on bonds we sell through it
on the secondary market. We will purchase church bonds for investment purposes only, and only at the public offering price. Church
bonds we purchase in the secondary market, if any, will be purchased at the best price available, subject to customary markups
(or in the case of sales - markdowns), on terms no less favorable than those applied to other customers of American. Principals
of ours and our advisor may receive a benefit in connection with such transactions due to their affiliation with the underwriter.
Other than with respect to the purchase and sale of church bonds for our portfolio in the ordinary course of business, all future
transactions between us and our officers, directors and affiliates will be approved, in advance, by a majority of our independent
and disinterested directors.
THE ADVISOR
AND OUR ADVISORY AGREEMENT
Our Advisor: Church Loan Advisors, Inc.
Subject to the supervision
of the board of directors, our business is managed by our advisor, Church Loan Advisors, Inc., which provides investment advisory
and administrative services. Church Loan Advisors, Inc. is a Minnesota corporation and has acted as our advisor since inception
in 1994. Mr. Myers owns 100% of the Advisor. Our advisor’s offices are located at 10237 Yellow Circle Drive, Minnetonka (Minneapolis),
Minnesota 55343. Our advisor renders lending and advisory services solely to us, and administers our business affairs and operations.
The following table
sets forth the names and positions of the officers and directors of the advisor:
Name
|
|
Position
|
Philip J. Myers
|
|
President, Treasurer and Director
|
Scott J. Marquis
|
|
Vice President, Secretary
|
See “Management”
for a description of the positions and business experience of Philip J. Myers and Scott J. Marquis.
Our Advisory Agreement
We have entered
into a contract with our advisor (the “Advisory Agreement”) under which our advisor furnishes advice and recommendations
concerning our affairs, provides administrative services to us, and manages our day-to-day affairs. The Company’s and the
advisor’s activities are governed by the Company’s Bylaws and the Advisory Agreement. Both of these documents substantially
comply with the NASAA REIT Guidelines, which include substantive limitations on, among other things, conflicts of interest and
related party transactions.
Other than with
respect to the purchase and sale of church bonds for our portfolio in the ordinary course of business, as described below, all
future transactions between us and our officers, directors and affiliates must be approved, in advance, by a majority of our independent
directors. Our advisor provides us with the following services:
|
·
|
serves as our mortgage loan underwriter and advisor in connection with our primary business of
making loans to churches
|
|
·
|
advises and selects church bonds for us to purchase and hold for investment
|
|
·
|
services all mortgage loans that we make
|
|
·
|
provides marketing and advertising and generates loan leads directly and through its affiliates
|
|
·
|
deals with borrowers, lenders, banks, consultants, accountants, brokers, attorneys, appraisers,
insurers and others
|
|
·
|
supervises the preparation, filing and distribution of tax returns and reports to governmental
agencies, prepares reports to Stockholders and acts on our behalf in connection with Stockholder relations
|
|
·
|
reports to us on its performance of the foregoing services
|
|
·
|
furnishes advice and recommendations with respect to other aspects of our business.
|
In performing its
services under the Advisory Agreement, our advisor uses facilities, personnel and support services of its affiliates. Expenses,
such as legal and accounting fees, director fees, stock transfer agent and registrar and paying agent fees, are our direct expenses
and are not provided for by our advisor as part of its services.
The Advisory Agreement
is renewable annually by us for one-year periods, subject to a determination, including a majority of our independent directors,
that our advisor’s performance has been satisfactory and that the compensation paid by us to our Advisor has been reasonable.
The Advisory Agreement was reviewed and renewed for a one-year period ending on April 12, 2017. We may terminate the Advisory Agreement
without cause or penalty on 60 days’ written notice. Upon termination of the Advisory Agreement by either party, the advisor
may require us to change our name to a name that does not contain the word “American,” “America” or the
name of the advisor or any approximation or abbreviation thereof. However, we may continue to use the word “church”
in our name. Our directors must determine that any successor advisor possesses sufficient qualifications to perform the advisory
function for us and justify the compensation provided for in its contract with us.
Pursuant to the
Advisory Agreement, our advisor is required to pay all of the expenses it incurs in providing us services including, but not limited
to, personnel expenses, rental and other office expenses of officers and employees of the advisor, and all of its overhead and
miscellaneous administrative expenses relating to performance of its functions under the Advisory Agreement. We are required to
pay all other expenses, including the costs and expenses of reporting to various governmental agencies and our Stockholders and
of conducting our operations as a mortgage lender, fees and expenses of appraisers, directors, auditors, outside legal counsel
and transfer agents, and costs directly relating to the closing of loan transactions.
In the event that
our total operating expenses exceed in any calendar year the greater of (a) 2% of our average invested assets or (b) 25% of our
net income (before interest expense), the advisor is obligated to reimburse us, to the extent of its fees for such calendar year,
for the amount by which the aggregate annual operating expenses paid or incurred by us exceed the limitation. Our independent directors
may, upon a finding of unusual and non-recurring factors which they deem sufficient, determine that a higher level of expenses
is justified in any given year.
Our Bylaws provide
that our independent directors are to determine, at least annually, the reasonableness of the compensation which we pay to our
advisor. Factors to be considered in reviewing the advisory fee include the size of the fees of the advisor in relation to the
size and composition of our assets, our profitability, the rates charged by other investment advisors performing comparable services,
the success of our advisor in generating opportunities that meet our investment objectives, the amount of additional revenues realized
by our advisor for other services performed, the quality and extent of service and advice furnished by our advisor, the quality
of our investments in relation to investments generated by our advisor for its own account, if any, and the performance of our
investments.
Pursuant to the
Advisory Agreement, we pay our advisor an annual base management fee of 1.25% of average invested assets on the first $35 million
of such assets, 1.00% on assets from $35 million to $50 million, and .75% on assets in excess of $50 million. Our advisor only
charges a .25% management fee on the church bond portion of our portfolio. For purposes of the Advisory Agreement, the Company’s
Invested Assets means outstanding church loans and bonds and does not include cash or cash equivalent temporary investments. As
defined in the Advisory Agreement, we remit to the advisor up to one-half of any origination fee collected from a borrower in connection
with mortgage loans made or renewed by us. For the six months ended June 30, 2017 and the year ended December 31, 2016 we paid
our advisor approximately $134,000 and $315,000, respectively.
The advisory agreement
requires us to indemnify our advisor and each of its directors, officers and employees against expense or liability arising out
of such person’s activities in rendering services to us, provided that the conduct against which the claim is made was determined
by such person, in good faith, to be in our best interest and was not the result of negligence or misconduct.
The foregoing is
a summary of the material provisions of the advisory agreement. Reference is made to the advisory agreement, filed as an exhibit
to the registration statement of which this prospectus is a part, for a complete statement of its provisions.
MATERIAL
FEDERAL INCOME TAX CONSEQUENCES ASSOCIATED WITH THE CERTIFICATES
The discussion set
forth below of the material United States federal income tax consequences relating to the acquisition, ownership and disposition
of the certificates is a summary and it is not exhaustive of all possible tax considerations. This discussion does not provide
a discussion of any estate, state, local, or foreign tax considerations.
Winthrop & Weinstine,
P.A. has acted as our special U.S. federal income tax counsel with respect to this offering, has reviewed this summary discussion
that is titled “Federal Income Tax Consequences Associated with the Certificates,” and is of the opinion that it fairly
summarizes the United States federal income tax consequences that are likely to be material to U.S. persons that acquire, own,
and dispose of our certificates. The opinion of Winthrop & Weinstine, P.A. has been filed as an exhibit to the registration
statement of which this prospectus is a part. The opinion of Winthrop & Weinstine, P.A. is based on various assumptions, is
subject to limitations, and is not binding on the Internal Revenue Service or any court.
The information
in this summary is based on the Internal Revenue Code (the “Code”), current and temporary proposed Treasury regulations
promulgated under the Code, the legislative history of the Code, current administrative interpretations and practices of the Internal
Revenue Service (“IRS”), and court decisions, all as of the date of this prospectus. The administrative interpretation
and practices of the IRS upon which this summary is based includes the practices and policies as expressed in private letter rulings,
which are not binding on the IRS, except with respect to taxpayers who request and receive such rulings. No assurance can be given
that future legislation, Treasury regulations, administrative interpretations and practices, and court decisions will not significantly
change current law, or adversely affect the existing interpretations of current law, on which the information in this summary is
based. Even if there is no change in applicable law, no assurance can be provided that the statements made in the following summary
will not be challenged by the IRS or will be sustained by a court if so challenged, and we will not seek a ruling with respect
to any part of the information discussed in this summary. This summary is qualified in its entirety by the applicable Code provisions,
Treasury regulations, and administrative and judicial interpretations of the Code.
The discussion applies
only to original purchasers of certificates at par value. The discussion is included for general information purposes only and
does not deal with persons in special situations, such as banks or other financial institutions, insurance companies, regulated
investment companies, dealers in securities or currencies, tax-exempt entities, persons holding certificates in a tax-deferred
or tax-advantaged account, traders in securities that elect to use a mark-to-market accounting method for securities holdings,
expatriates, persons holding certificates as a hedge against currency or interest-rate risks, as a position in a “straddle,”
or as part of a “hedging,” “conversion,” or integrated transaction for federal income tax purposes consisting
of the certificates and one or more other investments, holders who are U.S. persons for federal income tax purposes whose functional
currency for federal income tax purposes is not the U.S. dollar, holders who are not U.S. persons for federal income tax purposes,
trusts and estates, and pass-through entities, any equity holder of which is any of the foregoing. This discussion also assumes
that the certificates are held as “capital assets” within the meaning of Section 1221 of the Code.
YOU ARE ADVISED
TO CONSULT WITH YOUR OWN TAX ADVISOR TO DETERMINE THE IMPACT OF YOUR PERSONAL TAX SITUATION ON THE ANTICIPATED TAX CONSEQUENCES
OF THE ACQUISITION, OWNERSHIP, AND DISPOSITION OF THE CERTIFICATES. THIS INCLUDES THE FEDERAL, STATE, LOCAL, FOREIGN, AND OTHER
TAX CONSEQUENCES OF THE ACQUISITION, OWNERSHIP, AND DISPOSITION OF THE CERTIFICATES AND POTENTIAL CHANGES IN APPLICABLE TAX LAWS.
Tax Classification of the Certificates
We believe that
the certificates will be classified as debt of our company for federal income tax purposes. By your acceptance of a certificate,
and by virtue of any person’s acquisition of a beneficial interest in a certificate, you and or any such beneficial owner
agree to treat the certificates as debt for all tax purposes.
Our characterization
of the certificates as debt is not binding on the IRS, and the IRS could assert that the certificates represent an ownership interest
in the equity of the company or in the mortgage collateral. The IRS’s treatment of the certificates as equity interests could
adversely affect our ability to maintain our REIT status, and could result in collateral tax consequences to certificate holders,
including changes in the characterization and timing of income received with respect to the certificates and could adversely affect
our cash flow. The remainder of this discussion assumes that the certificates are treated as debt for federal income tax purposes.
Interest Income on the Certificates
We will pay interest
on the certificates quarterly. Interest paid on the certificates will generally be taxable to you as ordinary income as the interest
is paid to you if you are a cash-method taxpayer or as the interest accrues if you are an accrual-method taxpayer.
Treatment of Dispositions of Certificates
Upon the sale, exchange,
retirement or other taxable disposition of a certificate, you will recognize gain or loss in an amount equal to the difference
between the amount realized on the disposition (other than any amounts attributable to, and taxable as, accrued interest) and your
adjusted tax basis in the certificate. Your adjusted tax basis of a certificate generally will equal your original cost for the
certificate, increased by any accrued but unpaid interest you previously included in income with respect to the certificate and
reduced by any principal payments you previously received with respect to the certificate. Any gain or loss will be capital gain
or loss, except for gain representing accrued interest not previously included in your income. This capital gain or loss will be
long-term, capital gain or loss if the certificate had been held for more than one year and otherwise short-term capital gain or
loss.
Reporting and Backup Withholding
We will report annual
interest income paid, and any other information that is required to be reported with respect to the certificates, to the Internal
Revenue Service and to holders of record that are not excepted from the reporting requirements.
Under certain circumstances,
as a holder of a certificate, you may be subject to “backup withholding.” Backup withholding may apply to you if you
are a United States person and, among other circumstances, you fail to furnish your Social Security Number or other taxpayer identification
number to us. Backup withholding may apply, under certain circumstances, if you are a foreign person and fail to provide us with
the statement necessary to establish an exemption from federal income and withholding tax on interest on the certificates. Backup
withholding is not an additional tax and may be applied against your United States federal income tax liability or refunded provided
that you furnish the Internal Revenue Service with certain required information.
QUALIFICATION
AS A REIT FOR FEDERAL INCOME TAX PURPOSES
The discussion of
an entity’s qualification as a real estate investment trust (“REIT”) for federal income tax purposes set forth
below is a summary. It does not address fully all requirements for REIT qualification. The Company’s tax counsel has opined
that the Company has been organized in a manner that will permit it to satisfy the requirements under Sections 856 through 860
of the Code for qualification and taxation as a REIT for the taxable year 2015 and that the Company’s proposed method of
operation, as described herein, will permit the Company to satisfy the requirements for qualification and taxation as a REIT under
Sections 856 through 860 of the Code with respect to 2015 and subsequent taxable years.
WHETHER THE COMPANY
QUALIFIES AS A REIT FOR FEDERAL INCOME TAX PURPOSES WILL NOT AFFECT WHETHER THE CERTIFICATES ARE CLASSIFIED AS DEBT FOR FEDERAL
INCOME TAX PURPOSES OR THE SUMMARY OF THE ANTICIPATED MATERIAL FEDERAL INCOME TAX CONSEQUENCES TO U.S. PERSONS WHO HOLD THE CERTIFICATES
THAT IS SET FORTH IN THE PRECEDING DISCUSSION TITLED “MATERIAL FEDERAL INCOME TAX CONSEQUENCES ASSOCIATED WITH THE CERTIFICATES.”
IF THE
COMPANY
WOULD NOT CONTINUE TO QUALIFY AS A REIT FOR FEDERAL INCOME TAX PURPOSES, IT, HOWEVER, COULD AFFECT ADVERSELY THE COMPANY’S
ABILITY TO MAKE DEBT SERVICE PAYMENTS TO HOLDERS OF THE CERTIFICATES.
Qualification as a Real Estate Investment Trust
General.
The following is a general summary of the requirements to qualify as a REIT for federal income tax purposes. This summary is qualified
in its entirety by the applicable Code provisions, rules and regulations promulgated thereunder, and administrative and judicial
interpretations thereof. The requirements to qualify as a REIT may be changed, perhaps retroactively, by legislative, administrative
or judicial action at any time.
Requirements
for Qualification.
The Code defines a REIT as a corporation, trust or association (i) which is managed by one or more trustees
or directors; (ii) the beneficial ownership of which is evidenced by transferable shares, or by transferable certificates of beneficial
interest; (iii) which would be taxable, but for Sections 856 through 859 of the Code, as a domestic corporation; (iv) which
is neither a financial institution nor an insurance company subject to certain provisions of the Code; (v) the beneficial ownership
of which is held by 100 or more persons; (vi) during the last half of each taxable year not more than 50% of the outstanding stock
of which is owned, directly or indirectly, by five or fewer individuals (which term includes certain entities); and (vii) which
meets certain other tests, described below. Conditions (i) to (iv) must be met during the entire taxable year. Condition (v) must
be met during at least 335 days of a taxable year of 12 months, or during a proportionate part of a taxable year of less than 12
months.
To qualify as a
REIT for a taxable year, we must elect or previously have elected to be so treated, which we did, and must meet other requirements,
including percentage tests relating to the sources of our gross income, the nature and diversification of our assets and the distribution
of our income to our Stockholders. During our history of operations, we have operated as a REIT under the Code. Our ability to
continue to qualify to operate as a REIT depends, in part, on the timing and nature of our investments. There can be no assurance
that we will continue to qualify as a REIT. Qualification as a REIT is dependent on future events. No assurance can be given that
our business or that the actual results of our operation for any particular taxable year will satisfy the REIT requirements.
The Effect of Failure to Qualify as a Real Estate Investment
Trust
If we fail to qualify
as a REIT in any taxable year and the relief provisions do not apply, then we will be subject to a tax (including any applicable
minimum tax) on our taxable income computed in the usual manner for corporate taxpayers without any deduction for dividends paid.
In such event, to the extent of current and accumulated earnings and profits, all distributions to Stockholders will be taxable
to us at the corporate level as ordinary income, and, subject to certain limitations in the Code, corporate distributees may be
eligible for the dividends received deduction. Unless entitled to relief under specific statutory provisions, we will also be prohibited
from electing to be taxed as a REIT for the four taxable years following the year during which qualification is lost. To renew
our REIT qualifications at the end of such a four-year period, we would be required to distribute all of our current and accumulated
earnings and profits before the end of the period.
Loss of REIT status
from either our disqualification as a REIT or our revocation of REIT status would not affect whether the certificates are classified
as debt for federal income tax purposes, the anticipated federal income tax consequences to U.S. persons who hold the certificates,
or whether we may deduct interest paid to certificate holders for United States federal income tax purposes. To generate funds
with which to pay federal income taxes because of the loss of REIT status, however, could reduce our funds that are available for
investment, could cause us to incur additional indebtedness, or could cause us to liquidate investments, each of which could affect
adversely our ability to make debt service payments to holders of certificates.
ERISA CONSIDERATIONS
Certain employee
benefit plans and individual retirement accounts and individual retirement annuities (collectively, “Plans”), are subject
to various provisions of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) and the Internal
Revenue Code. Before investing in the certificates, a Plan fiduciary should ensure that such investment is in accordance with ERISA’s
fiduciary standards and that the investment will comply with the diversification, prudence, liquidity, and composition requirements
of ERISA. A Plan fiduciary also should consider the prohibitions under ERISA on improper delegation of control over, or responsibility
for “plan assets” and ERISA’s imposition of co-fiduciary liability on a fiduciary who participates in, or permits,
by action or inaction, the occurrence of, or fails to remedy, a known breach of duty by another fiduciary with respect to “plan
assets,” and a Plan fiduciary should consider the need to value the assets of the Plan annually. A Plan fiduciary also should
ensure that the investment is in accordance with the governing instruments and the overall policy of the Plan. In addition, provisions
of ERISA and the Code prohibit certain transactions in Plan assets that involve persons who have specified relationships with a
Plan. The consequences of such prohibited transactions include excise taxes, disqualifications of IRAs and other liabilities. A
Plan fiduciary should ensure that any investment in the certificates will not constitute a prohibited transaction. A Plan fiduciary
also should consider the illiquid nature of an investment in our certificates and that no secondary market will exist for them.
DESCRIPTION
OF CAPITAL STOCK
General
Our authorized capital
stock consists of 50,000,000 undesignated shares, of which our board of directors has established that 30,000,000 shares are Common
Stock, par value of $0.01 per share. Pursuant to our articles of incorporation, our board of directors has the authority to divide
the balance of the authorized capital stock into classes and series with relative rights and preferences and at such par value
as the board of directors may establish from time to time. Each share of Common Stock is entitled to participate equally in dividends
when and as declared by the directors and in the distribution of our assets upon liquidation. Each authorized share is entitled
to one vote and will be fully paid and nonassessable upon issuance and payment therefor. Each authorized share has no preference,
conversion, exchange, preemptive or cumulative voting rights. There are no cumulative voting rights in electing directors. We have
1,677,798 shares of common stock outstanding as of June 30, 2017.
Repurchase of Shares and Restrictions on Transfer
Two of the requirements
for qualification for the tax benefits accorded by the real estate investment trust provisions of the Internal Revenue Code are
that (i) during the last half of each taxable year not more than 50% of the outstanding capital stock may be owned directly or
indirectly by five or fewer individuals and (ii) there must be at least 100 Stockholders for at least 335 out of 365 days of each
taxable year or the proportionate amount for any partial taxable year.
Our articles of
incorporation prohibit any person or group of persons from holding, directly or indirectly, ownership of a number of shares in
excess of 9.8% of the outstanding capital stock. Shares owned by a person or group of persons in excess of such amounts are referred
to in the articles of incorporation and herein as “excess shares.” For this purpose, shares shall be deemed to be owned
by a person if they are constructively owned by such person under the provisions of Section 544 of the Code (as modified by Section
856(h) of the Code) or are beneficially owned by such person under the provisions of Rule 13d-3 promulgated under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”). The term “group” has the same meaning as that term
has for purposes of Section 13(d)(3) of the Exchange Act. Accordingly, shares owned or deemed to be owned by a person who individually
owns less than 9.8% of the outstanding capital stock may nevertheless be Excess Shares if such person is a member of a group which
owns more than 9.8% of the outstanding capital stock.
Our articles of
incorporation provide that in the event any person acquires excess shares, we may redeem such Excess Shares, at the discretion
of the board of directors. Except as set forth below, the redemption price for excess shares is the closing price on the last business
day prior to the redemption date if the shares are traded on an exchange or, if not listed on an exchange, the net asset value
of the excess shares as determined in good faith by the board of directors. In no event, however, may the purchase price of the
shares redeemed be greater than their net asset value as determined by the board of directors in good faith. To redeem excess shares,
the board of directors must give a notice of redemption to the holder of such excess shares not less than 30 days prior to the
date fixed by the board of directors for redemption. The redemption price for excess shares will be paid on the redemption date
fixed by the board of directors and included in such notice. Excess shares cease to be entitled to any distribution and other benefits
from and after the date fixed for redemption, except the right to payment of the redemption price for such shares.
Under our articles
of incorporation, any transfer of shares that would result in our disqualification as a real estate investment trust under the
Code is void to the fullest extent permitted by law. The board of directors is authorized to refuse to transfer shares to a person
if, as a result of the transfer, that person would own excess shares. Upon demand by the board of directors, a Stockholder is required
to provide us with an affidavit setting forth, as to that Stockholder, the information required to be reported in returns filed
by Stockholders under the Treasury Regulation Section 1.857-9 and in reports filed under Sections 13(d) and 16(b) of the Exchange
Act. Each proposed transferee of shares, upon demand of the board of directors, also may be required to provide us with a statement
or affidavit setting forth the number of shares already owned by the transferee and any related persons. The transfer or sale of
shares also are subject to compliance with applicable state “Blue Sky” laws.
Repurchase of Shares by Us
Although our shares
are not redeemable, we may at our complete discretion, repurchase shares offered to us by Stockholders. We may pay whatever price
our advisor deems appropriate and reasonable and is acceptable to the selling Stockholder and us. Any shares repurchased will be
re-designated as “unissued,” will no longer be entitled to distribution of dividends, and will cease to have voting
rights.
Transfer Agent and Registrar
The transfer agent
and registrar for our capital stock is Computershare Trust Company, Inc., 350 Indiana Street, Suite 800, Golden, CO 80401,
telephone: (303) 262-0600.
DESCRIPTION
OF THE CERTIFICATES
General.
The Series E Certificates we are offering by this prospectus are secured debt obligations of American Church Mortgage Company.
We have issued three prior series of Secured Investor Certificates: Series A, Series B, Series C and Series D. The following chart
summarizes the amount of certificates of each series originally authorized to be sold, the amount actually sold and the amount
outstanding as of August 31, 2017:
|
|
Authorized Amount
|
|
Amount Sold
|
|
Amount Outstanding
|
|
Series A
|
|
$
|
15,000,000
|
|
$
|
15,000,000
|
|
—
|
|
Series B
|
|
$
|
23,000,000
|
|
$
|
14,860,000
|
|
$
|
12,764,000
|
(1)
|
Series C
|
|
$
|
20,000,000
|
|
$
|
7,932,000
|
|
$
|
6,734,000
|
|
Series D
|
|
$
|
10,000,000
|
|
$
|
8,234,000
|
|
$
|
8,234,000
|
|
|
________________________________________
|
|
|
(1)
|
Includes $3,500,000 in Series A certificates that were renewed and became Series B certificates.
|
We will issue the
certificates under an indenture between us and Herring Bank, as trustee. The terms and conditions of the certificates include those
stated in the indenture and those made part of the indenture by reference to the Trust Indenture Act of 1939. The following is
a summary of some, but not all, provisions of the certificates, the indenture and the Trust Indenture Act. For a complete understanding
of the certificates, you should review the terms and conditions contained in the global certificate that we will issue to the trustee,
the indenture and the Trust Indenture Act, which include definitions of certain terms used below. Copies of the form of the certificates
and the indenture are available from us at no charge upon request.
The certificates
are secured by our assignment to the trustee of mortgage backed promissory notes or mortgage secured bonds issued by churches and
other not-for-profit religious organizations, which we own or will receive as a result of loans we make to churches and other nonprofit
religious organizations and bonds we purchase for cash. The mortgages securing the promissory notes will not be assigned to the
trustee nor will any bonds be re-registered to the trustee. Further, we are not required to establish or maintain a sinking fund
to provide for payment of maturing certificates.
You may determine
the amount (any multiple of $1,000) and term (5, 6, 7, 8, 9, 10, 11, 12, 13, 14 or 15 years) of the certificates you would like
to purchase when you subscribe, subject to availability. However, we may not always offer certificates of each maturity, depending
on market conditions and our capital requirements. Each certificate will mature on the anniversary of the last day of the fiscal
quarter in which the certificate is purchased. We will set interest rates based on current market conditions and our need for capital.
Interest rates will not be derived from any reference or published interest rate.
The interest rate
will be fixed for the term of your certificate and paid quarterly. The current rates we will pay for each maturity of certificates
are set forth below. The interest rate will vary based on the term to maturity of the certificate you purchase and these rates
may be changed at any time. You should check for any rate supplements at the time of purchase.
Certificate Term
|
|
Interest Rate %
|
5 Year
|
|
|
4.00
|
%
|
6 Year
|
|
|
5.00
|
%
|
7 Year
|
|
|
5.00
|
%
|
8 Year
|
|
|
5.25
|
%
|
9 Year
|
|
|
5.25
|
%
|
10 Year
|
|
|
5.75
|
%
|
11 Year
|
|
|
6.00
|
%
|
12 Year
|
|
|
6.00
|
%
|
13 Year
|
|
|
6.25
|
%
|
14 Year
|
|
|
6.25
|
%
|
15 Year
|
|
|
6.50
|
%
|
Upon acceptance
of your subscription to purchase certificates, the trustee, who is also acting as our servicing agent, will create an account in
our book-entry registration system for you and credit the principal amount of your subscription to your account. Our trustee will
send you a book-entry receipt that will indicate our acceptance of your subscription. If we reject your subscription, all funds
deposited will be promptly returned to you without any interest. Investors whose subscriptions for certificates have been accepted
and anyone who subsequently acquires certificates in a qualified transfer are referred to as “holders” or “registered
holders” in this document and in the indenture.
We may modify or
supplement the terms of the certificates described in this prospectus from time to time in a supplement to this prospectus. Except
as set forth under “Amendment, Supplement and Waiver” below, any modification or amendment will not affect then-outstanding
certificates. However, investors are advised to check for prospects supplements as interest rates are subject to change.
Denomination.
You may purchase certificates in principal amount of multiples of $1,000. You will determine the original principal amount of each
certificate you purchase when you subscribe.
Term and Maturity.
We are offering certificates with terms of five and seven to fifteen years.
You will select
the term of each certificate you purchase when you subscribe, depending on availability. You may purchase multiple certificates
with different terms by filling in investment amounts for more than one term.
The maturity date
will be the anniversary of the last day of the fiscal quarter in which you purchase your certificate. For example, if you purchased
a thirteen (13) year certificate on July 10, 2017, the certificate will mature on September 30, 2030. We may cease offering specified
maturities, and re-continue their offering, at any time during the offering period. We may change the interest rate offered on
any unsold certificates without prior notice.
Collateral.
We will assign to the trustee to secure the certificates mortgage secured promissory notes and bonds issued by churches and other
nonprofit religious organizations evidencing loans made by us or cash which have an aggregate unpaid principal balance of at least
100% of the aggregate outstanding principal amount of the certificates. Unless there is an event of default, we will not assign
the mortgages securing the assigned promissory notes and bonds to the trustee.
We will be obligated
to replace a promissory note or bond that we have assigned to the trustee if the church obligor prepays the promissory note or
bond or if it defaults in the payment of principal or interest on the promissory note or bond and the default continues for at
least 90 consecutive days. We will assign additional promissory notes and bonds or cash to the trustee as necessary to maintain
the aggregate outstanding principal balance of the assigned notes at a level of at least 100% of the outstanding principal balance
of the certificates sold in this offering.
We will furnish
the following to the trustee in connection with our assigning mortgage-secured promissory notes to the trustee:
|
·
|
An opinion of counsel to the effect that all necessary action has been taken to create and perfect
a first lien and security interest in favor of the trustee in the assigned promissory notes and bonds.
|
|
·
|
Annual opinions of counsel to the effect that all necessary action has been taken to maintain a
first lien and security interest in favor of the trustee in the assigned promissory notes and bonds.
|
|
·
|
Annual certification of our officers that all provisions of the indenture relating the deposit,
release and substitution of collateral have been complied with.
|
Generally, neither
we, nor the trustee will be required to provide reports to holders concerning the deposit, release or substitution of promissory
notes and bonds securing the certificates. However, the trustee will be required to report to holders if we default in our obligations
to maintain the 100% collateral coverage requirement and that default has not been cured within 90 days.
Interest Rate.
The interest rate on a particular certificate will be the interest rate for the particular term of the certificate at the time
of subscription or renewal. Please see the “Interest Rate” chart above or in an applicable supplement. The interest
rate will remain fixed for the original or renewal term of the certificate. We will set interest rates based on current market
conditions and our need for capital. Interest rates will not be derived from any reference or published interest rate. We will
establish and may change the interest rates payable for unsold certificates of various terms in a supplement to this prospectus.
Computation
of Interest.
We will compute interest on certificates on the basis of an actual calendar year. Interest will accrue from
the date of purchase, but will not be compounded. The date of purchase will be the first business day immediately following the
date we receive funds. Our business days are Monday through Friday, except for legal holidays recognized by FINRA.
Interest Payment
Dates.
Interest will be payable quarterly and interest checks will be mailed to certificate holders on the last day of
each calendar quarter (i.e., March 31, June 30, September 30 and December 31). If the last day of a quarter falls on a weekend
or a holiday, we will pay interest on the next business day.
Place and
Method of Payment.
We will pay principal and interest on the certificates through the trustee, who will act as our paying
agent, by check mailed on each interest payment date to your address appearing in the certificate register. If the foregoing payment
method is not available, principal and interest on the certificates will be payable at our principal executive office or at such
other place as we may designate for payment purposes. We will not wire or electronically transmit interest payments to holders
of certificates.
Servicing
Agent.
We have engaged Herring Bank, who is also acting as the trustee in this offering, to act as our servicing agent
for the certificates. The trustee’s responsibilities as servicing agent will include serving as our registrar and transfer
agent and fulfilling certain of our responsibilities to the holders.
You may contact
the trustee as follows with any questions about the certificates:
Herring Bank
1608 S. Polk St.
Amarillo, TX 79102
(806) 378-6655
Book-Entry
Registration and Transfer.
You will not receive or be entitled to receive physical delivery of a certificate. The issuance
and transfer of certificates will be accomplished exclusively through the crediting and debiting of the appropriate accounts in
our book-entry registration and transfer system. However, you will receive a book-entry acknowledgement from the trustee that will
show all pertinent information regarding your certificate, including the principal amount of your certificate, its interest rate
and maturity, and verification of its registration. The trustee will maintain our book-entry system.
The holders of the
accounts established upon the purchase or transfer of certificates will be deemed to be the owners of the certificates under the
indenture. The holders of certificates must rely upon the procedures established by the trustee to exercise any rights of a holder
of certificates under the indenture. The servicing agent will determine the interest payments to be made to the book entry accounts
and maintain, supervise and review any records relating to book-entry beneficial interests in the certificates.
Book-entry notations
in the accounts evidencing ownership of the certificates are exchangeable for actual certificates only if: (i) we, at our option,
advise the trustee in writing of our election to terminate the book-entry system, or (ii) after the occurrence of an event of default
under the indenture, holders of the certificates aggregating more than 50% of the aggregate outstanding amount of the certificates
advise the trustee in writing that the continuation of a book-entry system is no longer in the best interests of the holders of
certificates and the trustee notifies all registered holders of the occurrence of any such event and the availability of definitive
certificates. Subject to the exceptions described above, the book-entry interests in these securities will not be exchangeable
for fully registered certificates. The trustee will also issue fully registered certificates if required by the administrator of
an Individual Retirement Account or similar tax deferred account in which a holder has acquired a certificate. The trustee may
charge a $10 fee per certificate issuance.
Right to Reject
Applications.
We may reject any application for certificates in our sole discretion.
Renewal or
Payment on Maturity.
Approximately 30 days prior to maturity of your certificate, you will be notified that your certificate
is about to mature and whether we will allow you to renew the certificate. If we are offering renewal of certificates, we will
provide you with a schedule of interest rates then in effect, which will apply if you elect to renew your certificate, along with
a form on which you may elect to renew or not to renew your certificate. You will have until 10 days prior to the maturity date
to exercise one of the following options:
|
·
|
You can inform us in writing on or before 10 days prior to the scheduled maturity date that you
would like to renew the certificate, in which case the principal amount of your certificate will be renewed for the same term at
the interest rate we are offering at the time of renewal and we will pay you accrued interest through the maturity date of your
certificate. No commission will be charged for renewals.
|
|
·
|
You can do nothing or inform us that you would like us to pay the certificate in full; in either
case we will pay the principal amount and accrued interest when due.
|
|
·
|
We reserve the right to stop offering the option to renew certificates and to refuse to renew any
certificate in our complete discretion. Interest will accrue from the first day of each renewed certificate term. Each renewed
certificate will continue in all its provisions, including provisions relating to payment, except that the interest rate payable
during any renewed term will be the interest rate that we are then offering at the time of renewal.
|
|
·
|
If your certificate is not renewed for any reason, no interest will accrue after the stated date
of maturity and we will pay you the principal and unpaid accrued interest on your certificate within 5 business days of the stated
maturity date.
|
Redemption
Prior to Stated Maturity.
The certificates may be redeemed prior to stated maturity only as set forth below. You will have
no right to require us to prepay any certificate prior to its maturity date except as indicated below.
Discretionary
Redemption by Us on Thirty Days’ Notice.
We have the option to redeem all or a portion of the outstanding certificates
at any time, in our sole discretion. If we exercise this option, we will give affected certificate holders 30 days’ notice
that we intend to redeem their outstanding certificates.
Offer to Redeem
by Us upon a Change of Our Advisor.
Our advisor is currently Church Loan Advisors, Inc. If we terminate our advisory agreement
with our current advisor for any reason, we are required to offer to redeem all certificates outstanding as of the date of such
termination. In such case, certificates will be redeemable at the option of the holders. If we terminate our advisory agreement
with our current advisor, we will provide our certificate holders with notices offering to redeem all outstanding certificates
within 10 days of the termination. Holders of outstanding certificates will have 30 days after the date of the notice to inform
us in writing whether they will require us to redeem their certificates. The redemption price will be the principal amount of the
certificate, plus interest accrued and not previously paid up to the date of redemption.
Redemption
by the Holder upon Death.
Certificates may be redeemed upon the death of a holder who is a natural person (including certificates
held in an individual retirement account), by his or her estate giving us written notice within 45 days following his or her death.
The redemption price will be the principal amount of the certificate, plus interest accrued and not previously paid up to the date
of redemption. Subject to the limitations described below, we will pay the redemption price within 10 days of receiving notice
of the holder’s death. If spouses are joint registered holders of a certificate, the election to redeem will apply when either
registered holder dies. If the certificate is held by a person who is not a natural person such as a trust, partnership, corporation
or other similar entity, the right of redemption upon death does not apply. In addition, we will not be required to redeem any
certificates at the request of the holder in excess of $25,000 aggregate principal amount for all holders per calendar quarter.
For purposes of the $25,000 limit, redemption requests will be honored in the order in which they are received and any redemption
request not honored in a calendar quarter will be honored, to the extent possible, in the next calendar quarter. Redemptions in
the next calendar quarter are also subject to the $25,000 limitation. We will not redeem certificates in connection with a holder’s
death if an uncured event of default exists with respect to the outstanding certificates.
Discretionary
Redemption.
If you request us to redeem your certificate prior to maturity, we may do so and charge you early redemption
penalties, both at our complete discretion.
Transfers.
The certificates are not negotiable debt instruments and, subject to certain exceptions, will be issued only in book-entry form.
The book-entry receipt issued upon our acceptance of a subscription is not a negotiable instrument, and no rights of record ownership
can be transferred without our advisor’s prior written consent. Transfers of certificates will generally be prohibited. However,
our advisor intends to approve transfers of certificates upon a demonstrated need for liquidity, such as upon the death or bankruptcy
of a certificates holder, or to facilitate estate planning objectives. Ownership of certificates may be transferred on our register
only as follows:
|
·
|
The holder must deliver written notice requesting a transfer to the trustee signed by the holder(s)
or such holder’s duly authorized representative on a form to be supplied by our servicing agent.
|
|
·
|
Our advisor must provide its written consent to the proposed transfer.
|
|
·
|
The trustee may require a signature guarantee in connection with such transfer.
|
Upon transfer of
a certificate, the trustee will provide the new holder of the certificate with a book-entry receipt which will evidence the transfer
of the account on our records. The record date of any transfer will be the last day of the quarter in which the transfer is made.
The transferee will be entitled to all interest accruing in the quarter in which the transfer is made.
No Sinking
Fund.
We will not contribute funds to a separate account, commonly known as a sinking fund, to repay principal or interest
on the certificates upon maturity or default.
Restrictive
Covenants.
The indenture contains certain covenants that require us to maintain certain financial standards and restrict
us from certain actions as set forth below.
Maintenance
of Certain Financial Standards.
The indenture provides that, so long as the certificates are outstanding:
|
·
|
we will maintain a positive net worth, which includes Stockholders’ equity and subordinated
debt; and
|
|
·
|
our long-term liabilities will not exceed 300% of our Stockholders’ equity at the end of
any fiscal year, or such higher amount as authorized by our bylaws from time to time.
|
Prohibition
on Certain Actions.
The indenture provides that, so long as the certificates are outstanding:
|
·
|
we will not pay any dividends on our common or preferred stock if there is an uncured event of
default with respect to the certificates;
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we will not allow any other lien to be created or maintained on the collateral securing the certificates;
and
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we will not guarantee, endorse or otherwise become liable for any obligations of any of our control
persons, or other parties controlled by or under common control with any of our control persons.
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Consolidation,
Merger or Sale.
The indenture generally permits a consolidation or merger between us and another entity. It also permits
the sale or transfer by us of all or substantially all of our property and assets. These transactions are permitted if:
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the resulting or acquiring entity, if other than us, is organized and existing under the laws of
a domestic jurisdiction and assumes all of our responsibilities and liabilities under the indenture, including the payment of all
amounts due on the certificates and performance of the covenants in the applicable indenture; and
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immediately after the transaction, and giving effect to the transaction, no event of default under
the indenture exists.
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If we consolidate
or merge with or into any other entity or sell or lease all or substantially all of our assets, according to the terms and conditions
of the indenture, the resulting or acquiring entity will be substituted for us in the indenture with the same effect as if it had
been an original party to the indenture. As a result, such successor entity may exercise our rights and powers under the indenture,
in our name and, except in the case of a lease, we will be released from all our liabilities and obligations under the indenture
and under the certificates.
Events Of
Default.
The indenture provides that each of the following constitutes an event of default:
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any default for thirty days in the payment of interest when due on the certificates;
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any default for thirty days in payment of principal when due on the certificates;
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if we default in our obligations to maintain the 100% collateral coverage requirement and that
default has not been cured within 90 days;
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our failure to observe or perform any material covenant or our breach of any material representation
or warranty, but only after we have been given notice of such failure or breach and such failure or breach is not cured within
30 days after our receipt of notice;
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defaults in certain of our other financial obligations; and
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certain events of bankruptcy or insolvency with respect to us.
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If any event of
default occurs and is continuing, the trustee or the holders of at least a majority in principal amount of the then-outstanding
certificates may declare the unpaid principal of and any accrued interest on the certificates to be due and payable immediately.
In the case of an event of default arising from certain events of bankruptcy or insolvency, with respect to us, all outstanding
certificates will become due and payable without further action or notice. Holders of the certificates may not enforce the indenture
or the certificates except as provided in the indenture. Subject to certain limitations, holders of a majority in principal amount
of the then-outstanding certificates may direct the trustee in its exercise of any trust or power. The trustee may withhold from
holders of the certificates notice of any continuing default or event of default (except a default or event of default relating
to the payment of principal or interest) if the trustee determines that withholding notice is in the interest of the holders.
The holders of a
majority in aggregate principal amount of the certificates then outstanding by notice to the trustee may, on behalf of the holders
of all of the certificates, waive any existing default or event of default and its consequences under the indenture, except a continuing
default or event of default in the payment of interest on, or the principal of, the certificates.
Amendment,
Supplement and Waiver.
Except as provided in this prospectus or the indenture, the terms of the certificates then outstanding
may be amended or supplemented with the consent of the holders of at least a majority in principal amount of the certificates then
outstanding, and any existing default or compliance with any provision of the indenture or the certificates may be waived with
the consent of the holders of a majority in principal amount of the then outstanding certificates.
Notwithstanding
the foregoing, without the consent of any holder of the certificates, we or the trustee may amend or supplement the indenture or
the certificates:
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to cure any ambiguity, defect or inconsistency;
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to provide for assumption of our obligations to holders of the certificates in the case of a merger
or consolidation;
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to make any change that would provide any additional rights or benefits to the holders of the certificates
or that does not materially adversely affect the legal rights under the indenture of any such holder, including an increase in
the aggregate dollar amount of certificates which may be outstanding under the indenture;
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to modify our policy regarding redemptions elected by a holder of certificates and our policy regarding
redemptions of the certificates upon the death of any holder of the certificates, but such modifications shall not materially adversely
affect any then outstanding certificates;
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to comply with requirements of the SEC in order to effect or maintain the qualification of the
indenture under the Trust Indenture Act; or
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to maintain our status as a REIT.
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The Trustee.
Herring Bank has agreed to be the trustee under the indenture. The indenture contains certain limitations on the rights of the
trustee, should it become one of our creditors, to obtain payment of claims in certain cases, or to realize on certain property
received in respect of any claim as security or otherwise. The trustee will be permitted to engage in other transactions with us
and our affiliates.
The indenture provides
that in case an event of default specified in the indenture shall occur and not be cured, the trustee will be required, in the
exercise of its power, to use the degree of care of a reasonable person in the conduct of his own affairs. Subject to such provisions,
the trustee will be under no obligation to exercise any of its rights or powers under the indenture at the request of any holder
of certificates, unless the holder has offered to the trustee security and indemnity satisfactory to it against any loss, liability
or expense.
Resignation
or Removal of The Trustee.
The trustee may resign at any time, or may be removed by the holders of a majority of the principal
amount of then-outstanding certificates. In addition, upon the occurrence of contingencies relating generally to the insolvency
of the trustee or the trustee’s ineligibility to serve as trustee under the Trust Indenture Act of 1939, as amended, we may
remove the trustee or a court of competent jurisdiction may remove the trustee upon petition of a holder of certificates. However,
no resignation or removal of the trustee may become effective until a successor trustee has been appointed.
No Personal
Liability of Directors, Officers, Employees, Stockholders and Servicing Agent.
No director, officer, employee, incorporator
or Stockholder of ours or our servicing agent, will have any liability for any of our obligations under the certificates, the indenture
or for any claim based on, in respect to, or by reason of, these obligations or their creation. Each holder of the certificates
waives and releases these persons from any liability. The waiver and release are part of the consideration for issuance of the
certificates. We have been advised that the waiver may not be effective to waive liabilities under the federal securities laws
since it is the view of the Securities and Exchange Commission that such a waiver is against public policy.
Service Charges.
We and the trustee may assess service charges for changing the registration of any certificate to reflect a change in name of the
holder or transfers (whether by operation of law or otherwise) of a certificate.
Variations
By State.
We may offer different securities and vary the terms and conditions of the offer (including, but not limited
to, different interest rates and maturity dates) depending upon the state where the purchaser resides.
Interest Withholding.
We or the trustee will withhold the required portion of any interest paid to any investor who has not provided us with a Social
Security Number, Employer Identification Number, or other satisfactory equivalent in the account application (or another document)
or where the Internal Revenue Service has notified us that back-up withholding is otherwise required.
Liquidity.
THERE IS NO MARKET FOR THE CERTIFICATES.
We do not believe that a public market will develop for the certificates. You may
not be able to sell your certificates. You should be prepared to hold any certificates you purchase until maturity.
Reports.
We have published and filed with the Securities and Exchange Commission annual reports on Form 10-K, and will continue to publish
and file annual reports on Form 10-K, containing financial statements, and have published and filed quarterly reports on Form 10-Q,
and will continue to publish and file quarterly reports on Form 10-Q, containing financial information for the first three quarters
of each fiscal year. See “Additional Information.” We will send copies of our reports at no charge to any certificate
holder who requests them in writing. They are also available for viewing on the SEC’s website www.sec.gov.
SUMMARY OF
THE ORGANIZATIONAL DOCUMENTS
The following is
a summary of certain provisions of our organizational documents, which consist of our Amended and Restated Articles of Incorporation
(“Articles”) and the Third Amended and Restated Bylaws (“Bylaws”). This summary is qualified in its entirety
by specific reference to the organizational documents filed as exhibits to the registration statement of which this prospectus
is a part.
Certain Articles of Incorporation and Bylaws Provisions
Stockholders’
rights and related matters are governed by the Minnesota Business Corporation Act, our Articles and our Bylaws. Certain provisions
of our Articles and Bylaws, which are summarized below, may make it more difficult to change the composition of our board and may
discourage an attempt by a person or group to obtain control of us through acquisitions of shares.
Stockholder Meetings
Our Bylaws provide
for annual meetings of Stockholders. We typically hold our annual meeting of Stockholders during the second quarter of each year.
Special meetings of Stockholders may be called by (i) our Chief Executive Officer, (ii) a majority of the members of our board
of directors or a majority of our independent directors, or (iii) Stockholders holding at least 10% of the outstanding shares of
common stock entitled to vote at the meeting.
Board of Directors
Our Bylaws provide
that our board establishes the number of our directors, which may not be fewer than three (3) nor more than nine (9), and a majority
of which must be independent directors. Any vacancy will be filled by a majority of the remaining directors, except that a vacancy
of an independent director position must follow a nomination by the remaining independent directors. The directors may leave a
vacancy unfilled until the next regular meeting of the Stockholders.
Limitations on Director Actions
Without concurrence
of a majority of the outstanding shares, the directors may not: (i) amend our Articles or Bylaws, except for amendments which do
not adversely affect the rights, preferences and privileges of Stockholders including amendments to provisions relating to, director
qualifications, fiduciary duty, liability and indemnification, conflicts of interest, investment policies or investment restrictions;
(ii) sell all or substantially all of our assets other than in the ordinary course of our business or in connection with liquidation
and dissolution; (iii) cause us to merge with another entity or otherwise reorganize; or (iv) cause us to dissolve or liquidate.
A majority of the
then outstanding shares may, without the necessity for concurrence by our directors, vote to: (i) amend the Bylaws; (ii) terminate
the corporation; or (iii) remove the directors.
Minnesota Anti-Takeover Law
We are governed
by the provisions of Sections 302A.671 and 302A.673 of the Minnesota Business Corporation Act. In general, Section 302A.671 provides
that the shares of a corporation acquired in a “control share acquisition” have no voting rights unless voting rights
are approved in a prescribed manner. A “control share acquisition” is an acquisition, directly or indirectly, of beneficial
ownership of shares that would, when added to all other shares beneficially owned by the acquiring person, entitle the acquiring
person to have voting power of 20% or more in the election of directors. In general, Section 302A.673 prohibits a public Minnesota
corporation from engaging in a “business combination” with an “interested Stockholder” for a period of
four years after the date of the transaction in which the person became an interested Stockholder, unless the business combination
is approved in a prescribed manner. “Business combination” includes mergers, asset sales and other transactions resulting
in a financial benefit to the interested Stockholder. An “interested Stockholder” is a person who is the beneficial
owner, directly or indirectly, of 10% or more of
the
corporation’s voting stock or who is an affiliate or associate of the corporation and at any time within four years prior
to the date in question was the beneficial owner, directly or indirectly, of 10% or more of the corporation’s stock.
Restrictions on Roll-Ups
“Roll-up”
means a transaction involving our acquisition, merger, conversion, or consolidation (either directly or indirectly) and the issuance
of securities of a roll-up entity. Such term does not include: (i) a transaction involving our securities that have been for at
least 12 months listed on a national securities exchange or traded through the NASDAQ National Market System; or (ii) a transaction
involving the conversion to corporate, trust, or association form if, as consequence of the transaction, there will be no significant
adverse change in any of the following: (a) Stockholders’ voting rights; (b) our term of existence; (c) sponsor or advisor
compensation; (d) our investment objectives. “Roll-up entity” means a partnership, real estate investment trust, corporation,
trust, or other entity created or surviving after the completion of a roll-up transaction.
In connection with
a roll-up, an appraisal of all of our assets would be required to be obtained from a competent independent expert. The appraiser
would evaluate all relevant information, indicate the value of the assets as of a date immediately prior to the announcement of
the roll-up and assume an orderly liquidation of the assets over a 12-month period. Notwithstanding the foregoing, we may not participate
in any proposed roll-up which would:
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result in our Stockholders having rights to meeting less frequently or which are more restrictive
to Stockholders than those provided in our Bylaws;
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result in our Stockholders having voting rights that are less than those provided in our Bylaws;
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result in our Stockholders having greater liability than as provided in our Bylaws;
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result in our Stockholders having rights to receive reports that are less than those provided in
our Bylaws;
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result in our Stockholders having access to records that are more limited than those provided in
our Bylaws;
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include provisions which would operate to materially impede or frustrate the accumulation of shares
by any purchaser of the securities of the roll-up entity (except to the minimum extent necessary to preserve the tax status of
the roll-up entity);
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limit the ability of an investor to exercise the voting rights of its securities in the roll up
entity on the basis of the number of the shares held by that investor;
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result in investors in the roll-up entity having rights of access to the records of the roll-up
entity that are less than those provided in our Bylaws; or
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place upon us any of the costs of the transaction if the roll-up is not approved by the Stockholders.
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Nothing prevents
our participation in any proposed roll-up resulting in Stockholders having rights and restrictions comparable to those contained
in our Bylaws, with the prior approval of a majority of our Stockholders.
Stockholders voting
against a proposed roll-up have the choice of (i) accepting the securities of the roll-up entity offered in the proposed roll-up;
or (ii) one of either: (a) remaining as our Stockholders and preserving their interests therein on the same terms and conditions
as previously existed, or (b) receiving cash in an amount equal to the Stockholders’ pro rata share of the appraised value
of our net assets. We do not intend to participate in a roll up transaction.
Limitation on Total Operating Expenses
Our Bylaws provide
that, subject to the conditions described in this paragraph, our annual total operating expenses cannot exceed the greater of 2%
of our average invested assets or 25% our net income, computed before interest expense. The independent directors have a fiduciary
responsibility to limit our annual total operating expenses to amounts that do not exceed the foregoing limitations. The independent
directors may determine that a higher level of operating expenses is justified for such period because of unusual and non-recurring
expenses. Any such finding by the independent directors and the reasons in support thereof must be recorded in the minutes of the
meeting of the board of directors. We will send a written disclosure to our Stockholders within 60 days after the end of any fiscal
quarter for which operating expenses (for the 12 months then ended) exceed 2% of the average invested assets or 25% of net income.
In the event the operating expenses exceed the limitations described above and if our directors are unable to conclude that such
excess was justified then within 60 days after the end of our fiscal year, our advisor must reimburse us for the amount by which
the aggregate annual total operating expenses paid or incurred by us exceed the limitation.
Transactions with Affiliates
Our Bylaws restrict
our dealings with our advisor, sponsor and any director or affiliates thereof. In approving any transaction or series of transactions
with such persons or entities, a majority of our directors not otherwise interested in such transaction, including a majority of
the independent directors must determine that:
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(a)
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the transaction as contemplated is fair and reasonable to us and our Stockholders and its terms
and conditions are not less favorable to us than those available from unaffiliated third parties;
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(b)
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if the transaction involves compensation to any advisor or its affiliates for services rendered
in a capacity other than contemplated by the advisory arrangements, such compensation is not greater than the customary charges
for comparable services generally available from other competent unaffiliated persons and is not in excess of compensation paid
to any advisor and its affiliates for any comparable services;
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(c)
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if the transaction involves the making of loans (other than in the ordinary course of our business)
or the borrowing of money, the transaction is fair, competitive, and commercially reasonable and no less favorable to us than loans
between unaffiliated lenders and borrowers under the same circumstances; and
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(d)
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if the transaction involves the investment in a joint venture, the transaction is fair and reasonable
and no less favorable to us than to other joint venturers.
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If the proposed
transaction involves a loan to any advisor, director or any affiliate thereof, or to a wholly-owned subsidiary of ours, a written
appraisal of the underlying property must be obtained from an independent expert. The appraisal must be maintained in our records
for at least five years and be available for inspection and duplication by any Stockholder. Such loan is subject to all requirements
of our Financing Policy.
We cannot borrow
money from any advisor, director or any affiliate thereof, unless a majority of our directors (including a majority of the independent
directors) not otherwise interested in the transaction approve the transaction as being fair, competitive, and commercially reasonable
and no less favorable to us than loans between unaffiliated parties under the same circumstances.
We cannot make or
invest in any mortgage loans subordinate to any mortgage or equity interest of our advisor, directors, sponsors or any of our affiliates.
Restrictions on Investments
The investment policies
and restrictions set forth in our Bylaws have been approved by a majority of our independent directors. In addition to other investment
restrictions imposed by the directors consistent with our objective to qualify as a REIT, we will observe the guidelines and prohibitions
on our investments set forth in our Bylaws. These guidelines and prohibitions are discussed at the section headed “Our Business—Prohibited
Investments and Activities.”
PLAN OF DISTRIBUTION
General
The
underwriter is offering the certificates pursuant to the terms and conditions of a distribution agreement (a copy of which
is filed as an exhibit to the Registration Statement of which this prospectus is a part). The underwriter is
offering $10,000,000 principal amount of certificates on our behalf on a “best efforts” basis. “Best
efforts” means that the underwriter is not obligated to purchase any certificates. This is a “no minimum”
offering. No minimum principal amount of certificates must be sold, and we will receive the proceeds from the sale of
certificates as they are sold. This offering will be conducted on a continuous basis pursuant to applicable rules of the
Securities and Exchange Commission and will terminate three years from the date of effectiveness or upon completion of the
sale of all certificates. We may terminate this offering at any time.
Compensation
We will pay to the
underwriter a commission based on the principal amount of certificates sold. The amount of this commission is 2.75% for sales of
new certificates sold. We will also pay the underwriter a 0.75% management fee upon the original issuance of each certificate.
A fee not to exceed 1.25% may be charged for renewals and is paid to the underwriter. Because there is sharing of employees with
the underwriter, the underwriting compensation described above does not include the salaries or other
amounts
that such shared employees will receive from their employer, which amounts would be paid to those employees whether or not the
offering occurred. A portion of shared employee salary may be considered as underwriting compensation. This compensation, and
all compensation to be received by the underwriter and related persons, will not exceed ten percent (10%) of the total offering
proceeds. Shared employees are not directly involved in the sale of certificates and do not receive transaction-based compensation.
We have agreed to
pay the underwriter a non-accountable expense allowance of up to $60,000 to reimburse the underwriter for certain expenses incurred
by it in connection with the offer and sale of the shares, $10,000 of which is payable upon the sale of each $1,000,000 of certificates
up to $5,000,000 of certificates, and $1,000 for each additional $1,000,000 of certificates offered hereby up to the completion
or termination of this offering, whichever occurs first.
Other Compensation
Information
. We have agreed to pay the underwriter’s legal fees, to be worth no more than $5,000 in value. We will not
pay or award any commissions or other compensation to any person engaged by a potential investor for investment advice to induce
such person to advise the investor to purchase certificates. This provision does not prohibit the normal sales commission payable
to a registered broker-dealer or other properly licensed person for selling certificates.
Subscription Process
Our certificates
will be offered to the public through the underwriter and soliciting dealers. The certificates are being sold when, and if we receive
and accept account applications. We have the right to accept or reject any application. If we reject your application, your funds
will be returned to you, without interest. We will not accept applications for less than $1,000 for each maturity term of certificates.
The underwriter
may offer the certificates through its own registered representatives and broker-dealers who are members of the FINRA (“soliciting
dealers”). The underwriter may re-allow to soliciting dealers a portion of its commissions, fees and reimbursable expenses
payable to it under the distribution agreement. In no event will the compensation re-allowed by the underwriter to soliciting dealers
exceed the total of compensation payable to the underwriter under the distribution agreement.
Clients of soliciting
dealers who wish to purchase certificates must remit payment for the purchase of certificates directly to the underwriter payable
to “American Investors Group, Inc.” and will receive a confirmation of their purchase directly from the underwriter.
A sale will be deemed
to have been made on the date reflected in the written confirmation. The confirmation will be sent to each purchaser by the underwriter
on the first business day following the date upon which we advise the underwriter in writing that an application has been accepted.
Generally, payment for certificates should accompany the account application. You may rescind your purchase of certificates for
up to five (5) business days after you have received a final prospectus.
The distribution
agreement provides for reciprocal indemnification between us and the underwriter against certain liabilities in connection with
this offering, including liabilities under the Securities Act of 1933.
The foregoing discussion
of the material terms and provisions of the distribution agreement is qualified in its entirety by reference to the detailed terms
and provisions of the distribution agreement, a copy of which has been filed as an exhibit to the Registration Statement of which
this prospectus is a part.
Determination of Investor Suitability
We, the underwriter
and each soliciting dealer will make reasonable efforts to determine that those persons being offered or sold the certificates
are appropriate in light of the suitability standards set forth herein and are appropriate to such investor’s investment
objectives and financial situation. The soliciting dealer must ascertain that you can reasonably benefit from an investment in
our certificates. The following shall be relevant to such determination: (i) you are capable of understanding the fundamental aspects
of our business, which capacity may be evidenced by the following: (a) employment experience; (b) educational level achieved; (c)
access to advice from qualified sources, such as attorneys, accountants, tax advisors, etc.; and (d) prior experience with similar
investments; (ii) you have apparent understanding of (a) the fundamental risk and possible financial hazards of this type of investment;
(b) the lack of liquidity of this investment; (c) that the investment will be directed and managed by the Advisor; and (d) the
tax consequences of the investment; and (iii) you have the financial capability to invest in our certificates.
By executing your
account application, each soliciting dealer acknowledges its determination that the certificates are a suitable investment for
you, and will be required to represent and warrant its compliance with the applicable laws requiring the determination of the suitability
of the certificates as an investment for you. In addition to the foregoing, we will coordinate the processes and procedures utilized
by the underwriter and soliciting dealers and, where necessary, implement additional reviews and
procedures
deemed necessary to determine that you meet the suitability standards set forth herein. The underwriter and/or the soliciting
dealers must maintain for at least six (6) years a record of the information obtained to determine that you meet the suitability
standards imposed on the offer and sale of certificates and your representation that you are investing for your own account or,
in lieu of such representation, information indicating that you met the suitability standards.
Suitability of the Investment
Our certificates
are suitable only for investment by persons who have adequate financial means and can commit their investment for the full term
of the certificates purchased. You will be required to provide us with certain financial information in your account application.
You may purchase up to $5,000 of certificates if you meet one of the following standards: (i) a net worth (excluding home, home
furnishings and automobiles) of at least $45,000 and a minimum gross income (without regard to investment in the certificates)
of at least $45,000; or (ii) a net worth (excluding home, home furnishings and automobiles) of at least $150,000. To purchase in
excess of $5,000 of certificates, you must meet one of the following standards: (i) a net worth (excluding home, home furnishings
and automobiles) of at least $70,000 and a minimum gross income (without regard to investment in the certificates) of at least
$70,000; or (ii) a net worth (excluding home, home furnishings and automobiles) of at least $250,000. Suitability standards may
be higher in certain states. Please see
Exhibit B
. In the case of gifts to minors or purchases in trusts, the suitability
standards must be met by the custodian or the grantor. By acceptance of the confirmation of purchase or delivery of the certificates,
you will represent satisfaction of the applicable suitability standards and acknowledge receipt of this prospectus.
The account application
to be signed by all purchasers of the Series E Secured Investor Certificates contains an arbitration agreement. By this agreement,
each purchaser agrees that all controversies relating to the Certificates will be determined by arbitration before FINRA. However,
the arbitration agreement does not preclude investors from contacting state securities commissioners with respect to compliance
with state securities laws or regulations in relation to a dispute or problem with an investment or their account.
COMMISSION
POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Insofar as indemnification
for liabilities arising under the Securities Act may be permitted to directors, officers or controlling persons pursuant to our
bylaws, or otherwise, we have been informed that in the opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Securities Act, and is therefore, unenforceable.
LEGAL MATTERS
Certain legal matters,
including the legality of the certificates being offered hereby and certain federal income tax matters, are being passed upon for
us by Winthrop & Weinstine, P.A., Minneapolis, Minnesota.
EXPERTS
Our balance sheets
as of December 31, 2016 and 2015 and related statements of operations, stockholders’ equity and cash flows for the years
ended December 31, 2016 and 2015 included in this prospectus have been audited by Baker Tilly Virchow Krause, LLP, independent
registered public accounting firm, as set forth in the report thereon appearing elsewhere herein, and are included herein in reliance
upon such report given on the authority of said firm as experts in accounting and auditing.
ADDITIONAL
INFORMATION
We have filed with
the SEC a registration statement on Form S-11, including exhibits and schedules filed with the registration statement of which
this prospectus is a part, under the Securities Act of 1933, as amended, with respect to the Certificates to be sold in this offering.
This prospectus does not contain all of the information set forth in the registration statement and exhibits and schedules to the
registration statement. For further information with respect to us and the Certificates to be sold in this offering, reference
is made to the registration statement, including the exhibits and schedules to the registration statement. Copies of the registration
statement, including the exhibits and schedules to the registration statement, may be examined without charge at the public reference
room of the SEC, 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Information about the operation of the public reference
room may be obtained by calling the SEC at 1-800-SEC-0330. Copies of all or a portion of the registration statement may be obtained
from the public reference room of the SEC upon payment of prescribed fees. Our SEC filings, including our registration statement,
are also available to you, free of charge, on the SEC’s website at www.sec.gov.
We are required
to file annual, quarterly and special reports, proxy statements and other information with the Securities and Exchange Commission.
Our current and future SEC filings are and will be made publicly available, free of charge, on our website at http://www.church-loans.net
under the heading “Regulatory Filings”.
INDEX TO
FINANCIAL STATEMENTS
Financial Statements
Audited Financial Statements
Report of Independent Registered
Public Accounting Firm F-1
Balance Sheets as of December 31,
2016 and 2015 F-2
Statements of Operations for the
fiscal years ended December 31, 2016 and 2015 F-4
Statements of Stockholders’
Equity for the fiscal years ended December 31, 2016 and 2015 F-5
Statements of Cash Flows for the
fiscal years ended December 31, 2016 and 2015 F-6
Notes to Financial Statements F-8
Unaudited Interim Financial Statements
Balance Sheets as of June 30, 2017
and December 31, 2016 F-20
Statements of Operations for the
six month periods ended June 30, 2017 and 2016 F-22
Statements of Operations for the
three month periods ended June 30, 2017 and 2016 F-23
Statements of Cash Flows for the
six month periods ended June 30, 2017 and 2016 F-24
Notes to Unaudited Condensed Financial
Statements F-26
EXHIBIT A
EXHIBIT B
STATE SUITABILITY REQUIREMENTS
If you are a resident of
one of the states listed below, you must be able to represent that you meet the financial suitability requirements for the state
in which you live to invest in the Series E Secured Investor Certificates being offered by American Church Mortgage Company.
The investment firms that solicit purchases are required by law to ask you whether you meet these requirements to determine whether
a purchase of the certificates is suitable for you. When you sign the Subscription Agreement that is part of the Account
Application you are required to represent that you meet the suitability standards contained under the caption “Who May Invest”
(at page 11 of this Prospectus), and if applicable, the higher standards set forth in the table below.
IF YOU ARE A RESIDENT OF
ONE OF THE STATES BELOW, YOU MUST SATISFY THE NET WORTH REQUIREMENT OR THE COMBINED NET WORTH- NET INCOME REQUIREMENT SET FORTH
OPPOSITE THE STATE. When considering the net worth standards, you cannot include the value of your home, furnishings and
automobiles.
STATE
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ALTERNATIVE
1
NET WORTH
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ALTERNATIVE
2
NET INCOME
+ NET WORTH
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MINIMUM
INVESTMENT
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MAXIMUM
INVESTMENT
|
|
Arizona
|
|
$
|
250,000
|
|
$
|
70,000 net income PLUS $70,000 net worth
|
|
N/A
|
|
N/A
|
|
Iowa
|
|
$
|
350,000
|
|
$
|
100,000 net income PLUS $100,000 net worth
|
|
N/A
|
|
10% of Net Worth
|
|
Texas
|
|
$
|
250,000
|
|
$
|
70,000 net income PLUS $70,000 net worth
|
|
N/A
|
|
N/A
|
|
Prospective investors may rely only on the information contained in this prospectus. Neither American Church Mortgage Company nor the Underwriter has authorized anyone to provide any other information. This prospectus is not an offer to sell to — nor is it seeking an offer to buy securities from — any person in any jurisdiction in which it is illegal to make an offer or solicitation. The information here is correct only on the date of this prospectus, regardless of the time of the delivery of this prospectus or any sale of these securities.
|
TABLE OF CONTENTS
PROSPECTUS SUMMARY
|
1
|
RISK FACTORS
|
6
|
WHO MAY INVEST
|
12
|
USE OF PROCEEDS
|
13
|
COMPENSATION TO ADVISOR AND AFFILIATES
|
13
|
CONFLICTS OF INTEREST
|
14
|
DISTRIBUTIONS
|
17
|
CAPITALIZATION
|
19
|
SELECTED FINANCIAL DATA
|
20
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF 2OPERATIONS
|
21
|
OUR BUSINESS2OPERATIONS
|
28
|
MANAGEMENT
|
49
|
EXECUTIVE COMPENSATION AND EQUITY COMPENSATION PLANS; DIRECTOR COMPENSATION
|
52
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
|
52
|
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
|
53
|
THE ADVISOR AND OUR ADVISORY AGREEMENT
|
53
|
MATERIAL FEDERAL INCOME TAX CONSEQUENCES ASSOCIATED WITH THE CERTIFICATES
|
55
|
QUALIFICATION AS A REIT FOR FEDERAL INCOME TAX PURPOSES
|
56
|
ERISA CONSIDERATIONS
|
57
|
DESCRIPTION OF CAPITAL STOCK
|
58
|
DESCRIPTION OF THE CERTIFICATES
|
59
|
SUMMARY OF THE ORGANIZATIONAL DOCUMENTS
|
65
|
PLAN OF DISTRIBUTION
|
67
|
COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
|
69
|
LEGAL MATTERS
|
69
|
EXPERTS
|
69
|
ADDITIONAL INFORMATION
|
69
|
INDEX TO FINANCIAL STATEMENTS
|
F-i
|
Until December 12, 2017, all dealers
effecting transactions in the securities offered by this prospectus, whether or not participating in the offering, may be required
to deliver a prospectus. Dealers may also be required to deliver a prospectus when acting as underwriters and for their unsold
allotments or subscriptions.
|
|
American Church
Mortgage Company
$10,000,000 of Series E Secured Investor
Certificates
|
|
|
PROSPECTUS
|
|
|
American Investors
Group, Inc.
November 6, 2017
This Offering expires
November 6, 2020
|
|
|
|
|
AMERICAN CHURCH MORTGAGE COMPANY
Minnetonka, Minnesota
Financial Statements
As of and for the Years Ended December 31, 2016
and 2015
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
To the Stockholders and Board of Directors
American Church Mortgage Company
Minnetonka, MN
We have audited the accompanying balance sheets of American Church
Mortgage Company (the “company”) as of December 31, 2016 and 2015, and the related statements of operations, stockholders'
equity, and cash flows for the years then ended. These financial statements are the responsibility of the company's management.
Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have,
nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of
its internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting.
Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by
management as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of American Church Mortgage Company as of December 31, 2016 and 2015 and
the results of its operations and cash flows for the years then ended, in conformity with United States generally accepted accounting
principles.
/s/ Baker Tilly Virchow Krause, LLP
Minneapolis, Minnesota
March 31, 2017
AMERICAN CHURCH MORTGAGE COMPANY
|
|
|
|
|
|
Balance Sheets
|
|
|
|
|
|
|
|
As of December 31,
|
ASSETS
|
|
2016
|
|
2015
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
|
Cash and equivalents
|
|
$
|
3,382,994
|
|
|
$
|
4,377,110
|
|
Accounts receivable
|
|
|
219,352
|
|
|
|
189,609
|
|
Interest receivable
|
|
|
175,912
|
|
|
|
172,169
|
|
Investments
|
|
|
2,410
|
|
|
|
—
|
|
Current maturities of mortgage loans receivable, net of
|
|
|
|
|
|
|
|
|
allowance of $41,912 and $57,663 and deferred
|
|
|
|
|
|
|
|
|
origination fees of $22,444 and $23,406 at December
|
|
|
|
|
|
|
|
|
31, 2016 and 2015, respectively
|
|
|
725,727
|
|
|
|
1,134,157
|
|
Current maturities of bond portfolio
|
|
|
111,000
|
|
|
|
84,000
|
|
Prepaid expenses
|
|
|
1,489
|
|
|
|
19,904
|
|
Total current assets
|
|
|
4,618,884
|
|
|
|
5,976,949
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage Loans Receivable
, net of current maturities,
|
|
|
|
|
|
|
|
|
allowance of $1,270,071 and $1,147,170 and deferred
|
|
|
|
|
|
|
|
|
origination fees of $276,055 and $311,938 at December
|
|
|
|
|
|
|
|
|
31, 2016 and 2015, respectively
|
|
|
22,396,071
|
|
|
|
22,680,542
|
|
|
|
|
|
|
|
|
|
|
Bond Portfolio,
net of current maturities
|
|
|
11,371,616
|
|
|
|
10,429,428
|
|
|
|
|
|
|
|
|
|
|
Real Estate Held for Sale
|
|
|
340,872
|
|
|
|
697,422
|
|
|
|
|
|
|
|
|
|
|
Deferred Offering Costs
, net of accumulated amortization
|
|
|
|
|
|
|
|
|
of $1,101,441 and $974,991 at December 31, 2016 and
|
|
|
|
|
|
|
|
|
2015, respectively
|
|
|
839,195
|
|
|
|
861,810
|
|
Total Assets
|
|
$
|
39,566,638
|
|
|
$
|
40,646,151
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to Financial Statements are an integral part of this Statement.
|
|
|
|
|
|
|
AMERICAN CHURCH MORTGAGE COMPANY
|
|
|
|
|
|
Balance Sheets
|
|
|
|
|
|
|
|
As of December 31,
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
2016
|
|
2015
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
Current maturities of secured investor certificates
|
|
$
|
2,803,000
|
|
|
$
|
3,120,000
|
|
Accounts payable
|
|
|
36,951
|
|
|
|
29,417
|
|
Dividends payable
|
|
|
100,668
|
|
|
|
125,836
|
|
Total current liabilities
|
|
|
2,940,619
|
|
|
|
3,275,253
|
|
|
|
|
|
|
|
|
|
|
Deposit on real estate held for sale
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Secured Investor Certificates, Series B,
net of current maturities
|
|
|
11,486,000
|
|
|
|
13,074,000
|
|
Secured Investor Certificates, Series C,
net of current maturities
|
|
|
6,339,000
|
|
|
|
6,723,000
|
|
Secured Investor Certificates, Series D
|
|
|
7,296,000
|
|
|
|
5,329,000
|
|
Total liabilities
|
|
|
28,061,619
|
|
|
|
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
|
|
|
|
|
|
|
|
|
December 31, 2016 and 2015
|
|
|
16,778
|
|
|
|
16,778
|
|
Additional paid-in capital
|
|
|
19,113,458
|
|
|
|
19,113,458
|
|
Accumulated deficit
|
|
|
(7,625,217
|
)
|
|
|
(6,885,338
|
)
|
Total stockholders’ equity
|
|
|
11,505,019
|
|
|
|
12,244,898
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders' equity
|
|
$
|
39,566,638
|
|
|
$
|
40,646,151
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to Financial Statements are an integral part of this Statement.
|
|
|
|
|
|
|
AMERICAN CHURCH MORTGAGE COMPANY
|
|
|
|
|
|
Statements of Operations
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
Interest and Other Income
|
|
$
|
2,698,186
|
|
|
$
|
2,936,326
|
|
|
|
|
|
|
|
|
|
|
Interest Expense
|
|
|
2,025,000
|
|
|
|
1,997,249
|
|
|
|
|
|
|
|
|
|
|
Net Interest Income
|
|
|
673,186
|
|
|
|
939,077
|
|
|
|
|
|
|
|
|
|
|
Provision for losses on mortgage loans receivable
|
|
|
155,056
|
|
|
|
188,634
|
|
|
|
|
|
|
|
|
|
|
Net Interest Income after Provision for Mortgage
|
|
|
518,130
|
|
|
|
750,443
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses
|
|
|
|
|
|
|
|
|
Other than temporary impairment on bond portfolio
|
|
|
258,000
|
|
|
|
—
|
|
Other operating expenses
|
|
|
597,337
|
|
|
|
792,730
|
|
|
|
|
855,337
|
|
|
|
792,730
|
|
|
|
|
|
|
|
|
|
|
Operating Loss
|
|
|
(337,207
|
)
|
|
|
(42,287
|
)
|
|
|
|
|
|
|
|
|
|
Other Income
|
|
|
—
|
|
|
|
4,053
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
$
|
(337,207
|
)
|
|
$
|
(38,234
|
)
|
|
|
|
|
|
|
|
|
|
Basic and Diluted Loss Per Share
|
|
$
|
(0.20
|
)
|
|
$
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
Dividends Declared Per Share
|
|
$
|
0.24
|
|
|
$
|
0.23
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Common Shares Outstanding -
|
|
|
|
|
|
|
|
|
Basic and Diluted
|
|
|
1,677,798
|
|
|
|
1,677,798
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to Financial Statements are an integral part of this Statement.
|
|
|
|
|
|
|
AMERICAN CHURCH MORTGAGE COMPANY
|
|
|
|
|
|
|
|
|
|
Statements of Stockholders’ Equity
|
|
|
|
|
|
|
|
|
|
Years Ended December 31, 2016 and 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
Common Stock
|
|
Paid-In
|
|
Accumulated
|
|
|
Shares
|
|
Amount
|
|
Capital
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2014
|
|
|
1,677,798
|
|
|
$
|
16,778
|
|
|
$
|
19,113,458
|
|
|
$
|
(6,419,265
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(38,234
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(427,839
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2015
|
|
|
1,677,798
|
|
|
|
16,778
|
|
|
|
19,113,458
|
|
|
|
(6,885,338
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(337,207
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(402,672
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2016
|
|
|
1,677,798
|
|
|
$
|
16,778
|
|
|
$
|
19,113,458
|
|
|
$
|
(7,625,217
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to Financial Statements are an integral part of this Statement.
|
|
|
|
|
|
|
|
|
|
AMERICAN CHURCH MORTGAGE COMPANY
|
|
|
|
|
|
Statements of Cash Flows
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
2016
|
|
2015
|
|
|
|
|
|
Cash Flows from Operating Activities
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(337,207
|
)
|
|
$
|
(38,234
|
)
|
Adjustments to reconcile net loss to net cash
|
|
|
|
|
|
|
|
|
from operating activities:
|
|
|
|
|
|
|
|
|
Net loss on sales and impairment on real estate held for sale
|
|
|
78,473
|
|
|
|
296,727
|
|
Provision for losses on mortgage loans receivable
|
|
|
155,056
|
|
|
|
188,634
|
|
Other than temporary impairment on bond portfolio
|
|
|
258,000
|
|
|
|
—
|
|
Accretion of deferred loan origination fees
|
|
|
(36,845
|
)
|
|
|
(126,998
|
)
|
Amortization of deferred costs
|
|
|
126,450
|
|
|
|
130,548
|
|
Change in assets and liabilities
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(29,743
|
)
|
|
|
55,516
|
|
Interest receivable
|
|
|
(3,743
|
)
|
|
|
(43,269
|
)
|
Prepaid expenses
|
|
|
18,415
|
|
|
|
(14,025
|
)
|
Accounts payable
|
|
|
7,534
|
|
|
|
43,536
|
|
Net cash provided by operating activities
|
|
|
236,390
|
|
|
|
492,435
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities
|
|
|
|
|
|
|
|
|
Investment in mortgage loans
|
|
|
(1,076,520
|
)
|
|
|
(2,922,335
|
)
|
Collections of mortgage loans
|
|
|
1,897,287
|
|
|
|
4,845,882
|
|
Investments purchased
|
|
|
(2,410
|
)
|
|
|
—
|
|
Investment in bonds
|
|
|
(1,622,000
|
)
|
|
|
(1,850,053
|
)
|
Proceeds from bonds
|
|
|
394,812
|
|
|
|
145,228
|
|
Proceeds from real estate held for sale
|
|
|
32,000
|
|
|
|
—
|
|
Net cash (used for) provided by investing activities
|
|
|
(376,831
|
)
|
|
|
218,722
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities
|
|
|
|
|
|
|
|
|
Proceeds from secured investor certificates
|
|
|
1,452,000
|
|
|
|
1,877,000
|
|
Payments on secured investor certificate maturities
|
|
|
(1,774,000
|
)
|
|
|
(1,377,000
|
)
|
Payments for deferred costs
|
|
|
(103,835
|
)
|
|
|
(131,366
|
)
|
Dividends paid
|
|
|
(427,840
|
)
|
|
|
(469,783
|
)
|
Net cash used for financing activities
|
|
|
(853,675
|
)
|
|
|
(101,149
|
)
|
|
|
|
|
|
|
|
|
|
Net (Decrease) Increase in Cash and Equivalents
|
|
|
(994,116
|
)
|
|
|
610,008
|
|
|
|
|
|
|
|
|
|
|
Cash and Equivalents
- Beginning of Year
|
|
|
4,377,110
|
|
|
|
3,767,102
|
|
|
|
|
|
|
|
|
|
|
Cash and Equivalents
- End of Year
|
|
$
|
3,382,994
|
|
|
$
|
4,377,110
|
|
|
|
|
|
|
|
|
|
|
Notes to Financial Statements are an integral part of this Statement.
|
|
|
|
|
|
|
|
|
AMERICAN CHURCH MORTGAGE COMPANY
|
|
|
|
|
|
Statements of Cash Flows - Continued
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
2016
|
|
2015
|
|
|
|
|
|
Supplemental Cash Flow Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends payable
|
|
$
|
100,668
|
|
|
$
|
125,836
|
|
|
|
|
|
|
|
|
|
|
Loan origination fees
|
|
$
|
13,665
|
|
|
$
|
109,997
|
|
|
|
|
|
|
|
|
|
|
Interest paid
|
|
$
|
1,898,550
|
|
|
$
|
1,866,701
|
|
|
|
|
|
|
|
|
|
|
Loans transferred to real estate held for sale
|
|
$
|
134,173
|
|
|
$
|
473,105
|
|
|
|
|
|
|
|
|
|
|
Non-cash investing activity:
|
|
|
|
|
|
|
|
|
Real estate held for sale financed through
|
|
|
|
|
|
|
|
|
mortgage loans receivable
|
|
$
|
380,250
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
Notes to Financial Statements are an integral part of this Statement.
|
|
|
|
|
|
|
AMERICAN CHURCH MORTGAGE COMPANY
Notes to Financial Statements
December 31, 2016 and 2015
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 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.
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 Equivalents
The Company considers all highly liquid debt
instruments purchased with maturities of three months or less to be cash equivalents.
The Company maintains accounts primarily at
two financial institutions. At times throughout the year, the Company’s cash and equivalents balances may exceed amounts
insured by the Federal Deposit Insurance Corporation. Cash in money market funds is not federally insured. The Company had $14,841
and $2,233,533 in a money market fund account at December 31, 2016 and 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, Investments-Debt and Equity Securities. 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 $111,000 and $84,000 in bonds
as current assets as of December 31, 2016
AMERICAN CHURCH MORTGAGE COMPANY
Notes to Financial Statements
December 31, 2016 and 2015
and 2015, respectively, based on management’s estimates for liquidity requirements
and contractual maturities of certain bonds maturing in 2016 and 2015, respectively.
Allowance for Mortgage Loans Receivable
The Company records mortgage loans receivable
at estimated net realizable value, which is the unpaid principal balances of the mortgage loans receivable, less the allowance
for mortgage loans 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. At December 31, 2016, the Company reserved $1,311,983 for seventeen mortgage loans. Twelve of these loans are three or
more mortgage payments in arrears of which three are declared to be in default and two are in the foreclosure process. The total
principal amount of these twelve loans totals approximately $5,302,000 at December 31, 2016. At December 31, 2015, the Company
reserved $1,204,833 for eighteen mortgage loans. Thirteen of these loans are three or more mortgage payments in arrears of which
two are declared to be in default and three loans are in the foreclosure process. The total principal amount of these thirteen
loans totals approximately $5,503,000
A summary of transactions in the allowance
for mortgage loans for the years ended December 31 is as follows:
|
|
2016
|
|
2015
|
Balance at beginning of year
|
|
$
|
1,204,833
|
|
|
$
|
1,177,231
|
|
Provision for losses on mortgage loans receivable
|
|
|
155,056
|
|
|
|
188,634
|
|
Reclassified to real estate held for sale
|
|
|
(29,806
|
)
|
|
|
—
|
|
Charge-offs
|
|
|
(18,100
|
)
|
|
|
(161,032
|
)
|
Balance at end of year
|
|
$
|
1,311,983
|
|
|
$
|
1,204,833
|
|
The total impaired loans, which are loans that
are in the foreclosure process or are declared to be in default, were approximately $1,853,000 and $1,779,000 at December 31, 2016
and 2015, respectively, which the Company believes are adequately secured by the underlying collateral and the allowance for mortgage
loans. Approximately $663,000 of the Company’s allowance for mortgage loans was allocated to these loans at December 31,
2016. Approximately $581,000 of the Company’s allowance for mortgage loans was allocated to impaired loans at December 31,
2015.
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
AMERICAN CHURCH MORTGAGE COMPANY
Notes to Financial Statements
December 31, 2016 and 2015
delinquency in its payments
to the Company and has not arranged for the re-continuance of payments; (iii) lines of communication to the borrower have broken
down such that any reasonable prospect of rehabilitating the loan and return of regular payments is gone.
The Company’s policies on payments received
and interest accrued on non-accrual loans are as follows: (i) The Company will accept payments on loans that are currently on non-accrual
status when a borrower has communicated to us that they intend to meet their mortgage obligations. A payment made on a non-accrual
loan is considered a good faith deposit as to the intent to resume their mortgage payment obligation. This good faith deposit is
credited back to interest first then principal as stated in the mortgage loan documentation. (ii) A letter outlining the re-payment
terms or the restructure terms (if any) of the loan is provided to the borrower. This letter will be signed by the Senior Pastor
and all board members of the borrower. This letter resumes the obligation to make payments on non-accrual loans. (iii) The borrower
must meet all its payment obligations for the next 120 days without interruption in order to be removed from non-accrual status.
No interest income was recognized on non-accrual loans for the years ended December 31, 2016 and 2015.
When a loan is declared in default according
to the Company’s policy or deemed to be doubtful of collection, the loan committee of the Advisor to the Company will direct
the staff to charge-off the uncollectable receivables.
Loans totaling approximately $3,449,000 and
$3,724,000 exceeded 90 days past due but continued to accrue interest as of December 31, 2016 and 2015, respectively. The Company
believes that continued interest accruals are appropriate because the loans are well secured, not deemed to be in technical default
and the Company is actively pursuing collection of past due payments.
Real Estate Held for Sale
As of December 31, 2016, the company has two
properties acquired through foreclosure, and one via deed in lieu of foreclosure, with net carrying balances totaling approximately
$341,000. We have listed the properties for sale through local realtors except for the property for which we received a deed in
lieu of foreclosure. The Church is still occupying the property and paying rent while trying to either sell the building or obtain
refinancing. Each property is valued based on its current listing price less any anticipated selling costs, including, for example,
realtor commissions. The Company records real estate held for sale at the estimated fair value, which is net of the expected expenses
related to the sale of the real estate. The fair value of our real estate held for sale, which represents the carrying value, is
approximately $341,000 as of December 31, 2016 after total impairment of approximately $277,000.
Foreclosure was completed in 2004 on a church
located in Battle Creek, Michigan. The church congregation disbanded and the church property is currently unoccupied. The Company
owns and took possession of the church and has listed the property for sale through a local realtor.
A deed in lieu of foreclosure was received
in 2008 from a church located in Pine Bluff, Arkansas. The Company owns and took possession of the church while the church attempts
to obtain financing from
AMERICAN CHURCH MORTGAGE COMPANY
Notes to Financial Statements
December 31, 2016 and 2015
another lender. If alternative financing cannot be obtained, the Company will list the church for sale
with a local realtor. The church is paying monthly rent until the property is refinanced or sold.
Foreclosure was completed in 2016 on a church
located in Detroit, Michigan. The Company took possession of the property in March 2016 and listed it for sale through a local
realtor.
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 impairment loss 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 per the terms of the specific asset. 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 (loss) for
the purpose of calculating earnings (loss) per share, as there were no potential dilutive shares outstanding.
AMERICAN CHURCH MORTGAGE COMPANY
Notes to Financial Statements
December 31, 2016 and 2015
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 Stockholders
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 transaction
through the date the financial statements were available to be issued. No material events or transactions occurred in the time
period referenced above requiring adjustment to or disclosure in the December 31, 2016 financial statements.
2. FAIR VALUE MEASUREMENT
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 other than temporary impairment
for losses on our Agape bonds (Note 3), which totaled $458,000 and $200,000 for the years ended December 31, 2016 and 2015, respectively.
The following table summarizes the Company’s financial
instruments that were measured at fair value on a recurring basis:
|
|
|
|
|
|
|
Fair Value Measurement
|
|
December 31, 2016
|
|
|
Fair Value
|
|
|
|
Level 3
|
|
|
|
|
|
|
|
|
|
|
Bond portfolio
|
|
$
|
11,482,616
|
|
|
$
|
11,482,616
|
|
AMERICAN CHURCH MORTGAGE COMPANY
Notes to Financial Statements
December 31, 2016 and 2015
|
|
|
|
|
|
|
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
|
Purchases
|
1,622,000
|
Proceeds
|
(394,812)
|
Other than temporary investment
|
(258,000
)
|
Balance at December 31, 2016
|
$
11,482,616
|
|
|
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
years ended December 31, 2016 and 2015, respectively.
The following table summarizes the Company’s financial
instruments that were measured at fair value on a nonrecurring basis:
|
|
December 31, 2016
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Fair Value at December 31,
2016
|
Impaired Loans
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,189,873
|
|
|
$
|
1,189,873
|
|
Real estate held for resale
|
|
|
—
|
|
|
|
—
|
|
|
|
340,872
|
|
|
|
340,872
|
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,530,745
|
|
|
$
|
1,530,745
|
|
|
|
December 31, 2015
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Fair Value at December 31,
2015
|
Impaired Loans
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,197,302
|
|
|
$
|
1,197,302
|
|
AMERICAN CHURCH MORTGAGE COMPANY
Notes to Financial Statements
December 31, 2016 and 2015
Real estate held for resale
|
|
|
—
|
|
|
|
—
|
|
|
|
697,422
|
|
|
|
697,422
|
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,894,724
|
|
|
$
|
1,894,724
|
|
The change in 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)
|
(471,550)
|
Impairment
|
(111,362
)
|
( 19,173)
|
Balance at December 31, 2016
|
$
1,173,450
|
$
340,872
|
3. MORTGAGE LOANS RECEIVABLE AND BOND PORTFOLIO
At December 31, 2016, the Company had first
mortgage loans receivable totaling $24,732,280. The loans bear interest ranging from 0% to 10.25% with a weighted average of approximately
8.25% at December 31, 2016. The Company had first 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 December 31, 2016 and December 31, 2015, which are carried at fair value. The bonds pay either semi-annual or quarterly
interest ranging from 2.75% to 9.75%. The aggregate par value of secured church bonds equaled approximately $11,940,616 at December
31, 2016 with a weighted average interest rate of 6.77% and approximately $10,713,428 at December 31, 2015 with a weighted average
interest rate of 6.92%. These bonds are due at various maturity dates through May 2046. The Company has recorded an aggregate other
than temporary impairment of $458,000 and $200,000 at December 31, 2016 and 2015, respectively, for the First Mortgage Bonds issued
by Agape Assembly Baptist Church. This bond series in the aggregate constitute approximately 8.50% and 10.00% of the bond portfolio
at December 31, 2016 and 2015, respectively. The Company had maturities and redemptions of bonds of approximately $395,000 and
$145,000 in 2016 and 2015, respectively.
The contractual
maturity schedule for mortgage loans receivable and the bond portfolio as of December 31, 2016, is as follows:
|
Mortgage Loans
|
Bond Portfolio
|
|
|
|
2017
|
$ 790,083
|
$ 111,000
|
2018
|
3,283,240
|
139,000
|
2019
|
1,326,144
|
144,000
|
2020
|
1,389,493
|
156,000
|
AMERICAN CHURCH MORTGAGE COMPANY
Notes to Financial Statements
December 31, 2016 and 2015
2021
|
814,392
|
221,000
|
Thereafter
|
17,128,928
|
11,169,616
|
|
24,732,280
|
11,940,616
|
Less loan loss and other than temporary impairment on bonds allowance
|
(1,311,983)
|
(458,000)
|
Less deferred origination income
|
(298,499
)
|
___-____
|
Totals
|
$
23,121,798
|
$
11,482,616
|
The Company currently owns $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. Agape is
currently performing under a loan modification agreement. In October 2014, a minimum of 80% of the bondholders of Agape agreed
to a modification in the terms of their bonds which has resulted in the resumption of both principal and interest payments to both
the first and second mortgage bond holders. Both the First Mortgage Bonds and Second Mortgage Bonds have been modified to a fully
amortized fixed rate, quarterly interest payment of 6.25% with a new maturity date of September 2037 for all the issued and outstanding
bonds. The Company, along with all other bondholders, has a superior lien over all other creditors. The Company has an aggregate
other than temporary impairment of $458,000 and $200,000 for the First and Second Mortgage Bonds at December 31, 2016 and 2015,
respectively, which effectively reduces the bonds to the fair value amount management believes will be recovered.
4. SECURED INVESTOR CERTIFICATES
Secured investor certificates are collateralized
by certain mortgage loans receivable or secured church bonds of approximately the same value as the certificates. The weighted
average interest rate on the certificates was 6.47% and 6.44% at December 31, 2016 and 2015, respectively. Holders of the secured
investor certificates may renew certificates at the current rates and terms upon maturity at the Company’s discretion. Renewals
upon maturity are considered neither proceeds from nor issuance of secured investor certificates. Renewals totaled approximately
$831,000 and $958,000 during 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 December 31, 2016 is as follows:
|
|
|
2017
|
$ 2,803,000
|
|
2018
|
4,116,000
|
|
2019
|
2,333,000
|
|
2020
|
4,058,000
|
|
AMERICAN CHURCH MORTGAGE COMPANY
Notes to Financial Statements
December 31, 2016 and 2015
2021
|
1,928,000
|
|
Thereafter
|
12,686,000
|
|
|
|
|
Totals
|
$
27,924,000
|
|
In July 2014, the Company filed a registration
statement with the Securities and Exchange Commission to offer $10,000,000 worth of Series D secured investor certificates. The
offering was declared effective by the SEC on August 12, 2014. The offering was renewed with an effective date of September 23,
2016. The certificates are being offered in multiples of $1,000 with interest rates ranging from 4.00% to 6.50%, subject to changing
market rates, and maturities from 5 and 7 to 15 years. The certificates are collateralized by certain mortgage loans receivable
and church bonds of approximately the same value. At December 31, 2016, approximately 7,296 Series D certificates had been issued
and were outstanding for $7,296,000.
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. 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 $324,000 and $393,000 during the years ended December 31, 2016 and 2015, respectively.
6. INCOME TAXES
As discussed in Note 1, a REIT is subject to
taxation to the extent that taxable income exceeds dividend distributions to Stockholders. In order to maintain status as a REIT,
the Company is required to distribute at least 90% of its taxable income. In 2016, the Company had pretax loss of $(337,207) and
distributions to Stockholders in the form of dividends during the tax year of $402,672. The tax benefit based on statutory rates
to the Company, pre-dividends would have been $(114,650) in 2016. In 2015, the Company had pretax loss of $(38,234) and distributions
to Stockholders in the form of dividends during the tax year of $469,783. The tax based on statutory rates to the Company, pre-dividends,
would have been $(13,000) in 2015. The Company paid out 100% of taxable income in dividends in 2016 and 2015.
The following reconciles the income tax provision
with the expected provision obtained by applying statutory rates to pretax income:
|
|
2016
|
|
2015
|
|
|
|
|
|
Tax based on statutory rates
|
|
$
|
(114,650
|
)
|
|
$
|
(13,000
|
)
|
Tax effect on realized losses on properties
|
|
|
(361,276
|
)
|
|
|
—
|
|
AMERICAN CHURCH MORTGAGE COMPANY
Notes to Financial Statements
December 31, 2016 and 2015
Benefit of REIT distributions
|
|
|
475,926
|
|
|
|
13,000
|
|
|
|
|
|
|
|
|
|
|
Total tax provision
|
|
$
|
—
|
|
|
$
|
—
|
|
The components of deferred income tax assets
are as follows:
|
|
2016
|
|
2015
|
|
|
|
|
|
Loan origination fees
|
|
$
|
101,490
|
|
|
$
|
114,017
|
|
Loan and bond loss provisions
|
|
|
446,074
|
|
|
|
477,643
|
|
Real-estate impairment
|
|
|
94,254
|
|
|
|
271,984
|
|
Valuation allowance
|
|
|
(641,818
|
)
|
|
|
(863,644
|
)
|
|
|
|
|
|
|
|
|
|
Deferred income tax asset, net
|
|
$
|
—
|
|
|
$
|
—
|
|
The change in the valuation allowance was approximately
$(222,000) and $(64,000) for 2016 and 2015, respectively.
7. 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 December 31, 2016 and 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 management’s
estimate of the underlying value of the Company.
The estimated fair values of the Company’s
financial instruments, none of which are held for trading purposes, are as follows:
|
December 31, 2016
|
December 31, 2015
|
|
Carrying
|
Fair
|
Carrying
|
Fair
|
|
Amount
|
Value
|
Amount
|
Value
|
|
|
|
|
|
Cash and equivalents
|
$ 3,382,994
|
$ 3,382,994
|
$ 4,377,110
|
$ 4,377,110
|
Accounts receivable
|
219,352
|
219,352
|
189,609
|
189,609
|
Interest receivable
|
175,912
|
175,912
|
172,169
|
172,169
|
Mortgage loans receivable
|
24,732,280
|
25,646,901
|
25,354,876
|
29,054,399
|
Bond portfolio
|
11,940,616
|
11,940,616
|
10,713,428
|
10,713,428
|
Secured investor certificates
|
27,924,000
|
35,415,944
|
28,246,000
|
36,995,152
|
AMERICAN CHURCH MORTGAGE COMPANY
Notes to Financial Statements
December 31, 2016 and 2015
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 more 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. The credit markets in which the Company conducts business have experienced an
increase in interest rates resulting in the fair value of the mortgage loans falling during the fiscal year ended December 31,
2016.
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.
AMERICAN CHURCH MORTGAGE COMPANY
Minnetonka, Minnesota
Financial Statements
June 30, 2017
AMERICAN CHURCH MORTGAGE COMPANY
|
|
|
|
|
Balance Sheets
|
|
|
|
|
ASSETS
|
June 30, 2017
|
|
December 31, 2016
|
|
(unaudited)
|
|
|
Current Assets
|
|
|
|
Cash and equivalents
|
$ 963,383
|
|
$ 3,382,994
|
Accounts receivable
|
237,509
|
|
219,352
|
Interest receivable
|
178,477
|
|
175,912
|
Investments
|
2,410
|
|
2,410
|
Current maturities of mortgage loans receivable, net of
|
|
|
|
allowance of $101,393 and $41,912 and deferred
|
|
|
|
origination fees of $41,611 and $22,444 at June 30,
|
|
|
|
2017 and December 31, 2016, respectively
|
1,725,407
|
|
725,727
|
Current maturities of bond portfolio
|
131,000
|
|
111,000
|
Prepaid expenses
|
11,109
|
|
1,489
|
Total current assets
|
3,249,295
|
|
4,618,884
|
|
|
|
|
|
|
|
|
Mortgage Loans Receivable
, net of current maturities,
|
|
|
|
allowance of $1,262,389 and $1,270,071 and deferred
|
|
|
|
origination fees of $278,338 and $276,055 at June
|
|
|
|
30, 2017 and December 31, 2016, respectively
|
21,721,841
|
|
22,396,071
|
|
|
|
|
Bond Portfolio,
net of current maturities
|
12,915,616
|
|
11,371,616
|
|
|
|
|
Real Estate Held for Sale
|
225,872
|
|
340,872
|
|
|
|
|
Deferred Offering Costs
, net of accumulated amortization
|
|
|
|
of $1,161,088 and $1,101,441 at June 30, 2017 and
|
|
|
|
December 31, 2016, respectively
|
819,087
|
|
839,195
|
Total Assets
|
$ 38,931,711
|
|
$ 39,566,638
|
|
|
|
|
|
|
|
|
Notes to Financial Statements are an integral part of this Statement.
|
|
|
AMERICAN CHURCH MORTGAGE COMPANY
|
|
|
|
|
Balance Sheets
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
June 30, 2017
|
|
December 31, 2016
|
|
(unaudited)
|
|
|
Current Liabilities
|
|
|
|
Current maturities of secured investor certificates
|
$ 1,461,000
|
|
$ 2,803,000
|
Accounts payable
|
49,204
|
|
36,951
|
Dividends payable
|
117,446
|
|
100,668
|
Total current liabilities
|
1,627,650
|
|
2,940,619
|
|
|
|
|
Secured Investor Certificates, Series B,
net of current maturities
|
11,800,000
|
|
11,486,000
|
Secured Investor Certificates, Series C,
net of current maturities
|
6,237,000
|
|
6,339,000
|
Secured Investor Certificates, Series D
|
7,965,000
|
|
7,296,000
|
Total liabilities
|
27,629,650
|
|
28,061,619
|
|
|
|
|
Stockholders’ Equity
|
|
|
|
Common stock, par value $.01 per share
|
|
|
|
authorized, 30,000,000 shares, issued and outstanding, 1,677,798 at June 30, 2017 and December 31, 2016
|
16,778
|
|
16,778
|
Additional paid-in capital
|
19,113,458
|
|
19,113,458
|
Accumulated deficit
|
(7,828,175)
|
|
(7,625,217)
|
Total stockholders’ equity
|
11,302,061
|
|
11,505,019
|
|
|
|
|
Total liabilities and stockholders' equity
|
$ 38,931,711
|
|
$ 39,566,638
|
|
|
|
|
|
|
|
|
Notes to Financial Statements are an integral part of this Statement.
|
|
|
AMERICAN CHURCH MORTGAGE COMPANY
|
|
|
|
|
Statements of Operations
|
|
|
|
|
|
For the Six Months Ended
|
|
June 30, 2017
|
|
June 30, 2016
|
|
(Unaudited)
|
|
(Unaudited)
|
|
|
|
|
Interest and Other Income
|
$ 1,382,792
|
|
$ 1,338,230
|
|
|
|
|
Interest Expense
|
955,754
|
|
1,005,657
|
|
|
|
|
Net Interest Income
|
427,038
|
|
332,573
|
|
|
|
|
Provision for losses on mortgage loans receivable
|
51,799
|
|
144,476
|
|
|
|
|
Net Interest Income after Provision for Mortgage Losses
|
375,239
|
|
188,097
|
|
|
|
|
Other than temporary impairment on bond portfolio
|
-
|
|
120,000
|
|
|
|
|
Operating Expenses
|
343,305
|
|
342,236
|
|
|
|
|
Operating Income (Loss)
|
31,934
|
|
(274,139)
|
|
|
|
|
Other Income
|
-
|
|
-
|
|
|
|
|
Net Income (Loss)
|
$ 31,934
|
|
$ (274,139)
|
|
|
|
|
Basic and Diluted Income (Loss) Per Share
|
$ 0.02
|
|
$ (0.16)
|
|
|
|
|
Dividends Declared Per Share
|
$ 0.07
|
|
$ 0.06
|
|
|
|
|
Weighted Average Common Shares Outstanding -
|
|
|
|
Basic and Diluted
|
1,677,798
|
|
1,677,798
|
|
|
|
|
|
|
|
|
Notes to Unaudited Financial Statements are an integral part of this Statement.
|
|
|
AMERICAN CHURCH MORTGAGE COMPANY
|
|
|
|
|
Statements of Operations
|
|
|
|
|
|
For the Three Months Ended
|
|
June 30, 2017
|
|
June 30, 2016
|
|
(Unaudited)
|
|
(Unaudited)
|
|
|
|
|
Interest and Other Income
|
$ 700,067
|
|
$ 661,666
|
|
|
|
|
Interest Expense
|
474,622
|
|
506,338
|
|
|
|
|
Net Interest Income
|
225,445
|
|
155,328
|
|
|
|
|
Provision for losses on mortgage loans receivable
|
28,425
|
|
92,377
|
|
|
|
|
Net Interest Income after Provision for Mortgage Losses
|
197,020
|
|
62,951
|
|
|
|
|
Other than temporary impairment on bond portfolio
|
-
|
|
60,000
|
|
|
|
|
Operating Expenses
|
143,632
|
|
177,310
|
|
|
|
|
Operating Income (Loss)
|
53,388
|
|
(174,359)
|
|
|
|
|
Other Income
|
-
|
|
-
|
|
|
|
|
Net Income (Loss)
|
$ 53,388
|
|
$ (174,359)
|
|
|
|
|
Basic and Diluted Income (Loss) Per Share
|
$ 0.03
|
|
$ (0.10)
|
|
|
|
|
Dividends Declared Per Share
|
$ 0.07
|
|
$ 0.06
|
|
|
|
|
Weighted Average Common Shares Outstanding -
|
|
|
|
Basic and Diluted
|
1,677,798
|
|
1,677,798
|
|
|
|
|
|
|
|
|
Notes to Unaudited Financial Statements are an integral part of this Statement.
|
|
|
AMERICAN CHURCH MORTGAGE COMPANY
|
|
|
|
|
Statements of Cash Flows
|
|
|
|
|
|
For the Six Months Ended
|
|
June 30, 2017
|
|
June 30, 2016
|
|
(Unaudited)
|
|
(Unaudited)
|
Cash Flows from Operating Activities
|
|
|
|
Net income (loss)
|
$ 31,934
|
|
$ (274,139)
|
Adjustments to reconcile net income (loss) to net cash
|
|
|
|
from operating activities:
|
|
|
|
Net gain (loss) on sales and impairment on real estate held for sale
|
66,971
|
|
(62,043)
|
Provision for losses on mortgage loans receivable
|
51,799
|
|
144,476
|
Other than temporary impairment on bond portfolio
|
-
|
|
120,000
|
Accretion of deferred loan origination fees
|
21,450
|
|
6,000
|
Amortization of deferred costs
|
59,647
|
|
64,082
|
Change in assets and liabilities
|
|
|
|
Accounts receivable
|
(18,157)
|
|
(16,858)
|
Interest receivable
|
(2,565)
|
|
(2,411)
|
Prepaid expenses
|
(9,620)
|
|
10,772
|
Accounts payable
|
(15,276)
|
|
38,156
|
Management fee payable
|
27,529
|
|
-
|
Net cash provided by operating activities
|
213,712
|
|
28,035
|
|
|
|
|
Cash Flows from Investing Activities
|
|
|
|
Investment in mortgage loans
|
(3,088,230)
|
|
(690,497)
|
Collections of mortgage loans
|
2,689,530
|
|
1,035,652
|
Proceeds from sale of real estate held for sale
|
48,029
|
|
-
|
Investment in bonds
|
(1,621,000)
|
|
(930,000)
|
Proceeds from bonds
|
57,000
|
|
44,000
|
Net cash (used for) investing activities
|
(1,914,671)
|
|
(540,845)
|
|
|
|
|
Cash Flows from Financing Activities
|
|
|
|
Proceeds from secured investor certificates
|
661,000
|
|
996,000
|
Payments on secured investor certificate maturities
|
(1,122,000)
|
|
(151,000)
|
Payments for deferred costs
|
(39,538)
|
|
(60,522)
|
Dividends paid
|
(218,114)
|
|
(226,504)
|
Net cash (used for) provided by financing activities
|
(718,652)
|
|
557,974
|
|
|
|
|
Net (Decrease) Increase in Cash and Equivalents
|
(2,419,611)
|
|
45,164
|
|
|
|
|
Cash and Equivalents
- Beginning of Period
|
3,382,994
|
|
4,377,110
|
|
|
|
|
Cash and Equivalents
- End of Period
|
$ 963,383
|
|
$ 4,422,274
|
|
|
|
|
Notes to Unaudited Financial Statements are an integral part of this Statement.
|
|
|
AMERICAN CHURCH MORTGAGE COMPANY
|
|
|
|
|
Statements of Cash Flows - Continued
|
|
|
|
|
|
For the Six Months Ended
|
|
June 30, 2017
|
|
June 30, 2016
|
|
(Unaudited)
|
|
(Unaudited)
|
Supplemental Cash Flow Information
|
|
|
|
|
|
|
|
Dividends payable
|
$ 117,446
|
|
$ 100,668
|
|
|
|
|
Loan origination fees
|
$ 31,750
|
|
$ -
|
|
|
|
|
Interest paid
|
$ 896,108
|
|
$ 942,575
|
|
|
|
|
Non-cash investing activity:
|
|
|
|
Real estate held for sale financed through
|
|
|
|
mortgage loans receivable
|
$ -
|
|
$ 340,872
|
|
|
|
|
Notes to Unaudited Financial Statements are an integral part of this Statement.
|
|
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, 2016 audited financial statements included in the Company’s Annual Report
on Form 10-K, as filed with the Securities and Exchange Commission for the year ended December 31, 2016. Operating results for
the periods presented are not necessarily indicative of the results that may be expected for the year ending December 31, 2017.
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 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 Equivalents
The Company considers all highly liquid debt
instruments purchased with maturities of three months or less to be cash equivalents.
The Company maintains accounts primarily at
two financial institutions. At times throughout the year, the Company’s cash and equivalents balances may exceed amounts
insured by the Federal Deposit Insurance Corporation. Cash in money market funds is not federally insured. The Company had $629
and $14,841 in money market fund accounts at June 30, 2017 and December 31, 2016, 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 $131,000 and $111,000 in bonds as current assets as of June 30, 2017 and
December 31, 2016, respectively, based on management’s 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 Company’s loan loss policy provides an allowance for estimated uncollectible loans based on an evaluation
of the current status of the loan portfolio. This policy provides for principal amounts outstanding on a particular loan if cumulative
interruptions occur in the normal payment schedule of a loan; therefore, the Company recognizes a provision for losses and an allowance
for the outstanding principal amount of a loan in the Company’s portfolio if the amount is in doubt of collection. Additionally,
no additional interest income is recognized on impaired loans that are declared to be in default and are in the foreclosure process.
At June 30, 2017, the Company provided $1,363,782 for seventeen mortgage loans, of which seven totaling approximately $3,457,000
are three or more mortgage payments in arrears, three loans totaling approximately $1,226,000 are declared to be in default and
two loans totaling approximately $633,000 are in the foreclosure process. At December 31, 2016, the Company provided $1,311,983
for seventeen mortgage loans, of which seven totaling approximately $3,449,000 were three or more mortgage payments in arrears,
three loans totaling approximately $1,226,000 were declared to be in default and two loans totaling approximately $627,000 were
in the foreclosure process.
A summary of transactions in the allowance
for credit losses for the three months ended June 30, 2017 is as follows:
Balance at December 31, 2016
|
|
$ 1,311,983
|
Provision for additional losses
|
|
51,799
|
Balance at June 30, 2017
|
|
$
1,363,782
|
The total impaired loans, which are loans that
are in the foreclosure process or are declared to be in default, were approximately $1,858,000 and $1,853,000 at June 30, 2017
and December 31, 2016, respectively. Which the Company believes are adequately secured by the underlying collateral and the allowance
for mortgage loans. Approximately $688,000 and $663,000 of the Company’s allowance for mortgage loans was allocated to impaired
loans at June 30, 2017 and December 31, 2016, 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 Company’s policies on payments received
and interest accrued on non-accrual loans are as follows: (i) The Company will accept payments on loans that are currently on non-accrual
status when a borrower has communicated to us that they intend to meet their mortgage obligations. A payment made on a non-accrual
loan is considered a good faith deposit as to the intent to resume their mortgage payment obligation. This good faith deposit is
credited back to interest first then principal as stated in the mortgage loan documentation. (ii) A letter outlining the re-payment
terms or the restructure terms (if any) of the loan is provided to the borrower. This letter will be signed by the Senior Pastor
and all board members of the borrower. This letter resumes the obligation to make payments on non-accrual loans. (iii) The borrower
must meet all its payment obligations for the next 120 days without interruption in order to be removed from non-accrual status.
When a loan is declared in default according
to the Company’s policy or deemed to be doubtful of collection, the loan committee of the Advisor to the Company will direct
the staff to charge-off the uncollectable receivables.
Loans totaling approximately $3,457,000 and
$3,449,000 exceeded 90 days past due but continued to accrue interest at June 30, 2017 and December 31, 2016, 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 June 30, 2017, the Company had one property
acquired via deed in lieu of foreclosure, with outstanding loan balances totaling $225,872. The Church is still occupying this
property and paying rent while trying to either sell the building or obtain refinancing. 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 $225,872 as of June 30, 2017. There was no additional
impairment for the six month period ended June 30, 2017.
The Company sold one property and disposed
of a second property during the six month period ended June 30, 2017. The first property was sold to an unrelated third party for
approximately $48,000. The second property was disposed by way of a “Quit-Claim Deed” to an unrelated third party.
The disposed property had no carrying value. The Company realized an additional loss of approximately $67,000 on property that
was sold as of June 30, 2017. The Company sold two properties during the six month period ended June 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 June 30, 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.
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 $458,000 for both periods ended June 30, 2017 and December 31, 2016.
The following table summarizes the Company’s financial
instruments that were measured at fair value on a recurring basis:
|
|
Fair Value
Measurement
|
June 30, 2017
|
Fair Value
|
Level 3
|
|
|
|
Bond portfolio
|
$13,046,616
|
$13,046,616
|
|
|
Fair Value
Measurement
|
December 31, 2016
|
Fair Value
|
Level 3
|
|
|
|
Bond portfolio
|
$
11,482,616
|
$
11,482,616
|
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 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, 2016
|
$11,482,616
|
Purchases
|
1,621,000
|
Proceeds
|
(57,000
)
|
Balance at June 30, 2017
|
$
13,046,616
|
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 $0 and $19,173 for the six month
periods ended June 30, 2017 and December 31, 2016, respectively.
The following table summarizes the Company’s financial
instruments that were measured at fair value on a nonrecurring basis:
|
|
June 30, 2017
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Fair Value at March 31,
2017
|
Impaired Loans
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,172,294
|
|
|
$
|
1,172,294
|
|
Real estate held for resale
|
|
|
—
|
|
|
|
—
|
|
|
|
225,872
|
|
|
|
225,872
|
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,398,166
|
|
|
$
|
1,398,166
|
|
|
|
December 31, 2016
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Fair Value at December 31,
2016
|
Impaired Loans
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,189,873
|
|
|
$
|
1,189,873
|
|
Real estate held for resale
|
|
|
—
|
|
|
|
—
|
|
|
|
340,872
|
|
|
|
340,872
|
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,530,745
|
|
|
$
|
1,530,745
|
|
The change in 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, 2016
|
|
$
|
1,189,873
|
|
|
$
|
340,872
|
|
Additions
|
|
|
7,036
|
|
|
|
—
|
|
Dispositions
|
|
|
—
|
|
|
|
(115,000
|
)
|
Provision for other than temporary losses
|
|
|
(24,615
|
)
|
|
|
—
|
|
Balance at June 30, 2017
|
|
$
|
1,172,294
|
|
|
$
|
225,872
|
|
3. MORTGAGE LOANS RECEIVABLE AND BOND PORTFOLIO
At June 30, 2017, the Company had mortgage
loans receivable totaling $25,130,979. The loans bear interest ranging from 0% to 10.25% with a weighted average of approximately
8.20% at June 30, 2017. The Company had mortgage loans receivable totaling $24,732,280 that bore interest ranging from 0% to 10.25%
with a weighted average of approximately 8.25% at December 31, 2016.
The Company has a portfolio of secured church
bonds at June 30, 2017 and December 31, 2016, which are carried at fair value. The bonds pay quarterly interest ranging from 2.75%
to 9.75%. The aggregate value of secured church bonds equaled approximately $13,505,000 at June 30, 2017 with a weighted average
interest rate of 6.84% and approximately $11,941,000 at December 31, 2016 with a weighted average interest rate of 6.77%. These
bonds are due at various maturity dates through May 15, 2046.
The contractual
maturity schedule for mortgage loans receivable and the bond portfolio as of June 30, 2017, is as follows:
|
Mortgage Loans
|
Bond Portfolio
|
|
|
|
July 1, 2017 through June 30, 2018
|
$ 1,868,411
|
$ 131,000
|
July 1, 2018 through December 31, 2018
|
2,742,724
|
83,000
|
2019
|
1,301,152
|
155,000
|
2020
|
1,362,089
|
168,000
|
2021
|
784,343
|
236,000
|
Thereafter
|
17,072,260
|
12,731,616
|
|
25,130,979
|
13,504,616
|
Less loan loss and bond other than temporary impairment
|
(1,363,782)
|
(458,000)
|
Less deferred origination income
|
(319,949
)
|
______-__
|
Totals
|
$
23,447,248
|
$
13,046,616
|
The Company currently owns $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, a minimum of 80% of the bondholders of Agape agreed to a modification in the terms of their bonds which has resulted in the
resumption of both principal and interest payments to both the first and second mortgage bond holders. Both the First Mortgage
Bonds and Second Mortgage Bonds have been modified to a fully amortized fixed rate, quarterly interest payment of 6.25% with a
new maturity date of September 2037 for all the issued and outstanding bonds. The Company, along with all other bondholders, has
a superior lien over all other creditors. The Company has an aggregate other than temporary impairment of $458,000 for the First
and Second Mortgage Bonds at June 31, 2017 and December 31, 2016, which effectively reduces the bonds to the fair value amount
management believes will be recovered. The Church has subsequently defaulted on their modification agreement in 2016 and no interest
payments were made to bondholders during the six month period ended June 30, 2017. However, the trustee made a distribution to
bondholders during the quarter 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.
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 6.45% and 6.47% at March 31, 2017 and December 31, 2016, respectively. Holders of
the secured investor certificates may renew certificates at the current rates and terms upon maturity at the Company’s discretion.
Renewals upon maturity are considered neither proceeds from nor issuance of secured investor certificates. Renewals totaled approximately
$141,000 and $174,000 for the three months ended June 30, 2017 and 2016, 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 June 30, 2017 is as follows:
|
|
|
July 1, 2017 through June 30, 2018
|
$ 1,461,000
|
|
July 1, 2018 through December 31, 2018
|
3,539,000
|
|
2019
|
2,333,000
|
|
2020
|
4,062,000
|
|
2021
|
1,928,000
|
|
Thereafter
|
14,140,000
|
|
|
|
|
Totals
|
$
27,463,000
|
|
In July 2014, the Company filed a registration
statement with the Securities and Exchange Commission to offer $10,000,000 worth of Series D secured investor certificates. The
offering was
declared effective by the SEC on August 12, 2014. The offering was renewed with an effective date of September 23,
2016. The certificates are being offered in multiples of $1,000 with interest rates ranging from 4.00% to 6.50%, subject to changing
market rates, and maturities from 5 and 7 to 15 years. The certificates are collateralized by certain mortgage loans receivable
and church bonds of approximately the same value. At June 30, 2017, approximately 7,965 Series D certificates had been issued and
were outstanding for $7,965,000. The offering will be terminated in September 2017.
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 $80,000 during the three months ended June, 2017 and 2016, respectively and
management fees of approximately $162,000 and $160,000 for the six months ended June 30, 2017 and 2016, respectively.
6. FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company is required to disclose the fair
value information about financial instruments, where it is practicable to estimate that value. Because assumptions used in these
valuation techniques are inherently subjective in nature, the estimated fair values cannot always be substantiated by comparison
to independent market quotes and, in many cases, the estimated fair values could not necessarily be realized in an immediate sale
or settlement of the instrument.
The fair value estimates presented herein are
based on relevant information available to management as of June 30, 2017 and December 31, 2016, respectively. Management is not
aware of any factors that would significantly affect these estimated fair value amounts. As these reporting requirements exclude
certain financial instruments and all non-financial instruments, the aggregate fair value amounts presented herein do not represent
management’s estimate of the underlying value of the Company.
The estimated fair values of the Company’s
financial instruments, none of which are held for trading purposes, are as follows:
|
|
June 30, 2017
|
|
December 31, 2016
|
|
|
Carrying
|
|
Fair
|
|
Carrying
|
|
Fair
|
|
|
Amount
|
|
Value
|
|
Amount
|
|
Value
|
|
|
|
|
|
|
|
|
|
Cash and equivalents
|
|
$
|
963,383
|
|
|
$
|
963,383
|
|
|
$
|
3,382,994
|
|
|
$
|
3,382,994
|
|
Accounts receivable
|
|
|
237,509
|
|
|
|
237,509
|
|
|
|
219,352
|
|
|
|
219,352
|
|
Interest receivable
|
|
|
178,477
|
|
|
|
178,477
|
|
|
|
175,912
|
|
|
|
175,912
|
|
Mortgage loans receivable
|
|
|
23,227,248
|
|
|
|
27,494,751
|
|
|
|
24,732,280
|
|
|
|
25,646,901
|
|
Bond portfolio
|
|
|
13,046,616
|
|
|
|
13,046,616
|
|
|
|
11,940,616
|
|
|
|
11,940,616
|
|
Secured investor certificates
|
|
|
27,463,000
|
|
|
|
33,746,095
|
|
|
|
27,924,000
|
|
|
|
35,415,944
|
|
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 Company’s 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.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 31. Other Expenses of Issuance and Distribution.
Item
|
|
Estimated Cost
|
SEC Registration Fee
|
|
$
|
1,245
|
|
FINRA Filing Fee
|
|
$
|
2,000
|
|
Blue Sky Qualification Fees and Expenses*
|
|
$
|
10,000
|
|
Underwriter’s Expense Allowance**
|
|
$
|
60,000
|
|
Printing and Engraving*
|
|
$
|
2,000
|
|
Legal Fees and Expenses*
|
|
$
|
55,000
|
|
Accounting Fees and Expenses*
|
|
$
|
5,000
|
|
Total
|
|
$
|
135,245
|
|
* Estimated
** Assumes
sale of all securities offered
Item 32. Sales to Special Parties.
None.
Item 33. Recent Sales of Unregistered Securities.
None.
Item 34. Indemnification of Directors and Officers.
Our Articles require us
to indemnify and pay or reimburse reasonable expenses to any individual who is our present or former director, advisor or affiliate,
provided that: (i) the director, advisor or affiliate seeking indemnification has determined, in good faith, that the course of
conduct which caused the loss or liability was in our best interest; (ii) the director, advisor or affiliate seeking indemnification
was acting on our behalf or performing services on our behalf; (iii) such liability or loss was not the result of negligence or
misconduct on the part of the indemnified party, except that in the event the indemnified party is or was an independent director,
such liability or loss shall not have been the result of gross negligence or willful misconduct; and (iv) such indemnification
or agreement to be held harmless is recoverable only out of our assets and not from our Stockholders directly.
We may advance amounts
to persons entitled to indemnification for legal and other expenses and costs incurred as a result of legal action instituted against
or involving such person if: (i) the legal action relates to the performance of duties or services by the indemnified party for
or on our behalf; (ii) the legal action is initiated by a third party who is not a Stockholder, or the legal action is initiated
by a Stockholder acting in his or her capacity as such and a court specifically approves such advancement; and (iii) the indemnified
party receiving such advances undertakes, in writing, to repay the advanced funds, with interest at the rate we determined, in
cases in which such party would not be entitled to indemnification.
Notwithstanding
the foregoing, we may not indemnify our directors, advisor, or affiliates and any persons acting as a broker-dealer for any losses,
liabilities or expenses arising from or out of an Subject to the limitations described above, we have the power to purchase and
maintain insurance on behalf of an indemnified party. We may procure insurance covering our liability for indemnification. The
indemnification permitted by our Articles is more restrictive than permitted under the Minnesota Business Corporation Act.
Item 35. Treatment of Proceeds From
Stock Being Registered.
None.
Item 36. Financial Statements and
Exhibits.
(a) Financial Statements:
Audited Financial Statements
Reports of Independent Registered
Public Accounting Firm
Balance Sheets as of December 31,
2016 and 2015
Statements of Operations for the
fiscal years ended December 31, 2016 and 2015
Statements of Stockholders’
Equity for the fiscal years ended December 31, 2016 and 2015
Statements of Cash Flows for the
fiscal years ended December 31, 2016 and 2015
Notes to Financial Statements
Unaudited Internal Financial Statements
Balance Sheets as of June 30, 2017
and December 31, 2016 (audited)
Statements of Operations for the
six months ended June 30, 2017 and 2016
Statements of Operations for the
three months ended June 30, 2017 and 2016
Statements of Cash Flows for the
six months ended June 30, 2017 and 2016
Notes to Financial Statements
(b) Exhibits:
See attached exhibit
index.
Item 37. Undertakings.
The undersigned registrant hereby undertakes:
|
(1)
|
To file, during any period
in which offers or sales are being made, a post-effective amendment to this registration statement:
|
|
a.
|
To include any prospectus
required by Section 10(a)(3) of the Securities Act of 1933.
|
|
b.
|
To reflect in the prospectus
any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the “Calculation
of Registration Fee” table in the effective registration statement.
|
|
c.
|
To include any material
information with respect to the plan of distribution not previously disclosed in the registration statement or any material change
to such information in the registration statement.
|
|
(2)
|
That, for the purpose
of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
|
|
(3)
|
To remove from registration
by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
|
|
(4)
|
That, for the purpose
of determining liability under the Securities Act of 1933 to any purchaser:
|
|
a.
|
If the registrant is
relying on Rule 430B:
|
|
i.
|
Each prospectus filed
by the registrant pursuant to Rule 424(b)(3) shall be deemed to be part of the registration statement as of the date the filed
prospectus was deemed part of and included in the registration statement; and
|
|
ii.
|
Each prospectus required
to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as part of a registration statement in reliance on Rule 430B relating
to an offering made pursuant to Rule 415(a)(1)(i), (vii)
,
or (x)
for the purpose of providing the information
required by section 10(a) of the Securities Act of 1933 shall be deemed to be part of and included in the registration statement
as of the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale
of securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any
person that is at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement
relating to the securities in the registration statement to which that prospectus relates, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof. Provided, however, that no statement made in a registration
statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by
reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with
a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement
or prospectus that was part of the registration statement or made in any such document immediately prior to such effective date;
or
|
|
b.
|
If the registrant is
subject to Rule 430C, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering,
other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed
to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however,
that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document
incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration
statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that
was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately
prior to such date of first use.
|
|
c.
|
That, for the purpose
of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the
securities: The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant
to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities
are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller
to the purchaser and will be considered to offer or sell such securities to such purchaser:
|
|
d.
|
Any preliminary prospectus
or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;
|
|
e.
|
Any free writing prospectus
relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
|
|
f.
|
The portion of any other
free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities
provided by or on behalf of the undersigned registrant; and
|
|
g.
|
Any other communication
that is an offer in the offering made by the undersigned registrant to the purchaser.
|
|
(5)
|
Insofar as indemnification
for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers or controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such
indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. If a claim
for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed
by the final adjudication of such issue.
|
|
(6)
|
For purposes of determining
any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration
statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared
effective.
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(7)
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For the purpose of determining
any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
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(8)
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The undersigned registrant
hereby undertakes to file an application for the purpose of determining the eligibility of the trustee to act under subsection
(a) of Section 310 of the Trust Indenture Act in accordance with the rules and regulations prescribed by the Commission under Section
305(b)(2) of the Act.
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SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-11 and has duly caused this registration statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the city of Minnetonka, state of Minnesota, on November 6, 2017.
AMERICAN CHURCH
MORTGAGE COMPANY
By
/s/ Philip J. Myers
Philip J. Myers,
President and Chief Executive Officer
By
/s/ Scott J. Marquis
Scott J. Marquis,
Chief Financial Officer and Treasurer
POWER OF ATTORNEY
Pursuant to the requirements of the Securities
Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
/s/ Philip J. Myers
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Director, President and
Secretary.
(Principal Executive Officer)
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November 6, 2017
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Philip J. Myers
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/s/ Scott J. Marquis
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Chief Financial Officer and
Treasurer
(Principal Financial and Accounting Officer)
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November 6, 2017
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Scott J. Marquis
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/s/ Kirbyjon H. Caldwell*
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Director
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November
6, 2017
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Kirbyjon H. Caldwell
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/s/ Dennis J. Doyle*
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Director
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November 6, 2017
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Dennis J. Doyle
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/s/ Michael G. Holmquist*
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Director
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November 6, 2017
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Michael G. Holmquist
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*By Philip J. Myers and Scott J. Marquis, Attorneys-in-Fact
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INDEX TO EXHIBITS
Exhibit No.
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Title
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1.1
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Form of Distribution Agreement by and between the Company and American Investors Group, Inc.
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1
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1.2
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Form of Soliciting Dealers Agreement
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1
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3.1
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Amended and Restated Articles of Incorporation
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3
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3.2
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Third Amended and Restated Bylaws
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4
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4.1
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Form of Trust Indenture between the Company and Herring Bank
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1
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5
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Form of Opinion Letter of Winthrop & Weinstine, P.A. as to the legality of the securities
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1
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8
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Form of Opinion Letter of Winthrop & Weinstine, P.A. as to certain tax matters relating to the securities
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1
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10.1
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Amended and Restated REIT Advisory Agreement by and between the Company and Church Loan Advisory, Inc. dated January 22, 2004
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5
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10.5
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Form of Security Agreement by and between the Company and Herring Bank
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1
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21
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Subsidiaries of the Registrant
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6
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23.1
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Consent of Counsel (included in Exhibit 5 and 8)
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1
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23.2
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Consent of Independent Registered Public Accounting Firm Baker Tilly Virchow Krause, LLP
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1
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25
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Statement of Eligibility of Trustee
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1, 7
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101
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The following financial information from our Quarterly Report on Form 10-Q for the second quarter of fiscal year 2017 filed with the Securities and Exchange Commission on August 14, 2017, is formatted in eXtensible Business Reporting Language (XBRL): (i) the Consolidated Balance Sheets at June 30, 2017 and December 31, 2016; (ii) Consolidated Statements of Operations for both the six months and three months ended June 30, 2017 and 2016; (iii) the Consolidated Statements of Cash Flows for the six months ended June 30, 2017 and 2016; and (iv) the Notes to Financial Statements (Unaudited).
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1
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The following financial information from our Annual Report on Form 10-K/A for the fiscal year 2016 (as amended) filed with the Securities and Exchange Commission on May 10, 2017, is formatted in eXtensible Business Reporting Language (XBRL): (i) the Consolidated Balance Sheets at December 31, 2016 and December 31, 2015; (ii) Consolidated Statements of Operations for the years ended December 31, 2016 and 2015; (iii) the Statement of Stockholder’s Equity for the years ended December 31, 2016 and 2015 (iv) the Consolidated Statements of Cash Flows for the years ended December 31, 2016 and 2015; and (v) the Notes to Financial Statements.
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1
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_______________
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(2)
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To be filed by Amendment.
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(3) Incorporated herein
by reference to the Company’s Registration Statement on Form 8-A filed April 30, 1999
(Commission File No. 000-25919).
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(4)
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Incorporated herein by reference to the Company’s Current Report on Form 8-K filed July 3,
2007.
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(5)
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Incorporated herein by reference to the Company’s Current Report on Form 8-K filed August
1, 2007.
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(6)
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Incorporated herein by reference to the Company’s Prospectus filed April 1, 2009.
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(7)
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Articles of Incorporation and By-Laws of the Trustee incorporated herein by reference to Exhibit
25 to the Company’s Registration Statement, SEC File #333-197326 filed July 9, 2014.
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