ACMC American Church Mortgage Inc (CE)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

or

[ ] Transition Report Under Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the Transition Period from ------------to------------

Commission File Number 000-25919

American Church Mortgage Company
(Exact name of registrant as specified in its charter)

 Minnesota 41-1793975
(State or other jurisdiction of
 incorporation or organization) (I.R.S. Employer Identification No.)

10237 Yellow Circle Drive Minnetonka, MN 55343
(Address of principal executive offices) (Zip Code)

(952) 945-9455
(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ___

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or such shorter period that the registrant was required to submit and post such files). Yes ___ No ___

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ___ Accelerated filer ___ Non-accelerated filer ___ Smaller reporting company X
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ___ No X

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

 Class Outstanding at August 14, 2009
--------------------------------------- -------------------------------------
Common Stock, $0.01 par value per share 2,472,081 shares

 AMERICAN CHURCH MORTGAGE COMPANY



 INDEX Page
 No.



 PART I. FINANCIAL INFORMATION


Item 1. Financial Statements:

 Condensed Balance Sheets...............................................................2 - 3

 Condensed Statements of Operations.....................................................4 - 5

 Condensed Statements of Cash Flows.....................................................6 - 7

 Notes to Condensed Financial Statements ..............................................8 - 14

Item 2. Management's Discussion and Analysis of Financial
 Condition and Results of Operations .................................................15 - 19

Items 4T. Controls and Procedures..................................................................19


 PART II. OTHER INFORMATION

Item 1. Legal Proceedings.20

Item 1A. Risk Factors..............................................................................20

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds...............................20

Item 3. Defaults Upon Senior Securities...........................................................20

Item 4. Submission of Matters to a Vote of Security Holders.......................................20

Item 5. Other Information.........................................................................21

Item 6. Exhibits..................................................................................21

 Signatures................................................................................22

AMERICAN CHURCH MORTGAGE COMPANY

Minnetonka, Minnesota

Financial Statements

June 30, 2009

AMERICAN CHURCH MORTGAGE COMPANY

Condensed Balance Sheets

--------------------------------------------------------------------------------------------------------------------------
 ASSETS June 30, 2009 December 31, 2008
--------------------------------------------------------------------------------------------------------------------------
 (Unaudited)
Current Assets
 Cash and equivalents $ 195,603 $ 271,373
 Accounts receivable 175,424 133,638
 Interest receivable 233,756 154,466
 Current maturities of mortgage loans receivable, net of
 allowance of $185,306 and $107,308 and deferred
 origination fees of $31,676 and $32,531 at
 June 30, 2009 and December 31, 2008, respectively 385,571 463,841
 Current maturities of bond portfolio 97,000 342,000
 Prepaid expenses 11,841 9,724
 ------------- ----------
 Total current assets 1,099,195 1,375,042


Mortgage Loans Receivable, net of current maturities 30,768,813 32,100,196

Bond Portfolio, net of current maturities 11,894,064 11,536,937

Real Estate Held for Sale 956,633 1,261,832

Deferred Secured Investor Certificates Offering Costs,
 net of accumulated amortization of $509,671 and $977,237
 at June 30, 2009 and December 31, 2008, respectively 765,687 654,810

Deferred Financing Costs, net of accumulated
 amortization of $16,191 and $5,835 at June 30, 2009
 and December 31, 2008, respectively 22,026 32,383
 ------------ ------------
 Total Assets $ 45,506,418 $ 46,961,200
 ============ ============

Notes to Unaudited Condensed Financial Statements are an integral part of this Statement.

AMERICAN CHURCH MORTGAGE COMPANY

Condensed Balance Sheets

----------------------------------------------------------------------------------------------------------------------
 LIABILITIES AND STOCKHOLDERS' EQUITY June 30, 2009 December 31, 2008
----------------------------------------------------------------------------------------------------------------------
 (Unaudited)
Current Liabilities
 Current maturities of secured investor certificates $ 3,709,000 $ 3,969,000
 Line of credit 3,600,000 4,500,000
 Accounts payable 30,975 23,317
 Building funds payable 25,000 352,595
 Dividends payable 271,929 123,604
 ----------- -----------
 Total current liabilities 7,636,904 8,968,516

Secured Investor Certificates, Series A 2,996,000 3,151,000
Secured Investor Certificates, Series B 14,504,000 14,518,000
Secured Investor Certificates, Series C 156,000 -

Stockholders' Equity
 Common stock, par value $.01 per share
 Authorized, 30,000,000 shares
 Issued and outstanding, 2,472,081 shares at June 30,
 2009 and December 31, 2008 24,721 24,721
 Additional paid-in capital 22,814,911 22,814,911
 Accumulated deficit (2,626,118) (2,515,948)
 ---------- ----------
 Total stockholders' equity 20,213,514 20,323,684

 Total liabilities and stockholders' equity $ 45,506,418 $ 46,961,200
 ============ ============

Notes to Unaudited Condensed Financial Statements are an integral part of this Statement.

AMERICAN CHURCH MORTGAGE COMPANY

Condensed Statements of Operations

--------------------------------------------------------------------------------------------------------------------
 Six Months Ended
 June 30, 2009 June 30, 2008
--------------------------------------------------------------------------------------------------------------------
 (Unaudited) (Unaudited)

Interest and Other Income $ 1,900,843 $ 1,842,965

Interest Expense 899,309 957,408
 ----------- -----------
Net Interest Income 1,001,534 885,557

Provision for losses on mortgage loans receivable 77,998 12,945
 ----------- -----------

Net Interest Income after provision for mortgage losses 923,536 872,612
 ----------- -----------

Operating expenses
Other operating expenses 448,516 420,097
Real estate impairment 92,000 93,000
Total operating expenses 540,516 513,097

Operating income 383,020 359,515

Other income 1,226 2,049

Net Income $ 384,246 $ 361,564
 ============ ============

Basic and Diluted Income Per Share $ 0.16 $ 0.15
 ============ ============

Dividends Declared Per Share $ 0.20 $ 0.20
 ============ ============

Weighted Average Shares Outstanding - Basic and Diluted 2,472,081 2,488,867
 ============ ============

Notes to Unaudited Condensed Financial Statements are an integral part of this Statement.

AMERICAN CHURCH MORTGAGE COMPANY

Condensed Statements of Operations

---------------------------------------------------------------------------------------------------------------------
 Three Months Ended
 June 30, 2009 June 30, 2008
---------------------------------------------------------------------------------------------------------------------
 (Unaudited) (Unaudited)

Interest and Other Income $ 994,271 $ 920,474

Interest Expense 449,544 470,762
 ----------- ----------

Net Interest Income 544,727 449,712

Provision for losses on mortgage loans receivable 44,504 -
 ----------- ----------
Net Interest Income after provision for mortgage losses 500,223 449,712

Operating Expenses
Other operating expenses 182,701 207,502
Real estate impairment 92,000 -
 ----------- ----------
Total operating expenses 274,701 207,502
 ----------- ----------

Operating income 225,522 242,210

Other income 367 469
 ----------- ----------

Net Income $ 225,889 $ 242,679
 =========== ============

Basic and Diluted Income Per Share $ 0.09 $ 0.10
 =========== ============

Dividends Declared Per Share $ 0.11 $ 0.20
 =========== ============

Weighted Average Common Shares Outstanding -
 Basic and Diluted 2,472,081 2,484,138
 =========== ===========


Notes to Unaudited Condensed Financial Statements are an integral part of this
Statement.

AMERICAN CHURCH MORTGAGE COMPANY

Condensed Statements of Cash Flows

-----------------------------------------------------------------------------------------------------------------------------------
 For the Six Months Ended
 June 30, 2009 June 30, 2008
-----------------------------------------------------------------------------------------------------------------------------------
 (Unaudited) (Unaudited)
Cash Flows from Operating Activities
 Net income $ 384,246 $ 361,564
 Adjustments to reconcile net income to net cash
 from operating activities:
 Impairment on real estate held for sale 92,000 93,000
 Provision for losses on mortgage loans receivable 77,998 12,945
 Amortization of loan origination discounts (39,070) -
 Amortization of deferred costs 62,975 102,492
 Change in assets and liabilities
 Accounts receivable 32,952 20,723
 Interest receivable (79,290) (595)
 Prepaid expenses (2,117) (8,152)
 Accounts payable 7,658 (30,720)
 Accrued expenses - -
 -------------- -----------
 Net cash from operating activities 537,352 551,257

Cash Flows from Investing Activities
 Investment in mortgage loans (352,595) (111,219)
 Collections of mortgage loans 1,534,186 662,652
 Investment in bonds (457,900) (626,825)
 Proceeds from bonds 345,773 24,314
 Proceeds from sale of property 180,532
 -------------- ------------
 Net cash provided by investing activities 1,069,464 129,454

Cash Flows from Financing Activities
 Proceeds from payments on line of credit, net (900,000) 600,000
 Proceeds from secured investor certificates 156,000
 Payments on secured investor certificate maturities (429,000) (631,000)
 Payments for deferred costs (163,495) (5,647)
 Stock redemptions - (112,948)
 Dividends paid (346,091) (374,039)
 -------------- -----------
 Net cash used for financing activities (1,682,586) (523,634)
 -------------- -----------

Net Increase (Decrease) in Cash and Equivalents (75,770) 157,077

Cash and Equivalents - Beginning of Period 271,373 285,118
 -------------- -----------
Cash and Equivalents - End of Period $ 195,603 $ 442,195
 ============== ===========

Notes to Unaudited Condensed Financial Statements are an integral part of this Statement.

AMERICAN CHURCH MORTGAGE COMPANY

Condensed Statements of Cash Flows - Continued

-----------------------------------------------------------------------------------------------------------------------------------
 For the Six Months Ended
 June 30, 2009 June 30, 2008
-----------------------------------------------------------------------------------------------------------------------------------
 (Unaudited) (Unaudited)
Supplemental Cash Flow Information

 Dividends payable $ 271,929 $ 247,208
 ============== ==============

 Mortgages and accounts receivable to
 real estate held for sale $ - $ 368,000
 ============== =============

 Real estate held for sale to mortgage loans $ 210,599 $ -
 ============== ==============

 Interest paid $ 836,335 $ 854,916
 ============== =============

Notes to Unaudited Condensed Financial Statements are an integral part of this Statement.

AMERICAN CHURCH MORTGAGE COMPANY

Notes to Condensed Financial Statements - Unaudited

June 30, 2009

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited condensed 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 condensed financial statements of the Company should be read in conjunction with its December 31, 2008 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, 2008. Operating results for the periods presented are not necessarily indicative of the results that may be expected for the year ending December 31, 2009.

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 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.

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 has not experienced any losses in such accounts.

Bond Portfolio

The Company accounts for the bond portfolio under Financial Accounting Standards No. 115, "Accounting for Certain Investments in 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 the Company's secured investor certificates or provide additional liquidity in the short term.

Allowance for Mortgage Loans and Accounts Receivable

The Company records mortgage loans receivable at estimated net realizable value, which is the unpaid principal balances of the mortgage loans receivable and accounts receivable, less the allowance for mortgage loan losses. The Company's loan policy provides an allowance for estimated uncollectible loans based on an evaluation of the current status of the loan portfolio. This policy reserves for principal amounts outstanding on a particular loan if cumulative interruptions occur in the normal payment schedule of a loan; therefore, the Company recognizes a 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 interest income is recognized on impaired loans that are in the foreclosure process. At June 30, 2009, the Company reserved $185,306 for fourteen mortgage loans, of which ten are three or more mortgage payments in arrears. Three of the loans are in the foreclosure process. At December 31, 2008, the Company reserved $107,308 for eleven mortgage loans, of which five were three or more mortgage payments in arrears. One of the loans was in the foreclosure process.

A summary of transactions in the allowance for credit losses for the quarter ended June 30, 2009 is as follows:

Balance at December 31, 2008 $ 107,308
Provision for additional losses 77,998
Charge-offs -
 ---------
Balance at June 30, 2009 $ 185,306

The total impaired loans, which are loans that are in the foreclosure process or are no longer performing, were approximately $1,714,000 and $640,000 at June 30, 2009 and December 31, 2008, respectively, which the Company believes is adequately secured by the underlying collateral.

Loans totaling approximately $2,919,000 and $901,000 exceeded 90 days past due but continued to accrue interest as of June 30, 2009 and December 31, 2008, respectively. The Company believes that continued interest accruals are appropriate because the loans are well secured, not deemed impaired and the Company is actively pursuing collection of past due payments.

Real Estate Held for Sale

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.

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.

Subsequent Events

The Company has evaluated subsequent events through August 14, 2009, the date which the financial statements were issued. The Company is not aware of any subsequent events which would require recognition or disclosure in the condensed financial statements.

Reclassifications

The Company made certain reclassifications to the Condensed Statement of Operations for the three months ended June 30, 2008, to conform to classifications for the three months ended June 30, 2009. Amortization of loan costs and other costs of approximately $53,000 are reclassified from operating expenses to interest expense in the Condensed Statements of Operations for the three months ended June 30, 2008. Other income of approximately $470 was reclassified from interest and other income to other income in the Condensed Statements of Operations for the three months ended June 30, 2008. Total stockholders' equity, net income, and cash flows are unchanged due to these reclassifications.

The Company made certain reclassifications to the Condensed Statements of Operations for the six months ended June 30, 2008, to conform to classifications for the six months ended June 30, 2009. Amortization of loan costs and other costs of approximately $102,000 are reclassified from operating expenses to interest expense in the Condensed Statements of Operations for the six months ended June 30, 2008. Other income of approximately $2,000 was reclassified from interest and other income to other income in the Condensed Statements of Operations for the six months ended June 30, 2008. Total stockholders' equity, net income, and cash flows are unchanged due to these reclassifications.

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 established by Statement of Financial Accounting Standard No. 157, "Fair Value Measurements" (SFAS 157). SFAS 157 requires the utilization of the lowest possible level of inputs to determine fair value. 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.

No events occurred during the six months ended June 30, 2009 that would require adjustment to the recognized balances of assets or liabilities, which 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 realtor commission, which is a Level 3 input in the SFAS 157 valuation hierarchy. The resulting impairment charge in the second quarter of $92,000 was included in earnings for the period.

The following table summarizes the Company's financial instruments that were measured at fair value on a recurring basis:

 Fair Value
 Measurement
June 30, 2009 Fair Value Level 3
 ----------- -------

Bond portfolio $11,991,064 $11,991,064
 ========== ==========

 Fair Value
 Measurement
December 31, 2008 Fair Value Level 3
 ----------- -------

Bond portfolio $11,878,937 $11,878,937
 ========== ==========

We determine the fair value of the bond portfolio shown in the table above by comparing it with similar instruments in inactive markets as well as using widely accepted valuation techniques, including, for example, discounted cash flow analysis on the expected cash flows of the bonds. The analysis reflects the contractual terms of the bonds, which are callable at par by the issuer at any time, including the period to maturity 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, 2008 $11,878,937
Purchases 457,900
Proceeds (345,773)
Provision for losses -
 ----------
Balance at June 30, 2009 $11,991,064
 ==========

3. MORTGAGE LOANS RECEIVABLE AND BOND PORTFOLIO

At June 30, 2009, the Company had first mortgage loans receivable totaling $31,898,066. The loans bear interest ranging from 5.00% to 10.25% with a weighted average of approximately 8.49% at June 30, 2009. The Company had first mortgage loans receivable totaling $33,268,791 that bore interest ranging from 5.00% to 12.00% with a weighted average of approximately 8.70% at December 31, 2008.

The Company has a portfolio of secured church bonds at June 30, 2009 and December 31, 2008, which are carried at fair value. The bonds pay either semi-annual or quarterly interest ranging from 4.00% to 10.45%. The aggregate par value of secured church bonds equaled $12,413,000 at June 30, 2009 with a weighted average interest rate of 7.70% and $12,298,000 at December 31, 2008 with a weighted average interest rate of 7.73%. These bonds are due at various maturity dates through February 2039.

The contractual maturity schedule for mortgage loans receivable and the bond portfolio as of June 30, 2009, is as follows:

 Mortgage Loans Bond Portfolio

July 1, 2009 through June 30, 2010 $ 602,553 $ 97,000
July 1, 2010 through December 31, 2010 743,523 121,000
2011 681,325 530,000
2012 753,189 357,000
2013 1,426,155 665,000
Thereafter 27,691,321 10,621,064
 ---------- ----------
 31,898,066 12,391,064
Less loan loss and bond loss provisions (185,306) (400,000)
Less deferred origination income (558,376) _________
 ------------ ---------
 Totals $31,154,384 $11,991,064
 ========== ==========

The Company currently owns $2,035,000 First Mortgage Bonds issued by St. Agnes Missionary Baptist Church located in Houston, Texas. The total principal amount of First Mortgage Bonds issued by St. Agnes is $13,375,000. St. Agnes defaulted on its payment obligations to bondholders in June 2007. The church subsequently commenced a Chapter 11 bankruptcy reorganization proceeding regarding the three properties that secure the First Mortgage Bonds in November 2007, which was dismissed in September 2008, and the church was subsequently foreclosed upon. The Company, along with all other bondholders, has a superior lien over all other creditors. No accrual for interest receivable from the First Mortgage Bonds is recorded by the Company. The Company has a provision for losses of $400,000 for the First Mortgage Bonds at June 30, 2009 and December 31, 2008, respectively, which effectively reduces the bonds to the fair value amount management believes will be recovered. St. Agnes agreed to rent the three properties securing the bonds back from Herring Bank and has agreed to maintain the properties as it seeks either re-financing or a buyer for the properties. The lease was signed in March 2009. Lease payments began in the second quarter of 2009 and are being remitted to bondholders as partial interest payments. The lease payments represent approximately half of the church's monthly debt obligation under the current trust indenture.

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 6.77% and 6.86% at June 30, 2009 and December 31, 2008, 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 total approximately $656,000 and $385,000 for the six months ended June 30, 2009 and 2008, respectively. The secured investor certificates have certain financial and non-financial covenants.

The estimated maturity schedule for the secured investor certificates at June 30, 2009 is as follows:

July 1, 2009 through June 30, 2010 $ 3,709,000
July 1, 2010 through December 31, 2010 369,000
2011 870,000
2012 1,271,000
2013 1,148,000
Thereafter 13,998,000
 -----------

 Totals $21,365,000
 ==========

In October 2008, the Company filed a registration statement with the Securities and Exchange Commission to offer $20,000,000 worth of Series C Secured Investor Certificates. The offering was declared effective by the SEC on March 30, 2009, and the certificates are being offered in multiples of $1,000 with interest rates ranging from 6.25% to 7.25%, subject to changing market rates, and maturities from 13 to 20 years. The certificates are collateralized by certain mortgage loans receivable and church bonds of approximately the same value. At June 30, 2009, approximately $156,000 Series C certificates had been issued with interest rates ranging from 6.25% to 7.25% and maturities from 13 to 20 years.

5. LINE OF CREDIT

The Company has a $4,500,000 line of credit with Beacon Bank until September 2010. Advances on the line of credit are available up to $4,500,000, subject to borrowing base limitations, until Beacon Bank participates out the remaining portion of the line of credit up to $8,000,000. Interest on the new line of credit is charged monthly at the prime rate with minimum interest of 5.00%. If the prime rate becomes greater than 6.00%, the interest rate will be the prime rate less .50%, subject to a minimum interest rate of 6.00%. The line of credit is secured by a first priority security interest in substantially all of the Company's assets other than collateral pledged to secure the Company's Series A, Series B and Series C Secured Investor Certificates. The line of credit has various financial and non-financial covenants. At June 30, 2009 and December 31, 2008, the interest rate on the line of credit was 5.00% with outstanding balances of $3,600,000 and $4,500,000, respectively.

6. 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. The Company paid the Advisor management fees of approximately $194,000 and 198,000 during the periods ended June 30, 2009 and 2008, respectively.

7. FAIR VALUE OF FINANCIAL INSTRUMENTS

The estimated fair values of the Company's financial instruments, none of which are held for trading purposes, are as follows:

 June 30, 2009 December 31, 2008
 --------------------------------- -----------------------------
 Carrying Fair Carrying Fair
 Amount Value Amount Value
 -------------- ------------ ---------- ----------
Cash and equivalents $ 195,603 $ 195,603 $ 271,373 $ 271,373
Accounts receivable 175,424 175,424 141,821 141,821
Interest receivable 233,756 233,756 154,466 154,466
Mortgage loans receivable 31,154,384 30,823,812 32,564,037 33,469,004
Bond portfolio 11,991,064 11,991,064 11,878,937 11,878,937
Secured investor certificates 21,365,000 23,101,957 21,638,000 23,341,297

The fair value of the mortgage loans receivable is currently less than the carrying value as the portfolio is currently yielding a lower rate than similar mortgages with similar terms for borrowers with similar credit quality. The credit markets in which we conduct business have experienced an increase in interest rates resulting in the fair value of the mortgage loans falling during the six months ended June 30, 2009. We determine the fair value of the bond portfolio shown in the table above by comparing with similar instruments in inactive markets as well as using widely accepted valuation techniques, including, for example, discounted cash flow analysis on the expected cash flows of the bonds. The analysis reflects the contractual terms of the bonds, which are callable at par by the issuer at any time, including the period to maturity 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 fair value of the secured investor certificates is currently greater than the carrying value due to higher interest rates than current market rates.

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995

Certain statements contained in this section and elsewhere in this Form 10-Q constitute "forward-looking statements" 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.

A detailed statement of risks and uncertainties is contained in our reports to the SEC, including, in particular, our Annual Report on Form 10-K for the year ended December 31, 2008 and other public filings and disclosures. Investors and shareholders are urged to read these documents carefully.

Plan of Operation

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

We have completed four public offerings of common stock, the last of which also included debt securities. We also completed a public offering of debt securities on October 7, 2006. We sold $14,860,000 Series B Secured Investor Certificates of the $23,000,000 offered. On October 29, 2008, we filed a registration statement with the Securities and Exchange Commission for a public offering of $20,000,000 worth of Series C Secured Investor Certificates, which may be purchased in multiples of $1,000 at interest rates ranging from 6.25% to 7.25%, subject to changing market rates, and maturities from 13 to 20 years. The offering was declared effective by the Securities and Exchange Commission on March 30, 2009. At June 30, 2009, approximately $156,000 in certificates had been issued.

We currently have seventy-two first mortgage loans aggregating $31,898,066 in principal amount and a first mortgage bond portfolio with par values aggregating $12,413,000. Funding of additional first mortgage loans and purchase of first mortgage bonds issued by churches is expected to continue on an on-going basis as more investable assets become available through: (i) future sales of securities; (ii) prepayment and repayment at maturity of existing loans and bonds; and (iii) borrowed funds.

Results of Operations

Net income for the Company's six month periods ended June 30, 2009 and 2008 was approximately $384,000 and $362,000, respectively, on total interest and other income of approximately $1,901,000 and $1,843,000, respectively. Interest and other income is comprised of interest from loans, interest from bonds, amortization of bond discounts and amortization of loan origination fees. As of June 30, 2009, the Company's loans receivable have interest rates ranging from 5.00% to 10.25%, with an average, principal-adjusted interest rate of 8.31%. The Company's bond portfolio has an average current yield of 7.70% as of June 30, 2009. As of June 30, 2008, the average, principal-adjusted interest rate on the Company's portfolio of loans was 8.80% and the Company's portfolio of bonds had an average current yield of

7.68%. The increase in interest income was largely due to the purchase of additional bonds and to the receipt of some of the past-due interest on St. Agnes Missionary Baptist Church bonds.

Interest expense was approximately $899,000 and $957,000 for the six month periods ended June 30, 2009 and 2008, respectively. The decrease in interest expense was due to the maturity of secured investor certificates and the decline in the interest rate and outstanding balance on our line of credit. Net interest margin increased from 48.40% to 52.69% resulting from a decline in interest expense as secured investor certificates were repaid and a $900,000 decline in the outstanding balance on our line of credit during the six month period ended June 30, 2009.

Provision for losses on mortgage loans receivable increased as we recorded additional allowance against the mortgage loans. We recorded a provision for losses on loans during the six months ended June 30, 2009 of approximately $78,000 compared to approximately $13,000 for the six months ended June 30, 2008. We continually assess our loan portfolio and reserve for potential losses based on the payment history and status of loans. At June 30, 2009, we reserved approximately $185,000 for fourteen mortgage loans, of which nine are three or more mortgage payments in arrears. Three of these loans are in the foreclosure process. Two of the loans that are in the foreclosure process have filed bankruptcy proceedings. At December 31, 2008, we reserved approximately $107,000 for eleven mortgage loans, of which five were three or more mortgage payments in arrears.

Operating expenses for the six months ended June 30, 2009 increased to approximately $541,000 compared to $513,000 at June 30, 2008. The increase is the result of increases in professional fees and taxes on impaired real estate.

Net income for the Company's three month periods ended June 30, 2009 and 2008 was approximately $226,000 and $243,000, respectively, on total interest and other income of approximately $994,000 and $920,000, respectively. Interest expense was approximately $450,000 and $471,000 for the three month periods ended June 30, 2009 and 2008, respectively. The decrease was due to the increase in the real estate impairment reserve.

Operating expenses for the three months ended June 30, 2009 increased to approximately $275,000 compared to $208,000 at June 30, 2008. The increase relates to the increase in impairment charges for real estate held for sale partially offset by decreases in advisory fees and delinquency costs.

Four mortgage loans were paid in full during the six months ended June 30, 2009. We did not fund any new loans during the six months ended June 30, 2009. Foreclosure was initiated on two loans to the same borrower totaling approximately $919,000 during the six months ended June 30, 2009. The borrower filed a Chapter 11 bankruptcy proceeding prior to the sheriff's sales of the properties. We have filed motions to remove our collateral from the assets protected under the bankruptcy filing. We sold one property that we had listed for sale during the six months ended June 30, 2009, and recorded impairment charges of $92,000 for another property due to a reduction in the listing price.

We currently own $2,035,000 worth of First Mortgage Bonds issued by St. Agnes Missionary Baptist Church, which is located in Houston, Texas. St. Agnes has defaulted on its payment obligation to bondholders, who are currently owed approximately $13,027,000 excluding any accrued interest, fees or

expenses. Herring Bank, Amarillo, Texas, is trustee for the First Mortgage Bondholders. Since September 30, 2007, the Company has not recorded an accrual for interest from these bonds. Additionally, the Company has reserved $400,000 for the St. Agnes bonds at June 30, 2009 and December 31, 2008 as part of the fair value adjustment.

St. Agnes agreed to rent the three properties securing the bonds back from Herring Bank and has agreed to maintain the properties as it seeks either re-financing or a buyer for the properties. The lease was signed in March 2009. Lease payments began in the second quarter of 2009 and are being remitted to bondholders as partial interest payments. The lease payments represent approximately half of the church's monthly debt obligation under the current trust indenture.

We have elected to operate as a real estate investment trust, therefore we are required, among other things, to distribute to shareholders at least 90% of "Taxable Income" in order to maintain our REIT status. The dividends declared and paid to shareholders may include cash from origination fees even though they are not recognized as income in their entirety for the period under generally accepted accounting principles in the United States. There were no origination fees for the six months ended June 30, 2009. We earned origination fees of approximately $21,000 for the six months ended June 30, 2008.

Our Board of Directors declared dividends of $.11 for each share held of record on July 28, 2009. The dividend, which was paid July 31, 2009, represents a 4.40% annual rate of return on each share of common stock owned, assuming a purchase price of $10 per share.

Liquidity and Capital Resources

We generate revenue through implementation of our business plan of making mortgage loans to, and acquiring first mortgage bonds issued by, churches and other non-profit religious organizations. Our revenue is derived principally from interest income, and secondarily through the origination fees and renewal fees generated by the mortgage loans we make. We also earn income through interest on funds that are invested pending their use in funding mortgage loans and on income generated on church bonds. Our principal recurring expenses are advisory fees, legal and accounting fees, interest payments on secured investor certificates and our line of credit. Our liabilities at June 30, 2009 are primarily comprised of: dividends declared as of June 30, 2009 but not yet paid; our line of credit balance; and our secured investor certificates.

Our future capital needs are expected to be met by: (i) the additional sale of securities; (ii) prepayment, repayment at maturity, and renewal of mortgage loans we make; and (iii) borrowed funds. We believe that the "rolling" effect of mortgage loans maturing will provide a supplemental source of capital to fund our business operations in future years. Nevertheless, we believe that it may be desirable, if not necessary, to sell additional securities in order to enhance our capacity to make mortgage loans on a continuous basis. There can be no assurance we will be able to raise additional capital on terms acceptable for such purposes.

The Company has a $4,500,000 line of credit with Beacon Bank. Advances on the line of credit are available up to $4,500,000, subject to borrowing base limitations, until Beacon Bank participates out the remaining portion of the line of credit up to $8,000,000. Interest is charged at the prime rate with a minimum interest rate of 5.00%. When the prime rate is greater than 6.00%, the interest rate is prime less .50%, subject to a minimum interest rate of 6.00%. At June 30, 2009, the interest rate on the line of credit was 5.00% and we had an outstanding balance of $3,600,000. The line of credit is secured by a first

priority security interest in substantially all of the Company's assets other than collateral pledged to secure the Company's Series A, Series B, and Series C Secured Investor Certificates.

On October 29, 2008, the Company filed with the Securities and Exchange Commission a registration statement to offer $20,000,000 worth of Series C Secured Investor Certificates to qualified investors. The offering was declared effective by the Securities and Exchange Commission on March 30, 2009. These certificates are expected to provide a source of capital to fund additional loans to qualified borrowers, pay down existing maturing certificates and to pay down our line of credit which, at times, may provide funds at less favorable terms than funds obtained through our certificate offering. At June 30, 2009, approximately $156,000 had been collected from the issuance of Series C certificates. The proceeds were used to purchase church bonds.

During the six months ended June 30, 2009, our total assets decreased by approximately $1,455,000 due to a decrease in mortgage loans receivable resulting from payments, primarily the prepayment of four mortgage loans. Current liabilities decreased by approximately $1,332,000 for the six months ended June 30, 2009 due to decreases in current maturities of our secured investor certificates, our line of credit balance and building funds payable. Non-current liabilities decreased by approximately $13,000 for the six months ended June 30, 2009 due to the maturation of secured investor certificates.

For the six months ended June 30, 2009, cash from operating activities decreased to approximately $537,000 from $551,000 from the comparative period ended June 30, 2008, primarily related to missed interest payments due to the Company on one series of bonds during the second quarter of 2009. This decrease in cash inflow was partially offset by a decrease in cash outflow for accounts payable.

For the six months ended June 30, 2009, cash provided by investing activities was approximately $1,083,000 compared to cash provided by investing activities of approximately $129,000 from the comparative six months ended June 30, 2008, due to an increase in collections of mortgage loans and proceeds from bonds.

For the six months ended June 30, 2009, cash used for financing activities increased to approximately $1,683,000 from $524,000 for the comparative six months ended June 30, 2008, primarily due to an increase in payments on our line of credit and payments for deferred costs.

Critical Accounting Estimates

Preparation of our financial statements requires estimates and judgments to be made that affect the amounts of assets, liabilities, revenues and expenses reported. Such decisions include the selection of the appropriate accounting principles to be applied and the assumptions on which to base accounting estimates. We evaluate these estimates based on assumptions we believe to be reasonable under the circumstances.

The difficulty in applying these policies arises from the assumptions, estimates and judgments that have to be made currently about matters that are inherently uncertain, such as future economic conditions, operating results and valuations as well as management intentions. As the difficulty increases, the level of precision decreases, meaning that actual results can and probably will be different from those currently estimated.

Of our significant accounting policies described in the notes to our financial statements included herewith, we believe that the estimation of fair value of our mortgage loans receivable, bond portfolio and real estate held for resale involves a high degree of judgment. We estimate the fair value of our mortgage loans receivable and related allowance for loan losses based on the current status of loans, the history of

payments and the number of payments in arrears. We estimate the fair value of the bond portfolio based on similar bonds in inactive markets and widely accepted valuation techniques. We had one bond series default, which was subsequently foreclosed upon by the bond trustee. We have estimated losses on this bond based on the underlying collateral, the anticipated selling price of the properties, the current credit environment and the condition of the economy in general. The recorded losses on the defaulted bonds effectively reduced the bonds to fair value, which is the amount management believes will be recovered.

We estimate the value of real estate we hold for re-sale on a number of factors. We look at the current condition of the property as well as current market conditions in determining fair value. Since churches are primarily single-use facilities, the listing price of the property may be lower than the total amount owed to us. Attorney fees, taxes, utilities and 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 re-sale includes estimates of expenses related to the sale of the real estate.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Disclosure Controls and Procedures

An evaluation was carried out under the supervision and with the participation of the Company's management, including the principle accounting officer, of the effectiveness of the Company's disclosure controls and procedures as of the end of the quarter ended June 30, 2009. Based on that evaluation, the principle accounting officer concluded that the Company's disclosure controls and procedures were not effective to provide reasonable assurance that information required to be disclosed by the Company in reports that it files or submits under the Securities and Exchange Commission is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and that information required to be disclosed in reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principle accounting officer, to allow timely decisions regarding required disclosure. The principal reason for the position is, as the Company has previously reported, due to the fact that the Company has a limited number of personnel in the finance and accounting functions. Were there a larger staff, it would be possible to provide for enhanced disclosure of financial reporting matters and greater segregation of duties which would permit checks and balances and reviews that would improve internal control. We continue to evaluate internal controls, particularly segregation of duties, to provide greater segregation and improve overall internal control. Some of the remediation actions we are undertaking include, but are not limited to, the following: a) having an internal control review done by an Independent Board Member who performs periodic testing of our internal controls and procedures; b) having separate oversight of bank reconciliations and other cash management procedures by individuals who are not involved in the day to day operations of the Company; and c) improved monitoring of changes to financial reporting requirements.

Changes in Internal Controls Over Financial Reporting

During the six months ended June 30, 2009, there were no changes in the Company's internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.

PART II

OTHER INFORMATION

None.

Not applicable.

(a) Not Applicable

(b) Not Applicable

(c) Not Applicable

None.

Our annual meeting of shareholders was held on June 25, 2009. We requested our shareholders to vote on:

(i) the election of four (4) directors to hold office until the next annual meeting of shareholders and until their successors have been duly elected and qualified.

(ii) ratification of the appointment of Boulay, Heutmaker, Zibell & Co., P.L.L.P. as our independent registered public accounting firm for the year ending December 31, 2009.

All of our directors were re-elected, Boulay, Heutmaker, Zibell & Co., P.L.L.P. was appointed as our independent registered public accounting firm for the year ending December 31, 2009. There were no broker non-votes for any of the proposals.

Final Proxy Votes for Annual Meeting Held Thursday June 25, 2009

Proposal #1 Election of
Directors

 For Percentage Withheld Percentage Total Shares Voted
Philip J. Myers 1,143,296 91.53% 105,853 8.47% 1,249,149
Kirbyjon H. 1,143,367 91.53% 105,782 8.47% 1,249,149
Caldwell
Dennis J. Doyle 1,143,117 91.51% 106,032 8.49% 1,249,149
Michael G. 1,142,104 91.43% 107,045 8.57% 1,249,149
Holmquist

Proposal #2 Proposal to ratify the appointment of Boulay, Heutmaker, Zibell & Co., P.L.L.P. as the Independent
 Auditors of the Corporation for the Year Ended December 31, 2009



 For Percentage Against Percentage Abstain Percentage Total Shares
 Voted
 1,159,543 92.83% 71,846 5.75% 17,760 1.42% 1,249,149

 Percentage that voted: 50.53%
 Outstanding shares: 2,472,081

None.

Exhibit
Number Title of Document

31.1 Certification of the Chief Executive Officer and Chief Financial
 Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
 Section 302 of the Sarbanes-Oxley Act of 2002.

32.1 Certification of Chief Executive Officer and Chief Financial Officer
 pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
 of the of the Sarbanes-Oxley Act of 2002.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused the report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: August 14, 2009

AMERICAN CHURCH MORTGAGE COMPANY

By: /s/ Philip J. Myers
 Philip J. Myers
 Chief Executive Officer and Chief Financial Officer
 (Principal Executive Officer and Principal Financial
 and Accounting Officer)

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