American Church Mortgage Co - Amended Quarterly Report (10-Q/A)

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

FORM 10-Q/A

(Amendment No. 1)

[X] Quarterly Report Under Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the Quarterly Period Ended June 30, 2008

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 (I.R.S. Employer Identification No.) incorporation or organization) 10237 Yellow Circle Drive Minnetonka, MN 55343 (Address of principal executive offices) (Zip Code) [phone] (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 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 July 31, 2008 -------------------------------------- --------------------------------- Common Stock, $0.01 par value per share 2,472,081 shares

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Explanatory Note

This Quarterly Report on Form 10-Q/A, Amendment No. 1, is being filed by the Registrant solely to file the Condensed Statements of Cash Flows which were inadvertently omitted from the original filing on Form 10-Q, filed with the Securities and Exchange Commission on August 14, 2008. Pursuant to applicable Securities Exchange Act of 1934 regulations, we are herein refiling Part I in its entirety.

This Amendment contains only Part I and the exhibits to the original filing which are being amended and those unaffected parts or exhibits are not included herein. This Amendment continues to speak as of the date of the original filing and we have not updated the disclosure contained herein to reflect events that have occurred since the filing of the original filing.

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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 - 18 Items 4T. Controls and Procedures.................................................................19 PART II. OTHER INFORMATION Item 6. Exhibits..................................................................................20 Signatures................................................................................21

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AMERICAN CHURCH MORTGAGE COMPANY

Minnetonka, Minnesota

Financial Statements

June 30, 2008

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AMERICAN CHURCH MORTGAGE COMPANY Condensed Balance Sheets ----------------------------------------------------------------------------------------------------------------------------------- ASSETS June 30, 2008 December 31, 2007 ----------------------------------------------------------------------------------------------------------------------------------- (Unaudited) Current Assets Cash and equivalents $ 442,195 $ 285,118 Accounts receivable 76,617 112,546 Interest receivable 151,700 151,105 Current maturities of mortgage loans receivable, net of allowance of $67,583 at June 30, 2008 and $72,056 at December 31, 2007 892,963 907,812 Current maturities of bond portfolio 49,000 41,000 Prepaid expenses 15,224 7,072 ----------- ------- Total current assets 1,627,699 1,504,653 Mortgage Loans Receivable, net of current maturities 32,104,149 33,061,115 Real Estate Held for Sale, net of impairment reserve 1,656,215 1,566,561 Deferred Secured Investor Certificates Offering Costs, net of accumulated amortization of $925,592 at June 30, 2008 and $871,437 at December 31, 2007 651,971 700,479 Deferred Line of Credit Costs, net of accumulated amortization of $84,989 at June 30, 2008 and $36,652 at December 31, 2007 178,941 227,278 Bond Portfolio, net of current maturities and allowance of $100,000 at June 30, 2008 and December 31, 2007 11,817,224 11,222,713 ----------- ---------- Total assets $ 48,036,199 $ 48,282,799 =========== ==========

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

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AMERICAN CHURCH MORTGAGE COMPANY Condensed Balance Sheets ----------------------------------------------------------------------------------------------------------------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY June 30, 2008 December 31, 2007 ----------------------------------------------------------------------------------------------------------------------------------- (Unaudited) Current Liabilities Current maturities of secured investor certificates $ 2,278,000 $ 2,197,000 Line of credit 3,950,000 3,350,000 Accounts payable 16,243 28,941 Accrued expenses - 18,022 Building funds payable - 50,000 Current maturities of deferred income 30,296 30,412 Dividends payable 247,208 124,680 ---------- --------- Total current liabilities 6,521,747 5,799,055 Deferred Income, net of current maturities 586,823 596,164 Secured Investor Certificates, Series A 5,323,000 6,008,000 Secured Investor Certificates, Series B 14,599,000 14,626,000 Stockholders' Equity Common stock, par value $.01 per share Authorized, 30,000,000 shares Issued and outstanding, 2,472,081 at June 30, 2008 and 2,493,565 at December 31, 2007 24,721 24,936 Additional paid-in capital 22,814,911 22,927,644 Accumulated deficit (1,834,003) (1,699,000) ---------- ---------- Total stockholders equity 21,005,629 21,253,580 ---------- ---------- Total liabilities and equity $48,036,199 $ 48,282,799 ========== ==========

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

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AMERICAN CHURCH MORTGAGE COMPANY Condensed Statements of Operations ----------------------------------------------------------------------------------------------------------------------------------- Six Months Ended June 30, 2008 June 30, 2007 ----------------------------------------------------------------------------------------------------------------------------------- (Unaudited) (Unaudited) Revenues Interest income loans $1,443,340 $1,589,391 Interest income other 378,597 403,651 Capital gains realized 2,049 5,015 Origination income 21,028 68,320 --------- --------- Total revenues 1,845,014 2,066,377 Operating expenses Professional fees 86,415 41,054 Provision for losses on mortgage loans receivable 12,945 31,865 Real estate held for sale impairment 93,000 161,805 Costs associated with real estate held for sale 104,242 77,694 Director fees 2,200 2,400 Advisory fees 197,959 212,675 Amortization expense 102,492 85,621 Other 29,281 48,994 Total operating expenses --------- ------- 628,534 662,108 --------- ------- Operating Income 1,216,480 1,404,269 Other Expense Interest expense 854,916 903,769 --------- --------- Net Income $ 361,564 $ 500,500 ========= ========= Basic and Diluted Income Per Share $ 0.15 $ 0.20 ========= ========= Dividends Declared Per Share $ 0.20 $ 0.19 ========= ========= Weighted Average Shares Outstanding - Basic and Diluted 2,488,867 2,493,595 ========= =========

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

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AMERICAN CHURCH MORTGAGE COMPANY Condensed Statements of Operations ----------------------------------------------------------------------------------------------------------------------------------- Three Months Ended June 30, 2008 June 30, 2007 ----------------------------------------------------------------------------------------------------------------------------------- (Unaudited) (Unaudited) Revenues Interest income loans $ 719,468 $ 754,765 Interest income other 193,144 210,649 Capital gains realized 469 3,159 Origination income 7,862 29,215 -------- ------- Total revenues 920,943 997,788 Operating expenses Professional fees 57,539 33,432 Provision for losses on mortgage loans receivable - 31,865 Real estate held for sale impairment - 121,805 Costs associated with real estate held for sale 42,538 59,195 Director fees 1,200 1,000 Advisory fees 101,229 106,271 Amortization expense 52,750 34,782 Other 4,996 22,956 Total operating expenses 260,252 411,306 Operating Income 660,691 586,482 Other Expense Interest expense 418,012 451,279 --------- -------- Net Income $ 242,679 $ 135,203 ========= ======== Basic and Diluted Income Per Share $ 0.10 $ 0.05 ========= ======= Dividends Declared Per Share $ 0.10 $ 0.03 ========= ====== Weighted Average Shares Outstanding - Basic and Diluted 2,484,138 2,493,595 ========= =========

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

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AMERICAN CHURCH MORTGAGE COMPANY

Condensed Statements of Cash Flows

---------------------------------------------------------------------------------------------------------------------- For the Six Months Ended June 30, 2008 June 30, 2007 ---------------------------------------------------------------------------------------------------------------------- (Unaudited) (Unaudited) Cash Flows from Operating Activities Net income $ 361,564 $ 500,500 Adjustments to reconcile net income to net cash from operating activities: Impairment loss on real estate held for sale 93,000 161,805 Provision for losses on mortgage loans receivable 12,945 31,865 Amortization expense 102,492 85,621 Change in assets and liabilities Accounts receivable 20,723 (3,528) Interest receivable (595) 3,232 Prepaid expenses (8,152) 28,916 Accounts payable (30,720) (39,126) Deferred income (9,457) (1,342) ------- ------- Net cash from operating activities 541,800 767,943 Cash Flows from Investing Activities Investment in mortgage loans (111,219) (3,558,223) Collections of mortgage loans 672,109 6,091,988 Investments in bonds portfolio (626,825) (1,909,840) Proceeds from bond portfolio 24,314 125,650 ------- --------- Net cash provided by (used for) investing activities (41,621) 749,575 Cash Flows from Financing Activities Proceeds from sale of property 180,532 130,343 Proceeds from line of credit, net 600,000 234,000 Payments on secured investor certificate maturities (631,000) (1,262,000) Payments for deferred costs (5,647) (14,632) Stock redemptions (112,948) - Dividends paid (374,039) (802,628) ------- --------- Net cash used for financing activities (343,103) (1,714,917) ------- --------- Net Increase (Decrease) in Cash and Equivalents 157,077 (197,399) Cash and Equivalents - Beginning of Year 285,118 232,258 Cash and Equivalents - End of Year $ 442,195 $ 34,859 ======== =======

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

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AMERICAN CHURCH MORTGAGE COMPANY

Condensed Statements of Cash Flows - Continued

----------------------------------------------------------------------------------------------------------------------------------- For the Six Months Ended June 30, 2008 June 30, 2007 ----------------------------------------------------------------------------------------------------------------------------------- (Unaudited) (Unaudited) Supplemental Schedule of Noncash Financing and Investing Activities Dividends payable $ 247,208 $ 62,341 ======= ====== Reclassification of mortgage and accounts receivable to real estate held for sale $ 368,000 $ 772,148 ======= ======= Supplemental Cash Flow Information Cash paid during the period for Interest $ 854,916 $ 903,769 ======= =======

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

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AMERICAN CHURCH MORTGAGE COMPANY

Statements of Stockholders' Equity

----------------------------------------------------------------------------------------------------------------------------------- Additional Common Stock Paid-In Accumulated Shares Amount Capital Deficit ----------------------------------------------------------------------------------------------------------------------------------- Balance, December 31, 2007 2,493,595 $ 24,936 $ 22,927,644 $ (1,699,000) Redemption of 21,514 shares of common stock (21,514) (215) (112,733) Net income 361,564 Dividends declared (496,567) -------------------------------------------------------------------- Balance, June 30, 2008 (unaudited) 2,472,081 $ 24,721 $ 22,814,911 $ (1,834,003) ====================================================================

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

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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 condensed financial statements of the Company should be read in conjunction with its December 31, 2007 audited financial statements included in the Company's Annual Report on Form 10-KSB, as filed with the Securities and Exchange Commission for the year ended December 31, 2007. Operating results for the periods presented are not necessarily indicative of the results that may be expected for the year ended December 31, 2008.

Nature of Business

American Church Mortgage Company, a Minnesota corporation, was incorporated on May 27, 1994. The Company engages 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 allowance for mortgage loans and the valuation of real estate held for sale and the bond portfolio. 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. At June 30, 2008 and December 31, 2007, such investments were $5,000. The Company has not experienced any losses in such accounts.

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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 its bond portfolio as "available-for sale." Available-for-sale bonds are carried at fair value. Although no ready public market for these bonds exists, management believes the cost approximates fair value, since the bonds are callable at any time by the issuer at par and the bond portfolio yield is currently higher than interest rates on similar instruments.

Allowance for Mortgage Loans Receivable

The Company records loans receivable at their estimated net realizable value, which is the unpaid principal balance less the allowance for mortgage loans. The Company's loan policy provides an allowance for estimated uncollectible loans based on an evaluation of the current status of the loan portfolio. This policy reserves for principal amounts outstanding on a particular loan if cumulative interruptions occur in the normal payment schedule of a loan. The Company reserves 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 non-performing loans that are in the foreclosure process. At December 31, 2007, the Company reserved approximately $72,000 for fourteen mortgage loans, of which four were three or more mortgage payments in arrears. Three of the loans are in the foreclosure process, of which one has declared bankruptcy. At June 30, 2008, the Company reserved approximately $68,000 for nine mortgage loans, of which three churches are three or more mortgage payments in arrears and two churches are in the foreclosure process.

The total non-performing loans, which are loans that are in the foreclosure process or are no longer performing, were approximately $621,000 and $1,156,000 at June 30, 2008 and December 31, 2007, respectively.

Real Estate Held for Sale

Foreclosure was completed on a church located in Battle Creek, Michigan. The church congregation disbanded and the church property is currently unoccupied. The Company owns and has taken possession of the church and has listed the property for sale through a local realtor.

Foreclosure was also completed on a church located in Tyler, Texas. The church congregation is now meeting in a different location and the church property is currently unoccupied. The Company owns and has taken possession of the church and has listed the property for sale through a local realtor.

A deed in lieu of foreclosure was received from a church located in Cleveland, Ohio. The Company took possession of the church and listed the property for sale through a local realtor. The sale of the property was completed on January 18, 2008. The property sold for approximately $215,000 and the Company received proceeds of approximately $182,000 from the sale of the property after closing costs and realtor fees. The Company realized a tax deductible loss on the property totaling approximately $221,000.

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Foreclosure was completed on a church located in Dayton, Ohio. The church congregation is now meeting in a different location and the church property is currently unoccupied. The Company took possession of the church and listed the property for sale through a local realtor.

Foreclosure was also completed on a church located in Dallas, Texas. The Company took possession of the property. The Company received an earnest money deposit from a buyer who is currently in the process of obtaining a certificate of occupancy. When the certificate of occupancy is obtained, the sale of the property will be completed.

Foreclosure was also completed on a church located in Anderson, Indiana. The Company took possession of the property in May 2008, and is currently preparing the property to be listed for sale.

The Company recorded the real estate held for sale at fair value, which is net of the expected expenses related to the sale of the real estate.

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 significantly before the end of estimated useful life.

Recoverability is assessed based on the carrying amount of the asset and fair value, which is generally determined based on 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 not recoverable and exceeds fair value.

Revenue Recognition

Interest income on mortgage loans and the bond portfolio is recognized as earned. Deferred income represents loan origination fees, which are recognized over the life of the loan as an adjustment to the yield on the loan.

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2. FAIR VALUE MEASUREMENT

Effective January 1, 2008, the Company adopted Statement of Financial Accounting Standard No. 157, "Fair Value Measurements" (SFAS 157), as it applies to our financial instruments, and Statement of Financial Accounting Standard No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities - Including an amendment of FASB Statement No. 115" (SFAS 159). SFAS 157 defines fair value, outlines a framework for measuring fair value, and details the required disclosures about fair value measurements. SFAS 159 permits companies to irrevocably choose to measure certain financial instruments and other items at fair value. SFAS 159 also establishes presentation and disclosure requirements designed to facilitate comparison between entities that choose different measurement attributes for similar types of assets and liabilities.

Under SFAS 157, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or most advantageous market. SFAS 157 establishes a hierarchy in determining the fair value of an asset or liability. The fair value hierarchy has three levels of inputs, both observable and unobservable. SFAS 157 requires the utilization of the lowest possible level of input 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.

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 assets or liabilities at fair value, as permitted by SFAS 159. No events occurred during the six months ended June 30, 2008 which would require adjustment to the recognized balances of assets or liabilities which are recorded at fair value on a nonrecurring basis.

The following table summarizes the Company's financial instruments that were measured at fair value on a recurring basis at June 30, 2008.

Fair Value Measurement Fair Value Level 3 Bond portfolio $11,866,224 $11,866,224 =========== ==========

We determine the fair value of the bond portfolio shown in the table above by using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of the bonds. The analysis reflects the contractual terms of the bonds, which are callable by the issuer at any time, including the period to maturity and the anticipated cash flows of the bonds and uses observable market-based inputs.

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The change in level 3 assets measured at fair value on a recurring basis is summarized as follows at June 30, 2008:

Bond Portfolio -------------------- Beginning balance January 1, 2008 $11,263,713 Purchases 626,825 Proceeds (24,314) Unrealized gains 1,162,000 Callability provision (1,162,000) ----------- Ending balance June 30, 2008 $11,866,224 ===========

3. MORTGAGE LOANS AND BOND PORTFOLIO

At June 30, 2008, the Company had first mortgage loans receivable totaling $33,064,695. The loans bear interest ranging from 7.50% to 12.00% at June 30, 2008 and December 31, 2007.

The Company also had a portfolio of secured church bonds at June 30, 2008. The bonds pay either semi-annual or quarterly interest ranging from 4.50% to 12.00%. The combined principal of $11,996,000 at June 30, 2008 is due at various maturity dates between August 15, 2008 and February 15, 2039.

The contractual maturity schedule for mortgage loans and the bond portfolio as of June 30, 2008, is as follows:

Mortgage Loans Bond Portfolio July 1, 2008 through June 30, 2009 $ 960,546 $ 49,000 July 1, 2009 through December 31, 2009 374,727 36,000 2010 1,221,650 175,000 2011 857,467 525,000 2012 945,567 351,000 Thereafter 28,704,738 10,860,000 ---------- ---------- 33,064,695 11,996,000 Less loan loss and bond reserves (67,583) (100,000) Less discount from par (29,776) ---------- ---------- Totals $32,997,112 $11,866,224 ========== ==========

The Company currently owns $2,035,000 First Mortgage Bonds issued by St. Agnes Missionary Baptist Church located in Houston, Texas. St. Agnes defaulted on its payment obligations to bondholders. The church subsequently commenced a Chapter 11 bankruptcy reorganization proceeding regarding three properties in November 2007. The Company, along with all other

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bondholders, has a superior lien over all other creditors. No accrual for interest receivable from the bonds is recorded by the Company.

The Company reserved $100,000 for the bonds at June 30, 2008 and December 31, 2007.

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 6.34% at June 30, 2008. The maturity schedule for the secured investor certificates at June 30, 2008 is as follows:

Secured Investor Certificates ----------------- July 1, 2008 through June 30, 2009 $ 2,278,000 July 1,2009 through December 31, 2009 2,927,000 2010 1,145,000 2011 705,000 2012 1,167,000 Thereafter 13,978,000 ----------- Totals $22,200,000 ==========

Interest expense related to these certificates was approximately $764,000 and $863,000 for the six months ended June 30, 2008 and 2007, respectively.

5. TRANSACTIONS WITH AFFILIATES

The Company has an Advisory Agreement with Church Loan Advisors, Inc., Minnetonka, Minnesota ("Advisor"). The Advisor is responsible for the day-to-day operations of the Company and provides office space, administrative services and personnel. The Advisor and the Company are related through common ownership and common management. The Company paid Advisor management and origination fees of approximately $198,000 and $213,000 for the six months ended June 30, 2008 and 2007, respectively.

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6. FAIR VALUE OF FINANCIAL INSTRUMENTS

The estimated fair value of the Company's financial instruments, none of which are held for trading purposes, are as follows at June 30, 2008 and December 31, 2007:

June 30, 2008 December 31, 2007 ------------------------------------------------------------------ Carrying Fair Carrying Fair Amount Value Amount Value ------------------------------------------------------------------ Cash and equivalents $ 442,195 $ 442,195 $ 285,118 $ 285,118 Accounts receivable 76,617 76,617 112,546 112,546 Interest receivable 151,700 151,700 151,105 151,105 Mortgage loans receivable 32,997,112 39,065,522 33,968,927 33,968,927 Bond portfolio 11,866,224 11,866,224 11,263,713 11,263,713 Secured investor certificates 22,200,000 22,200,000 22,831,000 22,831,000

At June 30, 2008, the fair value of the mortgage loan portfolio is 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.

The carrying value of the bond portfolio approximates amortized cost since our bonds are callable at any time by the issuer at par and the bond portfolio yield is currently higher than interest rates on similar instruments.

The carrying value of the secured investor certificates approximates fair value because the interest rates at which the certificates have been sold have not changed significantly.

7. LINE OF CREDIT

The Company has a $15 million revolving credit facility with KeyBank National Association. There were balances of $3,950,000 and $3,350,000 outstanding at June 30, 2008 and December 31, 2007 respectively. Interest is charged at the LIBOR rate plus an applicable margin, which was 1.50% at June 30, 2008 which totaled 4.44%. The applicable margin is indexed based upon the Company's financial performance. The revolving credit facility 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" and Series "B" secured investor certificates. The Company obtained amendments to its non-performing assets ratio covenant allowing an increase to this ratio, ultimately amending it through December 30, 2008. In addition, the Company was out of compliance with the cash flow coverage ratio covenant at June 30, 2008. The Company is in the process of obtaining a new line of credit from another borrower. If the Company does not obtain a new line of credit, the interest rate on the line may increase an additional 2.00% over the current rate of LIBOR plus 1.50%.

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

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AMERICAN CHURCH MORTGAGE COMPANY

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.

Plan of Operation

We were founded in May 1994 and began a "best efforts" offering of our common stock on July 11, 1995, and commenced active business operations on April 15, 1996 after completion of the "Minimum Amount" in our initial public offering.

We have completed four public offerings of common stock, the last of which also included debt securities. We 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.

We currently have seventy-four first mortgage loans aggregating $33,064,694 in principal amount and a first mortgage bond portfolio with face values aggregating $11,996,000. 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 public offerings; (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, 2008 and 2007 was approximately $362,000 and $501,000 on total revenues of approximately $1,845,000 and $2,066,000, respectively. Interest income earned on our portfolio of loans was approximately $1,443,000 and $1,589,000 for the six month periods ended June 30, 2008 and 2007, respectively. As of June 30, 2008 the Company's loans receivable have interest rates ranging from 7.50% to 12.00%, with an average, principal-adjusted interest rate of 8.80%. The Company's bond portfolio has an average current yield of 7.68% as of June 30, 2008. All loans we have made as of June 30, 2008 range in interest rate charged to borrowers from 7.50% to 12.00%. As of June 30, 2007, the average, principal-adjusted interest rate on the Company's portfolio of loans was 8.79% and the Company's portfolio of bonds had an average current yield of 7.51%. The decrease in interest income was largely due to the repayment of mortgage loans without new loans issued and the decline in interest rates throughout the later part of 2007. Interest expense was approximately $855,000 and $904,000 for the six month periods ended June 30, 2008 and 2007, respectively. The

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decrease in interest was due to the maturity of secured investor certificates and the decline in the interest rate on our line of credit.

Net income for the Company's three month periods ended June 30, 2008 and 2007 was approximately $243,000 and $135,000 on total revenues of approximately $921,000 and $998,000. Interest income earned on our portfolio of loans was approximately $719,000 and $755,000 for the three month periods ended June 30, 2008 and 2007, respectively. The decrease in 2008 was due primarily to the repayment of mortgage loans without new loans issued. Interest expense was approximately $418,000 and $451,000 for the three month periods ended June 30, 2008 and 2007, respectively. The decrease in 2008 was due to the maturation of secured investor certificates.

One mortgage loan was paid in full during the first half of 2008. We did not fund any new loans during the first half of 2008 due to the lack of qualified borrowers. This reduced taxable income since no new origination income was generated. There were no material changes in nonperforming loans and we had one foreclosure occur during the first half of 2008. We sold one property we had listed for sale during the six months ended June 30, 2008 and recorded an impairment charge of $93,000 for another property. The impairment charge was due to a reduction in the listing price of one of our properties we currently own and have listed for sale.

We currently own $2,035,000 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. The church subsequently declared Chapter Eleven (11) bankruptcy on its three properties in November 2007. The Company, along with all other bondholders, has a superior lien over all other creditors. Since September 30, 2007, the Company has not recorded an accrual for interest from these bonds.

The church has listed all three of its properties for sale for an aggregate price of approximately $19,167,000. The bondholders 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. Herring Bank and its legal counsel are monitoring the bankruptcy process and will advise the bondholders of the church's re-organization plan once it is made available. The Company has reserved $100,000 for the bonds at June 30, 2008. When additional information regarding the Church's reorganization plan is provided, the Company will determine whether an additional valuation adjustment for the bond investment should be recorded.

St. Agnes Missionary Baptist Church has yet to submit a viable reorganization plan to the Bankruptcy Court. However, St. Agnes has been making maintenance payments to the trustee as agreed to with the Bankruptcy Court.

We have elected to operate as a real estate investment trust, therefore we distribute to shareholders at least 90% of "Taxable Income." The dividends declared and paid to shareholders for the six months ended June 30, 2008 may include cash from origination fees even though they are not recognized in their entirety for the period under generally accepted accounting principles in the United States. We earned origination fees of approximately $21,000 and $68,000 for the six months ended June 30, 2008 and 2007, respectively.

Operating expenses for the six months ended June 30, 2008 decreased to approximately $629,000 from $662,000 at June 30, 2007. The change relates to decreases in impairment charges for real estate held for sale of approximately $69,000 and our Advisory fee of approximately $15,000. The decreases were partially offset by increases in professional fees of approximately $45,000, costs associated with real estate held for sale of approximately $27,000, and amortization expense of approximately $17,000.

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Our Board of Directors declared dividends of $.10 for each share held of record on June 30, 2008. The dividend, which was paid July 31, 2008, represents a 4.00% annual rate of return on each share of common stock owned and purchased for $10 per share. Our liabilities at June 30, 2008 are primarily comprised of:
dividends declared as of June 30, 2008 but not yet paid; accounts payable; our line of credit balance; deferred income; and our secured investor certificates.

Liquidity and Capital Resources

We generate revenue through implementation of our business plan of making mortgage loans to churches and other non-profit religious organizations. Our revenue is derived principally from interest income, and secondarily, origination fees and renewal fees generated by 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 expenses are advisory fees, legal and accounting fees, interest payments on secured investor certificates and our line of credit.

Our future capital needs are expected to be met by (i) additional sale of our shares and issuance of debt securities to the public (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 shares of common stock and to issue debt 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 entered into a three-year, adjustable rate, $15 million revolving credit facility with KeyBank National Association. Interest is charged at LIBOR plus an applicable margin, which was 1.50% at June 30, 2008, totaling 4.44% at June 30, 2008. The applicable margin is indexed based upon the Company's financial performance. The revolving credit facility 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" and Series "B" secured investor certificates. We had an outstanding balance of $3,950,000 on our line of credit as of June 30, 2008.

At both December 12, 2007 and April 30, 2008, we obtained waivers of and amendments to the provisions of the Company's Credit Agreement related to the non-performing assets ratio covenant allowing an increase to this ratio, ultimately amending it through December 30, 2008. In addition, the Company was out of compliance with the cash flow coverage ratio covenant at June 30, 2008. The Company is in the process of obtaining a new line of credit from another borrower. If we are unsuccessful in obtaining a new line of credit from another borrower, we may be subject to an increase in our applicable margin rate up to 2.00% over our current rate of 1.50%.

During the six months ended June 30, 2008, our total assets decreased by approximately $247,000 due to a decrease in mortgage loans receivable resulting from payments. Current liabilities increased by approximately $723,000 for the six months ended June 30, 2008 due to increases in current maturities of our secured investor certificates and our line of credit balance. Non-current liabilities decreased by approximately $721,000 for the six months ended June 30, 2008 due to the maturation of secured investor certificates and a decrease in deferred income.

For the six months ended June 30, 2008, cash from operating activities decreased to approximately $542,000 from $768,000 from the comparative period ended June 30, 2007, due to the decrease in interest income on mortgage loans and origination fee income. In addition, the Company had increased costs associated with real estate held for sale.

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For the six months ended June 30, 2008, cash used for investing activities was approximately $42,000 compared to cash provided by investing activities of approximately $750,000 from the comparative six months ended June 30, 2007, due to a decrease in activity in mortgage loans and bonds. The Company is receiving proceeds on mortgage loans and bonds faster than it is investing such amounts.

For the six months ended June 30, 2008, cash used for financing activities decreased to approximately $343,000 from $1,715,000 for the comparative six months ended June 30, 2007, primarily due to an increase in proceeds from our line of credit and a decrease in payments on maturities of our secured investor certificates.

Critical Accounting Estimates

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

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

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 sale involve a high degree of judgment. We estimate the fair value of our mortgage loans receivable based on the average interest rate for special purpose commercial mortgage rates extracted from the most recent edition of www.RealtyRates.com. The carrying value of the bond portfolio approximates amortized cost since our bonds are callable at any time by the issuer at par and the bond portfolio yield is currently higher that interest rates on similar instruments. We do consider the interest rate or the yield rate of a loan or bond in estimating fair value. We do not consider the availability of a market for a loan in estimating fair value. The value of real estate held for sale is based on management's estimate, real estate appraisals and similar property market comparisons.

Our loan loss policy results in reserves based on a percentage of the principal amount outstanding on a loan if cumulative interruptions occur in the normal payment schedule of a loan. The amount reserved under our loan loss policy ranges from 1% to 5% of the outstanding principal amount of the loan, depending on the number of payments that are delinquent. Management reviews the amount reserved on payments that are in arrears on an ongoing basis and may increase the amount reserved to adequately reflect the amount that is believed to be collectible.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

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Items 4T. Controls and Procedures

Disclosure Controls and Procedures

An evaluation was carried out under the supervision and with the participation of the Company's management, including the Chief Executive Officer ("CEO")/Chief Financial Officer ("CFO"), of the effectiveness of the Company's disclosure controls and procedures as of the end of the quarter ended June 30, 2008. Based on that evaluation, the CEO/CFO 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 CEO/CFO, to allow timely decisions regarding required disclosure.

Changes In Internal Controls Over Financial Reporting

During the six months ended June 30, 2008, 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.

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PART II

OTHER INFORMATION

Item 6. Exhibits

Exhibit
Number Title of Document

31.1 Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

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

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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 20, 2008

AMERICAN CHURCH MORTGAGE COMPANY

By: /s/ Philip J. Myers -------------------------------- Philip J. Myers Chief Executive Officer and Chief Financial Officer

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